By Peter Whoriskey
Wednesday, September 8, 2010; 3:06 AM

WINCHESTER, VA. – The last major GE factory making ordinary incandescent light bulbs in the United States is closing this month, marking a small, sad exit for a product and company that can trace their roots to Thomas Alva Edison’s innovations in the 1870s.

The remaining 200 workers at the plant here will lose their jobs.

“Now what’re we going to do?” said Toby Savolainen, 49, who like many others worked for decades at the factory, making bulbs now deemed wasteful.

During the recession, political and business leaders have held out the promise that American advances, particularly in green technology, might stem the decades-long decline in U.S. manufacturing jobs. But as the lighting industry shows, even when the government pushes companies toward environmental innovations and Americans come up with them, the manufacture of the next generation technology can still end up overseas.

What made the plant here vulnerable is, in part, a 2007 energy conservation measure passed by Congress that set standards essentially banning ordinary incandescents by 2014. The law will force millions of American households to switch to more efficient bulbs.

The resulting savings in energy and greenhouse-gas emissions are expected to be immense. But the move also had unintended consequences.

Rather than setting off a boom in the U.S. manufacture of replacement lights, the leading replacement lights are compact fluorescents, or CFLs, which are made almost entirely overseas, mostly in China.

Consisting of glass tubes twisted into a spiral, they require more hand labor, which is cheaper there. So though they were first developed by American engineers in the 1970s, none of the major brands make CFLs in the United States.

“Everybody’s jumping on the green bandwagon,” said Pat Doyle, 54, who has worked at the plant for 26 years. But “we’ve been sold out. First sold out by the government. Then sold out by GE. ”

Doyle was speaking after a shift last month surrounded by several co-workers around a picnic table near the punch clock. Many of the workers have been at the plant for decades, and most appeared to be in their 40s and 50s. Several worried aloud about finding another job.

“When you’re 50 years old, no one wants you,” Savolainen said. It was meant half in jest, but some of the men nod grimly.

If there is a green bandwagon, as Doyle says, much of the Obama administration is on board. As a means of creating U.S. jobs, the administration has been promoting the nation’s “green economy” – solar power, electric cars, wind turbines – with the idea that U.S. innovations in those fields may translate into U.S. factories. President Obama said last month that he expects the government’s commitment to clean energy to lead to more than 800,000 jobs by 2012, one step in a larger journey planned to restore U.S. manufacturing.

But officials are working against a daunting trend. Under the pressures of globalization, the number of manufacturing jobs in the United States has been shrinking for decades, from 19.5 million in 1979 to 11.6 million this year, a decline of 40 percent.

At textile mills in North Carolina, at auto parts plants in Ohio, at other assorted manufacturing plants around the country, the closures have pushed workers out, often leaving them to face an onslaught of personal defeats: lower wages, community college retraining and unemployment checks.

In Obama’s vision, the nation’s mastery of new technology will create American manufacturing jobs.

“See, when folks lift up the hoods on the cars of the future, I want them to see engines stamped “Made in America,” Obama said in an Aug. 16 speech at a Wisconsin plant. “When new batteries to store solar power come off the line, I want to see printed on the side, “Made in America.” When new technologies are developed and new industries are formed, I want them made right here in America. That’s what we’re fighting for.”

But a closer look at the lighting industry reveals that isn’t going to be easy.

At one time, the United States was ahead of the game in CFLs.

Following the 1973 energy crisis, a GE engineer named Ed Hammer and others at the company’s famed Nela Park research laboratories were tinkering with different methods of saving electricity with fluorescent lights.

In a standard incandescent bulb, in which the filament is electrified until it glows, only about 10 percent of the electricity is transformed into light; the rest generates heat as a side effect. A typical fluorescent uses about 75 percent less electricity than an incandescent to produce the same amount of light.

The trouble facing Hammer was that fluorescents are most efficient in long tubes. But long, linear tubes don’t fit into the same lamp fixtures that the standard incandescent bulbs do.

Working with a team of talented glass blowers, though, Hammer twisted the tubes into a spiral. The new lamps had length, but were also more compact.

“I knew it was a good lamp design,” he recalled recently. In retrospect, in fact, it was a key innovation. The Smithsonian houses Hammer’s original spiral CFL prototype.

At the time, however, the design had one big problem. Bending all that glass into the required shape was slow and required lots of manual labor.

“I used to say you would need 40,000 glass blowers to make the parts,” Hammer said. “Without automation, it was economically unfeasible. It was a lamp before its time.”

The company decided to make investments in other types of lighting then being developed.

