D. Dowd Muska

 

American Manufacturing’s Impossible Dream

May 03, 2012

When something that “can’t” happen does happen, it’s important to take notice.

We’ll get to the disproven impossibility in question soon, but first, some history. In 1979, manufacturing employment in America hit an all-time high of 19.6 million. In the three decades since, protectionists, populists, and nostalgists have subjected the citizenry to relentless wailing. The nation, their story goes, “doesn’t make anything anymore.” Foreigners are “stealing American jobs,” and turning the Land of the Free into the United States of Burger Flippers. It’s only a matter of time until the descent to full-bore Third World status -- the process of “deindustrialization” has become so severe, it cannot be reversed.

The ain’t-it-awful chorus enjoys considerable success with its depressing narrative because most people associate the health of a business, industry, or economic sector with the number of workers it’s hiring. That’s a violation of elementary economics. Wealth is created by doing more with less. Since the Carter era, that’s exactly what manufacturers have accomplished.

U.S. factories’ value added, which the Census Bureau says is “considered to be the best … measure available for comparing the relative economic importance of manufacturing among industries and geographic areas,” rises nearly every year. Recessions cause occasional downticks, but the overall trend is undeniable. Even during the fiscal and monetary blunderfests of George W. Bush and Barack Obama, production has grown. As economist Mark J. Perry noted in The Wall Street Journal, “In every year since 2004, manufacturing output has exceeded $2 trillion (in constant 2005 dollars), twice the output produced in America’s factories in the early 1970s. Taken on its own, U.S. manufacturing would rank today as the sixth largest economy in the world, just behind France and ahead of the United Kingdom, Italy and Brazil.”

Globalization’s haters aren’t interested in a dispassionate analysis of data. They’re certain that “slave labor” abroad will inexorably reduce our smokestack jobs to zero. The assertion is easily dismissed. Some manufacturing is labor-intensive, but much is not. A 2011 paper by the Center for American Progress explained that firms have many issues to weigh when deciding where to invest, including “proximity to engineering and design centers, access to raw materials, avoiding currency fluctuation risk, knowing their intellectual property will be safe, [and] the … cost of transporting some goods across long distances.”

Now back to the it-can’t-be-true phenomenon. Since manufacturing employment’s rock-bottom point of January 2010, American factories have created a net 470,000 jobs. And no, the growth hasn’t been confined to Texas. The Lone Star State has picked up 43,500 positions since its Great Recession nadir. But Indiana (54,600) and Ohio (43,600) have fared better. Other winners, and their job gains, include:

• Wisconsin: 24,900

• South Carolina: 17,200

• Minnesota: 14,800

• Pennsylvania: 13,500

• Tennessee: 12,300

Why the good news, in states both red and blue? No one can provide a perfectly complete answer. Wages are rising in China. Cap-and-trade is kaput. Expensive petroleum has sent transportation costs soaring. And cheap natural gas is a windfall for many manufacturers. (Particularly chemical companies.) 

Whatever the causes, factories are hiring. The Seattle Times reported that since December, “Terex Aerial Work Platforms has hired about 500 workers in Washington amid rebounding demand for its lifts.” In April alone, Kentucky welcomed a Japanese auto-parts company (100 jobs), a subsidiary of Israel Aerospace Industries opened an office in Maryland (100 jobs), Bobcat expanded its operation in North Dakota (200 jobs), a pharmaceutical corporation announced a new facility in Georgia (1,500 jobs), Dow Chemical picked Texas for the site for a hydrocarbon cracker (150 jobs), Deere & Co. disclosed a new project in Iowa (125 jobs), and Cummins chose to invest more in Indiana (290 jobs).

As for the future, The Boston Consulting Group believes that “the underlying math of global manufacturing is starting to swing in America’s favor,” and “600,000 to 1 million direct factory jobs” could be created this decade.

Perhaps. But with the U.S. possessing so many assets -- a tradition of innovation, vast natural resources, hardworking immigrants, a sizable supply of affluent consumers, a work ethic that hasn’t been entirely obliterated by welfarism -- one thing is certain: Whether it’s hiring or firing, manufacturing will continue to thrive here.

The terrifying tale of post-industrial America gets plenty of legacy-media attention, but it has never contained much truth. And with factories bringing on workers at a rate that hasn’t been seen in decades, the vanishing-jobs argument has collapsed.

That pesky manufacturing decline. It’s been just-around-the-corner for ages. Won’t it ever arrive?

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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