Made in USA Is Alive and Well

Despite downturn and dire outlook for factories, value of American-made goods still leads world.

WASHINGTON -- It may seem like the country that used to make everything is on the brink of making nothing. In January, 207,000 U.S. manufacturing jobs vanished in the largest one-month drop since October 1982 (see chart above). Factory activity is hovering at a 28-year low. Even before the recession, plants were hemorrhaging work to foreign competitors with cheap labor. And some companies were moving production overseas.

But manufacturing in the United States isn't dead or even dying. It's moving upscale, following the biggest profits, and becoming more efficient, just like Henry Ford did when he created the assembly line to make the Model T.

The U.S. by far remains the world's leading manufacturer by value of goods produced. It hit a record $1.6 trillion in 2007 -- nearly double the $811 billion in 1987. For every $1 of value produced in China's factories, America generates $2.50.

So what's made in the USA these days?

The U.S. sold more than $200 billion worth of aircraft, missiles and space-related equipment in 2007. And $80 billion worth of autos and auto parts. Deere & Co. (DE) sold $16.5 billion worth of farming equipment last year, much of it to the rest of the world. Then there's energy products like gas turbines for power plants made by General Electric (GE), computer chips from Intel (INTC) and fighter jets from Lockheed Martin (LMT). Household names like GE, General Motors (GM), IBM, Boeing (BA), Hewlett-Packard (HPQ) are among the largest manufacturers by revenue.

Several trends have emerged over the decades:

• America makes things that other countries can't. Today, "Made in USA" is more likely to be stamped on heavy equipment or the circuits that go inside other products than TVs, toys, clothes and other items.
• U.S. companies have shifted toward high-end manufacturing as the production of low-value goods moves overseas. This has resulted in lower prices for shoppers and higher profits for companies.
• When demand slumps, all types of manufacturing jobs are lost. Some higher-end jobs -- but not all -- return with good times. Workers who make goods more cheaply produced overseas suffer.

Once this recession runs its course, surviving manufacturers will emerge more efficient and profitable, economists say. More valuable products will be made using fewer people. About 12.7 million Americans, or 8% of the labor force, still held manufacturing jobs as of last month. Fifty years ago, 14.6 million people, or 28% of all workers, toiled in factories.

Using slightly different data than the AP article, the chart above shows U.S. Manufacturing Output (Gross Value) from The Federal Reserve, and U.S. Manufacturing Payroll Employment from the BLS (via Economagic), monthly from 1972-2009. In the last 37 years, manufacturing output in real dollars has more than doubled, while manufacturing employment has dropped by more than 26%, resulting in an almost tripling of the amount of manufacturing output per manufacturing worker in the U.S., from less than $80,000 in 1972 to almost $240,000 per worker today (see chart below).

It's certainly the case that the U.S. leads the world in overall manufacturing output, and it's probably the case that when it comes to manufacturing output per person, nobody in the world comes close to the U.S.

You hear from a lot of people that the U.S. can't be a job-creating, world-class economy without a thriving and expanding manufacturing sector. In fact, except during recessions, the U.S. continues to produce more and more manufacturing output year after year. But because of increases in worker productivity year after year, we can produce more output with fewer workers.

It's a lot like the trend in agriculture that took place starting in the 19th century. We produce more and more food every year with fewer and fewer farm workers, due to increases in productivity. Instead of bemoaning the loss of manufacturing or farm jobs, we should be celebrating the increasing productivity of the American worker!

Thanks to Bob Wright.

Comments

[If U Say So:]

One very important piece of our upscale output is defense related. The Obama administration has made it crystal clear that they will be cutting defense spending and specifically weapons systems dramatically. That means very few dollars spent in future years for research and development. This is great for Russia, France, the UK and China. The rest of the world will make great inroads in the world defense market and at a cheaper cost, while we give away what market share we now command.

Feb 23 02:51 PM

[Detfan:]

The demise of the domestic auto manufacturers is highly overstated in your comments. Let's see what happens in 2010-2011, when all three domestic auto manufacturers are profitable, shall we?


On Feb 22 12:09 PM Glen L. wrote:

> Dave Wrixon is absolutely correct. American manufacturing is much
> too heavily involved with weapons production ordered by the federal
> government, and as anyone who has ever worked on a federal contract
> knows, the supposed "productivity" of high sales vs. low number of
> workers merely reflects the outrageous prices the government pays
> its favorite crony capitalists.
>
> If and when the Obama administration drastically cuts war spending
> the true weakness of America's manufacturing sector, and the entire
> economy, will be fully exposed. For one example, that household
> electronics name, GE, will likely go bankrupt without the huge DOD
> contracts it relies on now. This will be on top of the demise of
> most of our domestic auto industry (unless it's nationalized) which
> also contributes heavily to the gross numbers above. Then there's
> the decrease in commercial jet orders...
>
> The doodoo is getting deeper by the day.

