MANUFACTURING UPDATE

- September 2015 -

1. LATEST POLICY

==================================

Vice President Biden Announces New Integrated Photonics Manufacturing

Innovation Hub in Rochester, New York

Vice President Biden announced that the Research Foundation for the State University of New York (RF
SUNY) will lead a new Manufacturing Innovation Institute to secure U.S. leadership in manufacturing
integrated photonics. These emerging technologies have the potential to transform many industries
from creating needleless tests for medical conditions like diabetes, to increasing the carrying capacity
of broadband communications ten times over.
The Manufacturing Innovation Institute for Integrated Photonics is the sixth of nine such public-private
partnerships to boost advanced manufacturing, foster American innovation, and attract and create jobs
that strengthen the middle class.
More: White House Release

Key Senate Committee Passes Bipartisan Bill from Coons, Roberts, Schumer to
Spur Private Research and Development

The U.S. Senate Finance Committee unanimously passed bipartisan legislation to allow startup
companies and small businesses to access the successful Research and Development Tax Credit. The
Innovators Job Creation Act would help startups and other small companies take advantage of valuable
R&D tax credits that are currently unavailable to them. The legislation, led by U.S. Senators Chris Coons
(D-Del.), Pat Roberts (R-Kan.), and Chuck Schumer (D-N.Y.), now heads to the full Senate for
consideration.
More: Coons Release

One Hand Tied Behind Our Backs: Why America Must Do Much More to Curb
Chinas Dangerous Innovation Mercantilism

Ahead of Chinese President Xi Jinpings visit to the United States later this month, please join ITIF on
September 17 for an expert panel discussion exploring the ramifications of Chinas economic and trade
strategies and delving into potential remedies and responses.
Despite commitments China made when it joined the World Trade Organization in 2001 to embrace key
tenets of rules-governed, market-based trade, it remains wedded to an aggressive innovation
mercantilism that seeks advantage for its domestic technology companies at the expense of foreign
competitors. Across a wide range of advanced technology industries, from information technology to
biotechnology, China has embarked on a systematic plan to replace American companies with Chinese
equivalents, using a range of techniques including forced technology transfer or joint venturing as a
condition of market access, cybertheft of foreign intellectual property, abuse of anti-monopoly and
competition laws, and outright subsidies to state-owned or directed enterprises. For example, Chinas
National Guidelines for Development and Promotion of the Integrated Circuit Industry unabashedly
call for a closed-loop semiconductor ecosystem that would reduce Chinese imports of U.S.
semiconductors by half in 10 years and eliminate them entirely within 20.
More: Information Technology and Innovation Foundation

U.S. Secretary of Commerce Penny Pritzker Announces Designation of 12 New

Manufacturing Communities under the Investing in Manufacturing Communities
Partnership Program
U.S. Secretary of Commerce Penny Pritzker announced 12 new communities that have received
designations under the Obama Administrations Investing in Manufacturing Communities Partnership
(IMCP) initiative. In May 2014, Secretary Pritzker announced the first 12 communities to receive the
designation under this U.S. Commerce Department-led program, which is designed to accelerate the
resurgence of manufacturing in communities nationwide by supporting the development of long-term
economic development strategies.
More: Economic Development Administration

Pentagon Joins Silicon Valley in 'Flexible' Tech Hub

The Pentagon is building a tech hub in Silicon Valley to help create new gadgetry for the supersoldiers of
the future as well as tech-savvy consumers.
According to the White House, the project seeks to foster "American leadership in manufacturing
technologies from smart bandages to self-monitoring weapons systems to wearable devices."
It brings together the electronics industry and the high-precision printing industry in a "FlexTech
Alliance" to create sensors that conform to the curves of a human body or stretch across an object or
structure.
The $171 million plan announced by Defense Secretary Ashton Carter will get $75 million in federal
funds, and bring together electronics and semiconductor companies like Applied Materials, Apple,
United Technologies, Hewlett-Packard and Qualcomm with users of the technology such as Boeing,
General Motors, the Cleveland Clinic, Corning and Motorola.
More: Business Insider

Senate Passes Baldwin, Kaine, Portman Career Readiness Amendment

The Senate has unanimously passed an amendment to the Every Child Achieves Act of 2015 introduced
by U.S. Senators Tammy Baldwin (D-WI), Tim Kaine (D-VA), and Rob Portman (R-OH) to help ensure
students are ready for postsecondary education and the workforce. The amendment encourages states
to create work-based learning opportunities through partnerships with businesses that allow students
to earn industry-recognized credentials and credit for postsecondary education. By incorporating career
readiness indicators into their state accountability systems, states will have the opportunity to recognize
schools that are successfully preparing students for postsecondary education and the workforce through
tools like technical skills training and college credits. The amendment strengthens the Career Ready Act,
which was incorporated into the Every Child Achieves Act of 2015 after being introduced by Baldwin,
Kaine, and Portman earlier this year.
More: Baldwin Release

