Signs American Manufacturing Can Make A Comeback

Signs American Manufacturing Can Make A Comeback

July 21, 2016 | U.S. Manufacturing

The signs are visible—that U.S. manufacturing may once again take root and bloom. 2016 has seen steady economical growth, raising hopes. Now that major manufacturers are returning their industries to American soil, the market is poised for another spurt. Step-by-step, America is regaining its economic and financial strength, proving that U.S.-based manufacturing can eventually make a comeback.

The Incentive

In the early 2000s, hardly any manufacturing jobs were present in America. At this time, restructuring and off-shoring was popular. Other countries offered materials and physical labor for a cheaper price, and so this was seen as the smartest business route. However, the act of moving work to other countries dampened the U.S. economy and lead a high rate of nationwide unemployment, bankruptcy, and other serious issues. That was when American companies made a pivotal choice: to bring jobs back to the U.S.—an action called “re-shoring” and to coax “foreign direct investment”, where foreign companies bring labor to America. In 2014, the economy saw its first significant gain in manufacturing jobs in 20 years.

One reason for this growth was Americans purchasing Made in USA labelled goods. Offshoring and near-shoring was in many ways the result of ignorance to where goods were being fabricated. While downsizing American manufacturing favored overseas job growth, it did nothing for the American dream. Currently, increasing wages in other countries, as well as a surge of patriotism, has prompted companies to retract these jobs and bring them closer to where the demand is. Not only does this decrease shipment costs, the supply can meet the demand in a more timely fashion.

Walmart was one of the first to see this as incentive to withdraw their overseas production lines. General Electric Co. followed suit. Even Apple Inc. promised to make the necessary steps to make its computers in the U.S.

2016 Gains

In recent news, U.S. industrial production, particularly the automobile sector, has spiked in 2016. This may a result of companies like Ford bringing their production home and BMW bringing jobs in. Reportedly, production saw a 0.6% increase. While it might not seem like much, in a global economy that has been struggling along and the presence of inflation, that fact that Americans are spending more on U.S. made products did something wonderful. In a governmental job report, over 287,000 jobs were created in June.

The fact that Americans are willing to open their wallets more often is also seen in inventory growth throughout the country. So far in 2016, retailers expanded inventories by 0.5 percent, auto dealers expanded by 0.7 percent, furniture and appliances by 0.5 percent and home improvement and garden supplies by 1.1 percent.

Despite Brexit rattling the global financial climate, the gains in June were better than what had been predicted.

Rebounding

Other signs that American manufacturing is set for a comeback is the decline in the trade deficit. The term ‘trade deficit’ refers to the cost of a country’s imports exceeding the value of its exports. 2005 saw close to a -6.0 percent deficit, meaning that bringing in foreign goods cost the economy way more than it should have. Meaning, America was hardly receiving anything for what it was sending out. In 2015, the deficit had been halved.

The June 2016 Manufacturing ISM Report on Business, a national report by the Institute for Supply Management revealed that it’s not just an increase in auto production sweeping the nation. The following manufacturing industries reported growth in production and incoming orders in June:

• Printing
• Textiles
• Petroleum and Coal
• Food, Beverage and Tobacco products
• Fabricated Metal products
• Apparel and Leather
• Paper
• Computer and Electronics
• Chemicals
• Machinery
• Primary Metals
• Non-metallic Mineral Products

Moreover, the June 2016 Employment report from the U.S. Bureau of Labor Statistics in the manufacturing sector grew after a slight drop at the beginning of the year. Food manufacturing added 13,000 jobs, signalling the industry’s “largest 1-month increase since July 2000.” Employment in durable goods (built to last) manufacturing saw around 3000 new jobs. Additionally, non-durable good production rose by 13,000 jobs.

Albeit the global financial market is on a quaking foundation, growth in manufacturing, no matter how slight, is something America can be proud of. Bringing jobs back home via reshoring, encouraging foreign countries to bring business here, and purchasing American-made products has proven to be economically beneficial. If the trend continues, U.S. manufacturing can transcend expectations and make a comeback.