Manufacturing’s potential for an economic boost comes with varied opinions

Differing opinions about the strength of manufacturing in the United States are front and center when it comes to looking at the sector as a driver of economic growth.

By ·

A little while back, I came across a New York Times article with this headline: “The Myth of Industrial Rebound” and this subhead: “Don’t buy the hype about a manufacturing revival. It is not enough to restore the U.S. economy.”

Given what we cover and keep an eye on at LM, it was hard not to take notice of this article for certain. At the same time, I had this thought in the back of my head: could this article really be true? If so, it would widely dispel the many data points, metrics, and cases (strong ones, too) being made for the actual strength of manufacturing in the U.S. and how it is serving as an economic driver, maybe not the force that pulls all engines but something to point to and see it for what it is, an economic catalyst.

Looking at things like the monthly manufacturing reports on business from the Institute for Supply Management (ISM) and decent volume numbers for many industrial commodities being hauled on the rails provided by the Association of American Railroads, as two examples, it made me very curious to see what the New York Times article was saying.

The article points out that there are some manufacturing success stories, with some companies bringing back manufacturing operations to the U.S. But its author, Steven Rattner, a former Wall Street executive who also served as President Obama’s lead auto adviser, maintains that the hype about any type of domestic manufacturing revival is overblown, as the “so-called renaissance…has in reality been a trickle of jobs, often dependent on huge public subsidies. Most important, in order to compete with China and other low-wage countries, these jobs offer less in health care, pension and benefits than industrial workers historically received.”

Rattner went on to say that dispiriting wage trends in manufacturing are a central reason for the slow economic recovery, as without sustained income growth, consumers can’t spend. 

The assessment of American manufacturing in this article was described as “one man’s opinion,” according to Brad Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee, and lead author of the ISM’s monthly Manufacturing Report on Business.

“It is not supported by my data, which I try to stick with so what we can see and might agree on is that manufacturing is just 11-12 percent of GDP so in that regard it does not account for all of the U.S. economy,” noted Holcomb. “The services sector has to be paid attention to as well. And we should look at manufacturing and services combined and remember trends require many months of collective data, with manufacturing well- and appropriately-regarded as not the whole of, but a bellwether for the U.S. economy and rightfully so.”

And Josh Green, CEO of Panjiva, an online search engine with detailed information on global suppliers and manufacturers, said that while excitement about the possible resurgence of U.S. manufacturing is a good thing, he explained there is still a massive wage differential between the U.S. and other countries around the world.

“In one way, it is a fantastic thing for American workers as their wages are, relatively speaking, higher, but what it means for manufacturing is there is a relatively small slice of manufacturing that makes sense for it to be relocated to the U.S.

What’s more, to the extent that manufacturing does come back, Green said it is not going to be a cure all for the country’s jobs’ problem because it is not going to be as massive as it once was. What could make more economic sense, he said, is technology-intensive manufacturing rather than labor-intensive manufacturing although that comes with the caveat that with manufacturing there are not a high percentage of jobs being created.

When it comes to manufacturing’s staying power and subsequent job growth, it is fair to say there are—and will likely always be—differing opinions. That said, it is doing quite well, while representing less than one-fifth of our country’s economic output. Can it raise all tides and get the country back on its economic feet all by itself? Probably not but it still is a good thing to have on our economy’s side.

About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

AAR · ISM · Manufacturing · All Topics
Latest Whitepaper
Efficiency improvements in Track/Trace Enhances Customer Loyalty
Consumer satisfaction with the quality of your products is clearly important, but the service you provide before and after the sale is equally important to any business, but often overlooked as benefiting the bottom line.
Download Today!
From the October 2016 Issue
Over the past decade we’ve seen a major trend in regards to safety regulations for freight transport within the United States as well as for import and export shippers—that trend is the “international­ization” of rules and regulations.
European Logistics Update: Post-Brexit U.K. moving ahead, but in which direction?
Badcock Home Furniture &more: Out with paper, in with Cloud TMS
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
How API Technology Connects the Transportation Economy
Dynamic decision making is made possible through accurate, actionable data. When combined with progress in data science and the Internet of Things, technology companies that add value to direct-to-carrier APIs and combine them with high-power data analytics will create new concepts for the information economy.
Register Today!
Motor Carrier Regulations Update: Caught in a Trap
The fed is hitting truckers with a barrage of costly regulations in an era of scant profits....
25th Annual Masters of Logistics
Indecision revolving around three complex supply chain elements—transportation, technology and...

2016 Quest for Quality: Winners Take the Spotlight
Which carriers, third-party logistics providers and U.S. ports have crossed the service-excellence...
Regional ports concentrate on growth and connectivity
With the Panama Canal expansion complete, ocean cargo gateways in the Caribbean are investing to...