Industry in the US has been on the decline for decades. It seemed to everyone that the US would not be able to compete globally in these markets|industries do to the lower wages of foreign works and lack of regulations in third world countries. However, despite this the US manufacturing sector has risen for the previous ten straight months. Once again optimism is beginning to appear in the once great powerhouse of manufacturing; however it is unlikely that we will ever see the levels attained at our height.
Still, American manufacturing is experiencing unexpected growth. Closed down factories are reopening and jobs are being created. The devastated economies of manufacturing dependent states have grown unexpectedly. The State of Michigan for example has the exciting problem of what to do with 500 million dollars in taxes that they never expected to receive. The reason is the current upsurge in manufacturing. In markets where the US has been traditionally strong, such as aviation, we have continued to grow while in other areas like the auto industry there has been a marked resurgence. General Motors has once again become the world’s top automaker and all three of the “Big Three” are posting profit levels that they couldn’t dream about a year ago.
Still America isn’t producing a lot of the smaller, less technological items that we once did. For example nails and screws haven’t been produced in the US for some time and there is little hope in regaining these markets. However, even in these areas the US has found a niche. Items like extrusion dies that are required for making nails and screws take a skilled work to create them and the typical US carbide die company have been able to rebuff their foreign competition. The reason seems to be that companies using these dies don’t want to risk going with the cheapest suppliers do to the fact that if they have to send an deficient carbide die back to the manufacturer that means production will come to a grinding halt. Apparently managers don’t want to explain why their company is losing millions of dollars a day because they are waiting for a $75 dollar part to the company’s owners.
So why is the US manufacturing sector making a comeback? In short, we are becoming more competitive. US manufacturing has been on a downward slide for forty years, and with it the wages paid to our works has decreased. While the owners of US firms have been doing everything possible to trim wages and cut costs the average wage of Chinese works has gone up at an average of 17% per year. It will be a very long time if ever that Chinese and US workers receive the same wages but it’s a step in the right direction. Coupled with the better education of US workers (yes, we still do have that!) America is finding itself on much more equal footing. The fact of the matter is that if you take an average worker from the Peoples Republic of China and one from the good old US of A, the American worker is more skilled on Average. Another advantage is fuel costs. US industries tend to be closer to the major consumer markets and have more reliable access to power.
The Earthquake in Japan has been a mixed blessing. While US auto production has surged pass Japanese we are finding ourselves hampered by lack of Japanese parts we use in our own cars. It still remains to be seen if the disaster will be a net gain or loss for domestic auto makers. Similar stories are playing out in the electronics, chip manufacturing and other industries. In fact, this month has been the first month without growth in the US manufacturing sector and the reason cited is supply chain problems stemming from the disaster in Japan.
So, US manufacturing is rebounding, but the fact of the matter is that it has a very long way to go if we ever want to reach our former heights of productivity. The fact of the matter is that growth is slow and it will be about ten years before we even hit the levels attained before the economic crash. Of course, the good news is that we are finally on that path and experiencing widespread, if slow paced, growth.
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