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Manufactured Facts

Last week the Institute for Supply Management released their June Manufacturing Index that showed a contraction in US factory output. That brought to mind some important questions:

We still have factories in the US?

Wasn’t that all shipped to Mexican maquiladoras or Chinese sweatshops long ago?

Our country still builds things?

I did some research and found these facts about the state of American manufacturing today:

  • We manufacture as much as we used to. US manufacturing has held at a steady 22% of global manufacturing since 1980.
  • We manufacture a lot. If US manufacturing were a country by itself, it would be the eighth largest economy in the world (bigger than Canada, India, South Korea, Spain, etc.)
  • We make a lot of money from our manufacturing. The value of US made goods was $1.64 Trillion in 2008, growing 22% since 1998. (China is just over $400 billion by comparison)
  • Our manufacturing is diversified. The five largest US manufacturing industries are food, chemicals, computers and electronics and fabricated metal products.
  • The small manufactures aren’t really that small. Small and medium sized (less than 100 employees) make up more than 80% of manufacturing companies.
  • We make more for less. Manufacturing productivity grew 103% between 1987 and 2008. This means we can now make twice as much for the same cost.
  • We heavily tax manufacturers. US manufacturers have the second highest corporate tax rate among our major trading partners.

So yes, the US is still in manufacturing – more than any other nation on the planet. But US manufacturing has changed from the rustbelt smokestack industry of previous generations.

Today’s plants are smaller, cleaner and more specialized then before. They employ highly trained and educated workers with fewer assembly line employees. You are more likely to find a robot doing precision work than an anvil or lathe. They are innovative, with more new patents granted to US applicants than to the rest of the world combined.

Much has been written about the manufacturing multiplier – the service sector jobs created by each manufacturing job. According to The Manufacturing Institute, “every manufacturing job supports five other jobs, and every dollar in total manufacturing value added supports $1.40 in output in other sectors of the economy.”

For as much as we hear about all the lost manufacturing jobs (2.7 million between 2000-2003) many go unfilled due to a lack of available skilled workers. A recent Deloitte study estimates that as many as 5% of manufacturing jobs – a staggering 600,000 jobs – “simply go unfilled because they can’t find the right people with the right skills.”

It is clear that US manufacturing our national economy are in lockstep. So how can a manu-friendly environment be created?

  • Lower corporate taxes by 5% (estimated to create 500,000 manu-jobs in 10 years).
  • Lower and stabilize energy prices (20% of US energy is used by manufacturing).
  • Invest in education and technical training to ensure skilled workers are available for jobs.
  • Reduce and streamline onerous regulation (adds about 12% to cost of US goods).

American manufacturing today is alive and well and vital to our national economy. If these steps were followed, I think we could once again be recognized as a country of builders.

David Morrison

David uses Values Based Financial Planning to align your financial choices with your most important goals and your most deeply held values. He has a comprehensive process to consolidate, coordinate and simplify your financial life in a way that brings you more confidence and clarity about your future. Learn more about David here.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

Securities offered through LPL Financial. Member FINRA/SIPC

Make – An American Manufacturing Movement. US Manufacturing Competitiveness Initiative, December 2011.

The Facts About Modern Manufacturing, 8th edition. The Manufacturing Institute, 2009.

Boiling Point? The Skills Gap in US Manufacturing. Deloitte and The Manufacturing Institute, 2011.