U.S Manufacturing In Context

The manufacturing sector continues to be a mainstay of our economic productivity, generating $1.8 trillion in GDP in 2011 (12.2% of total U.S. GDP). U.S. manufacturing firms lead the Nation in exports: The $1.3 trillion of manufactured goods shipped abroad constituted 86% of all U.S. goods exported in 2011. Moreover, manufacturing has a larger multiplier effect than any other major economic activity – $1 spent in manufacturing generates $1.35 in additional economic activity.1

The manufacturing sector employed 11.8 million workers in 2011, or 9% of total employment, and supported additional non-manufacturing jobs up and down the supply chain as well as in financial services.

In 2010, total hourly compensation, which includes employer-provided benefits, was $38.27 for workers in manufacturing jobs and $32.84 for workers in non-manufacturing jobs, a 17 percent premium.2 In addition, manufacturing jobs translate into additional jobs in other parts of the economy. At current manufacturing employment levels, almost 7 million additional jobs in other sectors of the economy estimated to dependent on manufacturing.

These additional jobs do not include new employment created in the local service sector (or “nontradable” sector), such as teachers, doctors, landscapers, hair stylist. On average, one new manufacturing creates 1.6 additional jobs in local service businesses. Jobs in high-tech manufacturing industries, which require workers with high skill levels and pay above-average wages, generate five local service jobs.3

Increasingly capable global competitors are severely challenging American leadership in manufacturing and innovation. After ranking as the world’s largest manufacturer for more than a century, the United States has lost ground to China in terms of share of global manufacturing output. It also has slipped below Germany, South Korea, and Japan in rankings of manufacturing intensity, a critical indicator of future job-creating innovation.

The U.S. remains the largest producer of advanced technology products, but competition in markets for these products also has ramped up over the last decade. In 2011, the U.S. ran a $99 billion deficit in trade of advanced technology products, an increase of almost 25 percent over the previous year’s deficit.4 The U.S. has lost 687,000 high-technology manufacturing jobs since 2000,5 when the nation posted a $5 billion trade surplus in advanced technology products.6 In 2011, imports of advanced technology products accounted for 17 percent of the total U.S. trade deficit.

But U.S. manufacturing has begun to rebound from the “great recession”. Since December 2009, manufacturers have increased their payrolls by almost 500,000 workers. In the first four months of 2012 alone, the U.S. manufacturing sector added 139,000 jobs.

Some of these jobs were the result of onshoring—the return of positions and operations that had been transplanted to lower-wage nations. Shifting global conditions and promising technologies could add momentum to these nascent trends, leading to a healthy resurgence in U.S. manufacturing output and to new employment opportunities across the economy.

In fact, several economic and technological trends are converging to create new opportunities for U.S. manufacturing. Increasing U.S. manufacturing productivity, rising labor costs in developing economies, prospective market-disrupting product and process technologies, growing production of domestic natural gas, and the desire to protect home-grown intellectual property are shifting the comparative advantages of global competitors. The shifts, many predict, will favor the U.S. manufacturing sectors, especially industries that produce high-value-added goods.

1Bureau of Economic Analysis, Industry-by-Industry Total Requirements Table.
2Economics and Statistics Administration, The Benefits of Manufacturing Jobs, May 2012.
3E. Moretti and P. Thulin, “Local Multipliers and Human Capital in the US and Sweden,” Research Institute of Industrial Economics, IFN Working Paper No. 914, 2012.
4U.S. Census Bureau, Trade in Goods with Advance Technology Products, 2010 and 2011.
5National Science Board, Science and Engineering Indicators 2012.
6U.S. Census Bureau, Trade in Goods with Advance Technology Products.

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