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Chapter 1 - What is the Current State of U.S. Manufacturing?


Rather than give my personal opinion on the current state of American manufacturing, we will consider what has happened to the manufacturing industry over the past few decades, what is the current state, and how the future state appears.

For over sixty years, American manufacturing dominated the globe.  It was responsible for turning the tide for the Allies in World War II and defeating Nazi Germany and Japan.  It helped rebuild Germany and Japan after the war and enabled the United States to win the Cold War against the Soviet empire, while meeting the material needs of the American people.

Manufacturing is the foundation of the American economy and was responsible for the rise of the lower working class into the middle class in the 20th Century, in which the average daily wage rose from $2.50 per day in 1900 to $96 per day in 1999.  

High-paying manufacturing jobs helped spur a robust and growing economy that had little dependence on foreign nations for manufactured goods.  American families and communities depended on a strong manufacturing base to improve our quality of life.

American companies like General Motors, Ford, Boeing, IBM, and Levi Strauss became household names.  American manufacturing became synonymous with quality and ingenuity. In more recent times, IBM sold their computer line to Chinese company Lenovo, and Levi jeans are made in China just like most every other brand of jeans.

We lost 5.86 million manufacturing jobs from the year 2000 through February 2010 in the depths of the trough according to the Bureau of Labor Statistics. This was about 20 percent of manufacturing jobs, and we have only recouped about 880,000 jobs through January 2017 or 7 percent since the low in February 2010.


Source:  https://fred.stlouisfed.org/series/MANEMP#0


According to Wikipedia, ”The largest manufacturing industries in the United States by revenue include petroleum, steel, automobiles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, and mining…the United States leads the world in airplane manufacturing.”
Manufacturing is the key engine that drives American prosperity. Federal Reserve Chair Ben Bernanke said, on February 28, 2007, "I would say that our economy needs machines and new factories and new buildings and so forth in order for us to have a strong and growing economy."

Similarly, in 2011 the Center for American Progress released a report entitled "The Importance and Promise of American Manufacturing: Why It Matters if We Make It in America and Where We Stand Today," by Michael Ettlinger and Kate Gordon. It asserts that: Manufacturing is critically important to the American economy. For generations, the strength of our country rested on the power of our factory floors—both the machines and the men and women who worked them. We need manufacturing to continue to be bedrock of strength for generations to come.... The strength or weakness of American manufacturing carries implications for the entire economy, our national security, and the well-being of all Americans.

Manufacturing ensures that the U. S. has a strong industry base to support its national security objectives. American manufacturers supply the military with the essentials needed to defend our country, including tanks, fighter jets, submarines, and other high-tech equipment.
In a keynote address “Lessons for a Rapidly Changing World” at the CA World 2003, Dr. Henry Kissinger, former U. S. Secretary of State, said “The question really is whether America can remain a great power or a dominant power if it becomes primarily a service economy, and I doubt that.  I think that a country has to have a major industrial base in order to play a significant role in the world. “
Manufacturing employment in the United States reached a peak of 19.6 million in June 1979, representing 22 percent of jobs. During the trough of the Great Recession in February 2010, it had dropped to 11.5 million, representing 11.3 percent of employment. By July 2017, manufacturing employment had increased to 12.4 million, representing only 9 percent of the workforce due to the increase of total jobs. 

Manufacturing represented 21.6percent of the Gross Domestic Product (GDP) in 1979 and dropped to 12 percent by the beginning of 2010. After increasing to 12.3 percent in 2013, it dropped back to 12 percent by the end of 2015, but grew 1.6 percent in 2016 for a new total of 13.6 percent.

The economic collapse of the real estate and financial markets in 2008 had more impact on manufacturing job losses than the recession of 2000-2001 caused by the dot.com bust because jobs related to manufacturing represented a much higher component of employment than the software/dot.com industry did at the time. 

When consumer demand dropped sharply because of so many people losing their jobs and homes, this eliminated the last thing keeping the domestic market floating on a bubble.

