New Report Indicates US Manufacturing Renaissance Does Not Exist

Throughout the latter half of 2014, news media reports touted the return of American manufacturing as Chinese orders declined and the European debt crisis continued. The manufacturing renaissance in the United States kept the recovering economy afloat. A new report, however, refutes what dozens of media reports have said.

The Information Technology & Innovation Foundation, based in Washington, claims the rebound of American manufacturing is a "myth" and proceeds to list five such myths. The Guardian's take on the report paints a starkly different picture of what pundits have made readers believe. Adams Nager, one of the authors of the report, told the news media outlet economists are "desperate" for good news about the U.S. manufacturing industry, but the official numbers simply do not out the claims being made.

To start, the report explains that while 520,000 jobs have come back, they do not replace the 2.5 million manufacturing jobs lost between 2007 and 2009. Most of the new jobs created were in the automotive industry. The lesson here for American manufacturing is that an entire industry cannot put its entire hopes on one sector.

Further, the study claims reports of reshoring American jobs from overseas is vastly overstated. While Chinese wages have increased in coastal areas, many companies go further inland to get cheaper labor. Manufacturers also seek out other Asian nations such as Bangladesh, Cambodia or Vietnam to lower labor costs. While some companies have come back to American soil, many still find bigger profits in Asia due to cheap labor.

Some caveats come with this new report on American manufacturing. First, the ITIF supports the information technology sector of computing and not necessarily the manufacturing industry. The data the report relies on come from official government numbers on "real manufacturing value" last updated in 2013.

Several industry indicators such as the stock market, revenue reports, sales and orders reported through 2014 seem to indicate an uptick in the manufacturing renaissance. The production index, orders and consumer spending all point to more goods sold. Even with more spending money on hand, not all goods produced in America stay in the United States to be sold. Plus, the ITIF report says the trade deficit is still out of whack as compared to China.

Some myths stated in the report include claims regarding Chinese wages being soon to match those in America, high shipping costs that even the playing field, and the shale gas boom that lowered gas prices, all claims designed to give American manufacturing a boost. However, while gas prices are a good indicator of the health of an economy, the energy industry, not manufacturing, benefits most from oil price fluctuations.

Many high-profile companies announced huge investments to promote American manufacturing, including European juggernaut Airbus and Dow Chemical. Both companies want to expand operations in the United States, moves that could create jobs and expand manufacturing. While the ITIF report is revealing, manufacturers and investors have already played a cautious tune thanks to recent stock market fluctuations.

Photo courtesy of Steve Jurvetson at Flickr.com