Archive for February, 2011

How Accurate is the Federal Unemployment Rate?

Tuesday, February 22nd, 2011

Each month, the Bureau of Labor Statistics (BLS) of the U. S. Department of Labor sends out a press release announcing the total number of employed and unemployed persons in the United States for the previous month, along with many characteristics of such persons.  Many people think that the federal unemployment rate is derived by adding the total of claims filed for unemployment insurance benefits under State or Federal Government programs.  This isn’t the case.  Let’s examine how the unemployment rate is generated to see how accurate it is.

The January 2011 official unemployment rate was 9.0%, down from 9.4% in December, and a high of 10.2% in November 2009 during the Great Recession.  Some people claim that if the unemployment rate were calculated as it was during the Great Depression, the current rate would be close to double what it is and nearly as high as the rates back in the 1930s.  The problem with this claim is that there was no official unemployment rate until the 1940s.  The rates we use today for this era were reconstructed after the fact based on the work of three economists:  Stanley Lebergott, Michael Darby, and G. H. Moore.  Libergott included those on work-relief as unemployed while Darby did not.  Libergott and Darby agreed on an unemployment rate of 3.2% in 1929 rising to a high of 23.6% and 22.9% respectively in 1932.  After the work-relief programs began in 1934, their rates diverged to a peak in 1936 of 16.9% compared to 9.9%.  If you compare the two series, it appears that between 1934 and 1941, WPA projects took two to 3.5 million workers off the unemployment roles, and shaved the rate by 4 to 7 percentage points.

During the Great Depression, a number of ad hoc attempts were made to calculate the rate using various sampling methods, which led to widely divergent results.  In 1940, the Work Projects Administration (WPA) began publishing statistics on those working, those looking for work, and those doing something else based on a survey of a sample population.

In 1962, high unemployment and two recessions in three years led to the formation of The President’s Committee to Appraise Employment and Unemployment Statistics to reassess the concepts used in gathering labor-market data by the BLS.  The Committee suggested some improvements, and the BLS tested new survey techniques for several years, before making a number of changes in 1967.  The Committee also recognized the need for more detailed data on persons outside the labor force, and the BLS began collecting information on those who wanted a job although they were not looking for work.

Among the most important changes was the requirement that workers must have actively sought employment in the last four weeks in order to be classified as unemployment.

In 1976, the BLS first published the original U1 to U7 tables to provide more information on the hidden unemployed, who would be part of the labor force in a full-employment scenario.   These tables were revised in the 1994 redesign (becoming U1 to U6) and added the requirement that discouraged workers must have sought work in the prior year.

U1:  Percentage of labor force unemployed 15 weeks or longer.

U2:  Percentage of labor force that lost jobs or completed temporary work.

U3:  Official unemployment rate that is the proportion of the civilian labor force that is unemployed but actively seeking employment.

U4:  U3 rate + “discouraged workers who have stopped looking for work.

U5:  U4 rate + other “marginally attached workers” who would like and are able to work, but have not looked for work recently.

U6:  U5 rate + part-time workers who want to work full time, but cannot due to economic reasons.

These unemployment rates are derived from a monthly survey of 60,000 households known as the Current Population Survey (CPS).  The CPS sample is selected to be representative of the entire population of the U. S.  All of the counties and county-equivalent cities in the country are grouped into 2,025 geographic areas (sampling units), and the Census Bureau then designs and selects a sample consisting of 824 of these geographic areas to represent each state and the District of Columbia.  The sample is a State-based design and reflects urban and rural areas, different types of industrial and farming areas, and the major geographic divisions of each state.  This mix of geographic areas to represent each state is important because there is a wide range of unemployment rates from state to state.  For example, North Dakota had the lowest rate for December 2010 at 3.8%, while Nevada had the highest rate at 14.5%, with California not far behind at 12.5%.

Every month, 25% of the households in the sample are changed, so that no household is interviewed more than four consecutive months.  After a household is interviewed for four consecutive months, it leaves the sample for eight months, and then is interviewed for the same four calendar months a year later, before leaving the sample for good.  This procedure results in approximately 75 percent of the sample remaining the same from month to month and 50 percent from year to year.

