If you're like a lot of people, you've got this nagging feeling that something's wrong with America. Not with its ideals or its customs or its teachers and firefighters and all that. No, the problem runs deeper. And it touches that sensitive nerve of economic insecurity.
At the center is the fear that we've lost our edge as an exporting powerhouse -- the edge upon which the modern middle class was founded after World War II. After all, Chrysler and General Motors are now wards of the state, while Boeing (BA, news, msgs) is increasingly getting airplane parts overseas and just snapping the pieces together here at home.
The result has been stagnant wages and the loss of 5.6 million manufacturing jobs over the past 10 years. Now, nearly a year after the unofficial end of the recession, the broad measure of unemployment remains at 16.6%, compared with 6.8% back in 2000.
We were reminded of this backward slide last week. The United States reported a trade deficit of $40 billion for May, the highest since December 2008. After providing a boost to the economy in 2009, U.S. net exports are beginning to act as a drag on overall growth.
Has America lost too much ground to eager emerging economies like those in China, India and Brazil? Has our economic backbone been broken -- battered by two economic bubbles, two recessions, two wars and a runaway national debt?
Good news: The answer, based on the numbers and backed up by lots of company stories, is no.
Competitive, but not paid for it
In fact, according to Jeremiah Sullivan, a professor emeritus of international business at the University of Washington, America remains the world's most competitive economy. He bases this on a review of data on industrial specialization, global market share and export prices. As for the threat from China: It "produces mostly stuff that the U.S. doesn't want to produce."Sullivan also notes that unemployment isn't correlated with imports -- so don't blame the Chinese for America's joblessness.
The problem is that this competitiveness, while boosting corporate profits, hasn't translated into income gains for the average worker. Again, there's good news here: That's likely to change.
The World Economic Forum is warning of a "talent crisis" and believes the United States will need to add 26 million workers to the mix over the next 20 years to maintain the current level of economic growth. In the near term, indicators such as the number of hours worked, corporate profitability per employee and worker productivity all suggest increased hiring and wage growth are just around the corner.
I know it might be hard to accept this premise. But let's explore Sullivan's argument. Then we'll take a look at why job and wage gains are on the way, and at a few stocks that will continue to benefit from America's leadership, focusing on those with the highest exposure to fast-rising China.
Continued: 3 measures of leadership