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Multinational companies need to grow sales in emerging markets. That may mean tailoring the product development process that matches the market. In the McKinsey Quarterly , Sauri Gudlavalleti , Shivanshu Gupta , and Ananth Narayanan note that this requires companies to step out of their comfort zone: Traditional approaches to product development are coming under strain as emerging markets start to dominate the global economy. Companies that learn to shake up their thinking and effectively challenge the assumptions about how they design, develop, and manufacture products are more likely to master the extremes of this new competitive landscape. The authors outline three key steps in the product development process. Here they are, illustrated: Read the article here .

Researchers in the Brooking Institution 's Metropolitan Policy Program have put out a new paper calling on the federal government to "initiate a short-term competitive Regional Export Accelerator Challenge (REACH) grant program." They argue that too many U.S. cities are too slow to engage in the global marketplace. From the paper: Despite the size and growth of foreign consumer demand, too many firms and too many parts of the United States remain domestically-oriented, thereby missing out on opportunities to innovate and expand. In addition, the national export service delivery system is too Washington-centric and does not embrace federalism’s opportunities to work directly with leaders in regions, and their state partners, to globalize traditional economic development strategies. The key problem is that both individual firms and entire regions under-export. -Too few firms are exporting and exporting regularly. As of 2010, less than 1 percent of U.S. firms sell a product abroad, a much lower share than in other countries, including major trading partners such as Canada, Germany, and Korea. While the number of new exporting firms continues to grow (with 16,500 firms beginning to export between 2009 and 2010), that pace is slower than the creation of all new firms, keeping the overall percentage of exporting firms low. As of 2010, the United States has 293,000 exporters. However, only 188,000 firms exported in both 2009 and 2010, suggesting that approximately one-third of exporters may be “accidental exporters” that react to one-time demand from international buyers rather than integrating exports into their long-term sales and marketing strategy. -The nation itself remains a patchwork of exporting activity. The share of the U.S. economy that is driven by exports is relatively small, at 14 percent. But even at that level, 74 percent of metro areas—and 86 of the 100 largest metro economies—underperform the national rate. Metro areas as large and diverse as Atlanta, Baltimore, Denver, Miami, New York, and San Antonio all generate less than 8 percent of their economic output through exports, placing them in the bottom quarter of performers among the largest 100 metro economies. Read the paper here . Amy Liu , co-director of the Metropolitan Policy Program, discusses the need for domestic firms to expand exports in this interview:

In 1962, Arthur Okun wrote that "changes in the level of economic activity are associated with shifts in the composition of employment and output by industry." But the nature of the economic recovery in the U.S. (as slow as it may seem) has made reconsidering Okun's Law popular (if not necessary). In a post for VoxEU , Laurence Ball , Daniel Leigh , and Prakash Loungani examine whether jobs and output can now be decoupled: Figure 1 shows peak-to-trough declines in output for a group of OECD countries during the Great Recession against the change in unemployment over the same period. The correlation is essentially zero. In the language of economics textbooks, Figure 1 suggests a breakdown of Okun’s Law, the short-run negative relationship between output and unemployment reported by Arthur Okun in 1962. Figure 1. The Great Recession: Peak-to-trough output and unemployment changes (simple scatter plot) We believe the casual impression that "Okun’s broken" is misleading (Ball, Leigh and Loungani 2013). Two adjustments are needed to restore Okun’s Law (as shown in Figure 2): The first adjustment is to account for differences in the duration of the recessions; For the set of recessions shown in these charts, the period from peak to trough ranges from two quarters to seven quarters. As we show in our paper, Okun’s Law implies a relationship between the changes in unemployment and output only if we control for this factor. The second adjustment accounts for the fact that, historically, the coefficient in Okun’s Law varies across countries. Figure 2. The Great Recession: Peak-to-trough output and unemployment changes (with adjustments for duration of recessions and country-specific Okun coefficients) Read the full post here .

Earlier this week, Brookings gathered business leaders and policy makers to discuss "fiscal challenges, U.S. manufacturing and government performance." Bruce Katz , VP of the Brookings Metropolitan Policy Program , addressed the good and the bad of American manufacturing. Katz pointed out the manufacturing sector lost the most jobs during the great recession. When you lose manufacturing jobs, other jobs, like design and engineering jobs, leave the country as well. But some manufacturing jobs have come back (see Katz's handout on jobs recovered, by sector, here ). And Katz sees some trends that suggest continuing recovery in American manufacturing is possible. The key to continued growth, Katz says, is collaboration: You can watch other excerpts from the Brookings panel discussion on American manufacturing here .

