The U.S. manufacturing sector expanded more strongly than expected in June, with the rate of growth advancing to the highest level in more than four years, according to an industry report released on June 23.
The gain of 600,000 manufacturing jobs over the past four years, for a total of 12 million, has led some economists to believe that manufacturing in the U.S. is starting a comeback. Several factors support this optimistic view.
“The economics of the world are changing in favor of U.S. manufacturing,” consultant Hal Sirkin recently told the Wall Street Journal.
One factor is that wages are rising in China and other emerging economies. Sirkin’s Boston Consulting Group estimates that China’s overall manufacturing-cost advantage over the U.S. has shrunk to just 4%. When wages are adjusted for productivity and the costs of shipping and inventories are included, it can be more economical to make some products in the U.S. than in Asia.
Whatever you may think about environmental hazards posed by hydraulic fracturing, or “fracking”, the practice has caused a surge in U.S. oil and gas production, pushing down energy costs. It’s a subject manufacturers care deeply about.
Manufacturers also paid attention when an earthquake and nuclear disaster in Japan, and flooding in Thailand, temporarily halted production of vital parts for cars, electronic goods and other products. Supply chains that stretch across the Pacific are subject to a greater variety of natural disasters than those that stay closer to home.
It’s also worth noting that some major foreign players are beginning to bet on America again. Germany’s BMW is expanding a car plant and Michelin of France last year opened a plant, both in South Carolina. China’s Lenovo Group is making personal computers in North Carolina.
On the other hand, there are obstacles to a renaissance in U.S. manufacturing. U.S. manufacturers bemoan a lack of skilled people to operate and repair sophisticated machinery.
The worker shortage suggests that manufacturers should start thinking about how to recruit and groom skilled workers, much as PG&E has been trying to do with its PowerPathways program. Instead of obsessing over how to keep unions out, manufacturers might want to take a fresh look at how a union contract could help them attract and retain the workers they need to make a go of it again in America.
IBEW 1245 is actively participating in the IBEW branding committee, which is building a website and exploring other ways to promote IBEW employers and their products nationally. As more manufacturers look to bring their production back to the U.S., they may find it’s time to look at unions as a potential partner in gaining market share, rather an enemy to be beaten into submission.
Is there going to be a manufacturing comeback? IBEW 1245 is ready for it.