Amazing Modern Manufacturing

I worked many years for the National Association of Manufacturers (NAM) and I have never been as excited about the prospects for U.S. manufacturing as I am today. We are entering a new era – a new golden age of amazing modern manufacturing.

All of a sudden all the ingredients of competitive manufacturing are swinging our way. The biggest single reason is the dramatic drop in the cost of natural gas, which has always been a critical factor in our manufacturing base. We pay about $3.50 per million BTUs, opposed to $12 in Europe and $16 in Japan. And we will keep that edge for a long time, even as we are also ramping up our production of oil. By 2025, the U.S. will be a net exporter of energy.

Meanwhile, other key costs associated with manufacturing, such as labor and land, are rising faster among our main competitors. Wages and benefits in China are rising 15-10 percent a year and the yuan is gaining ground on the dollar. Also, industrial land is much cheaper in parts of the U.S. than in the coastal regions of China where most of the industrial base is located. Ergo, we are fast closing the gap in production costs between the U.S. and China.

But another advantage of U.S. manufacturing, and one that will have greater impact over the long haul than energy, is the creativity of the American people. Manufacturing accounts for about two-thirds of all private sector research and development, and the lion’s share of patents and innovation. Our legal system protects intellectual property which is a big reason why manufacturers pump so much capital into R&D. And the shop floor, today as always, is the real world where new ideas are tested – whether new products or new processes for  making products of  higher quality more efficiently.

As technology roars ahead, the U.S. is well positioned to build on its leadership because of our commitment to innovation. Today as always, manufacturing is our economy’s primary driver of productivity gains. Thanks to innovation, the turnaround time for new product lines is shortening, which adds yet another incentive for manufacturers to produce their products here where they can closely monitor the development process.

All of which means a growing number of manufacturers are bringing production back to the U.S. from overseas even as more foreign manufacturers are shifting production into the U.S. To be sure, U.S. manufacturing will never be the jobs machine it once was, but we will probably add 2.5 million or more new manufacturing jobs by 2020, nipping 2-3 points off the unemployment rate, and by and large they will be good jobs that pay well.

This is not idle speculation; it is happening and it will continue to happen at a quickening pace in the months and years ahead. Hang on to your hats, friends. This promises to be an exciting and productive ride.