Oil Price Fallout: Jobs Coming Home?
As shipping costs rise, businesses jump ship.
By SHARON ALFONSI
June 24, 2008
As the cost of shipping continues to soar along with fuel prices, homegrown manufacturing jobs are making a comeback after decades of decline.
While it once cost $3,000 to ship a container from a city like Shanghai to New York, it now costs $8,000, prompting some businesses to look closer to home for manufacturing needs.
Furniture designer Carol Gregg used to have her signature Chinese chests assembled in China, but such a luxury no longer seems viable, considering that some of her pieces now cost five times more to ship.
So now Gregg is having the chests made in North Carolina, simply because its cheaper.
Some large companies like Crown Battery are cutting expenses by moving jobs from Mexico to Ohio. And hair care company Farouk Systems plans to shift all of its production from China to Houston this summer â€” bringing with it 1,000 jobs.
Globalization, in Reverse
The rise in transportation costs are fueling what some economists are calling "reverse globalization." For instance, DESA, a company that makes heaters to keep football players warm, is moving all its production back to Kentucky after years of having them made in China.
"Cheap labor in China doesn't help you when you gotta pay so much to bring the goods over," says economist Jeff Rubin.
Some local manufacturers have suddenly found themselves in the thick of boom times.
"In December, we had three employees here. We were just getting set up. Now it's 14," says Casey Hearn, who owns a furniture manufacturing business in North Carolina.
Other sectors of U.S. manufacturing may see a boost in jobs as well. Rubin says the U.S. steel industry is poised to reap benefits.
"It's not just about labor costs anymore," says Rubin. "Distance costs money, and when you have to shift iron ore from Brazil to China and then ship it back to Pittsburgh, Pittsburgh is looking pretty good at 40 bucks an hour."
And after decades of watching manufacturing roll out of North Carolina, Hearn feels encouraged by the trend.
"If the price of oil goes up, then I think we'll get more and more calls," says Hearn.