Carpe Diem

‘Made in the USA’ is making a comeback

Photo Credit: Shutterstock

Photo Credit: Shutterstock

In a post on the Curious Capitalist blog titled “How ‘Made in the USA’ is Making a Comeback,” Rana Foroohar writes about a “powerful equation refiguring the global economy”:

U.S. factories increasingly have access to cheap energy thanks to oil and gas from  the shale boom. For companies outside the U.S., it’s the opposite: high global  oil prices translate into costlier fuel for ships and planes — which means some labor savings from low-cost plants in China evaporate when the goods are shipped thousands of miles.

And about those low-cost plants: workers from China to India are demanding and getting bigger paychecks, while U.S. companies have won  massive concessions from unions over the past decade. Suddenly the math on outsourcing doesn’t look quite as attractive. Paul Ashworth, the North America  economist for research firm Capital Economics, is willing to go a step further. “The offshoring boom,” Ashworth wrote in a recent report, “does appear to have largely run its course.”

 

Related: Time Magazine’s cover story this week is “Made in America” (subscription required).

MP: I wrote about this trend last summer in an article for the US Chamber of Commerce titled ”Manufacturing In Our Favor,” here’s part of my conclusion:

The increased competitiveness of America’s industrial sector in recent years has brought manufacturing production and employment back to the United States and this reallocation of global production is expected to continue in the future. From two parallel boosts to the U.S. manufacturing sector—one wage-related and one energy-related—the reallocation of global manufacturing could possibly create 3 to 4 million new manufacturing jobs in the United States over the next decade.

A significant benefit of the U.S. manufacturing renaissance is that it will help move America’s industrial sector forward in one area where it already has a strong global edge —technology-driven, modern, advanced manufacturing. As new manufacturing technologies emerge, like computationally engineered materials, 3-D printing, and direct-digital manufacturing, the highly paid, technically-trained workers available in America will be more important than cheap overseas labor for the technology-driven factory floor of the 21st century. With America’s rich history of innovation, research, education, and entrepreneurship, it has the key resources available to maintain its position as one of the world’s largest and most sophisticated manufacturing nations.

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.”

13 thoughts on “‘Made in the USA’ is making a comeback

  1. Output in the materials sector is at an all time high. Mining output is close to surpassing the 1980s peak. Durable goods output is at an all-time high. Rate of change in all three is above the rate of 2000-2007.

  2. ‘Made in the USA’ is making a comeback“…

    Yet another Obama water carrier trying to wish away reality…

    Not to worry, ObamaCare will make it all a moot point quite handily…

  3. It will not help the employment rate much when you consider automation, robotics, and computers taking more and more jobs.

    • It will not help the employment rate much when you consider automation, robotics, and computers taking more and more jobs.

      No, but your unemployment check will stretch further.

  4. Remember: The tsunami of imports that crushed U.S. factories over the last 40 years raised your living standards, and now that jobs are coming back to American factories, that is good news too.

    Got that?

  5. This celebration is premature. Despite antidotal evidence there has been no meaningful return of manufacturing. Labor cost savings from outsourcing trumps energy sayings.

    There has been economic activity in this land for about 400 years. During the whole of that time we have never once been labor cost competitive with the rest of the world. Even when we had slave labor there was always somewhere else in the world where labor was cheaper. Our success has been built not on cheap labor but innovation, research, education, low cost energy, and capital. Our free trade agreements level the playing field and put us in direct competition with the lowest cost labor on the planet. Capital can go anywhere. Energy cost will be about the same anywhere. If we become self-sufficient in energy we will quit buying foreign oil. That reduced demand will reduce the price for China and others. Even if innovation and research allow us to pay high wages and still be product competitive with the rest of the world it will still be more profitable to outsource. No matter how low the labor cost component of a product is made by innovation and research low cost labor abroad will still produce more profit for the producer. There is no way to keep those advantages here. Education will not save us. Outside the USA there are enough English speaking college graduates to take every job we have several times over. We have already given away 200 years of manufacturing knowhow.

    Bottom line – no tariffs no recovery!

    • Bottom line – no tariffs no recovery!

      Heh. James, do you think if you sneak that nonsense in here during the wee hours no one will notice?

    • James: “Bottom line – no tariffs no recovery!”

      That depends on how you define “recovery”. Some indicators show a very real recovery:

      1. U.S. GDP – the real value added of business and government operations which are physically located in the 50 states – reached all time highs in 2011 and then again in 2012.

      2. By a number of measures, the U.S. stock market has reached all time highs in 2013.

      3. Total non-farm employment reached 135 million in March, just 2 percent below the all time high in 2008, and higher than any year before 2007.

      The problem facing many workers in the U.S. is just that the skills they possess are no longer needed.

  6. Another problem to consider when trying to repatriate jobs that have been offshored is the high corporate taxes that these companies pay. Why bring your labor and/or manufacturing back to the US to save a few bucks on energy consumption or out of patriotic feelings when the government is going to whack you with some of the highest corporate taxes in the world. Anyone wonder why big companies like Coco Cola and MSFT have billions stashed overseas? Its the taxes, stupid!

  7. We do not yet have GDP by industry data for 2012, but the 2011 data is revealing. Real value added by plants, offices, hospitals, etc located in the U.S. was at an all time high in 2011. In other words, the U.S. economy had, in total, fully recovered.

    Here’s some of the industries which recorded all time highs for real value added in 2011:

    Profession, scientific, technical svcs …$1,006 billion
    General government ……………………….$508 billion
    Hospitals and nursing care facilities …….$402 billion
    Non-hospital health care svcs …………..$488 billion
    Computer & electronics mfg ……………..$362 billion
    Broadcasting & telecommunications …….$389 billion

    Many manufacturing industries, including motor vehicles, petroleum products, chemicals, paper, textiles, and electrical equipment were well below all time highs.

    Although health care and government employ hige numbers of workers, I don’t think the more technical of the recovered industries will help the millions of unemployed low-skilled workers.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>