Analysis: U.S. Manufacturing Is On the Rise

June 17, 2014 at 12:26 pm  •  Posted in Machine Builder  •  0 Comments

Advanced technology, innovative thinking, and increased manufacturing output are all reasons to be optimistic about the future of manufacturing in the U.S. In order to secure the future, “it will be important for companies not only to think about where they locate their plants, but also how they invest in their ecosystems: developing their supply base, helping their supply base think about the right locations, helping to invest in new-technology adoption, as well as thinking about worker training,” says one expert.

When you’re surrounded on all sides by a service economy, it can be easy to forget that stuff still actually needs to be built. If it’s out of sight it’s out of mind, and most of us rarely, if ever, interface with the actual manufacture of goods. According to the Bureau of Labor Statistics, the service providing sector accounted for 79.9 percent of total employment in 2012, and the share is expected to edge up to 80.9 percent by 2022. Meanwhile, goods producing sectors (excluding agriculture) employ just 12.6 percent of the total, and the share is expected to fall to 12.1 percent by 2022. Manufacturing itself (separated from mining and construction in the BLS data) employs just 8.2 percent of the total, and the share is expected to fall to 7.1 percent in 2022.

The “decline of U.S. manufacturing” captured by this data didn’t so much catch people off guard as it simply rolled through the economy like a cannonball. The evaporation of demand caused by lower-cost competition from emerging industrial countries was unavoidable, and in a sense many jobs were simply exported. Total employment in manufacturing peaked near 20 million in 1979, about 22 percent of total employment at the time, according to the BLS. Since then, manufacturing employment has fallen to about 12.1 million.

But despite the dramatic decline in employment, total real manufacturing output has nearly recovered to its pre-crisis peak. Real manufacturing output per hour is up more than 13 percent since the pre-crisis peak and measures of manufacturing activity show accelerated growth across most major components of the sector. This suggests that the blow to U.S. manufacturing was real, but far from fatal. In fact, the blow may have ultimately made the sector stronger. Many of the companies that survived (and the few that thrived) are leaner, savvier, and more innovative relative to the rest of the world than they were 10 or 15 years ago.

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