When American engineers talk about the need for the U.S. to better compete in the global economy, the discussion almost always centers on two countries: China and India. People rarely mention another country that is geographically closer to the United States: Mexico.

Mexico has quietly been building up its infrastructure over the past decade to educate more engineers and attract companies with advanced engineering design work. Some 451,000 students are currently enrolled in full-time undergraduate engineering programs in Mexico, up 20% since 2000.

American universities enroll 370,000 engineering undergraduates, a number that has barely inched up since 2000, even as the overall number of undergraduates has grown nationwide.

Multinational companies, including GE, Siemens and Honeywell, that once located facilities in Mexico to produce products are now opening up small operations for design and testing work, much of which is done by engineers. GE employs more than 500 engineers at a facility in Querétaro that designs and checks jet engines. Officials there expect to hire another 200 this year.

One reason for the hiring spree? Low salaries. Engineers fresh out of college in Mexico make around $15,000 annually; compare that with their U.S. counterparts, who graduate to $45,000-a-year jobs.

Read more here.

Dr. John and Christina Aguilera on Letterman, singing a duet of “Merry Christmas Baby.” Wow!

Dr. John singing “Such a Night” with “The Band” in the movie “The Last Waltz,” directed by Martin Scorcese.

Diana Krall singing “Charmed Life.”

“Escalation of commitment” is the phenomenon where people increase their investment in a decision despite new and often overwhelming evidence suggesting that the original decision was flawed, deficient and wrong.”

Exhibit A: Mike Nifong.

Economists are upgrading their forecasts for the U.S. economy after a series of surprisingly strong reports suggesting the so-called “soft landing” may be over and growth is accelerating.

Lehman Brothers chief economist Ethan Harris on Friday boosted his forecast for fourth quarter 2006 growth to an annualized rate of 3.3%, a leap from the firm’s prior call for just 2% growth:

“With the last of the major data in, we are now revising fourth quarter GDP to an above-trend 3.3 percent. A wide range of indicators have been stronger than expected. Most important have been the strong consumption data and the surprising improvement in the trade balance.”

From today’s NY Times (“Company Clinics Cut Health Costs”): “Frustrated by runaway health costs, the nation’s largest employers are moving rapidly to open more primary care medical centers in their offices and factories as a way to offer convenient service and free or low-cost health care.

Within the last two years, companies including Toyota, Sprint Nextel, Florida Power and Light, Credit Suisse and Pepsi Bottling Group have opened or expanded on-site clinics. And many other employers are adding or planning to add even more clinics.

For employees, on-site clinics can mean faster medical attention and lower out-of-pocket costs, since visits are usually free or carry only a small co-payment. For employers, on-site clinics can mean gains in worker productivity and lower health-insurance outlays.”

Seems like win-win. Companies save money on health care costs, employees have access to convenient on-site health care and spend less time away from work for appointments, etc. The traditional practice of “outsourcing” medical care with employer-paid insurance insulates both the employer and the employee from the true costs of medical care, and gives neither much direct control over medical costs. Employer-paid on-site medical care makes everybody more cost conscious.

Summary: This week’s slate of reports brought mixed economic news. Consumer credit soared twice as much as expected in November and retail sales were strong in December. Business inventories increased and the U.S. trade gap narrowed slightly. For the week, the S&P 500 Index rose 1.6% to 1,431. The 10-year U.S. Treasury yield rose 13 basis points to 4.77%, and the average 30-year fixed rate mortgage rose 5 basis points to 5.75%.

Read more details here.

Michigan gas prices fall below $1.85 per gallon, in some locations down to $1.82.

According to the Harbour Report, the productivity gap between unionized autoworkers and non-unionized autoworkers has narrowed recently to “only” 7.33 hours per vehicle in 2006, measured by total labor hours per vehicle.

As recently as 1998, the productivity gap was almost 17 hours between unionized GM and Chrysler autoworkers, and nonunionzed Toyota, Honda and Nissan autoworkers according to Harbour.

In 1998, Jim Harbour said that “GM still trails the pack in most key labor productivity areas. If it were as efficient as Toyota’s benchmark operations, it would not need the equivalent of 40,000 extra workers.” (And that doesn’t include the thousands of idle UAW workers in the “jobs bank.”)

Think about it. Unionized autoworkers are more expensive than non-unionized autoworkers and significantly less productive. Should it be any surprise that GM and Ford are losing money and contracting, and Toyota and Honda are making money and expanding?