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Cramer: Mass layoffs in manufacturing don't matter

Cramer: Mass layoffs in manufacturing don't matter

Earlier this week, the Institute for Supply Management (ISM) reported that the manufacturing sector fell to levels not seen since the great recession in 2009. While many were concerned about this horrendous reading, Jim Cramer wondered if the manufacturing economy even matters to the U.S. anymore.

"Does it provide that many jobs? Will lots of people be thrown out of work if it slows down more than it already has?" the "Mad Money" host asked.

On the eve of an all-but-certain raise in interest rates from the Federal Reserve, many investors fear that a hike in rates could prompt mass layoffs in manufacturing. The ISM manufacturing reading was 48.6, down from 50.1 in October. Economists were expecting a reading higher than 50. This was a shocking number to Cramer.

But the idea of mass layoffs in the manufacturing sector that could occur if the Fed raises rates? I'm not buying it. Nor am I concerned
Jim Cramer
An assembly worker works on Ford Mustangs at the Ford Motor Flat Rock Assembly Plant in Flat Rock, Michigan.
Rebecca Cook | Reuters

Rather than worry about a Fed rate hike, Cramer said that the most important question right now should be if manufacturing even matters anymore. The U.S. is much different than China, where report with a reading below 50 has severe international repercussions.

The current contraction in China has roiled every commodity and machinery market in the world. Yet the reading in the U.S. does not even seem to matter anymore. In fact, Cramer questioned that perhaps the Fed is making a bet that the U.S. is a service economy now.

That means, to keep wages down this country needs more jobs in service. And perhaps with unemployment this low, the U.S. does not have them.

"Let's face it, ever since we decided to embrace globalization as a religion, ever since we decided that free trade meant no tariffs for what pretty much any other country makes and sends here — we put a for sale sign on all of the factories in this country," Cramer said.

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After all, with lower health costs and more pollution in countries like Mexico, everything is cheaper. More and more goods are being pushed to China and Vietnam.

Twenty-five years ago, when there was still a robust manufacturing economy, the Fed's next move could be a disaster. In today's world, perhaps it won't make a difference. In Cramer's perspective the only real industrial marginal hiring that was happening was in the oil patch, and now that that is gone.

So, Cramer knows that the housing market could get overheated, and that autos are at peak production.

"But the idea of mass layoffs in the manufacturing sector that could occur if the Fed raises rates? I'm not buying it. Nor am I that worried," Cramer said. (Tweet This)

After decades of outsourcing manufacturing jobs, maybe we just don't have the masses to lay off anymore.

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