Decline of U. S. Manufacturing is Main Reason for Low Growth

At the January, 2017, San Diego County Economic Roundtable, Alan Gin, Associate Professor at the University of San Diego, said, "The big problem is that since the Great Recession, the growth rate has lagged. The U.S. economy has been shrinking at an annualized rate of 8 percent since 2009. The average GDP growth rate from 1947 to the Great Recession was about 3.5percent. While we have touched that rate for a few quarters…we have averaged a growth rate of about 2 percent." This level of growth is not enough to create the amount of jobs we need.

According to Kiplinger, 2017 will see a slight upturn in growth: “GDP growth in the second quarter bounced up to 2.6%, returning to a level that we expect will continue for a while. Economic expansion in the second half of 2017 should run at an annual pace of 2.5% or so, leaving growth for the full year at about 2.1%.” For 2018, “GDP growth is likely to be 2.4%.”

Where Did the Manufacturing Jobs Go?

The loss of manufacturing firms and jobs was mainly the result of the fact that a large number of multinational and American companies outsourced manufacturing offshore and/or set up plants in China and other parts of Asia. As originally reported in a Wall Street Journal article in April 2011, U. S. Department of Commerce data shows that "major U. S. corporations cut their work forces in the U. S. by 2.9 million jobs during the 2000s while increasing their employment overseas by 2.4 million."
These multinational companies literally outsourced American jobs in an attempt to compete with the “China price,” take advantage of less stringent environmental regulations, reduce taxes, and thereby maximize profits. While the majority of these jobs were lost due to the outsourcing of manufacturing jobs offshore in Asia, increased productivity through the use of automation and robots also played a role.

We lost an estimated 57,000 manufacturing firms during this same time period. Unfair competition through currency manipulation, product dumping, and government subsidies by China and other Asian nations were major factors in the closing of so many manufacturing firms.

Top Reasons Why U. S. Lost Manufacturing

  • China's Unfair Trade Policies
  • Transition to a Service Economy
  • End of NASA’s Manned Flight Program
  • Wind Down of War on Terrorism

Each of these is discussed in more detail below:

China's Unfair Trade Policies

On January 31, 2017, the Economic Policy Institute released a report, "Growth in U.S.–China trade deficit between 2001 and 2015 cost 3.4 million jobs," written by Robert Scott. 

Scott explained that when China entered into the World Trade Organization (WTO) in 2001, "it was supposed to bring it into compliance with an enforceable, rules-based regime that would require China to open its markets to imports from the United States and other nations by reducing Chinese tariffs and addressing nontariff barriers to trade." 

However, Scott wrote, "China both subsidizes and dumps massive quantities of exports. Specifically, it blocks imports, pirates software and technology from foreign producers, manipulates its currency, invests in massive amounts of excess production capacity in a range of basic industries, often through state owned enterprises (SOEs) (investments that lead to dumping), and operates as a refuse lot for carbon and other industrial pollutants. China has also engaged in extensive and sustained currency manipulation over the past two decades, resulting in persistent currency misalignments."

As a result, "China’s trade-distorting practices, aided by China’s currency manipulation and misalignment, and its suppression of wages and labor rights, resulted in a flood of dumped and subsidized imports that greatly exceed the growth of U.S. exports to China."

He added, "the WTO agreement spurred foreign direct investment (FDI) in Chinese enterprises and the outsourcing of U.S. manufacturing plants, which has expanded China’s manufacturing sector at the expense of the United States, thereby affecting the trade balance between the two countries. Finally, the core of the agreement failed to include any protections to maintain or improve labor or environmental standards or to prohibit currency manipulation."

These trade policies have resulted in an enormous trade deficit with China. Scott, stated, “From 2001 to 2015, imports from China increased dramatically, rising from $102.3 billion in 2001 to $483.2 billion in 2015… U.S. exports to China rose at a rapid rate from 2001 to 2015, but from a much smaller base, from $19.2 billion in 2001 to $116.1 billion in 2015. As a result, China’s exports to the United States in 2015 were more than four times greater than U.S. exports to China. These trade figures make the China trade relationship the United States’ most imbalanced trade relationship by far…"

He further expounds that "Overall, the U.S. goods trade deficit with China rose from $83.0 billion in 2001 to $367.2 billion in 2015, an increase of $284.1 billion. Put another way, since China entered the WTO in 2001, the U.S. trade deficit with China has increased annually by $20.3 billion, or 11.2 percent, on average.

