Here's Some Good Economic News: U.S. Manufacturing Is Rising Once Again

[Editors note: This is the first post in a series by Ravi Sawhney on the future of manufacturing.] Like many of you, I’ve been following the broad discussion and trends surrounding the “making” of things in the U.S. for some time and was glad to contribute recently to the conversation about branding U.S. innovation and America’s broadening definition of domestic creation. While some readers offered some encouragement and consensus on the state of manufacturing, some misunderstood my argument as advocating for abandoning focus on a national priority. (Perhaps the provocative title was a bit misleading.) I meant, rather, that our branding opportunities have expanded. Healthy domestic manufacturing and investment in innovation remain a critical priority for both our public and private sectors. Recently, things have been relatively healthy on the “Made in America” front; however, that news is too often overshadowed. This time around, I’ll address more positive manufacturing news that people should know about, as the first in a multipart series on the topic “Made in America.” Later, I’ll explore competitive dynamics and suggest recommendations for policy leaders and the design community. [figure=inline-large][caption][/caption][/figure]

The Good News

Manufacturing employment has been growing steadily in the United States for nearly two years. That’s critical, because from 1998 to 2010, manufacturing has made the largest private-sector, value-added contribution to Real GDP. Manufacturing is an engine of our economy, and every new high-quality manufacturing job has a multiplier effect on job creation. The latest Institute for Supply Manufacturing report reveals 27 consecutive months of modest domestic expansion. And manufacturing employment added 35,000 jobs per month in the first four months of this year, 14,000 in the following four months, and another 36,000 in July, according to the Bureau of Labor Statistics. Forbes reported that it is the first year-over-year increase since 1998 and that last year, “American manufacturers added value of $1.7 trillion to the U.S. economy, up 6.6% over the previous year after accounting for inflation. By the same measure, the rest of the economy grew by 2.2%.” The U.S. still commands about 20% of global manufacturing (the numbers vary slightly depending on whether you rely on data provided by the World Bank or the United Nations, and whether you use a nominal or value-added method to measure real output regardless of price and exchange variability.) According to the UN Industrial Development Organization’s 2010 International Yearbook of Industrial Statistics, the U.S. continues to lead the world in manufacturing, with 19% of the worldwide value-added manufacturing output.
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The U.S. has a more hopeful and competitive future than most realize.
Americans make great products, lots of them. Strong examples of U.S. manufacturing are all around us, from our kitchens (Viking) to our offices (Herman Miller) and means of transportation (Tesla, GM, Ford, and Harley Davidson). Boeing unveiled the future of aviation last month with the 787 Dreamliner and just announced their largest orders ever. The company employs 164,000 people (mostly in the U.S.) and is our largest exporter by value. Other great American brands, like Intel and Caterpillar, maintain domestic manufacturing bases despite their global orientation; three-quarters of Intel’s manufacturing capacity remains in the U.S., even though three-quarters of its revenue is generated abroad. Meanwhile, many companies, such as Ford and Continental AG are coming back, “repatriating” or “in-sourcing” their manufacturing for a host of reasons, including counterfeiting problems. At the same time, foreign corporations, like transplants Volkswagen and Samsung, are building manufacturing facilities in America. In Forbes’s August issue, Jon Bruner shared a number of interesting long-term graphs on manufacturing, adding, “You might not know it from public commentary, but the United States manufactures more than any other country (including China), and U.S. factories are within reach of their all-time greatest output--a record they set in 2000 and came close to reaching again in 2007.” [figure=inline-large][caption][/caption][/figure] The American people greatly value domestic manufacturing and want to support its growth. Three recent Gallup polls on job-creation recommendations revealed that the number one bipartisan answer is focusing on retaining U.S. manufacturing jobs and combating outsourcing. The disagreements arise over how best to support the effort. (I’ll explore some solutions in a future post.) “Made in America” is of such general interest that ABC World News Tonight created a series on the topic last spring and built a searchable online directory of U.S. manufacturing facilities. The TV network also developed this helpful resource guide on finding ways to purchase American-made goods. Similarly, Roger Simmermaker’s How Americans Can Buy American contains more than 16,000 products/services made in the United States, and the author has an accompanying e-guide to more than 2,500 goods sold at popular retailers. The resurgent feeling of American manufacturing also continues to grow, perhaps best captured in last year’s “Imported from Detroit” Super Bowl commercial, which has since become a full-blown national ad campaign.

Further Reason for Optimism

The United States’ reliable infrastructure, skilled workforce, excellent universities, creativity, entrepreneurial spirit, and diversity continue to be points of national manufacturing advantage. October’s report by the Boston Consulting Group addresses a positive shift in American manufacturing competitiveness, believing the U.S. will become more attractive as China’s cost advantages wane due to rising American productivity, a lower dollar and rising Chinese wages, as well as the prediction that more than 800K manufacturing jobs will return by mid-decade and have a multiplier effect. Other issues include shipping costs, duties, supply-chain risks, and piracy; last month’s Telegraph article, “World Power Swings Back to America,” by Ambrose Evan-Pritchard, offers a concise summary of other key findings. This assertion was echoed in Bill Clinton’s new book, in which the former president contends that “the cost of labor is not preventing good jobs in advanced manufacturing and related research and development activities from being created in America... Our workers are highly productive, reducing the disparity in costs with countries in which employees earn less but are also less efficient.” Findings from a new survey of senior U.S. manufacturing executives suggest that the country’s strongest manufacturing advantages over emerging markets continue to be high-quality products, innovative processes, and the protection of intellectual property. As you can see, the United States maintains a leadership position in global manufacturing and has a more hopeful and competitive future than most realize. However, much of this good news is eclipsed by concerns over the impressive growth of Brazil, Russia, India, and particularly China. So the next post will address other aspects of America’s global competitiveness with a particular emphasis on China. [Images: The 1930s-1940s in color, a set of rare color transparencies from the Library of Congress]

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