Years passed. The next major innovator to try his hand at CFLs was Ellis Yan, a Chinese immigrant to the United States, who had started his own lighting business in China and then in the early ’90s turned his attention to the possibilities of CFLs.

To make CFLs, he had workers in China sit beside furnaces and bend the glass by hand. Even with the low-wages there, the first attempts were very expensive, clunky and flickered when turned on, he said. But he persisted.

“Everybody [in the industry] stayed back and was watching me,” he recalled. “No one else wanted to make the big investment for the next generation of technology.”

The business prospered and Yan’s factories in China employed as many as 14,000 – not so far off from the 40,000 glass blowers that Hammer had once imagined would be necessary. With new automation techniques, Yan is seeking to cut the number of his employees in China, where wages are rising, to 5,000 by year’s end.

Today, about a quarter of the lights sold in the United States are CFLs, according to NEMA, an industry association. Of those, Yan says, he manufactures more than half.

Someday soon, Yan says, he hopes to build a U.S. factory, though he so far has been unable to secure $12.5 million in government funding for the project.

Manufacturing in the United States would add 10 percent or more to the cost of building a standard CFL, he said, but retailers have indicated that there is a demand for products manufactured domestically.

“Retailers tell me people ask for ‘Made in the USA’ ” Yan said. “I tell them the product will cost 45 to 50 cents more. They say people will pay for it.”

Sales of the CFLs began slowly, but they spiked in 2006 and 2007, when federal and state government efforts promoted their use.

The Energy Department teamed with Disney to develop a public service announcement based on the Disney Pixar film “Ratatouille” to encourage the adoption of technologies such as CFLs. It was shown on CNN, HGTV and the Food Network.

Lawmakers in California and Nevada drafted legislation calling for higher efficiency standards for light bulbs. And in December 2007, Congress passed its new energy standards.

GE balked at the standards at first, knowing that they could impact their U.S. manufacturing. But the company also saw that with restrictions gaining momentum in more states and other countries, some kind of legislation was unavoidable. They decided to support the bill as long as it didn’t amount to a ban on traditional incandescents, but instead simply set energy standards.

“We obviously pointed out to legislators that the impact of an outright ban would be an elimination of some manufacturing operations,” said Earl Jones, senior counsel in government relations and regulatory compliance at the company. “But it was inevitable that some kind of legislation would be coming to the U.S.”

As expected, the new standards hurt the business in traditional incandescents.

The company developed a plan to see what it would take to retrofit a plant that makes traditional incandescents into one that makes CFLs. Even with a $40 million investment and automation, the disparity in wages and other factors made it uneconomical. The new plant’s CFLs would have cost about 50 percent more than those from China, GE officials said.

The company also makes halogen light bulbs, which are an innovative type of incandescent, and Sylvania is transforming its incandescent light bulb factory in St. Marys, Pa. to halogen as well.

But the era of traditional incandescents built in the United States was coming to an end.

In announcing the plant closure here, GE said in a news release that “a variety of energy regulations,” including those in the United States, “will soon make the familiar lighting products produced at the Winchester Plant obsolete.”

“For those who make incandescent bulbs the law was bad for business,” Yan said. “For people like us, it was very good.”

Temperatures at the traditional incandescent plant here can be sweltering because of the heat coming from the machines that melt the glass. It’s noisy, too, and workers wear ear plugs and safety glasses. And the pace of the work demands constant hustle, an atmosphere created by managers over the years who set up competitions among teams of workers striving to meet production goals. The winning line could post a black-and-white checkered flag on their machinery.

Jobs at the plant have been prized locally for years: They pay about $30 an hour.

One day after punching out recently, the workers gathered around the picnic tables by the employee entrance.

Some expressed grievances with the plant managers, who they note will get new jobs elsewhere, or with Congress for passing the energy legislation. Several took aim at the new new technology itself, noting that CFLs have mercury in them.

Some at the plant will be able to retire off their severance packages. Those with less time on the job, or those who are younger, have braced themselves for whatever comes next.

Some are taking classes at the Lord Fairfax Community College, hoping that familiarity with solar panels or HVAC might land them a job. Others scan the want-ads but don’t see how they will replace what they were making at the factory.

This small town has not been terribly hurt by the recession; local unemployment is running at 7.5 percent, well below the national average.

But good-paying jobs in manufacturing, they said, have become difficult to find.

Beverly Carter, 50, who feeds cardboard sleeves into a machine and makes sure it doesn’t jam, has worked at the plant for 32 years.

“It’s very hard to find a job like that around here,” she said.

Moreover, because many of the workers are in their 40s and 50s, some were nagged by worries that other employers would see them as washed up.

“We gave GE the best years of our lives,” Savolainen said.

