Pondering Green Shoots

May 29, 2026

Doug Leyendecker

Welcome to This Week’s Leyendecker View

The best way to have a good idea is to have lots of ideas.
– Linus Pauling

FAVORITE READS OF THE WEEK

A Boomer fights back
We didn’t ruin the world.

AI can quickly make you lazy and dumb
Just send me my UBI check.

THINKING OUT LOUD

Pondering Green Shoots
Is it “springtime” for the US economy?

As the story has been told for decades, innovation always increases productivity, which leads to faster economic growth. But the 1980s technology boom, which continues today, tells a different story. Although it provided a slight economic boost in the 1990s, it has not proven to be a catalyst for ever greater economic growth. Instead, it was a catalyst for globalization, which destroyed a very large part of domestic manufacturing and produced lower economic growth than when the US was a manufacturing powerhouse.

Consider average annual GDP growth by decade since the 1950s:

1950s: 4.2%
1960s: 4.4%
1970s: 3.2%
1980s: 3.1%
1990s: 3.2%
2000s: 1.8%
2010s: 2.3%

The mainstream media pokes fun at the idea that the US will rebuild its manufacturing industries. It is true that any rebuild of our manufacturing sector will not return us to a 1950s-style economy. But since recent technological innovations haven’t delivered results many economists expected, we may need to rethink what actually creates economic growth.

About 50 years ago, our economy transitioned from primarily goods production based (manufacturing, construction, mineral extraction, and logging) to services based. Since then, the economy has essentially been running in place.

Why? Because manufacturing has a higher economic multiplier than services do. That economic multiplier exists in manufacturing supply chains—all the needed steps between mineral extraction to finished goods.

An enormous amount of supply chain must happen before the automobile assembly plant makes a car, while very little supply chain is needed before consulting firms like McKinsey provide their services.

As we outsourced our manufacturing overseas, we lost its economic multiplier effect. To keep the economy “growing,” the government was forced to resort to ever more fiscal and monetary stimulus. Consequently our debt to GDP today sits at around 120%, and we have to spend $3B a day on interest payments. $3B a day!

At the dawn of globalization, companies saw dollar signs: Lower overseas labor costs and less environmental regulation would mean greater profits forever. However this is proving to be a Faustian bargain. We traded short-term gains for long-term malaise, if not outright loss. In moving manufacturing overseas, we lost the catalysts that create long-term economic health and stability.

Since then, the story of American manufacturing has been one of decline. Factory towns emptied, industrial capacity migrated overseas, and the nation increasingly relied on imports for everything from steel and machinery to semiconductors, pharmaceuticals and consumer goods.

Turning this economic supertanker around is not going to be easy. But across industrial construction, capital investment, and manufacturing output, the US is starting to show signs of a goods-production revival.

The evidence is most obvious in industrial-related construction.

For years factory construction was largely stagnant in the US. More recently it has become one of the fastest-growing categories of nonresidential investment. Total construction spending in manufacturing data from the Federal Reserve shows current capital spending is about twice what it was ten years ago.

Projects including semiconductor plants, LNG export facilities, battery plants, pharmaceutical plants, drone factories, and specialty chemicals are appearing across the South and the industrial Midwest. Throw in all the power and data centers that AI needs, and we have a genuine industrial construction boom underway. The prospect of a shipbuilding reboot provides even more optimism.

These projects represent more than ordinary business cycle activity. They are long-duration capital commitments that require billions of dollars and many years to complete. Companies would not invest massive amounts of capital to build all these facilities unless they expect them to provide value for years to come. Such investments signal confidence that America’s industrial sector may be experiencing a reawakening.

Manufacturing output data also suggests that American industry retains considerable strength. Despite persistent challenges, US durable-goods production has remained resilient. As construction of new factories is completed, our gross manufacturing output and our durable-goods output should grow.

It’s likely only a matter of time before supply chains sprout up to support this growth of manufactured products. The current semiconductor plant construction boom is evidence of returning supply chains.

None of this means the American industrial renaissance is complete. Significant obstacles remain. Labor shortages and skills retraining, factory automation transitions, regulatory burdens, energy costs, and global competition continue to challenge domestic producers. Some recent reports also show areas of slowing factory activity and uneven investment trends. Yet economic turning points are not quickly obvious. Today’s green shoots show early signs of recovery rather than substantiate a permanent renewal.

Still the broader trajectory seems to be there. Goods production in America is no longer merely surviving. In important sectors, it is expanding again. Employment has stabilized, capital expenditures are rising, manufacturing construction is elevated, and industrial output is set to grow.

After decades of decline, the US may be witnessing the beginning of a long-needed industrial turnaround, one fueled in no small part by pro-domestic production policies.

The challenge with green shoots is that they are fragile. If they don’t receive regular support to strengthen their roots or if some economic or political event threatens them, our potential industrial and economic recovery may not happen.

THE RANDOMS

Whatever deal the US and Iran cut, we can be assured that Iran’s current leadership will not honor it. They do not understand the Western definition of honor. Their way of gaining honor is by destroying Western culture.

When the best AI-related job seems to be in cybersecurity, what does this say about AI’s influence on the world?

Pope Leo wants AI regulated. He fears what it may do to humanity. The Western world’s challenge is that China is very anti-religion, so they don’t care what the Pope says.

Won’t AI’s inaccuracies and hallucinations become part of its “knowledge”? If so, how is that any different from humans’ garbage in, garbage out?

Sam Altman wins the battle against Musk. Now likely comes the war.

Why isn’t there more research on the earth’s core cycle? If oceans really are warming, doesn’t it make more sense that they are doing so from the bottom of the sea, not from above it? What’s going to make a pot of water hotter, turning up the stove heat or blowing a bit of warmer air on the water’s surface?

ECONOMIC NEWS

Economy

CEOs turn pessimistic on US economy
GDP growth revised downward
While durable goods orders are up
Jobless claims rise
New car sales slump further
Credit card delinquencies at 15-year high

Labor

Labor takes a back seat to capital
The back office is disappearing
Big Four shift from audits to AI consulting

The Lone Star

Another pharma giant eyes Houston
SpaceX building giant factory in Bastrop
Turkish firm plans $4.5B Texas investment

BUSINESS

Finance

Banks are making the big bucks from trading
JPM wants to sell down private credit exposure
More evidence AI will reduce finance employment
LPs no longer care about IRRs

Real Estate

Materials inflation hits homebuilders
Apartment landlords are in trouble
The Midwest leads housing sales momentum