Up In Smoke Stacks

Larry Kudlow

June 3, 2004

The much-maligned factory sector is booming. Not rising. Not improving. Booming. According to just-released data from the Institute of Supply Management, which tracks the manufacturing sector, new orders, production, order backlogs, export orders and employment were very strong in May. The industrial sector is so strong that the speed of supplier deliveries has hit its highest level since April 1979. This means that firms cannot produce fast enough to meet rising demand, which is why commodity prices continue to climb. As a result, capacity use keeps growing and inventories are still too low in relation to skyrocketing sales.

Meanwhile, new factory hiring has jumped to a 31-year high, the best since 1973. Of more than 400 industrial firms surveyed, 36 percent added workers in May, while just 7 percent had fewer workers. This is another nail in the coffin of the jobless recovery. As the inventory-rebuilding process ratchets up over the next year, expect even more job creation to follow.

Election-year battleground states in the Midwest industrial heartland are reporting significantly lower unemployment rates compared to one year ago, according to the U.S. Bureau of Labor Statistics. In April, Michigan registered a 6 percent jobless rate compared to 7.2 percent in April 2003. Ohio's jobless rate fell to 5.8 percent from 6.2 percent. Pennsylvania's dropped to 4.9 percent from 5.4 percent. West Virginia reported 5.4 percent from 6.6 percent a year earlier. Missouri's jobless tally dropped to 4.5 percent from 5.5 percent. .....

....... The economic patient is recovering beautifully. Sen. John Kerry's European-style witches-brew policy elixir of trade protectionism and tax hikes would be exactly the wrong shot in the economy's arm. If it ain't broke, Sen. Kerry, don't try and fix it. "