The hidden economic trend that may re-elect Obama

In Ohio, Wisconsin, Michigan and elsewhere, President Obama finds himself doing unusually well among white males, the result, we are told, of the after-effects of his support for the auto bailout in 2009. And that's true, to a point. The renaissance of the American auto industry is the access point for voters there who feel better about their economic lot and prospects.

But there's a deeper reason why the big auto companies and their suppliers are doing well, staying put, and are not moving their jobs to China and elsewhere (despite the claims of Mitt Romney's advertisements).

It's because manufacturing in the American Midwest is more attractive now than it's been since the mid 1990s. An analysis by T. Rowe Price of unit labor costs compared to key U.S. trading partners finds that the U.S. has steadily become a better place to do certain types of business, a trend that actually began in 2002. Significantly, the marginal difference between the cost of per-unit labor in China versus the U.S. is lower than it has been in more than 15 years. With certain caveats, according to T. Rowe Price, it is cheaper to do business in the U.S. than it is in Canada, Japan, and Germany.

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Obama doesn't have much to do with these figures. Global trends get the credit, like the sudden drop in China's growth rate, the decline in value of the dollar relative to other countries, the European contraction, the tsunami in Japan and lower energy costs here, a result of the great recession. The T. Rowe Price analysis, which is available only to its members, notes that Chinese labor costs are rising at so fast a clip that a bunch of U.S businesses might soon decide to relocate and in-source their manufacturing operations to the United States, where labor costs are stable.

This means, of course, that all the political rhetoric about outsourcing and restrictive regulations are somewhat overheated. The truth is that U.S. employers are better able to project how much their operations will cost over time. Health care reform et al — those costs are important and not totally knowable, but compared to the uncertainties elsewhere, they're blips on a line.

One big caveat: The relative sexiness of the U.S. manufacturing market is not a guaranteed jobs creation machine. Productivity will keep job growth in check (unfortunately, if you don't have a job).

But it sure is helping Obama in the near term.