As early as 2006, when he visited approximately 30 hand-weaving factories in Shandong Province, China, Job observed that many of these factories were already in the process of closing, because employment rates were rising so high that people could find better paying work elsewhere.  Shandong Province has a population of over 95 million people according to 2010 Census Data. 

The Impact of Recession & Market Changes on Hand-Knotted Rug Production & Export

This used to be a major weaving center in China where some of the absolute finest hand-knotted rugs were being made, including outstanding silk rugs.  Now Chinese rug making centers on hand- tufted and other machine-facilitated rug types.   As there is an increasing demand for lower priced rugs, China is loosening restrictions on the use of automation and machinery in factories – a restriction that once existed due to the availability of workers exceeding the availability of work.

The December 2012 issue of “Rug News and Design” provides the following statistics from the United States International Trade Administration:

In 2005, hand-tufted rugs were 23% of U.S. rug imports.  By 2010, that percentage had risen to 41%.  And, by 2011, 50% of U.S. rug imports were hand-tufted.

(Hand-tufted rugs are constructed by punching wool strands through cloth to create the desired design, which is then anchored with glue and covered by a fabric backing.  A tufting gun is used to punch the wool through the fabric.  Tufted rugs have gained popularity for both their trendy designs and their ability to replicate traditional designs at a lower price point, but tufted rugs are less durable than hand-knotted rugs, and their overall beauty and material quality are not comparable to well-made, hand-knotted rugs.)

Since the U.S. recession began in late 2008, labor has started to move away from making hand-knotted rugs in countries like India and Turkey, where older weavers have retired and those who might otherwise continue the art and skill of weaving have found jobs in other industries that provide better wages and more reliable employment.  In order to keep the smaller number of willing weavers at their looms, wages have had to increase significantly.  Increased wages in combination with higher material and fuel costs have resulted in a 25-35% increase in the wholesale price of hand-knotted rugs across-the-board.   This means that it costs 25-35% more for the retailer to restock inventory today than it did just four or five years ago.

Following the U.S. recession and the global economic downturn, when the reduced demand for hand-knotted rugs was followed by increasing material and fuel costs, according to data from the United States International Trade Administration, the volume of hand-knotted rugs being shipped to the U.S. hit its low point in 2009 and has only modestly increased in years since.  So, not only has the price of these rugs increased, but the supply of new rugs has decreased as well.

According to the December 2012 issue of “Rug News and Design,” publishing data compiled by Rob Leahy who serves as a Subject Matter Expert for the U.S. Department of Commerce and also works with the interagency Afghanistan Investment and Reconstruction Task Force, the four largest exporting countries for hand-knotted rugs have experienced a decline for the following reasons:

1. India – Decline primarily due to global economic downturn.  Still biggest shipper of these rugs and slowly recovering.
2. Pakistan – Decline primarily due to poor demand and political unrest.
3. Iran – Decline due to U.S. embargo, signed into law July 1, 2010, preventing import of all rugs and carpets.
4. China – Decline due to major shift in rug production to types such as hand-tufted.

According to several recent articles, including one published February 21, 2013 in the Wall Street Journal, workers are moving away from jobs in industries like apparel and toy making, to look for work in more lucrative industries like electronics.  Following this year’s Chinese New Year holiday, writers Dana Mattioli and Laurie Burkitt stated in their WSJ article that of the millions of migrant workers that will visit their small towns and villages during the extended holidays, a higher percentage of those workers will return to their jobs in support of technology companies, than will return to their positions in other industries like apparel production.   The article goes on to state:  “The developments have American apparel companies scouring other countries for factory sites and have raised concerns in China.”

However, when you compare this crisis of labor in the apparel industry to the crisis of labor in an industry like hand-knotted rug weaving, the skill set is not so easily found in countries outside of those traditionally known for their rug weaving.  Countries like Vietnam and Indonesia, that have the labor force to produce apparel at a lower cost, do not have a tradition in rugs, so it is not a natural transition to develop organized hand-knotted rug production to these countries.  According to the “Rug News and Design” article by Rob Leahy, the most likely country to continue and expand on a tradition of rug-making would be Afghanistan “as Pakistan teaches the Afghan traders new skills and methods.”  The biggest impediment to increased production and export of Afghan rugs is ongoing political and economic instability in this part of the world.  According to Leahy:  “Prolonged civil unrest in either Afghanistan or Pakistan will severely weaken the carpet trade’s relationships with buyers and the consequent lack of demand may prevent this generational knowledge transfer.”

So, it would seem that the future of hand-knotted rug making has a huge question mark hanging over it.  While the U.S. economy is recovering, the demand for hand-tufted rugs has increased, while the demand for hand-knotted has not.  Weavers of hand-knotted rugs, who were once kept busy by the steady demand for these rugs in the 1980’s and 1990’s have now gone on to work in factories where other types of rugs are made, have stopped making rugs in pursuit of work that is likely to be higher paying and more consistent, or have demanded higher wages to continue weaving in light of reduced demand.  With the finest rugs being made by the most experienced weavers, in the absence of heirs to this culturally significant, traditional artisan craft, fewer and fewer high quality, hand-knotted rugs are likely to be available on the wholesale market going forward.

In order to replenish inventory and to maintain pricing stability, it is up to the retailer to buy very carefully.  Job Youshaei continues to hand-select rugs that fulfill his philosophy of providing quality and value to customers, while working with suppliers to get the best prices that he can.  Clearly, in light of all of the above, keeping our prices as low as possible for the beautiful, well-made rugs that we sell provides Job Youshaei Rug Company with both a goal and a challenge.