If you read the People profile about Harry Kazazian on page 16, you’ll see that he put pencil to paper and figured it was cheaper to manufacture in the United States. So he moved his sleeping-bag-making operation from Mexico to his plant in Alabama.
That was way back in 2000. Today, more business people appear to be following his example.
It seems more manufacturing is starting – just starting – to be done domestically. Why? Costs for labor and other inputs are rising in Asia. Oil prices are historically high, making the long journey from overseas more expensive. The dollar has been depreciated, automatically making foreign goods and services pricier.
Maybe the most telling local example was in the front-page article in the Aug. 8 issue of the Business Journal about how more apparel manufacturing suddenly is being done in Los Angeles. Velvet Heart, a downtown L.A. apparel company, now makes 95 percent of its clothing here, up from 30 percent at the beginning of the year.
Part of the reason is because the company feels compelled to quickly deliver the latest fashions to its customers, but part of the reason is cost. One source in that article said labor costs in China went up 20 percent last year, and they are likely to increase another 20 percent this year.
A local apparel service company executive was quoted in that article saying, “We are getting calls every day from brands saying, ‘We want to shift our production back to the United States.’ ”
If that’s really true, then it should be showing up about now in employment numbers. Indeed, it appears to be. The reporter, Alexa Hyland, noted in her article that apparel manufacturing jobs in Los Angeles County in June were 6.2 percent higher than one year earlier. That followed a decades-long slide in apparel-making jobs that hit bottom a couple of years ago.
However, overall manufacturing jobs in Los Angeles grew less than 1 percent over that one-year span. So if there’s any onshoring movement, it’s apparent mostly in apparel making.
Still, the local apparel industry could represent – maybe – the beginning of a turn. If Asia’s price advantage continues dissipating, the dollar remains devalued and oil stays pricey, then it wouldn’t be surprising to see manufacturers in other industries start or restart domestic plants and send cancellation notices to their overseas partners.
Of course, that would be significant for Los Angeles, a mammoth manufacturing county. Any kind of trend in which more stuff was made here presumably would benefit many L.A. companies – and manufacturing workers. A glint of good news for this Labor Day, no?
Another aspect to consider: If more manufacturing were done here instead of overseas, that would affect export and import flows, thereby creating a ripple at the ports of Los Angeles and Long Beach, the country’s biggest port complex. However, the picture there would be mixed.
If more manufacturing shifts stateside, then that would tend to boost exports but decrease imports. Whether the first would be great enough to offset the second is the big open question.
By the way, we may be seeing this already. At the Port of Los Angeles, exports of loaded containers increased much faster than imports (10.4 percent vs. 2.5 percent) in the first seven months of this year. Interestingly, in the latest month, July, the trend was exaggerated: Exports boomed 12.8 percent while imports actually shrank 3.17 percent compared with the same month last year.
While many folks would hail any kind of uptick in domestic manufacturing, it must be tempered with a dose of reality.
That’s because much of what’s driving manufacturers back home so far are high energy prices and a cheap dollar. Long term, that’s no prescription for a healthy economy.
Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].