Between 2008 and 2015, the U.S. goods trade deficit with China increased $100.8 billion. This 37.9 percent increase occurred despite the collapse in world trade between 2008 and 2009 caused by the Great Recession and a decline in the U.S. trade deficit with the rest of the world of 30.2 percent between 2008 and 2015. As a result, China’s share of the overall U.S. goods trade deficit increased from 32.0 percent in 2008 to 48.2 percent in 2015." Scott notes that the figures in this paragraph derive from his analysis of USITC 2016 data.

After explaining how EPI calculated the loss of jobs due to the U.S.-China trade deficit, he wrote, " U.S. exports to China in 2001 supported 171,900 jobs, but U.S. imports displaced production that would have supported 1,129,600 jobs. Therefore, the $83.0 billion trade deficit in 2001 displaced 957,700 jobs in that year. Net job displacement rose to 3,077,000 jobs in 2008 and 4,401,000 jobs in 2015.

That means that since China’s entry into the WTO in 2001 and through 2015, the increase in the U.S.–China trade deficit eliminated or displaced 3,443,300 U.S. jobs…the U.S. trade deficit with China increased by $100.8 billion (or 37.9 percent) between 2008 and 2015. During that period, the number of jobs displaced increased by 43.0 percent."

The report calculates job loss by state and Congressional District, stating that "Job losses have been most concentrated in states with high-tech industries, such as Arizona, California, Colorado, Idaho, Massachusetts, Minnesota, Oregon, and Texas, and in manufacturing states, including New Hampshire, North Carolina, and Vermont. Other hard-hit states include traditional manufacturing powers such as Georgia, Kentucky, Indiana, Illinois, Rhode Island, South Carolina, Tennessee, and Wisconsin."

In summarizing the lost wages from the increasing trade deficit with China, Scott stated, "U.S. workers who were directly displaced by trade with China between 2001 and 2011 lost a collective $37.0 billion in wages as a result of accepting lower-paying jobs in nontraded industries or industries that export to China assuming, conservatively, that those workers are re-employed in nontraded goods industries…"

In addition, Scott wrote, "According to the most recent Bureau of Labor Statistics survey covering displaced workers (BLS 2016b), more than one-third (36.7 percent) of manufacturing workers displaced from January 2013 to December 2015 were still not working, including 21.7 percent who were not in the labor force, i.e., no longer even looking for work."

Scott identifies the following specific problems that require a policy response:

  • "Due to the trade deficit with China 3.4 million jobs were lost between 2001 and 2015, including 1.3 million jobs lost since the first year of the Great Recession in 2008. Nearly three-fourths (74.3 percent) of the jobs lost between 2001 and 2015 were in manufacturing (2.6 million manufacturing jobs displaced).

  • The growing trade deficit with China has cost jobs in all 50 states and the District of Columbia, and in every congressional district in the United States.

  • The trade deficit in the computer and electronic parts industry grew the most, and 1,238,300 jobs were lost or displaced, 36.0 percent of the 2001–2015 total. As a result, many of the hardest-hit congressional districts (in terms of the share of jobs lost) were in California, Texas, Oregon, Massachusetts, Minnesota, and Arizona, where jobs in that industry are concentrated. Some districts in Georgia, Illinois, New York, and North Carolina were also especially hard-hit by trade-related job displacement in a variety of manufacturing industries, including computer and electronic parts, textiles and apparel, and furniture. In addition, surging imports of steel, aluminum, and other capital-intensive products threaten hundreds of thousands of jobs in these key industries as well.

  • Global trade in advanced technology products—often discussed as a source of comparative advantage for the United States—is instead dominated by China. This broad category of high-end technology products includes the more advanced elements of the computer and electronic parts industry as well as other sectors such as biotechnology, life sciences, aerospace, and nuclear technology. In 2015, the United States had a $120.7 billion deficit in advanced technology products with China, and this deficit was responsible for 32.9 percent of the total U.S.–China goods trade deficit. In contrast, the United States had a $28.9 billion surplus in advanced technology products with the rest of the world in 2015."

