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Deep Decline in U.S. Industrial Output - 5/17/16

There has recently been a deep decline in America’s industrial output.  U.S. industrial production, the Federal Reserve’s measure of manufacturing, mining and utility output, fell by nearly two percent during the first quarter from a year earlier.  Frequently, a dip in industrial production signals imminent recession. 

As reported by the Wall Street Journal, industrial production has never plunged so deeply in a year that didn’t include a recession according to records dating back to nineteen-nineteen.  Still, most economists believe that this time is different.  What appears to be occurring is that the while the industrial sector is contracting, the broader economy is inching ahead.

Manufacturing is not the employment engine that it once was.  Fewer than ten percent of U.S. workers and only about four percent of workers in Maryland are employed by factors.  Just after World War II, roughly a third of U.S. workers worked in manufacturing, so a decline in industrial production would naturally translate into recession. 

Moreover, the recent decline in industrial production was largely driven by a falloff in mining due to lower oil and natural gas prices.  Mining employs even fewer workers than manufacturing and falling energy prices support consumption.  

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.