Each month, 2,200 Census Bureau employees pose questions regarding whether individuals in the home have a job or if they are laid off.  Other questions query whether the persons are available for work, and the techniques they have used to look for work in the preceding month.  At the time of the first household interview, the interviewer prepares a roster of the household members, including their personal characteristics, date of birth, sex, race, marital status, education, and so on, and their relationships to the head of household.  The interviewers don’t decide on the respondents’ labor force classification.  They simply ask the questions in the prescribed way and record the answers.  Based on information collected in the survey and definitions programmed into the computer, individuals are then classified as employed, unemployed, or not in the labor force.

This information is then compared as a percentage to the number of people in the labor force, which consists of all persons employed or unemployed over the age of 15 and not on active duty in the Armed Forces or in an institution (correctional facility, residential nursing, or mental health care facility.)

The information collected is adjusted to account for independent population estimates across the entire nation.  These adjustments take into account factors such as state of residence, sex, age, and race.  The rate is calculated by dividing the total of the civilian labor force by the number of unemployed to get the percentage of unemployed.  The BLS releases the data collected on the first Friday of each month as the national unemployment rate.

Is it possible to skew the numbers to make the unemployment rate look better than it really is?  Yes, and there are two main ways to do it:  (1) select the geographic areas that have the lowest rate of unemployment as your sample to come up with a lower number of unemployed persons or (2) lower the number representing the total of the civilian labor force so that you get a lower percentage when dividing that number by the number of unemployed.   In addition, methods one and two could be combined.

It’s widely understood that it takes about 200,000 new jobs each month to stay even with the workers entering the labor force.  Economists say that it takes the creation of about 3,000,000 jobs to lower the unemployment by a full percentage point.  They also say that you need 5% GDP growth to lower the rate by a full percentage point.  Neither of these occurred in 2010.  The national GDP growth was only 2.8% for 2010 and is predicted to grow by only 3.5% in 2011.  Less than a million new jobs were created last year.  Separate government data shows that only 36,000 net jobs were created in January, barely a quarter of the number needed to keep pace with population growth.  Taking this into consideration, does it seem real that the official U3 unemployment rate dropped by .4 percent this January from 9.4% to 9.0%?  Remember, this is the same administration that directed the BLS to stop producing the jobs in manufacturing chart last March when the number of manufacturing jobs dropped below twelve million.

What did happen was that 2.2 million left the labor force in the past year, meaning that there was a lower number to use as the numerator for dividing the number of unemployed to get the unemployment percentage.   These are people who have given up looking for a job.  The real unemployment rate is the U6 rate that includes the “discouraged workers” and workers with a part-time job that want a full-time job.  The U6 rate on the BLS website for January is 16.1%.

According to a Gallup poll released on February 12th, the U. S. unemployment rate is 10.2%, and the underemployed rate (equivalent to the U6 rate) is 19.7%, rounded off to 20% on the Gallup website.  Another recent Gallup poll shows that 35% of Americans feel unemployment is the biggest challenge facing the nation right now.

Involuntary unemployment has devastating effects on American workers and their families.  Long-term unemployment leads to depression and despair to illness.  Loss of American employment decreases household wealth, reducing consumption of locally manufactured goods, which further stifles job creation.  Joblessness, homelessness, and hopelessness are the end result.

We need a plan to rebuild America to create the jobs Americans need.  The Reshoring Initiative is a good start to bring manufacturing work back to the United States from offshore to create more higher paying jobs for Americans.  Only then will the unemployment rate truly drop, and local, state, and budget deficits will begin to diminish.

Why Isn’t Economic Upturn Leading to Job Gain?

Tuesday, February 15th, 2011

According to the National Bureau of Economic Research, and independent group of economists, the Great Recession ended in June 2009.  It was the longest and deepest downturn for the U. S. economy since the Great Depression.  Some 20 months later, the average American would be inclined to dispute this opinion based on the lack of job opportunities.  What is the reality?

The January 2011 “Report on Business,” by the Institute for Supply Management stated that the manufacturing sector expanded for the 18th consecutive month.  Norbert J. Orwe, CPSM, chair of the Manufacturing Business Survey Committee said, “The manufacturing sector grew at a faster rate in January as the PMI registered 60.8 percent, which is its highest level since May 2004 when the index registered 61.4 percent…New orders and production continue to be strong, and employment rose above 60 percent for the first time since May 2004.”  This wasn’t just an upturn in a few industries – 14 of the 18 manufacturing industries reported growth in the PMI in January.