Charles Fishman writes In The Atlantic , writes about General Electric moving some manufacturing operations back to the U.S. It seems a bit of a stretch to say this is part of an "Insourcing Boom," as the article is titled, but the economic conditions that have led GE to manufacturing high end refrigerators and water heaters at Appliance Park in Louisville, Kentucky are important to note. Fishman: GE’s appliance unit does $5 billion in business—and today, 55 percent of that revenue comes from products made in the United States. By the end of 2014, GE expects 75 percent of the appliance business’s revenue to come from American-made products like dishwashers, water heaters, and refrigerators, and the company expects that its sales numbers will be larger, as the housing market revives. What’s happening in factories across the U.S. is not simply a reversal of decades of outsourcing. If there was once a rush to push factories of nearly every kind offshore, their return is more careful; many things are never coming back. Levi Strauss used to have more than 60 domestic blue-jeans plants; today it contracts out work to 16 and owns none, and it’s hard to imagine mass-market clothing factories ever coming back in significant numbers—the work is too basic. Appliance Park once used its thousands of workers to make almost every part of every appliance; today, every component GE decides to make in Louisville returns home only after a careful calculation that balances quality, cost, skills, and speed. Appliance Park wants to make its own dishwasher racks, because it can, and because the rack is an important part of the dishwasher experience for customers. But Appliance Park will likely never again make its own compressors or motors, nor is it going to build a microchip-etching facility. And of course, manufacturing employment will never again be as central to the U.S. economy as it was in the 1960s and ’70s—improvements in worker productivity alone ensure that. Back in the ’60s, Appliance Park was turning out 250,000 appliances a month. The assembly lines there today are turning out almost as many—with at most one-third of the workers. Read The Insourcing Boom here.

Productivity rose in wholesale trade and retail, but was flat in food services for 2011, according to new figures released by the Bureau of Labor Statistics . The breakdown of annual change in productivity by industry is particularly interesting. Take a look: From the report: In wholesale trade, labor productivity rose 1.9 percent as output grew 4.8 percent and hours increased 2.9 percent. Productivity grew 6.3 percent in durable goods, but fell 1.1 percent in nondurable goods. Output per hour increased in all but one of the durable goods industries but in only one of the nondurable goods industries. Output grew in 13 of the 19 wholesale trade industries and hours rose in 15. Productivity increased most rapidly in machinery and supplies wholesalers, where output rose more than in any other wholesale trade industry. Unit labor costs declined in 9 industries. In retail trade, labor productivity grew 2.2 percent – faster than in the other sectors presented here – as output increased 3.7 percent and hours rose 1.5 percent. Output per hour increased in 21 of the 27 detailed retail trade industries in 2011. Output grew in 23 industries and hours rose in 16. The largest productivity increases were in florists and vending machine operators, both of which recorded rapid declines in hours. Unit labor costs fell in 17 industries. In food services and drinking places, labor productivity recorded no change, as output and hours both grew 3.4 percent. Output per hour rose in three of the four detailed industries in this sector, but fell in limited-service eating places, where hours grew at a rate nearly double that of output. Output increased in three industries and hours grew in two. Unit labor costs rose in three of the four industries. Read the full release here .

Dani Rodrik wants us to tune out any talk of coming "growth miracles." The past growth miracles in East Asia, for example, weren't exactly miracles. Over at Project Syndicate Rodrik writes: Except for a handful of small countries that benefited from natural-resource bonanzas, all of the successful economies of the last six decades owe their growth to rapid industrialization. If there is one thing that everyone agrees on about the East Asian recipe, it is that Japan, South Korea, Singapore, Taiwan, and of course China all were exceptionally good at moving their labor from the countryside (or informal activities) to organized manufacturing. Earlier cases of successful economic catch-up, such as the US or Germany, were no different. And to expect rapid industrialization today is to discount current market and global conditions. Rodrik: Consider India, which demonstrates the limitations of relying on services rather than industry in the early stages of development. The country has developed remarkable strengths in IT services, such as software and call centers. But the bulk of the Indian labor force lacks the skills and education to be absorbed into such sectors. In East Asia, unskilled workers were put to work in urban factories, making several times what they earned in the countryside. In India, they remain on the land or move to petty services where their productivity is not much higher. Successful long-term development therefore requires a two-pronged push. It requires an industrialization drive, accompanied by the steady accumulation of human capital and institutional capabilities to sustain services-driven growth once industrialization reaches its limits. Without the industrialization drive, economic takeoff becomes quite difficult. Without sustained investments in human capital and institution-building, growth is condemned to peter out. But this time-tested recipe has become a lot less effective these days, owing to changes in manufacturing technologies and the global context. First, technological advances have rendered manufacturing much more skill- and capital-intensive than it was in the past, even at the low-quality end of the spectrum. As a result, the capacity of manufacturing to absorb labor has become much more limited. It will be impossible for the next generation of industrializing countries to move 25% or more of their workforce into manufacturing, as East Asian economies did. Read No More Growth Miracles here .

Last week the Brookings Institution hosted a forum on the future of manufacturing in America. Representatives from industry and Labor (and some Congressional Reps as well) discussed the potential for growth in the manufacturing sector, in spite of a half-century trend of business moving abroad. John White, Jr. , President of Taco-HVAC , sponsored the forum and participated. In this excerpt from the forum, he argued that one of the keys to improving growth in U.S. manufacturing is investing in developing skilled workers. Watch more excerpts from the forum here .