In summary, Scott stated, "The U.S.–China trade relationship needs to undergo a fundamental change. Addressing unfair trade, weak labor, and environmental standards in China, and ending currency manipulation and misalignment should be our top trade and economic priorities with China. It is time for the United States to respond to the growing chorus of calls from economists, workers, businesses, and Congress (Scott 2014b) and take action to stop unfair trade and illegal currency manipulation by China and other countries."

Transition to Service Economy

Another key factor was revealed by the in-depth analysis of national and state data presented in the report"Services, and the Pace of Economic Recovery” by Martha L. Olney and Aaron Pacitti, Berkeley Economic History Laboratory (BEHL), University of California, Berkeley March 2013. 

Their hypothesis was:  Do service-based economies experience slower economic recoveries than goods-based economies? They argue that they do. They conclude that “service-dependent economies experience longer recoveries because they cannot respond to anticipated demand.” Thus, in a service-based economy, the recovery from a recession will take about one year longer than in a goods-based economy.

Why is this? They state, “An economy recovers from a downturn when businesses increase production. Both goods and services can be produced in response to actual demand. But only goods—and not services—can be produced in response to anticipated increases in demand, allowing optimistic forward-looking producers to inventory goods until anticipated buyers appear. Services cannot be inventoried. The more services an economy produces relative to goods, the more production is dependent upon only actual increases in demand, and the slower the recovery.”

Services have to be delivered in real-time by doctors, dentists, lawyers, accountants, web designers, graphic artists, etc. Even in the industrial realm, services such as engineering design, product testing, shipping, and delivery services are performed as needed. These services cannot be produced ahead of the need and “stored.”  

The authors argue that there is a connection between the steady rise of services in the U.S. economy over the last half century and the slower pace of recovery from economic downturns. They state, “…as services become a larger share of output in an economy, more production is dependent on just actual and not also anticipated demand, slowing the pace of recovery from an economic downturn.”

 The increase in the services share over the past 60 years has been striking. “In 1950, 40 percent of expenditures for U.S. GDP were for services and service-producing jobs were 48 percent of employment. By 2010, services constituted over 65 percent of expenditures for GDP and service-producing jobs were nearly 70 percent of employment.” The rise in services in the U.S. has led to longer recoveries, causing the current recovery to last about one year longer than it would have a half century ago.

End of NASA’s Manned Flight Program

In 2012, the Commerce Department’s Bureau of Industry and Security (BIS) released a report, "National Aeronautics and Space Administration’s (NASA) Human Space Flight Industrial Base in the Post-Space Shuttle/Constellation Environment." The official retirement of the Space Shuttle program in 2011 resulted in a 19 percent drop in employment from 2007 to 2010 according to the assessment of the 536 companies in NASA’s manned space flight supply chain. Of the 536 companies, 50 percent of them are manufacturing companies, of which 21 percent are based in California, and 9 percent based in Florida.

The report stated that "the Shuttle retirement will impact future NASA programs through a loss of unique skills, capabilities, products, and services by select suppliers." The assessment focused on the "150 survey respondents that identified themselves as dependent on NASA." Within this group, 46 had "reported negative net profit margins for at least one year from 2007-2010… Without continued business opportunities, these companies have the highest potential of shutting down." The report stated that companies that supplied the Space Shuttle program are facing “large-scale layoffs and facility closures across both industry and government.”

Near the Kennedy Space Center, more than 7,400 people in Brevard County, Florida alone lost their jobs when the shuttle program ended. The mainly contractor positions cut by NASA accounted for just under 5 percent of the county's private sectors jobs. Thousands of formerly well-paid engineers and other workers around the country are still struggling to find jobs to replace the careers that flourished during the space shuttle program.