The PMI is the Purchasing Management Index, based on data compiled from purchasing and supply executives nationwide.  A PMI reading above 50% indicates that the manufacturing economy is expanding and below 50% indicates that it is declining.  At the very worst of the Great Recession, it was 32.5% in December of 2008.  Lakshman Achuthan, managing director of Economic Cycle Research Institute said, “Gross domestic product has recovered about 70% of its pre-recession level.”

While the national unemployment rate finally dropped to 9.0% in January from 9.4% in December, many experts realize that this is because thousands of men and women dropped off the unemployment rolls when the last of the extensions of up to 99 months ended in December. The U6 unemployment rate that takes into account the people that have lost their unemployment benefits or taken part-time jobs while seeking full-time employment is 16.1%.  This reflects the growing difficulty of increasing jobs of any type in today’s competitive global economy.

Gregory Tassey, Sr. Economist at the National Institute of Standards and Technology commented in a paper titled Rationales and Mechanisms for Revitalizing U. S. Manufacturing R&D Strategies, “For the first seven recessions after World War II, the relatively closed status of the U. S. economy meant that average employment recovery was swift and substantial (about four months to positive employment levels relative to the recession trough).  In the late 1980s, however, the growing global competition began to promote greater investment in addition to accelerated outsourcing.  The result was the 19 months elapsed before a positive employment level was attained.  This significant slowing of the cyclical rebound in employment was dwarfed by the extremely slow recovery in employment from the 2000-2001 recession, which required 30 months to reach a positive employment level relative to the recession trough.”

Why have the last two recessions resulted in “jobless recoveries?”  What is keeping unemployment so high now?  One of the main reasons is the loss of manufacturing jobs.  Too many manufacturers are sourcing all or most of their manufacturing offshore.  An upturn in their business doesn’t mean more manufacturing jobs for Americans if they aren’t producing or buying everything for their products in the United States.  Since 2001, we have lost 63% of the U. S. textile industry and 74% of the U. S. printed circuit board industry.  We have lost 47% of communication equipment jobs and 43% of motor vehicle and parts industry jobs.

Since manufacturing jobs create three to four other jobs, the loss of each manufacturing job causes the loss of three to four other jobs.  Our nationwide loss of jobs in all sectors won’t reverse until we stop the hemorrhaging of manufacturing jobs out of the United States.

In addition, manufacturers are doing more with less for three main reasons.  First, the United States ranks highest in productivity as measured by Gross Domestic Product per employed person at 97.1 compared to China’s rate of 10.2 and India’s rate of 7.5.  James Vitak, a spokesman for specialty chemical maker Ashland Inc. said,  “You can add more capability, but it doesn’t mean you necessarily have to hire hundreds of people.”

Second, an increasing number of manufacturers are adopting “lean manufacturing” based on the principle of continual improvement (Kaizen) of the Toyota Production System.  The “lean manufacturing process was developed to produce smaller batch sizes and just-in-time delivery; that is, producing only necessary units in necessary quantities at precisely the right time.  This results in reducing inventory, increasing productivity, and significantly reducing costs.  It has evolved into a system-wide management process that continually seeks to increase profits by stripping out wasted time, material, and manpower from the manufacturing process.  Thus, fewer people are needed to produce products.  Manufacturers aren’t building up inventory to fill orders – they are ordering materials, components, parts, and assemblies as needed to fill orders as they receive them from their customers.

Third, existing salaried employees have been required to work harder and longer because manufacturers are fearful of hiring new people until they have more confidence that the upturn in business will continue, and we won’t have a double dip recession.  Manufacturers can get away with doing this because for every person employed, there are a hundred people willing to fill the job.

The fear of increased taxes with the expiration of the Bush tax cuts, the cost of changes due to the Health Care Act of 2010, and the possibility of a “cap and trade” bill added to the uncertainty about the economy for all businesses last year.  Passage of the bill that maintained the current tax rates without an increase just before the end of the year reduced fears somewhat, but the other two issues are still causing uncertainty about the future.

The number of manufacturing jobs is a better indicator of what’s really happening in the economy than the stock market.  Many of the companies on the Dow and Standard & Poor indexes of the stock exchange are no longer American-owned companies.  They are multinational globalist companies that don’t care about providing jobs for Americans.  They care about their bottom line of making as big a profit as possible.  These companies may be doing well based on their worldwide business and could post profits and have their stock prices go up without creating jobs for American workers and benefiting the U. S. economy as a whole.