Booker, Gillibrand, Murray, Coons, Peters Introduce Bill to Scale-Up Investments

for Small Advanced Manufacturing Businesses
U.S. Sens. Cory Booker (D-NJ), Kirsten Gillibrand (D-NY), Patty Murray (D-WA), Chris Coons (D-DE), and
Gary Peters (D-MI) introduced the Scale-Up Manufacturing Investment Company (SUMIC) Act of 2015,
legislation that increases access to capital for entrepreneurs looking to scale-up and commercialize their
advanced manufacturing innovations.
Lack of access to capital pushes emerging manufacturing entrepreneurs to move their advanced
manufacturing technologies abroad to other nations that provide financing opportunities for small
businesses looking to commercialize their innovations. Not only does this migration drain the United
States of innovative manufacturing capabilities, it also causes us to lose out on high-paying, high-skilled
manufacturing jobs that accompany the commercialization of new ideas. We must do more to keep
these jobs and opportunities for innovation here at home.
The SUMIC Act creates a program that allows private investment firms to leverage funds provided by the
government to help emerging manufacturers commercialize their products. The program, modeled on
the Small Business Administrations (SBA) Small Business Investment Companies (SBIC) program, would
allow approved participating investment firms to invest in securities and issue debentures to raise
capital that would then be invested into emerging manufacturers businesses. Any fees, interest, and
profits received from the debentures and securities investments would offset the costs of the program.
More: Booker Release

Reed Seeks to Extend Cost-Effective, Job-Saving Layoff Prevention Act

In an effort to ensure employers can maintain a skilled workforce, and help workers keep their jobs
during a temporary business decline, U.S. Senator Jack Reed introduced the Layoff Prevention Extension
Act of 2015, a bill to extend the financing and grant provisions for the successful work sharing law
Reed authored as part of the Middle Class Tax Relief and Job Creation Act of 2012. As a result of Senator
Reeds efforts, an estimated $500 million in federal funding was made available to help states adopt or
expand a short-term compensation program alternative to layoffs.
The concept of work sharing is simple: it helps people who are currently employed, but in danger of
being laid off, to keep their jobs during a business slow down or market shift. By giving struggling
companies the flexibility to reduce hours instead of their workforce, work sharing programs prevent
layoffs and help employers save money on rehiring costs. Employees who participate in work sharing
keep their jobs -- along with health and retirement benefits -- and receive a portion of unemployment
insurance benefits to make up for lost wages when their hours are reduced.
More: Reed Release

Kaine Introduces Jobs Act to Expand Pell Grants for Workforce Training
Programs

U.S. Senator Tim Kaine, co-chair of the Senate Career and Technical Education (CTE) Caucus, introduced
the Jumpstart Our Businesses By Supporting Students (JOBS) Act, legislation that would amend
the Higher Education Act by expanding Pell Grant eligibility to students enrolled in short-term job
training programs. Under current law, Pell Grants - needs-based grants for low-income and working
students can only be applied toward programs that are over 600 clock hours or at least 15 weeks in
length, even though many job training programs are shorter term. The JOBS Act would expand Pell
Grant eligibility to students enrolled in high-quality job training programs that are at least 8 weeks in
length and lead to industry-recognized credentials and certificates. According to the U.S. Chamber of
Commerce, 3.7 million U.S. jobs are currently vacant because of a shortage of qualified workers. The
JOBS Act would address this shortage by helping workers afford the skills training and credentials that
are in high-demand in todays job market.
More: Kaine Release

Peters-Alexander-Stabenow Vehicle Innovation Act Advances in Senate

Bipartisan legislation introduced by U.S. Senators Gary Peters (D-MI), Lamar Alexander (R-TN) and
Debbie Stabenow (D-MI) advanced in the Senate today when it was included in the Energy Policy
Modernization Act of 2015 approved by the Senate Energy and Natural Resources Committee. The
Vehicle Innovation Act (VIA) promotes investments in research and development of clean vehicle and
advanced safety technologies that will create more fuel-efficient vehicles, reduce our nations
dependence on foreign oil and support American auto manufacturers.
More: Peters Release