The machinery and tools used to support a manned space program are in danger of being discarded. In a separate assessment of the space flight industry, BIS found that 52 companies that were major suppliers (Tier I) had 48,623 pieces of tools and machinery, 91 percent of which had been paid for by the government. This classifies them as “Government-Furnished Property” so that the General Services Administration can process them by being transferred, sold, scrapped, or donated.

The danger is that the U. S. government may never be able to re-establish a manned space flight program to support ongoing missions to the International Space Station once the supplier base of the manned space flight program has been decimated. At the present, the U. S. has no way of sending astronauts to space in its own vehicles, and NASA is relying on the Soviet-made Soyuz capsules to send U.S. astronauts to space station. Thus, the United States may never again be a leader of space exploration.

Wind Down of War on Terrorism

The end of the Cold war with the Soviet Union resulted in a major downsizing of the military-industrial complex in the early 1990s, causing the recession of 1991-1992 and hundreds of thousands of lost jobs. Likewise, the withdrawal of troops from Iraq and the ramp down of troops in Afghanistan had a similar effect on the defense/military industry, with a resulting loss of funding for new programs, cutbacks in existing programs, and job loss. Sequestration compounded the problem when it went into effect in March 1, 2013. 

Manufacturing Indicators Rebounding

Finally, during the election year of 2016, manufacturing started to rebound. I don’t know whether or not it started on the basis of the hope that a new president would change the direction of the country.  But, whatever the reason, one of the key manufacturing indicators turned sharply upward – the Purchasing Managers’ Index (PMI) issued by the Institute of Supply Management (ISM).  When the PMI is below 50 percent, the economy is contracting; when the index is above 50 percent, the economy is expanding.

Their July 2017 report stated, “Economic activity in the manufacturing sector expanded in June, and the overall economy grew for the 97th consecutive month. The report was issued by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: "The June PMI® registered 57.8 percent, an increase of 2.9 percentage points from the May reading of 54.9 percent. The New Orders Index registered 63.5 percent, an increase of 4 percentage points from the May reading of 59.5 percent. The Production Index registered 62.4 percent, a 5.3 percentage point increase compared to the May reading of 57.1 percent. The Employment Index registered 57.2 percent, an increase of 3.7 percentage points from the May reading of 53.5 percent.”

Source:  Institute for Supply Management

The U.S. Manufacturing Technology Orders report for June 2017 showed gains for the month and year over year, according to AMT – The Association for Manufacturing Technology.

The press release stated, “June manufacturing technology orders climbed 6.5 percent over May, according to a report released by AMT – The Association For Manufacturing Technology. The latest U.S. Manufacturing Technology Orders (USMTO) report also shows a year-over-year increase of more than 10 percent, the fifth consecutive month posting a year-over-year gain.

If the USMTO numbers aren’t convincing enough that a recovery is underway, certainly the buzz among our members underscores that a recovery is indeed underway,” said AMT President Doug Woods. “Members have shared that the aerospace supply chain in the Midwest is hot; auto orders doubled between May and June; and sales in the Southeast exploded. Over the next six months, they look forward to a broadening of the recovery into areas like agricultural, construction, power generation and off-road machinery industries.

The USMTO data supports the anecdotal evidence from AMT members. Automotive-related orders were up 109 percent from May and the aerospace industry’s bookings of new production technology were up 47 percent. While the largest growth by any region is the 42 percent increase in orders originating in the states from Tennessee north to Michigan, the Southeast and West are posting the fastest growth rates year-to-date in manufacturing technology orders.”

Upward Trend in Cutting Tool Orders

According to the U.S. Cutting Tool Institute (USCTI) and AMT – The Association For Manufacturing Technology, “U.S. cutting tool consumption totaled $186.57 million in June 2017. This total, as reported by companies participating in the Cutting Tool Market Report (CTMR) collaboration, was down 2.8% from May’s $191.93 million and up 6.0% when compared with the total of $175.97 million reported for June 2016. With a year-to-date total of $1.095 billion, 2017 is up 5.8% when compared with 2016.

These numbers and all data in this report are based on the totals reported by the companies participating in the CTMR program. The totals here represent the majority of the U.S. market for cutting tools.