I keep hearing that we won’t create enough jobs to lower the unemployment rate until consumer confidence is restored and consumer spending increases.  I disagree.  Consumer spending doesn’t create American jobs when most of the goods consumers buy are now made in offshore.  We won’t be able to create the jobs we need to lower the unemployment rate until business owners and consumers start “connecting the dots.”  We don’t create American jobs when companies outsource their manufacturing to other countries and consumers buy products made offshore.  To create jobs in America, we need to manufacture in America and then buy products made in America.

Why it’s Important to Understand Total Cost of Ownership For Outsourcing Manufacturing

Tuesday, February 8th, 2011

In the increasingly competitive global marketplace, manufacturers need to continually strive to reduce costs to keep or increase market share.  This is one of the key factors in making the decision of whether to make parts in-house, outsource to domestic suppliers, or outsource offshore.

Even after a company makes the decision to outsource to a supplier, most don’t look beyond the quoted unit price in making the decision about which supplier to select.  This is especially true when comparing the quotes for domestic vs. offshore suppliers.   Some companies choose to outsource offshore because the price is cheaper than a domestic supplier.  They don’t add in the costs for transportation, much less all of the other “hidden costs” of dealing with an offshore supplier.

In order to make the correct decision for outsourcing, a company needs to understand the concept of “total cost of ownership” for outsourcing manufacturing.

What is “Total Cost of Ownership?”  It is an estimate of the direct and indirect costs and benefits related to the purchase of any part, subassembly, assembly, or product.  The Gartner Group originated the concept of  (TCO) analysis several years ago, and there are a number of different methodologies and software tools for calculating the TCO for various industries, products, and services.

Total Cost of Ownership includes much more than the purchase price of the goods paid to the supplier.  For the purchase the types of manufactured products we are considering, it should include all of the other costs associated with the purchase of the goods, such as:

  • Geographical location
  • Transportation alternatives
  • Inventory costs and control
  • Quality controls
  • Reserve capacity
  • Responsiveness
  • Technological depth

The search for low cost areas for manufacturing isn’t something new. Fifty years ago, northern and New England companies started moving manufacturing to the southern states. Twenty-five years ago, many West Coast manufacturers started moving high volume production offshore to Hong Kong, Singapore, and the Philippines. “Offshoring” refers to relocating one or more processes or functions to a foreign location.  The next lower cost area was Mexico with the advent of the maquiladoras.

For the past 15 years, many manufacturers have sought to reduce costs by offshoring all or part of their manufacturing processes in China.   In the last decade, outsourcing offshore has evolved from a little-used practice to a mature industry.  Even conservative companies are now willing to experiment with going offshore to gain a competitive edge.  The concept of globalization has become part of the fabric of today’s business.

Many times, the decision to outsource offshore is based on faulty assumptions that can have unpleasant consequences.  In some cases, the basis for the decision is well intentioned, such as to win new business by being close to a customer.

But, with every business decision comes an assumption, and more often than not, the related assumptions are erroneous.  Here’s a list of well intentioned but often-faulty assumptions:

  • Longer lead times won’t affect our cost calculations very much.
  • Overseas suppliers have the same morals and work ethics as we do.
  • Overseas laws will protect our proprietary information.
  • We can teach our suppliers to reach our quality needs and to build our product reliably and efficiently.
  • Communication will not be an issue given daily conference calls, the Internet, and the fact that the supplier speaks English.
  • Assessment and travel costs won’t change our cost calculations very much.
  • The increase in delivery and quality costs won’t be significantly different than our cost calculations.
  • Lean manufacturing and Six Sigma methodologies can be taught to suppliers before our company’s bottom line is affected.

In actuality, many case studies have shown that these assumptions were orders of magnitude off from reality.  The problems with making these assumptions are:

  • It doesn’t capture a reasonable amount of variation.  Each lot takes weeks more time than anticipated to get to the U.S. or customer site for evaluation.
  • The overlying methods for producing product or service have gotten more complex, not less.  In general, costs rise with complexity.
  • The company doesn’t know the hidden costs that exist (i.e., process stability, process capability over time, potential for future deviations from the current process).
  • The company loses complete control of quick changes to react to hidden costs.  It’s like trying to control production via remote control.