Senate, House Leaders Introduce Bipartisan, Bicameral Bill to Protect Trade

Secrets

Senate Judiciary Committee members Chris Coons, D-Del., Orrin Hatch, R-Utah, Jeff Flake, R-Ariz.,
Sheldon Whitehouse, D-R.I., Thom Tillis, R-N.C., together with Senator Tammy Baldwin, D-Wisc. and
House Members Rep. Doug Collins, R-Ga., and Jerrold Nadler, D-N.Y., today introduced bipartisan,
bicameral legislation Wednesday to help combat the loss of hundreds of billions of dollars each year in
the United States to the theft of corporate trade secrets. The Defend Trade Secrets Act would empower
companies to protect their trade secrets in federal court by creating a federal private right-of-action.
More: Coons Release

2. OTHER NEWS

China's Currency Creep: The Country's Devaluation of the Yuan Poses Potential
Problems for the Rest of the World, Including the U.S.
When China devalued its yuan currency by nearly 2 percent Tuesday, the country's central bank
suggested it was merely a one-time adjustment that wasn't cause for greater concern.

But Beijing came out swinging as the week progressed, first with a 1.6 percent cut on Wednesday
followed by another 1.1 percent devaluation on Thursday, leading to China's biggest three-day currency
drop in decades. The moves set the stage for international trade and currency battles and plenty of
headaches for the U.S., which may get the short end of the economic stick from China's fiscal finessing
More: U.S. News and World Report

Negotiators Hope to Wrap up Trans-Pacific Partnership Talks this Month

After a disappointing round of talks ended last week in Hawaii without resolution, negotiators of the 12nation Trans-Pacific Partnership are hoping to meet later this month to try again to wrap up one of the
world's biggest free-trade agreements.
More: LA Times

A Critique of CRSs U.S. Manufacturing in International Perspective

The future of the U.S. economy depends in part on the health of U.S. manufacturing. Unfortunately,
over the last 15 years the U.S. manufacturing sector has declined significantly compared to those of
competitor nations. In the face of this decline, congressional action is needed more than ever to reduce
the effective corporate tax rate; to boost investment incentives, including for R&D; to better enforce
trade rules globally; and to support manufacturing innovation and workforce development.
More: Information Technology and Innovation Foundation

Manufacturing Job Loss: Trade, Not Productivity, Is the Culprit

The United States lost 5 million manufacturing jobs between January 2000 and December 2014. There is
a widespread misperception that rapid productivity growth is the primary cause of continuing
manufacturing job losses over the past 15 years. Instead, as this report shows, job losses can be traced
to growing trade deficits in manufacturing products prior to the Great Recession and then the massive
output collapse during the Great Recession.
More: Economic Policy Institute

US Industrial Output Rises on Strong Auto Production

U.S. industrial production rose in July, with a strong gain in automobile manufacturing offsetting lower
output from utilities, the Federal Reserve reported Friday.
Industrial output increased 0.6% in July, far above the revised 0.1% gain in June.
Output of motor vehicles and parts jumped 10.6%. Gains elsewhere in manufacturing rose 0.1%.
The strength in autos compensated for a 1.0% drop in the index for utilities.
Manufacturing, accounting for about three quarters of total industrial output, has been under pressure
from tepid consumer spending and a stronger dollar weighing on exports.
More: Industry Week

A New Look at Apprenticeships as a Path to the Middle Class

With its gleaming classrooms, sports teams and even a pep squad, the Apprentice School that serves the
enormous Navy shipyard here bears little resemblance to a traditional vocational education program.
And that is exactly the point. While the cheerleaders may double as trainee pipe fitters, electricians and
insulators, on weekends theyre no different from college students anywhere as they shout for the
Apprentice School Builders on the sidelines.
But instead of accumulating tens of thousands of dollars in student debt, Apprentice School students are
paid an annual salary of $54,000 by the final year of the four-year program, and upon graduation are
guaranteed a job with Huntington Ingalls Industries, the military contractor that owns Newport News
Shipbuilding.
More: New York Times

FCA CEO, Union Agree That Two-Tier Wages Should Go

Fiat Chrysler CEO Sergio Marchionne and United Auto Workers President Dennis Williams agree on at
least one thing: getting rid of the two-tier wages for hourly workers in the company's U.S. plants.
Marchionne and Williams formally opened bargaining a new four-year contract for FCA's 35,700 workers
Tuesday. The current contract expires in September.
More: Manufacturing.net

3. SECTOR DATA

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Purchasing Managers Index (PMI)

The July PMI was 52.7 percent, a decrease of 0.8 percentage points below the June reading of 53.5.
The PMI is a widely watched measure of aggregate manufacturing strength. PMI is based on a survey
that asks purchasing managers if Inventories, Supplier Deliveries, Employment, Production, and New
Orders have gone up or down that month. Results above 50 indicate growth.
For July, Inventories read 49.5 (-3.5% on February), Supplier Deliveries read 48.9 (+0.1%), Employment
read 52.7 (-2.8%), Production read 56 (+2.0%), and New Orders read 56.5 (+0.5%). This data is in chart
form below.
Change on
prior month
PMI
52.7
-0.8
Inventories

49.5

-3.5

Supplier
deliveries

48.9

+0.1

Employment

52.7

-2.8

Production

56

+2.0

New orders

56.5

+0.5

More: Institute for Supply Management

Employment

Preliminary estimates by the Bureau of Labor Statistics show that manufacturing employment was up
15,000 in July, at a seasonally adjusted 12.35 million.