Matt Madigan, 40, and his twin brothers, Wayne and Dwayne, also work at the plant.

“We’ve always had a lot of industry here in the valley, I’ve never had a problem finding a job,” he said. “A person really wanted to work, you could go from one factory to another. Everything nowadays is tougher.”

Source Article

http://www.washingtonpost.com/wp-dyn/content/gallery/2010/09/07/GA2010090704577.html?sid=ST2010090707038

A record number of federal dollars went to small businesses in 2009, although the federal government once again fell short of reaching its annual goal, according to a report from the Small Business Administration.

Nearly $97 billion or 21.9% of prime federal contracts went to small firms between Oct. 1, 2008 and Sept. 30, 2009. That’s up from the $93 billion that small businesses landed a year earlier, but still about $5 billion short of the 23% target established in a 1997 law.

Getty Images

“I think the goal is feasible for next year,” said Joe Jordan, the SBA’s associate administrator for government contracting and business development. The government has missed its target in recent years in part because some contracts, such as those for weapons systems or massive construction projects, are more suited to larger firms, he said.

The SBA’s fourth annual scorecard, issued Friday, evaluated 24 federal agencies on contracts awarded to small companies. For the first time, the agency used a letter-grade system in an effort to bring more transparency to the data. (See a complete list of agencies and their grades.)

Sixteen agencies received letter grades of A or B, meaning that they almost met or exceeded their goals for the year.

For example, the Department of Education got an A for surpassing its target of 12.8%, hitting 16.4%, or $244 million. The Social Security Administration received a B for nearly reaching its goal of 32.53%, with 32.47%, or $403 million.

The goals were negotiated by each agency and the SBA, and were based on both past performance and the number of feasible procurement opportunities available to small businesses.

Four of the agencies received a grade of D or F, including the Department of Justice, which awarded $1.9 billion or 24.5% of its prime contracts to small businesses, far from its 36.8% goal. The Office of Personnel Management awarded $224 million, or 14%, which was less than half of its goal, and received an F.

The SBA has previously been criticized by watchdog groups and the U.S. Government Accountability Office for failing to accurately track procured contracts, and for allowing large firms and fake companies to receive small-business contracts. The SBA says it has boosted efforts in the last year to remove fraud and errors in the procurement system, Mr. Jordan said.

Still, organizations such as the American Small Business League, which issued its own report on fiscal 2009 contract recipients, maintain that many government-hired firms claiming to be small are actually large businesses.

“Generally speaking, we are finding fraud and abuse at the same rate,” said Christopher Gunn, ASBL’s communications director.

The SBA says it plans to do more to make federal dollars available to small businesses, including “unbundling” or separating big-business contracts into separate contracts.

A number of agencies that received low grades say many of their prime contracts are better handled by larger companies, and that the SBA’s grading system should take subcontracts – which often go to small companies – into greater account.

One boost for small businesses has been the stimulus contracts that began rolling out in early 2009 as part of the $787 billion Recovery Act. Although stimulus jobs amount to only a small portion of overall government work, they are often modest in size and well-suited for small firms. Through early last month, small businesses have landed 32% of stimulus contracts, according to preliminary data.

The SBA’s scorecard indicates that the government, while showing improvement over 2008, is still not meetings its targets for women-owned or service-disabled veteran-owned companies, or for small businesses located in historically underutilized business zones or HUBZones. Federal agencies did meet their goals in awarding contracts to small “disadvantaged” businesses, a category that is based on the owner’s socioeconomic background.

For stimulus contracts, however, the government is meeting or exceeding its goals in all subcategories, Mr. Jordan said.

Write to Emily Maltby at emily.maltby@wsj.com

WASHINGTON (Reuters) – Economic growth was revised down to a sluggish 1.6 percent annual rate in the second quarter, dampened by the largest increase in imports in 26 years, the government said on Friday.

Gross domestic product growth previously was estimated at 2.4 percent and analysts had feared it would be pushed down even more sharply, but business investment was robust enough to partially cushion the blow from imports.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, would be revised to a 1.4 percent growth rate. The economy grew at a 3.7 percent pace in the first three months of the year.

“The instant reaction is that it isn’t good but we thought it might be worse, so there might be a bit of relief,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

U.S. stock index futures added to gains after the report, while Treasury debt prices extended losses. The U.S. dollar rose against the yen.

The soft GDP report came shortly before Federal Reserve Chairman Ben Bernanke addresses monetary policymakers at their annual retreat in Wyoming. Financial markets will be closely watching the 10 a.m speech for any hints the U.S. central bank may be mulling new measures to try to stimulate economic activity.

