Despite all of the bad economic news we are bombarded with daily, there has been a glimmer of hope these past few years under President Obama. The last 30 months have seen continuous job growth, but the real bright spot is the growth in manufacturing jobs. Of the nearly 4.5 million jobs created in the past 30 months, nearly 500,000 of them were in manufacturing. A sector once thought lost to third world countries has seemingly returned.
Why the sudden increase in manufacturing? A number of reasons have led to the shift. The Boston Consulting Group has done a lot of analysis on the subject, and they found that by 2015, manufacturing in China will only be 7% cheaper than right in here in the US. Labor costs in other developed countries is 20% to 45% higher than here in the US. Given the efficiency of the American worker, these numbers make companies more likely to build in the US.
Energy is another leading factor. The US is experiencing a boom in cheap natural gas thanks to hydraulic fracturing, also known as fracking. Natural gas prices are 50% to 70% cheaper in the US than in other regions at the moment.
These factors have led foreign companies to begin manufacturing in the US. Toyota has a plants in Kentucky. Hyundai has a plant in Alabama, as does Mercedes Benz. Airbus recently announced that its first US manufacturing site will be located in Mobile, Alabama.
These advantages should give domestic companies more incentive to build at home as well. While we may never get back things like electronics or textiles, other sectors could see a rebirth in the US. The automobile industry has seen strong growth under President Obama after both he and President Bush helped bail out the auto industry. The automobile industry doesn’t just cover cars, it also covers the manufacturing of car parts. It has become a vital portion of American manufacturing, supplying millions of jobs.
The reports of the American manufacturing sector’s demise were greatly exaggerated. We are still building things in American, and in fact the sector is growing. As wages rise in developing countries, this trend will continue. The US will remain a manufacturing juggernaut for many years to come.