Five years ago, much of the world was in the throes of a major recession – and U.S. manufacturing took hard hits as it struggled to survive in a battle against its global competitors. But fortunately for us all, things have turned around. And as indicated by the most recent monthly report released by the Institute for Supply Management (ISM), domestic manufacturing is progressing at its best pace in 2 ½ years.
On an interesting note, this suggests that U.S. manufacturers kept spending in October 2013, despite the partial federal government shutdown.
ISM’s purchasing index in October rose to 56.4 from 56.2 during the previous month. A reading above 50 indicates growth. This marked the fifth straight gain for the index, as new orders rose and production remained high. Factories added jobs during the month, though at a slower pace than in September.
“The Shining Star of this Recovery”
The continuing uptick in U.S. manufacturing is a positive development not only for job hunters – as hourly pay rates in factory positions are about double those of other service jobs – but also for staffing agencies who will be called upon in increasing numbers to help keep plants running and production at peak levels.
- Since 2010, U.S. manufacturing has been creating more jobs that it has eliminated, a welcome turnaround compared to the 2008-2009 recessionary period. 2010 was the first year since 1997 that domestic factory jobs grew significantly, as companies began building new plants and upgrading old ones. Thomas Runiewicz, economist at HIS Global Insight, calls manufacturing “the shining star of this recovery.”
- U.S. manufacturers are a competitive force – with lower labor costs and debt burdens, so can afford to expand. Mark Zandi, chief economist at Moody’s Analytics, notes that “manufacturing is going to be a significant source of job growth over the next decade.” Government tax breaks are further stimulating domestic investment.
The On-Shoring Trend
While they will keep some production overseas, U.S. manufacturers have begun to move business back to this country, a practice known as on-shoring. For example:
- Whirlpool since 2010 has invested $120 million on a new Cleveland, TN, plant just miles from an older, antiquated one, rather than move production to Mexico. In this case, even though Mexican labor costs were lower, Whirlpool chose to stay in Tennessee because its trained workforce was already there and freight costs would be lower, since most of the cooking appliances made at the plant are sold in the U.S.
- Caterpillar likewise spent $120 million on a new factory in Victoria, TX, for the production of excavator machines.
- Dow Chemical recently cut the ribbon on an 800,000-square-foot plant located near its Midland, MI, headquarters. There, the company makes batteries for hybrid and electric vehicles. Dow estimates that for every new job in a chemical, plant, five more are created at suppliers and related businesses.
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