BAD POLITICAL OMEN

A slackening recovery poses a major political challenge for the Obama administration and the Democratic Party two months away from crucial mid-term elections that could shift the balance of power in Congress in favor of Republicans.

A Reuters/Ipsos poll this week found Obama’s approval rating at 45 percent, overtaken for the first time by a 52 percent disapproval rating.

Despite concerns the economy may be at risk of slipping back into recession, analysts said the most likely prospect was for continued soft expansion rather than a double dip downturn.

“There is no doubt we are losing momentum in the economic recovery,” said Robert Dye, senior economist at PNC Financial Services in Pittsburgh. “But if we define recession as two or more consecutive declining quarters of GDP, I think we are not going to go there.

“We are going to see a pattern where we may have declining GDP in one quarter followed by smaller gains in the next quarter, bouncing along the bottom as it were,” Dye said.

The recovery from the worst economic downturn since the Great Depression had been largely fueled by a $862 billion government stimulus package and businesses rebuilding inventories from record low levels.

IMPORTS CHOKING GROWTH

Growth in the last quarter was stifled by a 32.4 percent surge in imports, the largest since the first quarter of 1984, dwarfing a 9.1 percent rise in exports. That created a trade deficit, which sliced off 3.37 percentage points from GDP, the largest subtraction since the fourth quarter of 1947.

A smaller contribution from business inventories than initially estimated also restrained output. Business inventories increased only $63.2 billion, rather than $75.7 billion, adding a slim 0.63 percentage point to GDP.

Inventories, which had been a major driver of the recovery that started in the second half of 2009, increased $44.1 billion in the first three months of the year.

Excluding inventories, the economy expanded at a 1 percent rate, instead of the 1.3 percent pace reported last month.

There were some bright spots in the report, with growth in consumer spending revised up to a 2 percent rate from 1.6 percent. Consumer spending grew at a 1.9 percent rate in the first quarter.

Stubbornly high unemployment has dampened consumer spending, which normally accounts for 70 percent of U.S. economic activity. Spending added 1.38 percentage points to GDP last quarter.

Although businesses have been reluctant to hire new workers, they have been splurging on equipment and software, which also contributed to the surge in imports. Business investment was revised up to a 17.6 growth percent rate, the largest increase since the first quarter of 2006, from the previously estimated 17 percent pace.

Investment in equipment and software was the strongest since the fourth quarter of 1983. Spending on structures was revised to show a far smaller increase than previously estimated but still posted the first rise in spending on structures since the second quarter of 2008.

Growth in new home construction was revised down slightly to 27.2 percent from 27.9 percent. The sector, which was a drag on growth in the first quarter, was lifted by a spurt in building activity spurred by a popular home-buyer tax credit, which has since expired. The rate of increase was still the biggest since the third quarter of 1983.

Residential investment had contracted at a 12.3 percent rate in the first quarter.

The report also showed corporate profits rose 2.9 percent in the second quarter after increasing 5.8 percent in the first three months of the year.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

By Nick Zieminski

NEW YORK (Reuters) – Workers with specialized skills like electricians, carpenters and welders are in critically short supply in many large economies, a shortfall that marks another obstacle to the global economic recovery, a research paper by Manpower Inc (NYSE:MAN – News) concludes.

“It becomes a real choke-point in future economic growth,” Manpower Chief Executive Jeff Joerres said. “We believe strongly this is really an issue in the labor market.”

The global staffing and employment services company says employers, governments and trade groups need to collaborate on strategic migration policies that can alleviate such worker shortages. Skilled work is usually specific to a given location: the work cannot move, so the workers have to.

The shortage of skilled workers is the No. 1 or No. 2 hiring challenge in six of the 10 biggest economies, Manpower found in a recent survey of 35,000 employers. Skilled trades were the top area of shortage in 10 of 17 European countries, according to the survey.

While the short-term way to address to shortages is to embrace migration, the long-term solution is to change attitudes toward skilled trades, Manpower argues.

Since the 1970s, parents have been told that a university degree — and the entry it affords into the so-called knowledge economy — was the only track to a financially secure profession. But all of the skilled trades offer a career path with an almost assured income, Joerres said, and make it possible to open one’s own business.

In the United States, recession and persistent high unemployment may lead parents and young people entering the workforce to reconsider their options.

WELDERS NEEDED

The skilled trades category also includes jobs like bricklayers, cabinet makers, plumbers and butchers, jobs that typically require a specialist’s certification.

Older, experienced workers are retiring and their younger replacements often do not have the right training because their schools are out of touch with modern business needs. Also contributing to the shortage is social stigma attached to such work, Manpower argues in its paper published on Wednesday.

