U.S. Manufacturing Overview

Manufacturing in the United States is more than just a sector of our economy; it’s a foundational cog in the machinery that propels economic growth and innovation throughout our country. For every dollar spent in American manufacturing, an impressive $2.79 is added to the economy, highlighting its role as an economic powerhouse in America. Despite representing only 11% of the gross domestic product (GDP), manufacturing accounts for a staggering 35% of American productivity growth. This post explores how U.S. manufacturing can continue to lead economic growth, emphasizing the need for expansion into underutilized sectors to enhance the presence of "Made in America" products.

We wanted this to be a detailed examination of key statistics, challenges, and opportunities to provide insight into the current state of U.S. manufacturing, its economic impact, and pathways to revitalization. We'll explore how expanding into niche areas and being purposeful with consumer purchases can shape the future of American manufacturing. Many Americans have felt stagnant wages and growth for years and data suggests that a large percent of that is due to a loss in our manufacturing base across the United States. Many parts of that loss was hard to predict and control, but there are things that we can do as every day Americans to reverse that trend.

Table of Contents

1. U.S. Manufacturing Overview
2. Economic Impact of Manufacturing
3. Key Statistics
4. Challenges Facing the Manufacturing Sector
5. Opportunities for Growth and Expansion
6. Revitalizing American Manufacturing
7. Expanding into Niche Areas
8. The Role of Consumer Purchases
9. The Future of U.S. Manufacturing

The Current State of U.S. Manufacturing

The U.S. manufacturing sector, once the crown jewel of the American economy, continues to face significant challenges. There seems to be hurdle after hurdle, especially as global competition continues to grow at a level many thought unimaginable only 30 years ago. Over the past few decades, we have witnessed a decline in market share and manufacturing jobs due to a variety of factors, including globalization and technological advancements. The allure of cheaper overseas labor has led many companies to move their manufacturing operations abroad, resulting in a steady erosion of American manufacturing capabilities. This is the main factor that has led to what is called the "Race to the bottom". What ends up happening is for our country to compete globally, it requires us to either outsource many of our own business processes, or provide jobs that pay less to offset the cheaper labor costs overseas. This isn't always felt immediately, but one can easily see the impacts this has had on our country over the last 30 years.

This decline is coupled with a reduction in domestic employment opportunities in manufacturing, leaving many skilled and even unskilled workers without jobs. The shift towards overseas manufacturing has not only affected job numbers but also the quality of employment, as many of these positions have been replaced with low-wage service or retail industry jobs. Consequently, there has been a noticeable impact on communities traditionally reliant on manufacturing industries for economic stability. Part of that reason is due to the other types of employment opportunities manufacturing jobs create. The Department of Defense suggests that for every manufacturing job that is created, an additional 5 to 12 new jobs in other or similar industries are created. This is the type of economic cycle that any country wants to see and why it is essential for us to help maintain that economic health.

Even amidst these challenges, there are always ways for America to rejuvenate the manufacturing sector, and thus all the jobs associated with them. By investing in modern technologies, adopting innovative product solutions and investing in companies making products right here in America, the U.S. manufacturing sector can regain its competitive edge. This revival requires a concerted effort from businesses, policymakers, industry stakeholders and the most important of them all, YOU.

The Economic Impact of U.S. Manufacturing

The economic contributions of U.S. manufacturing extend far beyond its direct output. The sector's multiplier effect of $2.79 significantly impacts various facets of the economy, including employment, consumer spending, and technological advancement. Each manufacturing job creates an average of 7 full-time positions within the economy, underscoring its critical role in job creation.

American manufacturing is a driving force behind innovation and technology adoption. The sector invests heavily in research and development, accounting for nearly two-thirds of all private-sector R&D investment. This commitment to innovation fuels advancements in emerging technologies, such as robotics, artificial intelligence, and advanced materials, further solidifying the sector’s importance to economic growth. That means that advancements in one area of the manufacturing sector typically leads to advancements in all others, even retail and other consumer goods. By experiencing those advancements in industries that allow us to export goods, that increases our ability to compete and profit from global trade. These exports contribute significantly to the U.S. trade balance, generating revenue and supporting jobs across the entire U.S. supply chain. Bolstering manufacturing capabilities at home can also help reduce trade deficits and enhance the nation's economic resilience to global headwinds. Manufacturing helps insulate the U.S. economy to domestic and international economic uncertainties, which we have seen over the last decade.

Pathways to Revitalizing U.S. Manufacturing

Revitalizing U.S. manufacturing requires a multi-faceted approach to increase competitiveness, drive economic growth and accelerate innovation. The three biggest factors we see impacting U.S. manufacturing are in workforce development, public policies and consumer behavior. If those three areas can be molded to support U.S. manufacturing and small businesses, then there isn't anything that the American people cannot do.

Workforce development is a critical element in revitalization efforts. By equipping workers with modern skills and training, we can ensure a steady supply of talent for advanced manufacturing processes. Collaboration between industry, educational institutions, and government agencies can create robust training programs and apprenticeship opportunities. Innovations and resources are only as good as the people that can harness them.

Public policy plays a significant role in fostering a favorable environment for domestic manufacturing. Policymakers can implement measures to incentivize investment in research and development, provide tax benefits for domestic production, and enforce fair trade practices for businesses right here in our communities. These initiatives can level the playing field and encourage companies to keep their manufacturing operations within the United States. This will not only encourage businesses to maintain their operations here, but will encourage others to start them here as well.

