CEOs view economic recovery with cautious optimism
Conference Board's leading index declines in June
Jobless claims dip in recent week
Report outlines strategies to combat job offshoring
Timken, United Steelworkers begin formal negotiations
Business Roundtable asks states to help boost productivity
AMT predicts North American manufacturing surge
Boeing unveils X-45C unmanned aircraft model
Kingsley Coach looks to triple manufacturing capacity
OSHA launches whistleblower Web page
Black & Decker to purchase Pentair's tools group
Industrial production declines in June

CEOs view economic recovery with cautious optimism
Although three in four fast-growth CEOs expect the current economic upturn will have staying power, the vast majority are proceeding with caution—managing with a business planning cycle of one year or less.

These business owners expect that over the next 12-24 months, the two greatest new risks to their businesses will involve their success in hiring additional permanent, full-time employees and increasing their investments in training.

Going forward, more are concerned about business and strategic risks than operational ones, even though few CEOs describe their company as "very prepared" for newer operational risks like identity theft, a disrupted supply chain or terrorist acts.

One in four, 24 percent, sees the economic upturn as a phenomenon of a year or less. However, 73 percent expect it will extend for two to three years or longer.

Though most fast-growth CEOs have a rosy outlook, their approach to business planning remains cautious. 

Two-thirds, 67 percent, are using a planning cycle of a year or less, rather than a longer one. Only 33 percent are operating from a plan covering the next two-to-three years.

Despite this cautious, short-term approach, 89 percent say their company's ability to meet its primary business objectives over the next 12-24 months is "excellent" (39 percent) or "good" (50 percent).

"Most fast growth companies have recovered their steam, but not all CEOs surveyed are in agreement about the duration of the economic upturn," said David VanEgmond, leader of PricewaterhouseCoopers' Private Company Services Detroit practice. "Although most have a hopeful outlook, they continue to plan using a cautious, short-term approach."

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Conference Board's leading index declines in June
The Conference Board's U.S. leading index decreased 0.2 percent in June, the first decline since March 2003. Last month's increase was also revised down slightly.

June's weakness was not widespread, and some of the decline was from the average manufacturing workweek, which was most likely the result of many businesses being closed for President Reagan's funeral, according to the Conference Board.

Five of the 10 indicators that make up the leading index increased in June. The positive contributors – beginning with the largest positive contributor – were index of consumer expectations, stock prices, average weekly initial claims for unemployment insurance (inverted), manufacturers’ new orders for nondefense capital goods, and manufacturers’ new orders for consumer goods and materials.

The negative contributors – beginning with the largest negative contributor – were building permits, average weekly manufacturing hours, vendor performance, real money supply and interest rate spread.

The leading index now stands at 116.2 (1996=100). Based on revised data, this index increased 0.4 in May and increased 0.1 percent in April. During the six-month span through June, the leading index increased 1.5 percent, with eight out of 10 components advancing.

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Jobless claims dip in recent week
The number of new unemployment claims fell 11,000 to 339,000 for the week ended July 17, according to the Department of Labor. The four-week moving average for jobless claims also declined, by 2,500 to 336,750.

The four-week moving average is generally considered by economists to be the more reliable of the two because it smoothes out week-to-week volatility. Both rates remained below 400,000, which is the level economists use to define a weak labor market and a stable one.

Continuing claims for unemployment insurance fell 167,000 to 2.8 million for the week ended July 10. Continuing claims are those older than two weeks.

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Report outlines strategies to combat job offshoring 
As the offshoring of American jobs becomes one of the most intensely debated issues of this election year, the Progressive Policy Institute (PPI) released a report offering a comprehensive set of strategies to help America compete and win in the global economy.

This report is the second in a series by PPI examining the offshoring challenges faced by our country.

In Meeting the Offshoring Challenge, PPI vice president Rob Atkinson outlines the specific steps government can take to help the U.S. economy adapt and innovate. In the current offshoring debate, both sides of the ideological spectrum offer flawed and superficial responses to increased competition from low-wage developing nations. 

Neither the right's "get cheap" agenda of tax cuts and a reduction of worker supports, nor the left's inclination to erect walls with legislation that seeks to restrict offshoring, makes sense. Instead, Atkinson argues that we need a third-way approach, focusing on the creation of high value-added, knowledge-based jobs and an aggressive effort to ensure open markets and free trade.

"If we are to successfully compete in the global economy - and preserve support for globalization itself -- then, it is time for something completely different," Atkinson said. "It is incumbent upon government, working with industry, universities, labor unions, and other groups, to develop and implement a national strategy for competing and winning in the global economy."

Atkinson recommends a series of concrete steps to implement a three-part "adapt and innovate" agenda.

