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Is Manufacturing in the United States Dying?

October 17, 2013

Manufacturing took one of the greatest hits during the recession but is it still suffering?

A decade or so ago, people would have said that manufacturing in the United States is a dying industry, with many companies closing up shop domestically and heading abroad to take advantage of lower labor costs. The economic recession further drove this point home, with even the most steadfast of manufacturers shipping jobs overseas to try and make ends meet.

However, over the past few years, the U.S. manufacturing industry has actually grown significantly. One White House report found that more than 330,000 industrial jobs have been added to the economy since 2010 – the fastest growth rate observed for the sector since the 1990s. Several major manufacturers have begun “insourcing” jobs from foreign economies, such as China, Mexico and Japan.

For many manufacturers, foreign operations can come at a significant reputational cost. For instance, social and labor issues at Asian factories such as Foxconn upset many consumers who may have purchased electronics manufactured there. The New York Times reported that a factory in India hired to produce clothes for big-name Western brands went up in flames, resulting in the deaths of more than 100 people. Catastrophic incidents such as these are encouraging many manufacturers to move jobs back to the United States, where they can have better control of the working conditions and prevent such disasters from occurring.

Additionally, operating domestically has several other advantages. For example, while wages may be higher for American workers, they can sometimes be offset by lower shipping and logistics costs. On top of that, new technology has enabled manufacturers to streamline their operations even further, freeing up additional expenses.

Locally, a number of different industry segments are positively impacted by these developments. The State of Massachusetts notes that computer and electronic products, such as computer and microchips, are the state’s leading manufactured products. Fabricated metal products (hand tools, stampings, valves, etc.) ranks second, followed by chemicals (pharmaceuticals, cleaning products, photographic materials). Other important industry segments include the manufacture of communication equipment, automation control devices, and other instruments.

Rhode Island is also benefiting from these developments. The state’s manufacturing base is led by the production of electrical equipment, followed by jewelry and silverware. Contrary to popular belief, the jewelry industry is not dead in Rhode Island. The state is still a leading jewelry producer with roughly 1,000 manufacturers.

This is not to suggest that all is rosy in the US manufacturing sector. The US recovery remains weak and the current uncertainty created by the federal government shutdown and looming debt ceiling crisis is only making matters worse. In addition, manufacturers will need to invest in new and innovative equipment and procedures to stay competitive. The country’s manufacturing base is also facing an aging workforce and gap in skilled labor. More professional training and development is needed to prepare manufacturers for the next generation.

Despite these challenges, USA Today states that manufacturing still accounts for just under 12 million US jobs today. Although domestic manufacturing is still significantly behind where it once was several decades ago, the notion that the sector is dying couldn’t be further from the truth. In reality, no US economic recovery will be robust enough without a strong manufacturing base.

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