Surprise! American Manufacturing is Rebounding

By: Editorial, USA Today

The United States is in a tepid recovery from a deep recession, but apparently no one has bothered to tell that to American manufacturers.
Since early 2010, they have created 489,000 and are struggling to fill nearly a quarter million more. Their output last year topped $1.84 trillion, 8% higher than the pre-recession peak.

Even with an underwhelming 16,000 manufacturing jobs added last month, the business of making stuff is doing well, so well that many economists see domestic manufacturing not as a lost cause but as entering a renaissance.

To some degree, the surge in output is a function of the growth in industries such as semiconductors, medical equipment and other high-tech gadgetry. But autos, steel and other Rust Belt industries have been bouncing back as well.

Several factors are behind the surprising trend. Labor and transportation costs are rising in places such as China. Meanwhile, automation and a willingness of Americans to accept more globally competitive wages are making the U.S. more attractive. A boom in oil and natural gas production is boosting energy-related manufacturing, and that cheap natural gas is itself fueling industries such as steel and petrochemicals.

A trend toward “in-shoring” can be seen in Caterpillar’s recent decision to move 2,400 jobs from Japan to a backhoe plant in Georgia. Toyota announced a similar move of engine-assembly jobs to Kentucky.

These are the kind of middle-class jobs that are essential to a vibrant economy and a healthy democracy. A society with too few good jobs between burger flippers and college-educated professionals breeds resentment and division.

Given the intense focus on jobs in the presidential campaign, is there a role for government in sustaining the manufacturing rebound?

The gains are mostly the result of private-sector trends, as was the earlier decline. Even so, boosting exports and better educating a workforce for today’s factory job openings are two places to start.

In theory, the trade part should be easier. Exports have surged in the past two years. In fact, they are on track to meet President Obama’s goal of doubling in five years, something that was dismissed in 2010 as political happy talk.

But trade has always come under attack from labor unions. Recently, Tea Party groups have gotten in to the act as well. Trade promotion authority, the ability of the president to negotiate pacts and send them to Congress for a vote with no amendments, lapsed in 2007. As a result, trade agreements wither or take forever to get done. Last year’s deals with South Korea, Colombia and Panama took at least four years.

Making matters worse, some fiscal conservatives have tried to kill the Export-Import Bank of the United States, a heretofore non-controversial finance agency that facilitates exports. Its future was held in doubt for months as a May 31 deadline approached, prompting some foreign companies to wonder whether they should commit to buying American and risk losing their financing. Export-Import’s reauthorization finally passed out of Congress on Tuesday.

On the education front, solutions include more support for community colleges, vocational schools and public-private partnerships for on-the-job training. And how about a campaign by trade groups, senior government officials and perhaps even celebrities to promote manufacturing as a career? Too many young people associate domestic manufacturing with shuttered factories, rigid union rules and, in some cases, inferior products, which is a far cry from today’s reality of high-tech factories needing smart workers.

With a lot of American ingenuity, the nearly half-million jobs created in the past two years might only be a beginning.

 

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