Manufacturing employees, millions

The below chart shows the total number of manufacturing employees over the last ten years in millions
of workers, as well as the month-on-month change in manufacturing employment for the last six
months (in thousands). Both numbers are seasonally adjusted.
Month-on-month change, thousands

15

+3

+6

+6

+2 +15

14
Feb Mar Apr May Jun Jul

13
12
11
'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

More: Bureau of Labor Statistics

Federal Reserve Data

The Fed publishes monthly data on industrial production and capacity utilization. Industrial production
is represented as an index where the 2007 level equals 100. Capacity utilization is shown as percent of
capacity. The chart below shows these measures for the last six months.

Manufacturing
production

90

104

80
102

76.2

100

70
60

Feb

Mar
April
May
June
July
Manufacturing production
Manufacturing capacity utilization

Manufacturing capacity
utilization (%)

105.7 100

106

More: Fed

In addition to the Feds national data, six of the twelve Federal Reserve regional branches publish
monthly updates on manufacturing conditions in their region. Because each branch uses different
questions and methodology, interregional comparisons are not suggested.
New York Fed (NY state, 12 northern NJ counties, and Fairfield County in CT)
The August 2015 Empire State Manufacturing Survey indicates that business activity declined for New
York manufacturers. The headline general business conditions index tumbled nineteen points to -14.9,
its lowest level since 2009
More: NY Fed
Philadelphia Fed (eastern PA, southern NJ, and DE)
[M]anufacturing activity in the region increased in August, according to firms responding to this
months Manufacturing Business Outlook Survey. The indicators for general activity are holding fairly
steady and suggest modest growth.
More: Philadelphia Fed
Richmond Fed (DC, MD, NC, SC, Virginia & most of WV)
[M]anufacturing activity slowed in August, according to the most recent survey by the Federal Reserve
Bank of Richmond. Shipments and order backlogs decreased, while new orders flattened this month.
More: Richmond Fed
Chicago Fed (southern WI, IA, northern IL, northern IN, and southern MI)
The Chicago Fed Midwest Manufacturing Index is currently suspended, while it undergoes a process of
data and methodology revision. The next release is preliminarily scheduled for fall of 2015.
More: Chicago Fed
Kansas City Fed (western MO, NE, KS, OK, WY, CO & northern NM)
[Manufacturing activity declined again in July but less so than in previous months.
More: Kansas City Fed
Dallas Fed (TX, northern LA and southern NM)
Texas factory activity declined slightly in July The production index, a key measure of state
manufacturing conditions, remained negative but rose for a second month in a row to -1.9, suggesting
further moderation in the decline in manufacturing output.
More: Dallas Fed

U.S. Manufacturing Technology Orders (USMTO)

June U.S. manufacturing technology orders totaled $355.43 million, up 4.6% from Mays 339.86 million
but down 13.2% when compared to June 2014.
This monthly boost in orders is good news at face value, but belies an overall sense of concern in U.S.
manufacturing, said AMT President Douglas K. Woods. There was noteworthy activity in the
aerospace, off road/highway construction, automotive, and contract machining industries. But if not for
a dozen or so standout orders from those industries, it could have been another down month. Economic
uncertainty both here and internationally continues to cause concern and hesitation to invest in capital
equipment, yet opportunities remain within several core industry sectors.
These numbers and all data in this report are based on the totals of actual data reported by companies
participating in the USMTO program. The chart below shows year-over-year change and total June 2015
orders on a national and regional basis. Fields marked n/a denote where, due to changes in the makeup of survey participants, an accurate reflection of the data is not available.
Year-over-year
June
change (%)
orders ($m)
Total

355.4

-1.0

Northeast

25.0

Southeast

n/a

North Central-East -31.4

North Central-West
South Central

77.1
37.2
80.9

-18.8

68.1
35.6

-38.7
West

n/a

56.6

More: Association for Manufacturing Technology

4. ABOUT THIS NEWSLETTER

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This update is provided by the Office of U.S. Senator Chris Coons on behalf of the Manufacturing Jobs for
America initiative. For more information, visit coons.senate.gov/manufacturing or email
Riley_Ohlson@coons.senate.gov.

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