When you analyze the continuing slump in the electrical construction market and unpeel it layer-by-layer, you realize that when business conditions improve, some parts of the business won't look very familiar. It will be the new normalcy.
The roadside will still be littered with dead dot-coms, but the Internet is here to stay. In this month's article on Ebay's interest in the electrical market (page 10), you will learn that at least one Web firm sees its place in the business as an extension of, rather than a replacement for, traditional business processes. The days of uninvited dot-com carpetbaggers barging into the electrical business and attempting to revolutionize it with unwanted e-business schemes are over.
As the electrical industry recovers, the telecom business may still be reeling because of the Internet bust and overbuilding of long-distance fiber-optic networks. But at least telecom companies are real entities that produce things, unlike many dot-coms. For the telecom business you can at least visualize fiber pipes filled with data flowing to bandwidth-intensive applications like high-definition television, teleconferences and movies on demand.
Most people have been through the cycles of the construction market, so no one will be too surprised when much of it returns to health. While the all-important office, commercial and retail segments have been a dead zone for way too long, you can see the day when they too will come back. Indeed, one F.W. Dodge forecast says office building will recover by a healthy 10 percent in 2004.
The scary part of the whole equation is the question of when — or if — the industrial market will recover. Although that same F.W. Dodge report is forecasting a 19 percent increase in the construction of manufacturing facilities next year, industry insiders are worried about how much of the U.S. industrial base has fled this country for good, leaving for China and other nations with a low-cost manufacturing climate.
Some cataclysmic statistics published recently by the Bureau of Labor Statistics support these concerns. In the past three years, three states that depend on manufacturing for large parts of their economic health lost one in six of their manufacturing jobs. From July 2000 to July 2003, Illinois lost 140,900 manufacturing jobs; Michigan's manufacturing employment plummeted from 900,300 jobs to 738,000 jobs; and Illinois lost 140,900 jobs.
These are mind-boggling numbers for an industry that has survived and thrived by serving the electrical maintenance and new construction needs of the factories where these employees worked. While cyclical layoffs are responsible for some of these lost jobs, unfortunately many of these manufacturing jobs are being exported overseas by corporate owners forced to search for lower-cost manufacturing alternatives.
It's not only factory jobs moving out of the United States. Recently, Sprint announced that on top of the 18,000 jobs it has eliminated since October 2001, it would move several hundred computer programming jobs from its headquarters in the Kansas City metropolitan area to India, China and other foreign countries, a growing trend amongst technology firms including Hewlett-Packard, Microsoft and IBM called “offshoring.”
Good economic times or bad, easy answers to this problem don't exist. I think part of the solution would be federal tax breaks for companies that increase their capital investment in facilities located in the United States because of the jobs they would retain or create.
The reality is that we all must learn to cope with a global economy. A panel discussion this fall on coping with the loss of U.S. manufacturing jobs at a conference sponsored by the National Electrical Manufacturers Representatives Association (NEMRA), Tarrytown, N.Y., and two other rep organizations will explore how reps can continue working with OEM accounts that move overseas, discuss the importance of building vendor brands in the face of less expensive offshore knockoffs, and wrestle with the thorny issue of vendor quotas that don't take into account the flight of U.S. manufacturing facilities overseas. These are tough issues, but they are problems the entire electrical industry needs to face.