Outsourcing and Current Economic Conditions

With today’s announcement that 62,000 jobs were lost in the month of June, I wonder what impact this may have on the outsourcing trend of recent years. As The Wall Street Journal reported on June 13, rising transportation costs are leading some US companies to end their outsourcing practices. With the cost of shipping goods from Asia up roughly 15% this year, companies are increasingly returning production to either domestic facilities or nearby countries such as Mexico. These are exactly the kind of jobs our economy needs right now: manufacturing. The loss of these jobs has been a popular and sensitive issue for some time now, and this is early evidence of a change of course. Certainly welcome news for the 33,000 manufacturing jobs lost during the month of June. Will the continued backlash against offshoring solve the employment problem for the hundreds of thousands of unemployed factory workers in the US? No, but it certainly can’t hurt anything.

So it seems that there is a silver lining to be found even in current economic conditions. If companies continue to return their production to domestic facilities, not only will this provide manufacturing jobs, but also they could eventually need to expand their capacity, providing employment to the many construction workers hit hard by the housing and credit crises. Having lost some 43,000 jobs in June, the construction industry would certainly welcome increased factory construction. Typically, these commercial projects are more predictable and less risky, since large corporations are backing them, financing is generally in place and readily available, and projects tend to cover a longer time period. All of these things combine to provide some small measure of optimism to a battered construction industry.