A poll of 15-year-olds by the Organization for Economic Cooperation and Development found only one in 10 American teenagers see themselves in a blue-collar job at age 30. The proportion was even lower in Japan.

Education could address that stigma. Students should be reminded that blue-collar work can be lucrative: skilled plumbers can make upwards of $75,000 a year, Manpower argues.

Overall, Manpower’s fifth annual talent shortage survey found 31 percent of employers worldwide are having difficulty filling positions due to the lack of suitable workers available in their markets, up one percentage point over last year.

for a link to Manpower’s research papers, click on: http://www.manpower.com/research/research.cfm

AN EMOTIVE ISSUE

Although the proportion of employers seeing shortages is still below pre-recession levels, shortages in some countries are more critical than the global average.

Majorities of those surveyed in Poland, Singapore, Argentina and Brazil reported shortages. In Japan, 76 percent had trouble finding the right workers, the highest reading among the 36 countries and territories.

Examples of successful, targeted migration include an Ohio shipbuilder that brought in experienced workers from Mexico and Croatia, and a French metal-parts maker that hired Manpower to find welders in Poland.

Obstacles to such migration include differing standards for certification in skilled trades, as well as political barriers to immigration, which remains an “emotive” subject in many countries, Manpower’s CEO said. Japanese employers, for example, have difficulty attracting skilled workers.

Sweden, on the other hand, is innovative and aggressive about strategic migration, for example by removing obstacles to workers being recertified in their specialty, Joerres said.

(Reporting by Nick Zieminski, editing by Dave Zimmerman

Founded in 2004, AvaLAN Wireless (“AvaLAN“) is a leading developer and manufacturer of long range industrial wireless radio technology. AvaLAN’s products are designed to enable affordable wireless connections in perimeter or remote locations. AvaLAN has grown each year since inception, shipping over 30,000 radios to networking, surveillance, digital signage, robotics, industrial automation, access control and smart grid markets. AvaLAN’s innovation concentrates on delivering robust and reliable wireless connections to devices at the network’s edge.

AvaLAN’s products have been implemented in such demanding environments as high interference indoor applications and long distance outdoor applications with range up to 30 miles. Specializing in the unlicensed 900MHz, 2.4GHz and 5.8GHz radio spectrum, AvaLAN offers a number of Ethernet bridge products and point-to-multi- point wireless networking products. AvaLAN’s products offer the ideal combination of price, data rate, security, interference avoidance, quality-of-service, and ease-of use that professional installers demand.

AvaLAN in 2010 will continue to expand their line of robust and reliable wireless products with new modules for easy integration and further expansion of solutions for machine-to-machine networking.

Made in USA Certified’s Co-founder and President, Julie Reiser stated, “In an industry that has been largely outsourced, AvaLAN’s commitment to R & D and manufacturing in the U.S.A. is a breath of much needed fresh air.”

“U.S. manufacturers perform half of all the R & D in the nation, driving more innovation than any other sector.  AvaLAN is proof that high technology R & D and manufacturing goes hand in hand and is crucial for a strong national economic strategy for jobs and a globally competitive America.”

About Made in USA Certified, Inc. (www.usa-c.com)

Made in USA Certified, Inc. is the leader in independent third party assurance verification for genuine Made in USA products and services. Seal of Certification assures consumer Made in USA or Product of USA claim is true – keeping you and your family safe, giving consumers peace of mind and helping to support and promote products and services Made in USA, one factory, one business at a time. Trust but Certify!™

Just a few years ago, American Apparel (APP) was held up as a model for American clothing retailers, thanks to hip marketing campaigns, profitable earnings, a high-flying CEO in Dov Charney and products entirely made in the USA.

But now a series of financial troubles coupled with allegations of shoddy labor practices leaves the company’s future in serious doubt, with signs American Apparel may go away sooner rather than later.

On Tuesday, according to CNNMoney, American Apparel said it may default on loan agreements with its lenders, citing ongoing weakness in its business. This news comes just months after negotiating a $94 million loan from British private equity firm Lion Capital and is a far cry from more profitable times as recent as February 2009. While American Apparel is in talks with creditors to avoid a default, if it does come to pass, the company warns that it may not have sufficient liquidity to stay in business for the next 12 months.

Falling Profits, Ballooning Debt

The news of a potential loan default also comes the same day that American Apparel reported provisional second-quarter earnings for the period ended June 30. As was the case for the first quarter, the stats are especially grim. The company expects same-store sales to drop 16% compared to same period last year and will report an operations loss of between $5 million and $7 million for the quarter, compared with a $7.3 million in profit earned 12 months ago.

Debt is expected to balloon by almost $30 million to total $120.3 million. So far the stock market has responded accordingly, with shares currently trading just over $1.

