Contrary to popular belief, manufacturing is booming
Rumors of the death of U.S. manufacturing have been greatly exaggerated.
Everyone from Sen. Bernie Sanders to Tucker Carlson laments the supposed demise of U.S. manufacturing. “Manufacturing … all but disappeared over the course of a generation,” said Carlson as a premise of his viral monologue recently on his Fox News program.
Not so. In fact, manufacturing is booming in the United States. The latest Labor Department jobs numbers show that 32,000 manufacturing jobs were created in December — the biggest monthly increase in 2018. Over the entire year, 284,000 new manufacturing jobs were created, the most since 1997. And over the last two years, nearly half a million have been created.
Contrast this to 2016, when the number of national manufacturing jobs actually declined. With every manufacturing job supporting 3.6 American jobs, this manufacturing boom is partially responsible for today’s strong labor market, including an unemployment rate that is hovering near a half-century low.
This manufacturing job growth is driven by strong manufacturing performance. The manufacturing Purchasing Managers’ Index, which surveys senior executives about production metrics such as new orders, remains well above 50, signaling manufacturing improvement. And private nonresidential fixed investment, a proxy for manufacturing health, has jumped by about $350 billion over the last two years. Manufacturing output is nearly double what it was during the supposed manufacturing heyday of the 1980s, with production jumping significantly over the last two years.
I can speak firsthand about this manufacturing boom as the president and CEO of HM Manufacturing, a power transmission component producer based outside of Chicago. We have recently purchased three machines valued at over $400,000, hired two new machinists to operate them, and are looking to hire one more. Due to the increased demand for American made manufacturing, we have also generally increased our workforce and its capabilities.
What’s driving this manufacturing boom? Company reinvestment in fields like additive manufacturing (3-D printing), automation and research and development have made the field more competitive and productive.
Additive manufacturing allows companies to rapidly and flexibly innovate, experimenting with new designs in real time. Meanwhile, real private nonresidential research and development spending has significantly increased, jumping $28 billion — or 7 percent — between the third quarters of 2017 and 2018, one of the biggest 12 month increases in the last decade.
The tax cuts that took effect last year are helping fuel this reinvestment. One largely overlooked tax cut provision that is especially helping manufacturing businesses like mine is the new 20 percent small business tax deduction. This tax cut allows small businesses to protect one fifth of their earnings, which can then be directed toward expansion, research, upgrades and hiring. Yet the deduction phases out at $315,000 of earnings for service businesses. While for manufacturers, it is limited to 50 percent of payroll, with no earnings limit, making it far more valuable to us.
We’ve used these tax cut savings to reinvest in our business and employees, raising wages, bonuses, and benefits — to the point that we pay for 100 percent of employee health care premiums. We’ve also used them to pay for employee training, education and apprenticeship programs. These apprentice programs have allowed several employees to advance from entry-level positions all the way up to senior-level programmers.
These investments aren’t purely altruistic. In today’s competitive environment, keeping and developing skilled employees is one of management’s most important priorities. The biggest challenge facing businesses today, according to several surveys, is finding qualified employees. Nearly half of businesses cannot find the workforce talent they need. That number jumps to about three-quarters for the skilled trades.
Contrary to the popular belief that manufacturing is slowing down and automation is putting people out of work, the opposite is true. Manufacturing is booming and creating jobs. In fact there are half a million unfilled manufacturing jobs in the country that employers like me simply cannot fill, according to the Labor Department.
Tax cut-induced wage increases and skills training programs like the ones we’re offering should help fill these jobs and boost manufacturing even further. Just don’t expect this to change the preconceptions of politicians and commentators.