Tags: manufacturing | rebound | myth | productivity

Study: US Manufacturing Rebound a 'Myth'

By    |   Monday, 12 January 2015 11:16 AM

While much talk of a U.S. manufacturing comeback has percolated through economic circles recently, Robert Atkinson and Adams Nager of the Information Technology and Innovation Foundation don't buy it.

The argument is that rising labor costs overseas, cheap oil and gas and automation "are combining to make America the new global manufacturing hub," they write in a report on the think tank's website.

"The data do not support such a rosy scenario. In fact, at the end of 2013 (the most recent year available) real manufacturing value added (the best measure of the health of U.S. manufacturing) was still 3.2 percent below 2007 levels, despite GDP growth of 5.6 percent."

There are 15,000 less manufacturing companies than in 2007 and 2 million fewer workers.

"It is true that some jobs are being brought back to the United States. However, reshoring numbers are modest and the manufacturing sector is also still sending jobs overseas, roughly at the same rate," the study states.

The authors cite several myths that lie behind the claim of a manufacturing renaissance:
  • China's rising labor costs will soon match U.S. wages. The authors note that while Chinese wages are increasing they are estimated to be just 12 percent of average U.S. wages this year.
  • The shale gas boom gives U.S. manufacturing a substantial advantage. In truth, energy costs are lower than 5 percent of shipment value for 90 percent of the manufacturing sector. Therefore, shale energy has had an impact only on energy-intensive industries so far.
  • Currency fluctuations will fix the trade deficit. The dollar has not been able to fix the U.S. trade deficit, which has been running since 1975.
  • Superior U.S. productivity growth will restore jobs. However, they write, productivity in the U.S. is growing much slower than in China and South Korea.
"From an in depth analysis of available data on U.S. manufacturing workforce, value added, and productivity, U.S. manufacturing is shown to be in state of moderate, cyclical growth and not experiencing a renaissance."

The manufacturing sector grew in December at its slowest pace in six months amid economic weakness overseas, the Institute for Supply Management reports.

"It makes sense that manufacturing activity should be coming off the boil," Paul Dales, an economist with Capital Economics, told Reuters. "But the strength of domestic demand will ensure that industry and the wider economy still perform particularly well in 2015."

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While much talk of a U.S. manufacturing comeback has percolated through economic circles recently, Robert Atkinson and Adams Nager of the Information Technology and Innovation Foundation don't buy it.
manufacturing, rebound, myth, productivity
396
2015-16-12
Monday, 12 January 2015 11:16 AM
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