Manufacturing's Death Has Been ExaggeratedTags U.S. Economy
The US manufacturing sector has had a rich history, one that has lifted millions of Americans into the middle-class, making the Land of the Free the most envied nation in the world. You clock in your eight to 10 hours a day, bring your lunch pail, and complete an honest day’s work, giving you a paycheck to purchase that new radio set to listen to Suspense, a modest two-bedroom home, and enough cash left over to buy your child the latest Cowboys and Indians toy set. The American Dream blossomed thanks in part to manufacturing.
Today, when you think of US manufacturing, it is rare to conjure up images of a thriving middle-class. Instead, you see in your mind ghost towns, shuttered factories, and thousands left jobless. The cherry on top are the headlines that say the company is sending jobs overseas, citing higher labor costs, ballooning energy prices, and a non-competitive tax environment.
For years, politicians have paid lip service to stimulating US manufacturing, making nauseating campaign stops in Ohio in an election year to nab a photo-op driving a Ford or operating a forklift. That said, there have been two political candidates who seemed to have really been genuine about their concerns: Ross Perot and President Donald Trump.
During the 1992 presidential election, the billionaire Independent candidate warned the nation about a “giant sucking sound going south.” In 2016, then-candidate Trump promised to restore manufacturing jobs following “a rapid deindustrialization that has evaporated entire communities.”
This may seem like a realistic account of what’s happening today. However, rumors of manufacturing’s death are greatly exaggerated. The US sector is alive and well, and it’s contributing immensely to national and global economies.
So, is it just fake news or a misreading of the data?
US Manufacturing is Thriving
The Federal Reserve recently published several manufacturing statistics from June, and they beat market forecasts and rose from the previous month:
- Factory output jumped 0.8%.
- Total industrial production advanced 0.6%.
- Capacity utilization increased to 78%.
Yes, there have been some hiccups along the way, but this has been the norm for years.
While it is true that factory jobs have fallen by approximately seven million since 1979, manufacturing output has climbed more than one-fifth since 2006. In fact, US manufacturing production, which totals $2.18 trillion, is equal to that of France, the UK, Italy, Germany, South Korea, and India combined ($2.19 trillion).
In the first quarter of 2018, the nation’s manufacturing output hit a record high of roughly $2 trillion.
Now, you will likely thank President Trump’s tariffs for this development, since he is targeting the very nations that ostensibly stole American jobs. However, domestic manufacturing didn’t suddenly become a force to be reckoned with; it’s been doing well for a long time thanks to technological advancements, not because of a Republican or Democrat administration.
We are witnessing record levels of output with the same or fewer number of factory workers. Automation has complemented the backbreaking labor, allowing the US to produce more at a lower cost. For example, it used to take 10 man-hours to create one ton of steel, but this has cratered to just 90 man-minutes in the last couple of years.
And most US workers are no longer confined to sweatshops, creating t-shirts and snow globes. They are developing everything from aerospace technology to business systems to financial services. Isn’t this a whole lot better than snow globe economics à la Senator Bernie Sanders (I-VT)?
Making Manufacturing Great Again
These are all befuddling findings because we routinely hear about how the nation is only consuming, not producing. Even the most eminent libertarians, the champions of free markets and free trade, espouse the falsehood that America isn’t making anything more. This is simply not true.
Some industries ebb and flow. Some industries perish. You only need to look at the energy sector to fathom how markets operate: It was five years ago when oil prices crashed, sending tens of thousands to the unemployment line. Today, a barrel of oil has topped $70, sending tens of thousands back to work. This will inevitably occur again.
There are a couple of realities to face: Automation will play a greater role in factories and every sector goes through the best of times and the worst of times. Logging jobs are tumbling, but the domestic industry is excelling because of monster equipment. Coal is dying because natural gas is taking its place. The horse-and-carriage niche faced its demise a century ago because of the automobile.
US manufacturing is so immense that output levels are the same as several nations combined. Sure, there may no longer be surly men wearing overalls and smoking Camel cigarettes all day long, but it remains the envy of the world, and it will stay that way for many years to come.