The US manufacturing industry has recently entered a bounce-back period of increased global innovation and demand. As a result, US manufacturers who want to profit are now expected to anticipate and adapt to new global trends. Furthermore, America must maintain its cutting-edge technology and well-trained workers if it is to be globally competitive.
Two factors contributing to the recent domestic comeback are: 1) higher labor prices abroad and 2) the shale boom. (The shale boom has led to lower domestic energy costs.)
Many Americans displeased with current job conditions still harbor nostalgia for the golden age of American manufacturing. But these people must realize that the thriving sector of the 1950s cannot be recreated. The disappearance of many jobs in manufacturing was mostly due to the rise of automation--and hence, the evolution of the American economy. (Robotic labor will continue to displace factory workers in the United States and across the world.)
Improved technology since the late aughts has brought the "Made in America" movement increases in both productivity and the amount of goods sold abroad. Although many people blame offshoring and globalized trade, the spike in US productivity was actually the primary cause of the 5.8 million domestic manufacturing jobs that vanished between 2000 and 2010. US output could not keep up with new demands after the spike, and offshoring became the business adaptation that allowed producers to meet the new demand. Because improved technology reduced the number of manual laborers required, the job distribution in manufacturing shifted. Most manufacturing jobs today are in engineering or marketing.
Americans today are wealthier than their counterparts 50 years ago, so they have more to spend on services. This has allowed the service sector to expand faster than the manufacturing sector. But the manufacturing sector also continues to expand, not stagnate. Yet, because the accelerated expansion of the service sector is a somewhat novel development, it has given rise to many unfavorable, unfair comparisons between the US economy and its competitors. Context is needed to tell the full story.
The United States manufacturing sector is ranked second worldwide, in terms of total output. (China ranks first.) Petroleum products are America's top manufactured good, followed by light trucks. Other top goods are pharmaceuticals, airplanes, automobiles, iron and steel, animal slaughtering, plastics, organic chemicals, and petrochemicals. Big players in US manufacturing are Apple
The decades-long rivalry between American and Chinese manufacturing took a turn in January 2013, when the Chinese computer company Lenovo (HKG: 0992) unveiled a new manufacturing line in North Carolina. Lenovo's move signaled to economists that the company found it more profitable to have an outpost in the US. Their decision points to the recent rise in the famously low Chinese wage (i.e., the shrinking wage gap between China and the US.) Like Lenovo, Nissan (TYO: 7201), Honda
Despite numerous changes in recent years, some changes from decades ago will never be reversed. Industries that rely heavily on cheap labor will probably never return to the United States, with two examples being textiles and mass produced clothing. The existing Chinese infrastructure for producing these goods is both too entrenched and too efficient to allow new competition to enter the scene.