‘2017 continues to be a much stronger year for cutting tools than 2016,” says Steve Stokey, President of USCTI. “High consumer confidence is a strong indicator that cutting tools sales will continue to improve through the second half of the year.’”

Major Advances in Technology in 2010s

In the January 11, 2016 issue of New Equipment Digest, author John Hitch wrote, "the manufacturing narrative so far in the 2010s has been the major advancements in robotics, 3D printing, and the Internet of Things. These are very different in form and function. The first handles material, the second creates it, and the last is sort of like the force for machines…They do; however, all share quite a few traits: the ability to boost performance, productivity, and profits. Depending on who you ask, they’ll make more jobs or take all the jobs, too…"

Hitch cites an example of an exciting advance in additive manufacturing ─ the introduction of the AgieCharmilles AM S 290 Tooling Additive Manufacturing machine that juxtaposes a direct metal laser sintering machine with a milling machine. The streamlined process could slash cycle times by 60 percent, claims Gisbert Ledvon, director of business development at GF Machining Solutions."

How Does the Health of U.S. Manufacturing Look from an International Perspective?

On January 18, 2017, the Congressional Research Services released a report, titled the “U.S. Manufacturing in International Perspective,” by Marc Levinson, Section Research Manager.

Because the decline in manufacturing employment has been of great interest to Congressional members who have introduced hundreds of bills over many sessions of Congress intended to support domestic manufacturing activity, the purpose of the report was to “inform the debate over the health of U.S. manufacturing through a series of charts and tables that depict the position of the United States relative to other countries according to various metrics.”

The key findings were:

  • “The United States’ share of global manufacturing activity declined from 28% in 2002, following the end of the 2001 U.S. recession, to 16.5% in 2011. Since then, the U.S. share has risen to 18.6%, the largest share since 2009.

    Leading Countries, Value Added in Manufacturing (Billion dollars, 2015)

  • China displaced the United States as the largest manufacturing country in 2010.
  • Manufacturing output, measured in each country’s local currency adjusted for inflation, has been growing more slowly in the United States than in China, South Korea, Germany, and Mexico, but more rapidly than in most European countries and Canada.
  • Employment in manufacturing has fallen in most major manufacturing countries over the past quarter-century. U.S. manufacturing employment since 1990 has declined in line with the changes in Western Europe and Japan…
  • U.S. manufacturers spend far more on research and development (R&D) than those in any other country, but manufacturers’ R&D spending is rising more rapidly in several other countries.”
  • Manufacturers in many countries appear to be spending increasing amounts on R&D, relative to their value added. U.S. manufacturers spend approximately 11% of value added on R&D, an increase of more than three percentage points since 2002.


Growth in Manufacturing R&D 2008-2014
Source: OECD STAN R&D database

Is the Recovery Real?

In the Industry Week article, “Is the Manufacturing Recovery Real,” by Laura Putre on June 13, 2017, Cliff Waldman, chief economist for the Manufacturers Alliance for Productivity and Innovation (MAPI) said, “U.S. manufacturing got walloped during the Great Recession. It lost 20% of its output and 15% of its workforce. “That’s second only to the Great Depression of the 1930s, when it lost about half its total output.”

Putre wrote, “And it wasn’t an isolated hit. Waldman and economist Mark Schweitzer, senior vice president at the Cleveland Federal Reserve, both say that the economy was still reeling from the recession of the early 2000s. The United States was just coming out of that recession when the terrorist attacks on the World Trade Center in September 2001 shook the economy again. It still hadn’t recovered when the U.S. housing market began crumbling in 2008. So much trauma in less than a decade sent the U.S. economy spiraling into the Great Recession. Manufacturing capacity utilization fell 8 percentage points during that time, a significant drop…”

“But it wasn’t long before weaknesses in other parts of the world began to take their toll. The financial shock in the U.S. housing sector in 2008 reverberated in Europe and emerging markets beginning in 2009, resulting in the nearly unheard-of event of contraction of the global gross domestic product, not just the U.S. GDP.