American Apparel’s financial problems have persisted for quite a while. Though the company filed a provisional first-quarter report in May, it released the official numbers only today — and they included an additional impairment charge of $4.2 million on top of the already pretty dismal previously reported results.

American Apparel had to release its 10-Q filing for the first quarter by yesterday in accordance with an agreement it struck with the New York Stock Exchange, which had threatened to delist the company. (Delisting from a stock exchange is often considered to be a prelude to bankruptcy.)

The retailer’s longtime accounting firm, Deloitte & Touche, also quit at the end of July, but it’s still tasked with investigating the clothing firm’s consolidated financial statements for all of 2009 and current and projected earnings for 2010. And the once-hefty advertising budget for its racy campaigns has been chopped by more than 40%.

Settling With Woody Allen

American Apparel has also faced criticism for its hiring practices — specifically targeting attractive young women and freezing out anyone who doesn’t fit that bill — and for Charney’s personal behavior, which has seen him slapped with a number of sexual harassment suits. The company also recently settled with Woody Allen for $5 million in the wake of Allen’s lawsuit for using his image on billboards without his permission.

All these factors add up to the likelihood of American Apparel’s bankruptcy, a fate that Jezebel attributes to the company expanding “beyond the point of rationality or even sanity.” All of the marketing and brand awareness can only go so far to compensate for mismanagement and endless legal battles. For American Apparel, they may not be enough to save it from doom.

Business Week

Andy Grove: How America Can Create Jobs

The former Intel chief says “job-centric” leadership and incentives are needed to expand U.S. domestic employment again

By Andy Grove

How to Make an American Job

Related Items

• How to Build an American Job

Recently an acquaintance at the next table in a Palo Alto (Calif.) restaurant introduced me to his companions, three young venture capitalists from China. They explained, with visible excitement, that they were touring promising companies in Silicon Valley. I’ve lived in the Valley a long time, and usually when I see how the region has become such a draw for global investments, I feel a little proud.

Not this time. I left the restaurant unsettled. Something did not add up. Bay Area unemployment is even higher than the 9.7 percent national average. Clearly, the great Silicon Valley innovation machine hasn’t been creating many jobs of late—unless you’re counting Asia, where American tech companies have been adding jobs like mad for years.

The underlying problem isn’t simply lower Asian costs. It’s our own misplaced faith in the power of startups to create U.S. jobs. Americans love the idea of the guys in the garage inventing something that changes the world. New York Times columnist Thomas L. Friedman recently encapsulated this view in a piece called “Start-Ups, Not Bailouts.” His argument: Let tired old companies that do commodity manufacturing die if they have to. If Washington really wants to create jobs, he wrote, it should back startups.

Friedman is wrong. Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.

The scaling process is no longer happening in the U.S. And as long as that’s the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.

What Went Wrong?

Scaling used to work well in Silicon Valley. Entrepreneurs came up with an invention. Investors gave them money to build their business. If the founders and their investors were lucky, the company grew and had an initial public offering, which brought in money that financed further growth.

I am fortunate to have lived through one such example. In 1968 two well-known technologists and their investor friends anted up $3 million to start Intel (INTC), making memory chips for the computer industry. From the beginning we had to figure out how to make our chips in volume. We had to build factories, hire, train, and retain employees, establish relationships with suppliers, and sort out a million other things before Intel could become a billion-dollar company. Three years later the company went public and grew to be one of the biggest technology companies in the world. By 1980, 10 years after our IPO, about 13,000 people worked for Intel in the U.S.

Not far from Intel’s headquarters in Santa Clara, Calif., other companies developed. Tandem Computers went through a similar process, then Sun Microsystems, Cisco (CSCO), Netscape, and on and on. Some companies died along the way or were absorbed by others, but each survivor added to the complex technological ecosystem that came to be called Silicon Valley.

As time passed, wages and health-care costs rose in the U.S. China opened up. American companies discovered that they could have their manufacturing and even their engineering done more cheaply overseas. When they did so, margins improved. Management was happy, and so were stockholders. Growth continued, even more profitably. But the job machine began sputtering.

The 10X Factor

Today, manufacturing employment in the U.S. computer industry is about 166,000, lower than it was before the first PC, the MITS Altair 2800, was assembled in 1975 (figure-B). Meanwhile, a very effective computer manufacturing industry has emerged in Asia, employing about 1.5 million workers—factory employees, engineers, and managers. The largest of these companies is Hon Hai Precision Industry, also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenues last year were $62 billion, larger than Apple (AAPL), Microsoft (MSFT), Dell (DELL), or Intel. Foxconn employs over 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard (HPQ), Intel, and Sony (SNE) (figure-C).

http://www.businessweek.com/magazine/content/10_28/b4186048358596.htm

TransMedia Group (www.transmediagroup.com) said it will conduct a national PR campaign for the industry leader in third party certification for genuine “Made in USA” products and services.