Accountants deal with hard costs such as material costs, material overhead costs, labor costs, labor overhead costs, quality costs, outside services, sales, general and accounting costs, profits, etc. What they don’t measure are the intangible costs associated with business such as the true costs of delay, defects, and deviations from standard or expected processes (the three D’s).

These costs are often called hidden factories because they keep everyone busy generating absolutely nothing of any tangible or openly measured value.  Another way to understand these costs is that they produce results that no one, especially the customer would want to pay for.  In addition to obvious direct costs – such as additional meetings, travel, and engineering time – hidden factories also indirectly produce many forms of “soft” costs, such as loss of good will, loss of competitiveness, extended warranty costs, and legal costs.

When it comes to outsourcing, there’s more to consider than the quoted price.  Some outsourcing costs are less visible – or downright hidden.  Here are the top hidden costs of outsourcing offshore:

  • Currency Fluctuations – last year’s invoice of $100,000 could be $140,000 today.
  • Lack of Managing an Offshore Contract – underestimating the people, process, and technology required to manage an outsourcing contract.
  • Design changes – language barriers make it difficult to get design changes understood and implemented
  • Quality problems – substitution of lower grade or different materials than specified is a common problem
  • Legal liabilities – offshore vendors refuse to participate in product warrantees or guarantees
  • Travel Expenses – one or more visits to an offshore vendor can dissipate cost savings
  • Cost of Transition – overlooking the time and effort required to do things in a new way.  It takes from three months to a year to complete the transition to an offshore vendor.
  • Poor Communication – communication is extremely complex and burdensome.
  • Intellectual Property – foreign companies, particularly Chinese, are notorious for infringing on IP rights without legal recourse for American companies

In the past, my experience was that once manufacturing moved out of the United States, it rarely came back.  However, in the past three years, we have seen more companies coming back from doing business in China. The main problems these companies encountered were:

  • Substitution of materials
  • Inconsistent quality
  • Stretched out deliveries
  • Inability to modify designs easily and rapidly

There’s also a growing realization that when it comes to quality and location, location may be the best guarantee of all.  It’s hard, very hard, to outsource quality, particularly to a distant land many miles and time zones away.  A growing number of manufacturers are realizing that “you get what you pay for” from their offshore suppliers. Applying good quality principles takes money, education, and experience, many of which are in short supply in the low-wage countries capturing the majority of offshoring dollars these days.

The “desirable” locations for cheaper outsourcing will change over time just as they have in the past fifty years.  The purely financial benefits of lower pricing will erode over time.  The challenge for America is to keep as many companies as possible growing and prospering within the United States.  As more manufacturers gain a correct understanding of the True Cost of Ownership for outsourcing manufacturing, it will help bring back and maintain more manufacturing in the United States.  You can help save American manufacturing by making sure everyone in your company gains this correct understanding.

Could the U. S. Become Top Exporter Again?

Tuesday, February 1st, 2011

Many would say this is an impossible goal since the U. S. lost its top ranking to Germany in 1992, and China replaced Germany as the top exporter in 2009.  I say it’s possible if American companies get back to what made them great in the first place – unique, innovative products made to high quality standards by a well-trained workforce.

For nearly 60 years, American manufacturing dominated the globe.  The United States led the world in innovation.  American companies like Ford, Boeing, Maytag, IBM, and Levi became household names.  American manufacturing became synonymous with quality and ingenuity.

Of these companies, Maytag was bought by Whirlpool, IBM sold off its PC business to Chinese company Lenovo, and Levis are now made in China just like every other brand of jeans manufactured.

When I drive around with my granddaughter, we play a game to see who can see the most “slug bugs” (VW Beatles).  They are easy to spot, even in oncoming traffic, because they have such a distinctive look compared to other cars.  Nearly every other car looks like peas in a pod – you can’t tell what automaker they are until you see the logo.

The unique appearance and features of a VW Beatle are examples of what those of us in marketing and sales call Differential Competitive Advantage (DCA).   Other examples of DCA thrusts are:  wide selection, customization, convenience, speed of service or product delivery, innovative cutting edge technology, fills a wide range of needs or a special need, specialized know-how, and lowest price.