While the factory sector still hasn’t recovered from the Great Recession, says Waldman, being 4% to 5% lower than its pre-recession peak, it is showing some rallying signs. Manufacturing employment was up every month from January to April 2017 (it dipped slightly in May) and output grew 2.7% in the first quarter of 2017.”

Manufacturers’ Optimism at 20-Year High, According to New NAM Survey

On March 31, 2017, the National Association of Manufacturers (NAM) released the first Manufacturers’ Outlook Survey since President Donald Trump took office. The survey shows a dramatic shift in sentiment, with more than 93 percent of manufacturers feeling positive about their economic outlook. This is the highest in the survey’s 20-year history, up from 56.6 percent one year ago and 77.8 percent in December.

The NAM’s release of the survey coincided with a meeting of small and medium-sized manufacturers with President Trump to talk regulations, taxes, and infrastructure at the White House.

“Across America, manufacturers’ optimism is soaring, in no small part because of President Trump’s laser-like focus on pursuing bold action, particularly on rethinking red tape to address regulatory reform, to accelerate a jobs surge in America,” said NAM President and CEO Jay Timmons.

“As the survey shows, manufacturers of all sizes are now less concerned about the business climate going forward because they are counting on President Trump to deliver results. Small manufacturers—more than 90 percent of our membership—are among the hardest hit by regulatory obstacles. Regulatory costs for small manufacturers with fewer than 50 employees total almost $35,000 per employee per year—money that could otherwise go to creating jobs. It’s encouraging to see an administration so focused on providing regulatory relief to spur manufacturing growth.

“We are grateful for the chance to meet with the president today as we continue to tell the White House directly which regulations are still the biggest obstacles to a manufacturing surge. There is much work to be done, and manufacturers have the solutions on regulatory reform as well as on infrastructure investment, workforce development, bold comprehensive tax reform and a host of other issues.”

The survey shows not only a positive outlook but also that concerns about the business environment have dropped. When manufacturers were asked to identify top challenges to their business, concerns about the business environment fell to third place. This had previously been respondents’ top concern since the question was added to the survey in 2011.

For the past 20 years, the NAM has surveyed its membership of more than 14,000 large and small manufacturers to gain insight into their economic outlook, hiring and investment decisions and business concerns. The NAM releases these results to the public each quarter.”

What is the Future Outlook?

I attended the 2016 FABTECH expo in Las Vegas only eight days after the 2016 election and immediately noticed an atmosphere of optimism. This is the show where equipment, tools, and support systems that are used by manufacturers that perform metal working fabrication services are exhibited. The expo was well attended and companies were receiving orders right on the show floor for new equipment.

This optimistic atmosphere was also displayed at the largest manufacturing-related show in southern California in February 2017 –the Medical Design & Mfg./Pacific Design/Plastics West, etc. held in Anaheim.  It carried over to the IPC/APEX show in San Diego, also in February 2017.

The reason for the optimism was the hope that the Trump Administration and Congress would repeal and replace Obamacare, eliminate burdensome over-regulation, and pass comprehensive tax reform.

However, if these policies do not pass this year, manufacturers may become discouraged. What concerns me is that historically, we have eight to ten years from the beginning of one recession to the beginning of another, and it has been almost nine years now since the beginning of the Great Recession.  The stock market is at an historic high, over 22,000, and real estate prices have rebounded in some parts of the country, such as California, to the pre-recession peak of 2007. 

The question is: Are we at the peak of another bubble that is about to burst?  I remember that in the year 2000, no one thought that the bubble would ever burst.  As a member of the San Diego Venture Group, I heard from all the local economists month after month that we were in a new paradigm, and the stock market was just going to keep going up and up. Then, we had the dot.com bust at the very end of the year.

We only had less than eight years from the end of the recession of the 2000-2001 recession to the beginning of the next recession, but during that same time period, the decimation of our manufacturing base accelerated dramatically due to the reasons we have discussed above.

We need to do things differently in the future if we want to change our course and rebuild American manufacturing.  In the following chapters, we will consider strategies and policies that would help rebuild American manufacturing to create jobs and prosperity. But first, in the next chapter, we will consider the threats to rebuilding manufacturing.

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