Near-term Trends

It’s beginning to look like a tolerably good Christmas season. For one, employment has begun to
pick up — though some isolated setbacks can’t entirely be ruled out. Also calculated to loosen
consumer purse strings: Improving family finances. Some of this improvement, of course, is due to
the brightening job situation and modest new hikes. But an even more important factor has been the
rather impressive decline in consumer debt over the past year or two. At last report, for example,
household debt came to 108.5-percent of after-tax income. That’s well under the 129.3-percent peak
noted just before the recent business downturn. Nor does the servicing of this debt seem to present
that much of a problem — with the percent of after-tax income used to pay down loans slipping from
a 2007 peak of 14.1 percent to a relatively low 10.7 percent. Growing household net worth —
currently put at $62.7 trillion — up 17 percent from recession lows — is still another indication
of more spending. Citing all these positives, virtually all forecasters are now predicting a
sizable fourth-quarter sales gain — with the prestigious National Retail Federation calling for a
strong 4.1-percent jump over comparable 2011 levels. Moreover, there’s increasing evidence that the
U.S. textile and apparel industries will be prime beneficiaries. Note, for example: The Institute
for Supply Management’s latest purchasing executive survey, which notes new demand gains at the
grass roots level; and the latest retail sales figures, which are running a solid 5-percent ahead
of last year.

The Employment Impact

Given all the above, it’s not surprising that textile mill workforce declines have slowed
down substantially. More importantly, this trend should persist — into next year and probably well
beyond that point. At least that’s what is suggested in the recently released 2012-13 U.S. Bureau
of Labor Statistics Occupational Outlook Handbook — a government study providing industry
projections going out through the end of the current decade. To be sure, the numbers for basic mill
products like fibers and fabrics indicate about a 13-percent reduction in labor requirements over
the current 2010-20 decade. But remember, that’s over a relatively long 10-year period. Convert to
an annual rate of change, and that comes to only a small 1-percent-per-year attrition. And this
relatively modest slippage is virtually the same for more highly fabricated mill products like
carpets, home furnishings, and industrial applications. Point to keep in mind: These projected
drops pale in comparison to the much heftier tumbles recorded over the previous 15-20 years. To be
sure, the numbers aren’t quite as encouraging in the downstream apparel sector, where domestic
employment is expected to fall at about a 4-percent annual rate over this extended period. But
here, too, the falloff marks an improvement over some of the previous precipitous declines. In
short, the U.S. textile and apparel industries are expected to continue as major players in U.S.
manufacturing employment through the foreseeable future — with their combined demand expected to
provide a significant 275,000 domestic factory jobs as far out as 2020.

Other Upbeat Signs

This same government report also shows U.S. mills holding their own vis-à-vis the rest of
the economy. Thus, the 1-percent annual rate of decline in mill employment projected for the
2010-20 period is pretty much duplicated by expectations of a similar slippage in the aggregate
U.S. manufacturing workforce. Meantime, another aspect of labor -productivity, or output per worker
— also indicates that textiles are doing well compared to the rest of the economy. Most industry
analysts, for example, believe that the 3-percent annual gains in the U.S. industry’s efficiency
over recent years will continue through the remainder of the decade. That’s actually a full
percentage point above new government estimates for overall U.S. manufacturing productivity. A few
words are also in order on some other positive implications of these expected efficiency gains. For
one, it suggests that mill unit labor costs won’t be rising, since these efficiency advances should
easily offset projected pay boosts of almost the same magnitude. Put another way, it means that
mill unit labor costs should remain basically unchanged. Another upbeat inference can be drawn by
comparing textile’s expected 3-percent annual productivity gains to the considerably smaller
1-percent annual slippage in the industry’s employment noted earlier. The implication here: an
actual increase in mill output over the next few years. While Textile World feels this could be a
bit optimistic, it’s still another indication of a continuing viable U.S. industry.

November 20, 2012