U.S. manufacturing in 2014 is up in both orders and output following a trend towards growth during the second decade of the 21st century. This trend has many analysts predicting a U.S. manufacturing renaissance that lasts into the future to boost the economy and lower general unemployment. Other analysts are less hopeful. Some see the growth trend as part of a cycle of manufacturing fluctuations that is unlikely to continue for long-term growth.
The biggest sign of a U.S. manufacturing renaissance is a steady growth in U.S. manufacturing output. The production index, which represents manufacturing output as reported by the Institute for Supply Management, rose to 61 in May 2014 from 55.7 in April. Numbers over 50 represent good output levels, and rising numbers show continued growth. Orders are another predictor of U.S. manufacturing growth. The index for order levels was up to 56.9 in May from 55.1 in April. This increase predicts continued growth in manufacturing output as manufacturers work to fill higher order levels.
Jan Hatzius, an economist for Goldman Sachs, is less hopeful about the possibility of a U.S. manufacturing renaissance. Hatzius has expressed concern that any manufacturing growth is simply part of the natural cycle of the economy. When the economy as a whole improves, manufacturing improves too. When the economy falls, manufacturing will return to previous levels. His doubts are fueled by the lack of growth in U.S. exports. Traditionally, export levels are the standard gauge of manufacturing growth.
Other economists argue that manufacturing levels are less important than they were in the past. If goods manufactured in the United States remain in the United States, that is a good thing. As consumers become more conscious of the benefits of buying goods manufactured at home and increasingly find those goods in the marketplace, orders will increase and production will surge. Analysts point to this circle as the possible foundation for a true U.S. manufacturing renaissance.
Another number used to gauge manufacturing growth is employment, and growth in factory jobs is not keeping pace with production increases. This is primarily due to the automation of factories. Additive manufacturing, robotics and 3-D printing are usurping some assembly line positions. The jobs that are increasing are in the areas of technology, research and development. Future manufacturing workers are expected to need more skills than the factory workers of the past.
Although economists do not agree on the probability of a U.S. manufacturing renaissance, government policy is pushing for further manufacturing growth. Policies that promote lower energy costs, cut corporate taxes for manufacturers, increase taxes on goods produced overseas and provide tax breaks for manufacturers who return manufacturing operations to the United States are aiding manufacturing growth and benefiting the economy with or without a full manufacturing renaissance.
Despite U.S. manufacturing growth, a true U.S. manufacturing renaissance is still uncertain. Increased incentives for manufacturing operations to stay in the United States and increased labor costs abroad make it likely that manufacturing growth will continue into the future. On the other hand, manufacturing growth does not necessarily include more jobs or a growth in manufacturing exports.
(Photo courtesy of anekoho at FreeDigitalPhotos.net)
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