Feb 23 03:07 PM

[Ricard:]

"The U.S. sold more than $200 billion worth of aircraft, missiles and space-related equipment in 2007. And $80 billion worth of autos and auto parts. Deere & Co. (DE) sold $16.5 billion worth of farming equipment last year, much of it to the rest of the world. Then there's energy products like gas turbines for power plants made by General Electric (GE), computer chips from Intel (INTC) and fighter jets from Lockheed Martin (LMT). Household names like GE, General Motors (GM), IBM, Boeing (BA), Hewlett-Packard (HPQ) are among the largest manufacturers by revenue."

Parse:

GE is now a laughing stock due to its complicity in the credit crisis.

GM has been a laughing stock for years, and is now on the brink of bankruptcy.

INTC and HPQ have the majority of their manufacturing activity OVERSEAS.

BA and LMT sell chaos and destruction. A worthy export indeed.

Out of your list of prominent companies, I can only count Deere (and I will add Caterpillar) as paragons of American capitalism, MADE IN AMERICA.

The rest of this list contains the very elements you so vehemently object.

Feb 23 03:10 PM

[GoldMoney:]

STRIP OUT MILITARY HARDWARE FROM THE DATA YOU GENIUS.

Feb 23 03:30 PM

[Nick Waddell:]

Good research anyway, Mark. Even with all the qualifiers readers have made to this article, I would bet that most of us wouldn't have thought that the US has increased its lead in value of goods produced.

Feb 23 03:35 PM

[dw57:]

maybe a shortage of jobs in other countries?
its certainly not the high wages that are growing.


On Feb 22 06:29 PM The Proclaimer wrote:

> Thanks for the correction, I still stand by my proclamations.
> The lost production is substantial, but the cost savings to me and
> the consumers of those products is greater. Consider brake rotors
> for your car, twenty years ago cost for a GM model (86 Park AVE)
> brake rotor was over $125 at Advanced Auto. After NAFTA the same
> rotor was $18. I have saved Thousands since NAFTA on car parts
> alone.
> The spectrum has shrunk but the gross dollar value did increase along
> with increased worker productivity. The point is that only with
> energy consumption was it possible to accomplish. Today's Electric
> power is more reliable. Because of that computerized production
> systems are much more reliable and that allows us to maintain high
> production rates.
> efficiencies.
>
> By exporting the mundane jobs we free up those workers to maintain
> and operate the computerized systems. There is a shortage of workers
> in this country, how else do you explain the illegal immigrants
> flocking to this country?

Feb 23 03:36 PM

[aarc:]

Let's face the truth.

American productivity is being measured on how many products are being produced by machines assisted by humans.

It is the machines that do the actual work while the machine operators and technicians do the menial jobs to keep the machines working or to prevent them from breaking down.

Maybe we need to differentiate between human productivity and machine productivity before comparing them to developing countries who rely mostly on human labor assisted by machines.

Feb 23 03:56 PM

[markg:]

On Feb 22 10:56 AM ROLEXDAYTONA wrote:

> Living in Frankfurt/Main and shopping there, I can't find here any
> American brands, for Europe, American quality is almost like Made
> in Thailand.
> The only thing that remains in Europe from America, is trading houses
> with their complex deleveraged exotic trading desks, but soon this
> will be gone too.
> I have advise to Americans, buy only Made in USA goods, otherwise
> your country will become so poor and dangerous, with crime levels
> like in Al Capone times.

Is this why Harley Davidson has done so well in Europe? I'm not even a Harley fan and I know this.

Europe unfortunately has had their share of paper shuffling musical chairs. In case you missed it, the economy is a global problem, and the misuse of the financial markets by the stupid and greedy is universal.

The lesson here, as is often the case, is that overgeneralizations are easy to make as well as misleading.

Feb 23 04:13 PM

[Caren:]

Unfortunately when price is a factor consumers don't care about American made. In a recession/depression, that attitude will really factor into their spending choices.

Feb 23 07:10 PM

[Ricard:]

Before I get carried away with negativity, I'd like to say that I would like to believe in the author's statement. However, I believe it is at best poorly defended.

