What is the true state of manufacturing in the United States?

By Alan Kelsky Monday, September 28, 2015 via MultiBriefs manufacturing

Experts in manufacturing hold differing opinions about how well the sector is doing since the Great Recession. In fact, the same sources tend to be schizophrenic about the manufacturing sector’s progress.

For example, CNBC ran a story on June 10 entitled, “Is there a renaissance in US manufacturing? Numbers don’t add up.”The numbers cited include that since 2007, when the Great Recession began, the manufacturing sector has not recovered and is down 3.2 percent in output and “2 million jobs have been lost.”

Two weeks later, CNBC reported a different story — “The manufacturing renaissance in America’s heartland” — based on a release from the National Association of Manufacturers’ Outlook Third Quarter Survey. This report was about how well the country is doing in the manufacturing sector.

Making sense of it all

So, are you as confused as I am? Perhaps the arguments presented by both sides are close to those of the Information Technology and Information Foundation (ITIF) and the Congressional Research Service (CRS).

You see, in March, the CRS rendered a report to Congress called, “U.S. Manufacturing in International Perspective.” In August, The ITIF released a scathing report called, “A Critique of CRS’s ‘U.S. Manufacturing in International Perspective.’

The ITIF report soundly criticized the CSR report as “overly rosy.” In fact, the ITIF report strongly indicated that the U.S. manufacturing industry is deeply in trouble and most likely needs more help than ever.

The ITIF report notes that the U.S. economy is inextricably bound to the manufacturing sector. The study authors, Adams B. Nager and Robert D. Atkinson, also inform readers that Congress looked to CRS in order to identify the need for policies and programs to nurture the industry.

The CRS, according to the ITIF is wrong in its overall finding that the manufacturing sector is healthy and the government, through legislation or program advances, will not have a positive impact on this important economic sector.

“Thus, CRS endorses an agenda of inaction,” the ITIF report states. “The CRS report mistakenly suggests that U.S. manufacturing is healthy while dismissing the need for supportive manufacturing policies. However, as we demonstrate in this response, the CRS report consistently errs on the side of ‘all is well’ when in fact actual U.S. manufacturing performance is declining significantly.”

Factors leading to the ITIF conclusions

As mentioned earlier, the manufacturing sector has 2 million fewer employees than before the Great Recession.

According to CRS, using data from The Conference Board to measure job loss, there has been a 12 percent employment loss in manufacturing from 2003 to 2013. Had that number been taken from the U.S. Bureau of Economic Analysis (BEA) the number is almost 50 percent larger at 17 percent. The ITIF seems to be accusing the CRS of cherry-picking numbers.

Moreover, ITIF is critical of the time period chosen by CRS. This criticism is due to leaving out the period from 2000 to 2003. At that time, U.S. manufacturing employment shrunk by 16 percent, caused by a recession. So, the actual loss of manufacturing jobs, if the alternative time period is used is more like 30 percent.

When an economic sector loses 30 percent of its jobs, the industry is likely in decline. Nevertheless, apologists for the U.S. economy tend to blame the job losses on increased productivity gains. Statistics say “it ain’t so.”

Using jobs and value-added growth by the manufacturing sector, ITIF claims that the productivity gain is imaginary — and the U.S. manufacturing job loss is due to a lack of competition and not an increase in productivity.

Takeaways

Manufacturing sector participants should read the reports by the CRS and ITIF. Read both with a pen and pencil to make notations and compare data. Then you can make an informed decision as to which data you believe.

Beware, though, the adage is true: “Statistics don’t lie, but liars use statistics.”


 

About the Author

Alan Kelsky

Alan Kelsky is a freelance writer with a master’s degree in business administration from Xavier University with a specialty in healthcare management. Alan was formerly a hospital CEO with an active emergency room and was the CEO of an urgent care center in Pompano, Florida. He is also formerly the owner of Electric Control Services. His company worked with manufacturers and commercial building owners by offering energy audits, energy efficiency technology sales, installation and follow-up monitoring.