According to TransMedia’s founder and CEO Thomas J. Madden, the campaign will be designed to build nationwide awareness that doing business with companies showing the “Made In USA Certified” seal is one of the best things consumers and businesses can do to help the economy and create jobs.

Made in USA Certified president and co-founder Julie Reiser said TransMedia will  “maximize exposure for the Made in USA Certification program and the branding/marketing opportunity it offers companies that promote their products and or services as ‘Made in USA.’”

Madden called the Made in USA Certified Seal an “instantly recognizable symbol that shows that an independent company has verified the supply chain of a company’s product(s) and they are compliant with current U.S. laws and regulations in regards to making the claim ‘Made in USA.’”

“‘Make It in America’ is a key initiative on Capital Hill and across much of Corporate America as it has become increasingly obvious that our Nation’s economic recovery, growth and economic sustainability must consist of a strong manufacturing/jobs base,” said Madden.

House Democrats were briefed recently on a poll conducted this spring by The Alliance for American Manufacturing, which found that voters are anxious about the nation’s mounting debt to China. Key voting blocs named the loss of manufacturing jobs as a top worry, the survey found.  Additionally, White House senior adviser David Axelrod said, “We have a vision of how to build a stronger economy,” and “Make It In America is an essential element.”

Reiser said TransMedia was selected from a list of top PR firm candidates because of Madden’s and TransMedia’s 30-year-plus history representing America’s leading companies, including AT&T, Kellogg’s Company, Rexall Sundown and The City of New York, for whom the firm created a campaign promoting fair housing, which earned it a Bronze Anvil Award from the Public Relations Society of  America.”

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The U.S. trade deficit widened to near a two-year high in June, as imports from its largest trading partners ballooned.

The shortfall in international trade of goods and services surged 19% to $49.90 billion, the Commerce Department said Wednesday.

The deficit is much larger than the Commerce Department had calculated in its initial second-quarter growth estimate, and the figures are likely to weigh in a downward revision of U.S. gross domestic product growth during the period.

Economists surveyed by Dow Jones Newswires had expected the deficit to expand to $42.7 billion in June. The deficit in May was revised down to $41.98 billion from an initial estimate of $42.27 billion.

The U.S. trade gap with China expanded to $26.15 billion in June, the widest level since October 2008 and a 17% gain on the previous month’s bilateral deficit of $22.28 billion. Imports expanded $3.83 billion, while exports slowed by $38 million. Earlier this week, China’s trade surplus ballooned far above market expectations, hitting $28.7 billion as exports grew faster than imports.

The figures are likely to continue to give ammunition to federal lawmakers pressuring the Obama administration to take China to task on its currency policy. Although China earlier this year announced a move to a more flexible exchange rate, lawmakers say the yuan is still artificially low, undermining U.S. competitiveness. Legislators are threatening to pass retaliatory laws that would penalize imports from countries that are deemed to be manipulating their currency.

In trade with other large partners, the U.S. registered an expanding deficit with Mexico at $6.21 billion while the deficit with the European Union ballooned by 26% to $7.76 billion. The deficit with Japan surged 45% to $5.25 billion while with Canada, it grew to $2.58 billion, up $320 million from the previous month.

Trade had been one of the pillars of support to the economy during the recent recession but has weighed on recovery growth.

The real, or inflation-adjusted deficit, which economists use to measure the impact of trade on GDP, climbed to $54.14 billion in June from $45.99 billion the month before, Commerce said.

“This is spectacularly terrible,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics. He expected the inflated deficit to shave up to half a percentage point off growth.

Joshua Shapiro, chief U.S. economist for MFR, said that the trade data, combined with the expected revisions to inventories and nonresidential construction, could push estimates of second-quarter real GDP growth down to 1%, compared with initial estimates of 2.4%.

U.S. exports contracted 1.3% to $150.45 billion, from $152.44 billion in May. Imports increased at a faster rate, expanding 3.1% to $200.35 billion from $194.42 billion.

Imports of consumer-goods imports increased 7.8%, driven by pharmaceuticals and household goods, auto imports were up 6.6% and capital goods rose 1.2%.

The U.S. bill for crude oil imports in June rose to $22.60 billion from $21.54 billion the month before, as volumes surged nearly 32 million barrels to 311.93 million barrels. The average price for oil fell nearly 6%, or $4.49 a barrel, to $72.44 a barrel.

