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The manufacturing mini-renaissance continues. Over the past year, according to today’s employment report from the Bureau of Labor Statistics, the sector has added 222,000 jobs, resuming a recovery that had paused in 2015 and 2016 amid strength in the dollar and weakness in the US oil and gas industry. As is somewhat apparent from the previous chart and is clear in the next one, the rate of manufacturing job gains has accelerated in the past few months. It’s also looking quite strong by the standards of the past three decades.
It’s important to put this in context: There were more than 17 million manufacturing jobs in the US as recently as 2001. Those 222,000 new manufacturing jobs since February 2017 accounted for just 9.8 percent of the payroll jobs added in the US.
Still, that’s higher than manufacturing’s 8.5 percent share of total nonfarm payroll employment. The manufacturing sector is adding jobs at a faster pace than the rest of the economy, which hasn’t happened much over the past half century. Manufacturing jobs pay better than other jobs ($900.55 in average weekly earnings for production and non-supervisory employees in February, versus $757.12 for the private sector as a whole). They also tend to have multiplier effects that most service jobs don’t, creating other jobs and income in their wake. So a booming manufacturing sector is a very good thing.
What parts of manufacturing are booming most, at least in terms of job creation? Here are the 10 major manufacturing sectors that have added the most jobs since February 2017.
What’s “miscellaneous nondurable goods manufacturing”? Beverages, mostly. And virtually all of the recent beverage job gains are in making beverages. The BLS releases data on narrower industry categories with a one-month lag, so here are the manufacturing industries with the biggest 12-month job gains through January:
Some of these gains can clearly be traced to the oil and gas revival — mining and oil and gas machinery most obviously, but also plastics and chemicals. But I think that while my Bloomberg View colleague Conor Sen was probably right back in January when he attributed much of last year’s economic strength to the oil and gas industry’s recovery from the shale mini-bust, there’s clearly more than that going on now (although 44,300 new jobs were added in support activities for oil and gas extraction from January to January). So what is causing this manufacturing boomlet? Well, a better question may be why it has taken so long. Here’s what Doug Hohner, Harold L. Sirkin and Michael Zinser of the Boston Consulting Group predicted back in 2011.
A combination of economic forces is fast eroding China’s cost advantage as an export platform for the North American market. Meanwhile, the US, with an increasingly flexible workforce and a resilient corporate sector, is becoming more attractive as a place to manufacture many goods consumed on this continent. An analysis by The Boston Consulting Group concludes that, by sometime around 2015 — for many goods destined for North American consumers — manufacturing in some parts of the US will be just as economical as manufacturing in China.
By 2016, others were proclaiming that the moment when the US would become the most competitive manufacturing location on Earth was nigh or already upon us, but signs of a major manufacturing renaissance were few and far between. They’re still not entirely convincing — the US trade deficit in manufactured goods, for example, is still growing. But clearly things are going better now than they were a couple of years ago.
As already mentioned, the domestic oil and gas industry is back to growing, after a brief swoon. The rest of the global economy, especially Europe, is much stronger than it was two years ago. The dollar has been weakening, making American-made products cheaper abroad. Business taxes in the US just got cut, by a lot. Congressional Republicans have stopped caring about the budget deficit. There’s some guy in the White House now who talks about manufacturing a lot.
The role of President Trump in all this is something of a contentious topic. He did sign the Tax Cuts and Jobs Act into law, which if Hillary Clinton had been elected would not have happened. I tend to think the tax act will have lots of not-so-great medium-to-long-term consequences, but it would be churlish to deny it any credit for what’s happening in manufacturing now.
As for the president’s tough talk, and some tough action, on tariffs and trade agreements, I think it’s just as likely to hurt manufacturing in the US as help it. Consider the manufacturing sector that saw the biggest jobs gain over the past 12 months, fabricated metal products. Those companies are consumers of the steel and aluminum that the president is about to make more expensive. Also, if the US really has just become the most competitive manufacturing location on Earth, is this really the time to start a trade war likely to raise barriers to US exports around the world?
One thing President Trump has done, though, is make clear that manufacturing jobs matter a lot to him, and that he thinks the US economy can produce lots more of them. In terms of concrete actions to aid manufacturing, I’m pretty sure Barack Obama did more than Trump has so far, but Obama was also a guy who went around saying (true) things like “some of those jobs of the past are just not going to come back.” Sometimes a cheerleader, even one who doesn’t fully understand the game he’s watching, can do wonders for team spirit — or animal spirits.
—Bloomberg
Justin Fox is an American financial journalist, commentator, and writer born in Morristown, New Jersey.
He is the editorial director of the Harvard Business Review Group and business and economics columnist for Time magazine