U.S. Manufacturing’s Fictional Renaissance

If you were to believe the many commentators and pundits who are publicly accessing the state of manufacturing in the U.S., you may think that the industry has completely turned around and is now well on the rise after its drastic fall in the 2000s. You might think that the gloomy times of lost jobs and low output as a result of competition from foreign countries are a thing of the past, and that the rising cost of foreign labor in conjunction with the inexpensive gas and oil costs here in the states are making worldwide manufacturing hotspot in America.

That is, if you are listening to the current narrative that is asserting dominance in the industry. There is talk of this being a “manufacturing renaissance” in the U.S.

Unfortunately, these high praises claiming the resurgence of U.S. manufacturing are not supported. To the contrary, a report from ITIF shows the data doesn’t validate any of these assertions. In late 2013 (the most current year accessible) the real added value of manufacturing (our best gauge of U.S. manufacturing’s health) was 3.2% lower than 2007’s numbers, in spite of a 5.6% growth in GDP. Additionally, the report still shows two million fewer jobs as well as 15,000 fewer manufacturers than those that existed in 2007.

The majority of growth seen after 2010 seems to be triggered by the cycle of recovery and demand, regarding motor vehicles and other durable goods in particular. 72% of jobs added and 187% of what has been proclaimed real value-added progress in the manufacturing industry from 2010 to 2013 was in transportation or primary and fabricated metals.

While there are jobs that are returning to the U.S., these numbers are fairly low and the manufacturing industry in general continues to send jobs to other countries at approximately the same rate. This rebalancing of companies bringing in and sending out jobs is definitely an improvement to the hasty off shoring, it can hardly be an indicator of “manufacturing renaissance.”

Upon thorough examination, a large amount of the supposed renaissance is centered on a variety of misconceptions regarding cost advantage in the U.S., which includes false ideas about productivity and wage growth in China, the cost of shipping globally, the position of the dollar, the significance of the energy boom driven by shale gas, and productivity growth in the U.S.. The widespread idea that these elements alone will bolster the U.S. manufacturing restrains the potential for legislation to be passed to encourage the United States manufacturing industry.

In order for us to accurately evaluate manufacturing in the U.S., it is critical that we understand our current position. The conversation regarding U.S. manufacturing shouldn’t be driven by hearsay or marketing efforts by different consultants, or reports written for the express purpose of hiding bad news which could interfere with continuing global integration. By utilizing accurate, in-depth data on U.S. manufacturing, it’s workforce, added value and productivity, we can see that instead of a renaissance, we are instead experiencing moderate cyclical growth.

Although we are not facing the resurgence of U.S. manufacturing that we might have hoped for, there are still ways to encourage growth in the manufacturing industry. For more information on how energy efficiency can affect your facility, please call 630-768-3743 or click here for details.

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