Is U.S. Manufacturing Headed for a Recovery?
Optimists believe that manufacturing in the United States is starting to make a comeback, and is poised for even bigger gains in the coming years. Driven by more competitive labor and energy costs, and the desire of manufacturing companies to produce goods closer to their customers, the number of factory jobs is rising after plunging for the last several decades. Some American companies are even bringing jobs back home, and foreign businesses are coming to the U.S. The following are reasons to bet on Units States manufacturing and domestic factories.
American Costs are Getting more Competitive – While wages soar at double digit rates in China and some other emerging countries, they have stayed roughly level in America in recent years, narrowing the gap between the U.S. and Asia. When wages are adjusted for productivity, and the costs of shipping and inventories are included, the figures attest that it is more economical to make certain products in the United States than in Asia. In addition, the surge in American production of oil and natural gas, made possible by hydraulic fracturing – also known as “fracking” – has reduced our nation’s energy costs. In 2012, German industrial companies spent more than double for electricity as their American counterparts, and quadruple for natural gas.
Companies are more Eager to Produce Closer to their Customers – Today, manufacturing businesses are increasingly focused on reacting quickly to changes in demand in the marketplace. Being nimble reduces the risk of businesses becoming stuck with excess unsalable items, or having a shortage of products still in demand.
It is much simpler for businesses to react quickly when products are developed closer to where the customer is located. Manufacturing on our own soil can reduce the time needed to obtain and ship goods.
America’s Political Climate for Manufacturing has Improved – ManyU.S. manufacturers argue that government subsidies and incentives are more generous overseas. To combat this issue, both U.S. state and local governments have lately been competing fiercely for investments, and are offering some beneficial packages. Moreover, the declining power of American unions also encourages many manufacturing companies to be centrally located in the United States, rather than overseas.
Foreign Companies are Betting on American Manufacturing – This past March, Germany’s BMW auto manufacturer announced a one billion dollar expansion of its car plant in Spartanburg, S.C., aimed at increasing production capacity by fifty percent. Michelin of France last year opened a plant in South Carolina to make large tires for earth moving vehicles. Most recently, China’s Lenovo Group is now creating personal computers in North Carolina. Even the American footwear industry, after hurting from decades of decline, is showing signs of life and is once again emerging as a successful prospect. Merchant House International Ltd., which is headed by Hong Kong entrepreneur Loretta B.H. Lee, has been making work boots in China and selling them in the United States since the beginning of the 1980s. Thus past May, the company began producing some of its work boots at a newly opened plant in Jefferson City, Tennessee.