Raising our game
To meet the new global competition enabled by a wired world, America needs to once again focus on developing a national competitiveness strategy. This means boosting innovation through a more generous R&D tax credit, increased and more focused federal investments in research, and a national strategy to accelerate the transformation to a digital economy. It also means investing in American workers by creating a National Skills Corporation, providing more funding for math and science education, and making it easier for foreign scientists and engineers to work in the U.S.

Getting tough on distortions of free trade
Trade distortions and barriers -- such as currency manipulation, tariff and non-tariff barriers, and piracy -- are a key driver of America's large and persistent trade deficit. If the textbook benefits of trade are to be realized, there needs to be as little distortion to global markets as possible. This means that it is time for the federal government to get serious about taking steps to stop currency manipulation, enforce global trade rules against product and service piracy, open up foreign markets to U.S. goods and services, and end subsidies given to companies that move production overseas of products or services sold in the U.S.

Establish a new bargain with American workers
Because trade can be disruptive, it is time to offer American workers a new bargain: If workers accept a rapidly changing and highly competitive economy, government policy should empower individuals with effective tools to adapt to change. This means requiring companies to provide at least three months advance notice of layoffs due to offshoring; extending Trade Adjustment Assistance benefits to service workers; and providing wage insurance for offshored workers. In addition, government should improve programs, including unemployment insurance, focused on displaced workers generally, and do more to help communities impacted by offshored jobs.

"In the same way a champion athlete uses the challenge of a big game as motivation to train harder, we as a nation should use the challenge of offshoring as motivation to put policies in place that will make our economy a leader in the 21st century," said Atkinson.

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Timken, United Steelworkers begin formal negotiations
The Timken Co. and the United Steelworkers of America union agreed to enter early formal negotiations over the current labor contract, which expires in September 2005.

The current contract includes associates in steel making operations in the Canton, Ohio, district, in addition to the company's bearing plants in Canton.

The company announced the decision to begin the closure of the Canton bearing plants earlier this year. A favorable new labor contract could mitigate the impact of the plant closures on employment.

Consistent with prior practice, there will be no further comments until discussions are completed.

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Business Roundtable asks states to help boost productivity
Business Roundtable president John J. Castellani called on state legislators from across the country to make states “laboratories of productivity” in a partnership with business to grow the economy and create jobs.

In a speech to the National Conference of State Legislatures, Castellani described an agenda for economic growth backed by the Business Roundtable, which is comprised of CEOs of America’s leading companies, with combined revenues of $4 trillion and more than 10 million U.S. employees.

“The roundtable’s agenda will help us build on the economic expansion and job creation already strongly underway and involves states as full partners,” said Castellani.

“Long regarded as laboratories of democracy, let states now become laboratories of productivity – providing innovative solutions to economic challenges that we face, from improving human capital to removing the many disincentives that hold businesses back from doing their best,” Castellani said. “Let there be 50 unique ways for states to help meet our challenges – adding up to a new surge of economic expansion.”

America’s CEOs believe the U.S. economy will continue to grow and add jobs, as results of their June CEO Economic Outlook Survey showed.

“Clearly, the economic trends are headed in the right direction, showing the level of strength that goes with self-sustaining growth,” said Castellani. “Business Roundtable CEO members expect real gross domestic product to reach 3.7 percent for 2004. Close to 90 percent of the CEOs expect sales to increase, while more than 80 percent expect their U.S. employment to increase or remain steady.”

The roundtable is committed to policies for sustaining growth in the U.S., and Castellani identified four broad areas for growth: education and training, encouraging investment and innovation; expanding free trade and growing foreign economies.

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AMT predicts North American manufacturing surge
A combination of external forces will place domestic manufacturers in a position to bid competitively against manufacturers overseas for contracts, according to John B. Byrd III, president of the Association for Manufacturing Technology (AMT).

Byrd predicts this will result in a major upswing in North American manufacturing production within the next 12 months.

Rising international shipping rates, continually improving North American productivity, changes in currency values and the escalating demand for raw materials will result in a restructured international manufacturing landscape.

While some pundits predict more outsourcing of manufacturing, indisputable factual evidence points in the opposite direction, said Byrd.

"Shipping costs and the availability of affordable raw materials will reduce the ability of overseas manufacturers to continue domination of U.S. and European manufacturing in many categories," said Byrd. "As these market forces converge, they will create upheaval in the international manufacturing sector. The result of which will be a boom in the North American manufacturing sector unlike anything we have seen in the last quarter century."

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Boeing unveils X-45C unmanned aircraft model
A glimpse into the future was unveiled today when the Boeing Joint Unmanned Combat Air Systems (J-UCAS) X-45C full-scale model made its debut at the Farnborough International Air Show in Farnborough, Great Britain.

The model represents what the X-45C will look like when completed at the company’s St. Louis manufacturing facility in 2006.

Photo credit: Boeing

Assembly of this revolutionary aircraft began in June. It is scheduled to make its first flight in 2007. Boeing previously built two X-45A vehicles, now being flight-tested at Edwards Air Force Base, Calif.