Consumer Behavior has a profound impact on the future of U.S. manufacturing. By choosing to support domestically produced goods and the businesses creating them, consumers can directly influence demand for American-made products, thus strengthening the entire sector. When individuals prioritize products labeled "Made in the USA," it not only boosts local economies but also fosters job growth across various industries connected to manufacturing. An increase in consumer demand for homegrown products can encourage companies to maintain, start or even expand their manufacturing operations within the country. Many people that buy purposefully talk about supporting companies that are focused on sustainability. Consumers play a critical role in driving sustainable practices by opting for goods that are environmentally friendly and produced through ethical supply chains. Most of which are done by companies in America who are trying to make an impact and work towards being carbon neutral.

Underutilized Sectors for Economic Expansion

Expanding U.S. manufacturing into niche and underutilized sectors presents a wealth of opportunities. Let's start with the basics. Just 40 years ago Americans produced over 80 percent of the goods that were consumed in America. That number shrank to nearly 65 percent by 2009 and to a mere 11 percent today. There are endless perspectives that can be discussed about the pros and cons of globalization and future costs of goods if products were only produced in America, but the data is showing that we are outsourcing away our ability to create things at home. With the U.S. Bank stating that nearly 70 percent of our entire Gross Domestic Product (GDP) is coming from consumption, one can easily see the impact we can have on our local businesses and communities.

Reshoring needs to happen in both physical and mental terms. Not until there is a mental understanding of the necessity of reshoring will there be a physical and economic change. Many of the consumer, medical and everyday goods that we have outsourced pose an immediate opportunity for American entrepreneurs. As global tensions rise and energy costs grow, it will only lead to rising overseas labor costs, supply chain disruptions, and increasing consumer demand for locally-produced goods. Companies and individuals that repatriate their manufacturing operations back into the States will be able to benefit as the last 40 years worth of trends slowly turn back in our favor.

The Impacts of Manufacturing and Retail Job Loss

It is hard to fully grasp what happens when money is or is not being spent on American manufacturers and retailers. We've compiled data from the Economic Policy Institute to showcase the impact of our buying behaviors and potential job loss in both the manufacturing and retail sectors. The question introduced by the EPI for Table 1 was, "Would the closing of a factory that manufactures durable goods and employs 1,000 people have a greater impact on the overall economy than the closing of a retail shopping mall that employs 1,000 people?"

Here's an explanation of Table 1 to showcase this economic impact:

The loss of 1,000 jobs directly impacts the economy similarly across sectors; however, employment multipliers can reveal the broader indirect consequences. According to Table 1, for every 100 direct jobs lost, approximately 744.1 additional jobs are indirectly affected in durable manufacturing, compared to 122.1 in retail trade. Consequently, closing an auto factory would result in an estimated indirect job loss of 7,441 positions, whereas the shutdown of the shopping mall would lead to an estimated loss of 1,221 indirect jobs. This makes it easier to understand why core manufacturing jobs have such a large impact on the greater economy.

The next question posed by the EPI was, "What are the effects on jobs when the demand for output drops by a certain amount? Specifically, would the disappearance of $1 million in final demand for output from factories producing durable goods have the same aggregate jobs impact as the disappearance of $1 million in retail?"

Here's an explanation of Table 2 to showcase the impact on demand:

In this scenario, a $1 million decrease in demand for durable goods manufacturing results in fewer direct job losses—approximately two jobs—compared to about ten jobs in retail. This discrepancy is due to the higher productivity levels in durable goods production, which require fewer direct jobs per dollar of output. However, the extensive connections and linkages within the manufacturing sector mean that the impact of this reduced demand is more widespread across the job market. The employment multipliers from Table 2 indicate that a $1 million decrease in demand leads to the loss of approximately 16.5 indirect jobs in durable manufacturing, versus 10.6 in retail. Consequently, although direct job losses are smaller in the manufacturing sector, the total jobs affected—including both direct and indirect—are roughly comparable between durable manufacturing and retail, with losses of 18.3 and 20.5 jobs, respectively, for a $1 million drop in demand.

The more understanding that we have on how manufacturing and retail jobs impact our economy, the easier it is to have our buying behaviors support initiatives that will bring economic growth to our communities. 

The Future of U.S. Manufacturing

Looking ahead, the future of U.S. manufacturing is filled with promise and potential, even with all of the headwinds that we face. We believe that in the bottom of our hearts. It all comes down to the people in our country and the decisions we decide to make over the coming years. It will require efforts from those in business, government and every household throughout America. If businesses aren't making an effort to produce products in the U.S., if the government doesn't provide legislation to make it easier for companies to compete globally and if Americans aren't willing to purchase products made from other Americans, then those are the key scenarios that would exacerbate the race to the bottom and the loss of American jobs. The biggest step in this is awareness. Sometimes ignorance is bliss, but we need more Americans to be aware of the economic impact that their dollar has in their communities. Individually, it may seem like a "drop in the ocean", but collectively, we are a large part of the economic ocean. The American people can do so much to positively impact their communities, this country and the world.

We are excited to see forums, companies and Americans coming together to raise awareness. If you know of any company, blog or person that would want to collaborate, please share their information below. We love meeting people on the same mission.