The status of manufacturing in the United States has been concerning over the last six months. With jobs continuing to be outsourced to other countries and American companies laying off workers at frightening speeds, there hasn’t been much good news to report. As we struggle to compete with foreign markets to keep prices competitive, U.S. based manufacturers are looking for new avenues to stay relevant.
Mixed Messages from the U.S. Manufacturing Index
For the first time since August, 2015, U.S. manufacturing registered growth for the months of March and April. The favorable economic response that markets had to a weakening dollar (which makes U.S. goods more affordable in foreign markets) and signs of weakness in overseas markets strengthened confidence in our factories. Export orders rose in April, and 15 of 18 manufacturing industries reported increases in production and new orders.
While U.S. manufacturing has shown signs of growth for the second straight month, the numbers are somewhat deceiving. It is important to note that the U.S. Manufacturing Index has historically been an unreliable measure of the status of manufacturing in our country. The index is a diffusion index, which means that it reflects the number of people saying the conditions are better compared to the number saying conditions are worse. It does not take into account any hard data. However, it does analyze trends. And, for the second month in a row, this economic indicator is trending upwards.
A Shift in Thinking
It’s no surprise to anyone living in America’s rust belt that the factories that once drove the economy of the Midwest have long since ceased their operations. This flourishing industrial region has struggled greatly as a result of the rise of the automation of the industrial process and the transfer of U.S. jobs to countries with minimum wages too low for our markets to compete with. As unemployment continues to rise and social conditions worsen, laborers, business owners and government officials are wrestling with how to breathe life back into this once bustling area.
The future of manufacturing in the United States is making a much needed shift in approach from one of scrambling to produce low cost goods to one of innovation. Corporations and major businesses are investing millions of dollars to fund research at universities across the country, focusing their efforts on combining brainpower with smart manufacturing. By integrating the world of electronics and mechanics with teams of highly skilled and well-trained individuals, the U.S. has the ability to make major breakthroughs in manufacturing as we know it.
Technological advances such as 3-D printers and robotics can help re-establish our country’s status as a leader in the global marketplace. We have always prided ourselves on our entrepreneurial spirit. By spearheading a ‘smart production’ movement, American engineers, venture capitalists, researchers and visionaries are combining efforts to launch new products and develop new industries.
Aviation and Defense Manufacturing Sector is Booming
In addition to the advancements being made in new technologies and manufacturing areas, one sector of U.S. manufacturing continues to boom. The aviation and defense industry is chugging along at an impressive rate, with gross export rates toping $143 billion dollars in 2015. Those numbers are extremely encouraging, especially when you take into consideration that they do not include domestic revenues received from contracts with our nation’s government.
With orders for F-15’s, F/A-18E/F’s, 747’s and other commercial and government aircraft streaming in, American aviation factories are working at full capacity. To make matters even better, the intense security protocols that must be followed when building these fighter jets means that they have to be built on U.S. soil. Boeing, with factories in Washington and Missouri, is projected to see growth of upwards of 3% over the next year.
Many people may not realize that the United States remains the world’s #1 arms dealer, responsible for 33% of global weapons sales. Security concerns and foreign conflicts continue to keep this area of manufacturing highly profitable. Despite the downturn in domestic defense spending under our current administration, insiders predict that whoever takes over the White House next November will increase spending in this area. The candidates understand the implications that a rise in our defense spending will have on our economy and it seems a surefire way to gain financial and military confidence from American citizens.
With manufacturing making up 10% of the U.S. economy, people look to its success to gauge their confidence in our markets. Its performance often foreshadows our country’s economic growth. The current state of U.S. manufacturing remains somewhat uncertain. Economists hope that the infusion of new technological advances to the manufacturing arena and a fresh perspective in the White House will provide the impetus to generate the turnaround our nation sorely needs.