The X-45C is 39 feet long with a 49-foot wingspan and cruises at 0.8 Mach. It will carry eight Small Diameter Bombs (SDBs); Boeing’s newest near-precision, 250-pound weapon; or the full range of Boeing’s Joint Direct Attack Munitions (JDAMs).

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Kingsley Coach looks to triple manufacturing capacity
Kingsley Coach Inc. started negotiations that could more than triple its current manufacturing capacity near its existing facility in Andover, Minn. The motor home and special-use coach manufacturer citing increased demand as its main motivator.

“Kingsley has seen explosive growth due to the recent increase in orders for our medical units, entertainment units and specialized homeland security command centers; and we have outgrown the manufacturing capacity at our existing facilities,” said Ralph Dickenson, CEO of Kingsley Coach. “With the current backlog of 16 coaches and the projected accelerating rate of growth for Kingsley over the balance of the year and beyond, we are looking to more than triple our current capacity and expect to consummate a lease in the very short term."

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OSHA launches whistleblower Web page
The Occupational Safety and Health Administration (OSHA) launched The Whistleblower Program Web page to provide a single source for obtaining detailed information on the laws with whistleblower protections administered by OSHA.

The new page consolidates a variety of whistleblower information previously available on the Web site. The page also includes supplements with access to other resources, including the Office of Administrative Law Judges and the Administrative Review Board.

The Web page includes direct links to the 14 laws with whistleblower protections administered by the agency, and lists the regulations governing the procedures for handling complaints under the various statutes. Detailed procedures on filing workplace discrimination complaints are provided, as is direct access to five separate OSHA fact sheets that focus on the whistleblower program.

OSHA's whistleblower protection responsibilities have grown from one statute (Section 11(c) of the OSH Act) to a total of 14 laws, the latest being the Corporate and Criminal Fraud Accountability Act of 2002, and the Pipeline Safety Improvement Act of 2002.

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Black & Decker to purchase Pentair's tools group
Pentair Inc. will sell its tools group to The Black & Decker Corp. of Towson, Md., for approximately $775 million. The transaction is expected to close in 2004, following the completion of customary regulatory clearance.

"In the 1990s, Pentair was largely defined by its top-performing tools businesses but, today, the water and enclosures businesses are the driving forces in our growth and expansion," said Randall J. Hogan, Pentair chairman and CEO. "The premier brands comprising our tools group continue to represent great value and have performed well against their competitors. However, the opportunities we see in the expansion of our water and enclosures groups made the sale of the tools group a logical step to build greater value for Pentair shareholders. The tools group is a strong business that performed well for Pentair, and we believe it will continue to grow and prosper under the ownership of Black & Decker."

Black & Decker is a global manufacturer and marketer of quality power tools and accessories, hardware and home improvement products, and technology-based fastening systems.

Pentair's tools group comprises brands including Porter-Cable, Delta, DeVilbiss Air Power, Oldham Saw, and FLEX, among others. The group employs approximately 4,200 people at facilities in North America, Europe and Asia.

"Black & Decker is a recognized leader in the power tool industry and has proven its ability to grow and sustain strong brand names," Hogan said. "We are very confident that we are placing our tools group in the hands of a team that can further build the tools businesses to benefit their customers, their suppliers and their employees."

Pentair noted that the proceeds from the sale of the tools group will be used to pay down debt associated with Pentair's acquisition of WICOR Industries, which recently was approved by the Federal Trade Commission and is expected to be complete at the end of July.

"Going forward, with Pentair's full resources focused on the growth and expansion of the water and enclosures groups, we will become a much stronger, more nimble company," Hogan said. "We also expect to be much better positioned to achieve with greater consistency the growth goals our shareholders expect."

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Industrial production declines in June
Industrial production decreased 0.3 percent in June after increasing 0.9 percent in May, according to the Federal Reserve. The gain in May was 0.2 percent point less than originally reported.

At 116.2 percent of its 1997 average, output was 5.6 percent higher than its level in June 2003. Capacity utilization for total industry slipped to 77.2 percent. The rate was 3.2 percent above its value in June 2003 but was 3.9 percent below its 1972-2003 average.

Manufacturing output edged down 0.1 percent in June; the overall factory operating rate declined 0.2 percent, to 76 percent.

The production of durable manufacturing goods was unchanged in June. The production of computer and electronic products climbed 1.5 percent in June and 21.4 percent (annual rate) for the quarter as a whole. Output in the aerospace and miscellaneous transportation equipment industry, which posted a third consecutive monthly gain, rose 0.6 percent. The production of machinery rose 0.7 percent. 

"If you discount the volatile auto manufacturing sector, manufacturing production actually rose by 0.1 percent thanks to healthy gains in machinery, primary metals, computers, aerospace production and other sectors," said National Association of Manufacturers president Jerry Jasinowski. "The manufacturers I talk to directly continue to report a strong manufacturing recovery."

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