The U.S. paid $28.02 billion for all types of energy-related imports, up from $27.60 billion in May.

Imports of foreign-made consumer goods like pharmaceuticals, toys and apparel surged $3.1 billion. Auto and related parts imports jumped $1.29 billion, while purchases of foreign-made capital goods such as computers rose $462 million. Food and feed imports increased $33 million.

Imports of industrial supplies decreased $186 million in June, however, amid declines in fuel oil and other petroleum products.

Breaking down exports, U.S. sales abroad of capital goods fell $1.43 billion, with declines across most products. Exports of industrial supplies, such as fuel oil, decreased $1.01 billion. Consumer goods exports increased marginally by $123 million in June, while auto exports grew by $233 million.

Meanwhile, exports of food, feed, and beverages went down by $310 million.

European Pressphoto AgencyStevedores ride past container berths in Yingkou, Liaoning Province in China.

BEIJING—China’s trade surplus is set to balloon again unless the government takes more steps to support domestic consumption, including letting its currency strengthen, the International Monetary Fund warned in its annual review of the nation’s economy.

The assessment by the IMF staff, published Thursday, reflects the growing concern among some economists and officials that a shift toward a more sustainable pattern of global economic growth could be stalling as the worst of the crisis recedes and countries return to business as usual. Some of the report’s conclusions—including its contention that China’s currency is “substantially” undervalued—were disclosed by the IMF earlier this week.

The fact that the report, known as an Article IV review, was released at all still marks an improvement in the sometimes-testy relationship between China and the fund. China had blocked publication of last year’s review, which was only completed after the IMF backed away from calling China’s currency “fundamentally misaligned.”

Yet the debate over currency policy is only part of the discussion over the broad direction of the Chinese economy, which both the IMF and China’s government agree still depends too much on exports. Supporting domestic consumption instead “will reduce China’s reliance on external demand and better insulate the economy from shocks in overseas markets,” the IMF said.

China gave domestic demand an enormous boost with its stimulus program to combat the effects of the financial crisis, resulting in a surge in imports of raw materials and equipment to feed a construction boom. As a result, China’s current account surplus—the broadest measure of its trade balance—fell sharply, reaching 4.5% of gross domestic product in the first quarter of this year, less than half the peak level of nearly 11% of GDP in 2007.

For China to ensure that its trade surplus continues to decline will be “an exceptionally complicated exercise in macroeconomic engineering” that “will require concerted action on multiple fronts,” the IMF said. Although China has taken some steps in the right direction, including the recent loosening of its currency’s link to the U.S. dollar, the IMF said, “The critical mass of policy reforms that will be needed to realize this goal is not yet fully in place.”

Achieving a shift toward lower trade surpluses in nations like China, and smaller trade deficits in nations like the U.S., should help global economic growth to be faster and more broad-based, the leaders of the Group of 20 major economies agreed at their summit meeting last month.

But with China’s government now gradually phasing out its stimulus program, and economies in the rest of the world getting closer to normal, the factors that drove the trade surplus down are in danger of being exhausted, the IMF report said. Earlier this month, the U.S. Treasury made a similar argument, warning that “China’s trade surplus is likely to rise again as the rest of the world recovers.”

The IMF noted that China’s government disagreed with its assessment, arguing that continued fast growth, rising wages and already-implemented reforms will ensure that the current-account surplus keeps falling, to about 4% of GDP over the next few years.

The IMF urged China to press ahead with measures such as allowing higher and more market-driven interest rates; reducing taxes to encourage consumption; improving healthcare coverage; accelerating urbanization by reducing restrictions on migration; and raising low, government-set prices of energy and raw materials.

China also needs to adjust its currency, the IMF said, which despite official promises of greater flexibility has so far moved very little. “The current undervaluation is counterproductive and acts as a headwind to increasing private consumption,” the report said. “A stronger currency will help increase the purchasing power of households, raise the labor share of income, and reorient investment toward those sectors that serve the domestic market.”

China has contested that analysis, and the report notes the Chinese government believes the currency’s value is now “much closer to equilibrium than at any time before.”

The IMF’s focus on medium-term structural issues reflects its view that the Chinese economy’s recovery is now solidly established, with little danger of high inflation. The fund expects China’s headline inflation rate to fall in the second half of this year and hover around 2% to 3% annually in coming years.

The IMF noted that China worries that efforts to cut budget deficits in Europe, the U.S. and Japan could weaken global growth, while China itself has room for more stimulus if needed. However, it said that after the lending binge that resulted from the previous stimulus plan, China also needs to deal with risks to the banking sector as well as continued risks of a bubble in the real-estate market.

Write to Andrew Batson at andrew.batson@wsj.com