KBMax Blog

US Manufacturing is Doing Great and Will Become No. 1 Surpassing China by 2020.

Posted by Thomas Plocher on 1/5/17 7:28 PM
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The number of jobs in the manufacturing sector has declined by about 5 million since 2000, falling from 17.3 million at the turn of the century to 12.3 million in 2015. This decline in manufacturing jobs certainly makes it seem as if America has been deindustrialized, but it is not so. America still makes lots of stuff, but the number of jobs has shrunk because it does not take nearly as many workers as it used to.
In 2010, China became the leading manufacturing economy in the world, but the United States maintains a strong second-place standing. The value added by U.S. factories is more than $2 trillion a year, equal to the next three countries (Japan, Germany and South Korea) combined. Gross output of U.S. manufacturing industries, counting products produced for final use as well as those used as intermediate inputs, totaled $6.2 trillion in 2015, about 36% of the U.S. GDP, nearly double the output of any of the other big sectors: professional and business services, government and real estate. Manufacturing is at the center of the economy and it is highly connected with most other sectors, such as transportation, retail, mining, utilities and business service.
Many do not realize, but manufacturing output is at a near record high. Technology and new ways of organizing work have revolutionized the American factory since the Golden Age of the 1980s. Today, U.S. factories produce twice as much goods as they did in 1984, but with one-third fewer workers. Total production of U.S. factories peaked in 2007 before falling by 18% during the Great Recession, according to the Federal Reserve’s industrial production report, which measures the volume of goods produced rather than the market value of those goods. The manufacturing sector has nearly recovered from the recession; output in 2015 was within 3% of the 2007 level. But factory output has now stalled, with a strong dollar boosting demand for foreign-made goods at the expense of things made in the USA. It may take a few more years of growth to beat that record. The output of durable goods was at an all-time high in 2015, more than triple what it was in 1980 and double what it was 20 years earlier. The production of electronics, aerospace goods, motor vehicles and machinery are at or close to all-time highs.
Recently, professional services firm Deloitte teamed up with the Council on Competitiveness to release its 2016 Global Manufacturing Competitiveness Index, showing that the United States is the second most competitive manufacturing economy after China. Here is a very interesting read from Chris Matthews on FORTUNE about the U.S. competitiveness and the reasoning as to why the U.S. will surpass China as the no. 1 country for manufacturing by 2020.
He is making a very good point answering the question: "So why has the United States been shooting up the ranks?" Long gone are the days when cheap labor was the most important input for manufacturers. Total manufacturing employment in China peaked during the 1990s and has been falling ever since. And as manufacturing continues to reduce the number of workers needed, the important ingredients to success in the sector are whether advanced technologies and materials are available, and whether or not intellectual property protections are strong. The United States beats out China on both of these scores.
KBMax definitely qualifies as one of these "advanced technologies" that enables the U.S. to stay highly competitive!

Topics: CPQ