U.S manufacturing has been in the news a lot over the past several years – and not in a positive light. But two new reports issued in February tell a different story. According to an article in the Wall Street Journal on February 25, author Mark. J. Perry, a Professor of Economics at the University of Michigan, Flint, tells of a thriving and growing U.S. manufacturing sector. “In 2009, the most recent full year for which international data are available, our manufacturing output was $2.155 trillion (including mining and utilities). That’s more than 45% higher than China...” Perry also states that in 2009 the U.S. produced more than 20 percent of global manufacturing output, and points out that “excluding recession-related decreases in 2001 and 2008-09, America’s manufacturing output has continued to increase since 1970.”
The article recognizes that although the United States is still making a lot of products, it is able to do it with far fewer workers than it needed in the past. Productivity-enhancing technology means fewer workers in the highly automated plants, and displaced workers are required to learn new skill sets. Shifting to a more efficient economy has been a bumpy road for many people.
A second article, written by Dr. Chris Kuehl, Economic Analyst at the Fabricators & Manufacturers Association (FMA), claims that the manufacturing sector is leading our economic recovery. It states that in 2010 there were more jobs added in manufacturing than were lost – 130,000 of them. This is the first time this has happened since 1997. Kuehl says that the trend is heading in a positive direction, and some expect a net job gain of 500,000 by the end of this year. He offers three reasons as to why manufacturers have played such an important role in this stage of the economic recovery.
1) Better Management – Most companies’ executives today are actively engaged in strategic planning, market development and human resource management. Not many years ago, this was not the case – it was all about the fastest and cheapest way to get something out the door.
2) Emphasis on Strategy and Marketing – This either means that companies have launched new product lines to access new markets, or they have taken existing products into the global marketplace. Kuehl reports that as recently as 10 or 15 years ago the majority of small and medium manufacturers did no business at all overseas. But the average company now does about 30 percent of its business in global markets, and some have much higher rates. The weak dollar, making U.S. goods cheaper to foreign buyers, has accelerated this trend.
3) Adaptation – The manufacturing sector has aggressively adapted to new business environments. Manufacturers have become much more capital-intensive and are relying more on technology to stay competitive.
The FMA article emphasizes that manufacturers must maintain their momentum. “In looking ahead, it is apparent that parts of the world will have an advantage when it comes to production costs in many situations. This means U.S. companies must out-manage and out-strategize their competitors,” Kuehl says. The full article is posted as an Online Article this month at www.pcimag.com.
Obviously, not all manufacturers are going to find that these reports ring true to their own experiences. The coatings industry has had its own challenges with raw material shortages and price increases over the past several years, which have had, and continue to have, a very negative effect. But overall, I am glad to see some positive news about the manufacturing sector in general. I would be interested to hear your thoughts and comments on this topic. Feel free to e-mail me at Kristin@pcimag.com.