There are no marketing rules that apply to every type of company, and there are no quick fixes or “magic pills” that will work for every company.  There is no such thing as a sustainable competitive advantage – it will change over time.  However, the universal law of marketing is “What’s in it For Me (WIFM) so that the DCA of your product has to answer that question.

To be successful at exporting, American companies need to have an innovative product that fills a market need in other countries.  They need to know their potential markets, know each possible way to reach that market with a persuasive message and use marketing methods that produce the maximum leverage with minimum effort.

For years now, I’ve been hearing that American companies had to outsource manufacturing offshore to remain competitive.  To me, this means that these companies gave up on marketing their products using their differential competitive advantage (DCA) and were down to competing on the price level.

German companies don’t compete on price; they compete on the perceived benefits of their reputation for high quality, precision-engineered products.  Germany’s average manufacturing wage is higher than the United States, the highest of all the European Union countries.  They have strong unions that offer more benefits and vacation time than any American companies or unions.  Germany was able to keep its position as the top exporting country for 17 years belying the argument of American companies that high union wages drove them to offshore manufacturing to be competitive.   It’s even less of an argument in my territory because only a handful of companies are unionized.

I believe that there is also an intangible factor in Germany’s success in exporting – the pride company owners have in their country and their products.  German company owners want to be successful as German companies, not global companies.  My research revealed that the majority of German companies are privately owned, not publicly traded.  This gives them the leeway of following their own measure of success instead of being responsible to their stockholders for the next quarter’s earnings.

Too many American based companies refer to themselves as global companies instead of American companies.  These companies are “globalist international companies” because they no longer have loyalty to the United States.  Their loyalty is to their bottom line, their stockholders, and their future bonuses, and they will do whatever it takes to make their bottom line look good even if it causes harm to themselves and their country in the long run.

American companies need to get back to producing their products in America.  If the majority of the components, parts, and assemblies in a product are being made offshore, is it really an American product?   Will companies who source offshore be able to produce their products if their overseas supply chain was disrupted to the point that they couldn’t get parts?

Do companies who outsource really understand the Total Cost of Ownership (TCO) of comparing the cost of sourcing parts and assemblies domestically rather than offshore?  Do they recognize the hidden costs of doing business offshore?  If not, the Reshoring Initiative of the National Tooling and Machining Association (NTMA) can provide a useful worksheet to calculate TCO.

There is no question that outsourcing offshore will continue for the foreseeable future, especially for the multinational companies that have products to sell within the countries in which they set up manufacturing operations.  Manufacturing products locally for consumption within a foreign country will be crucial to profitability as transportation costs continue to increase.

American manufacturers must be willing to continuously invest in their products to improve performance quality, and cost, but they must also be willing to improve the skills of their workers to be more competitive in the global market. Germany and Switzerland lead the world in their apprenticeship and workforce training.  Apprenticeship programs have virtually disappeared from American industry, and we must rebuild them to follow the example of Germany and Switzerland to train the skilled workforce needed for the 21st Century in the United States.

There is no lack of American ingenuity and creativeness.  The monthly meetings of the San Diego Innovators Forum are filled to standing room only with men and women who want to learn how to successfully convert their innovative ideas into products for the global marketplace.  Those of us on the steering committee are trying to help them to produce an American product, sourced in the United States instead of sourced offshore.

In his second annual message to Congress, December 1, 1862, President Abraham Lincoln said, “The dogmas of the quiet past are inadequate to the stormy present.  The occasion is piled high with difficulty, and we must rise – with the occasion.  As our case is new, so we much think anew, and act anew.  We must disenthrall ourselves, and then we shall save our country.”

We must arise to the occasion of our economy in crisis by thinking and acting anew to restore our manufacturing industry as the world leader.  American companies need to rejoin Team USA by making innovative, high quality products in the United States that can be exported to fit an unfilled niche in other companies.  Of course, no American company could succeed through exporting only; they need to have sufficient domestic customers also.  American consumers need to “connect the dots” to wake up and realize that buying cheap goods in China doesn’t create American jobs.  Buying cheap imports rather than buying “Made in USA” products is a big factor in our high unemployment rate.  We Americans need to be more like the Germans and be willing to pay a little more to buy products made in our own country.  By doing this, we can regain our position as the world’s top exporter and “Win the Future” as President Obama encouraged us to do in his State of the Union Address last week.