It seems to be the consensus in the news that the United States does not manufacture anything anymore. It seems that a lot of manufacturing has moved overseas and factories have done nothing but shut down. However, this isn’t exactly true. The United States is actually a global manufacturing powerhouse, accounting for one-fifth of the world’s manufacturing output in real terms.” In 2010, United States manufacturers exported “$1.3 trillion in goods”. This is “a sum about equal to the size of Australia’s economy”. 2011 is expected to be an even better year if the current trends continue.
So if manufacturing has actually been increasing, why does the general consensus seem to be that the United States isn’t producing anything anymore? It’s actually because manufacturers are producing more goods with less employees. United States manufacturing output has grown by “2.5 times since 1970, “even as employment shrank by 30 percent. Manufacturing jobs were decimated during the Great Recession and the anemic recovery that followed, plunging by 2 million positions, to 11.7 million jobs, from December 2007 to August 2011. (Manufacturing employment is up 2.5 percent, or 285,000, from its 2009 nadir; in keeping with the productivity story, however, manufacturing production has risen 13.2 percent from its 2009 low.)”
Manufacturing jobs, however, are still expected to come to the US. This is because operational costs and labor costs overseas have been increasing. Additionally, logistics costs and the risks of having a long supply chain have increased. “Taken altogether, the global manufacturing strategy is shifting to more of a regional strategy to sell to local markets,” says David Simchi-Levi, professor of civil and environmental engineering at the Massachusetts Institute of Technology.
Many companies in the US have moved their production overseas in the past few years because of cheap labor offered abroad. It used to be true that it was a lot cheaper to have things produced overseas and then have them shipped to the United States. However, labor costs are on the rise. Now, the cost of producing goods in the United States is almost the same as producing overseas. Plus, many companies believe that the shortened supply chain holds fewer risks and they are more assured of production quality.
Still, many people believe that production will always chase the “lowest-cost location”. Some expect production to move away from China and towards other areas, such as Vietnam, Mexico, and Africa. So, it may not be as simple as it sounds to move production from overseas and bring jobs back to America. “Simple or not, for the first time in decades, it seems that a number of underlying economic trends favor American manufacturers keeping more production business at home. That could be a relatively bright spot in a gloomy U.S. jobs picture.”