Friday, June 22, 2012

America's Manufacturing Renaissance

From my article "Manufacturing in Our Favor" for the U.S. Chamber of Commerce:

Intro: There were three related and important manufacturing trends that emerged in 2011:
 
a)  American manufacturing remained at the forefront of the United States’ economic expansion for the second year in a row and re-established itself as one of the economy’s strongest sectors;

b)  An erosion of China’s manufacturing cost advantages, especially for wages, started to bring manufacturing production back to the United States from China and other low-wage countries, reversing a decade-long trend of outsourcing production overseas; and,

c)  An abundance of domestic shale-based natural gas brought gas prices to record low levels and sparked a new boom in the United States for energy-intensive manufacturing. 
As a result of these trends, American manufacturing in 2011 had its best year in at least a generation by all relevant measures of economic performance: profits, output growth, and employment gains. In fact, it’s possible that we will look back on 2011 as a watershed year that marked the beginning of a great manufacturing renaissance in America.

Conclusion:

Putting it all together, the U.S. manufacturing sector had one of its best years ever in 2011, reflecting a new manufacturing rebound that is now underway and is expected to accelerate in the years ahead. Flush with record-level profits, the manufacturing sector has never been financially healthier than it is today, and the future of American manufacturing has never looked brighter. After years of negative reports about the decline of American manufacturing, it’s now time to recognize and celebrate a great turning point, as America’s industrial sector moves in a new direction that many are now calling a “manufacturing renaissance.” 

11 Comments:

At 6/22/2012 3:30 PM, Blogger Unknown said...

Cynics are going to look at the photo of the robotic arm posted in the article and conclude it won't mean any new jobs. :-/

 
At 6/22/2012 4:04 PM, Blogger Moe said...

Manufacturing is a capital-intensive business that requires equipment, tooling and raw materials. For the renaissance to come to fruition, the manufacturers will have to turn to banks for the financing required to hire more workers, buy new equipment and aggressively market themselves - and hopefully acquire those loans.

 
At 6/22/2012 4:27 PM, Blogger OBloodyHell said...

Now if only we can get rid of President Downgrade (maybe the electoral votes from those extra 7 states can help...?), so that the uncertainty he's constantly introducing into the business cycle will fade, it should really take off in 2013.

 
At 6/22/2012 6:40 PM, Blogger VangelV said...

Manufacturing is a capital-intensive business that requires equipment, tooling and raw materials. For the renaissance to come to fruition, the manufacturers will have to turn to banks for the financing required to hire more workers, buy new equipment and aggressively market themselves - and hopefully acquire those loans.

If those loans come from newly printed money the manufacturers will find their investments to be much more expensive than they planned on and a great deal of the investment will be wasted. Capital comes out of savings and on that front the US is falling behind. Now you could argue that foreigners will invest their savings in the US but that is a hard argument given the terrible regulatory environment in the US.

 
At 6/22/2012 8:05 PM, Blogger RjLais said...

There will be many new jobs from the manufacturing boom...But first the manufacturers need to hire some PR firms to advertise these jobs as quality, high paying, rewarding jobs. Nobody says, "When I grow up I want to go into manufacturing". Hence, manufacturers hurtle is the workforce's perception not the reality.

 
At 6/22/2012 8:06 PM, Blogger RjLais said...

This comment has been removed by the author.

 
At 6/23/2012 10:54 AM, Blogger Jon Murphy said...

There are ways of raising financing without bank loans: selling bonds, selling stock, diverting profits, etc.

 
At 6/23/2012 7:58 PM, Blogger Roger said...

A couple of comments speak of getting loans for new equipment. Will businesses turn to loans, or will they draw on the cash sitting on the sidelines? After all, businesses are sitting on $2T ($3T, by some accounts) cash. Why wouldn't they draw down on the cash reserves?

 
At 6/23/2012 8:11 PM, Blogger VangelV said...

Sitting on cash? The only way that you can sit on cash it to take it out of the banking system and put it in a mattress. When you keep it in the bank it is used to make loans that are a multiple of that amount of cash. If you put it in a money market fund it uses that cash to buy treasuries, corporate paper, etc. If you withdraw that cash interest rates will rise. Given the sensitivity of the economy to low rates that would cause stresses that cannot be handled easily.

 
At 6/24/2012 5:44 PM, Blogger marmico said...

After all, businesses are sitting on $2T ($3T, by some accounts) cash.

Another myth tossed into the dustbin of history.

 
At 6/25/2012 2:09 AM, Blogger OBloodyHell said...

>>>>> Cynics are going to look at the photo of the robotic arm posted in the article and conclude it won't mean any new jobs. :-/

LOL, of course it won't. That's the entire point -- to shift the remaining percentage of manufacturing labor to other things, just as mechanization took the 80% of the ag labor force down to 2-5% of the labor force.

We should see the manufacturing sector reduce down to 2-5% of the labor force in the coming decades.

Are we wailing about the lost ag workers from a century+ ago?

 

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