If the author brought in companies like P&G, Campbells, Caterpillar, hell, even Walmart in that the paragon of efficiency is MADE IN THE USA, then I would credit the author with making a sound case. However, he brings in GM...you have to be kidding. BA and LMT? Even our own populace has serious misgivings about the military-industrial complex. GE would be good on a list, but it has relied on its financial division for years to make a MAJORITY of its profit. VALUE has NOT been found in its manufacturing or productive capabilities. Here again the author goes astray.



"The U.S. by far remains the world's leading manufacturer by value of goods produced. It hit a record $1.6 trillion in 2007 -- nearly double the $811 billion in 1987. For every $1 of value produced in China's factories, America generates $2.50."

This treads on very dangerous ground. Value in this case is subjective. In an investing perspective, value deals will low-cost goods with high quality delivered to customers AT THE RIGHT PRICE. For us, we are clearly not the low-cost producer. Our quality has been judged as second to none. So far, our products (P&G, Campbells) demand huge premiums overseas. But...can anyone imagine scenarios where this can easily change?

For example, it is difficult to argue that Japanese production is not valuable. However, it is not valued very highly in the world - it is essentially the low-cost producer (think automobiles of all status groups). By sticking to this strategy of offering low cost, at high quality, and at the right (low) price, it has bankrupted its main competitor, America's Big Three. Can one see the cost of Japanese automobiles increasing from this point? What value would that have produced, if they arbitrarily hike up their prices 20-30%, just because they could? This could be viewed as the third characteristic - "the right price" - in a value perspective. This would make Japanese manufacturing more "valuable" because of its reputation, earned over 40 years of honing manufacturing to perfection, and more importantly, because that reputation demands a higher premium.

This brings me to the root cause as to why I find the valuation of manufacturing suspect. Much of this value is based on the last characteristic - selling AT THE RIGHT PRICE. For decades the right price of our goods have been astronomical compared to what the rest of the world (except Europe) produces. Nike adds "value" simply by slapping its slogan on shoes made in southeast Asia. Through that lens, I'd challenge readers to re-read this quote from the author:

"For every $1 of value produced in China's factories, America generates $2.50."

Again, I'd like to believe in what the author states. I believe such an argument can be made, although our current situation would emphatically argue against the opposite (i.e., if we did make as much as the author states, we would not owe so much money to foreigners). However, I think the author has not done a good job at all in stating it,
despite his credentials.

Feb 23 09:50 PM

[Mafeking:]

Trouble is that 'things that others can't make' changes year by year. A few years ago (relatively speaking) China could not make computers. Today they cannot make high quality aircraft and heavy good, but that will change.

When I worked in Asia I saw how they systematically reverse engineered everything they got hold of from the US. (The likely apocryphal story was that they even copied a products flaws.) Right now I bet somewhere in China there are reverse engineering a Boeing.

With their lower costs (labor and almost zero R&D costs) and manufacturing expertise within 10 years they will be making aircraft and passable cars (Cherry is looking at buying Volvo). Alas I wish I could be as positive as Dr Perry. His view is rose tinted.

Feb 23 10:31 PM

[Allen Phatimer:]

The point you make promotes the same misguided policies that as henarl pointed out turns out walmart employees and folks that create electronic entries and paperwork. Less people making less to produce more (productivity) is great for the business owner, but it is not in the best interest of us as a nation. When you forsake the ability to produce labor intensive goods you also give up the ability to innovate in the future and create value accordingly. You give up the ability to add value (however small) at each step in the value chain. You can bet your half baked theory that someone will create significant innovations in autos, machinery and the like at some point and it wont be us. There are universities in China that have majors in things like bra engineering - and they now produce differentiated, value added bras that our wives spend $50 and $60 in Vicki's hush hush. For now that value creation is being split nicely in the retailer's favor but its a matter of time till there are bootlegs available for half that price and it then becomes the beginning of the end of another American company. Once upon a time the brits were good manufacturers and had a strong economy, as were the Germans, as were the Japanese and others. As their manufacturing base lost its luster, so too did the economic growth, and real incomes. These countries became second rate economies where too many battle for too few jobs and wages and standards of living collapse. It isn't long till too few are left who can afford the few things still produced domestically. Don't lose sight of the fact that one's spending is another's revenue. The view that we will retain high value added, high paying jobs is naive. The Chinese, Indian's and Brazilians amogst other now have not only cheap labor, but also knowledge, technology and capital to knock off almost everything. As they do, they will put more U.S. businesses and consumers out of commission. Of course we are using technology and a better educated, more industrious workforce to produce more efficiently and that much is a good thing. But make no mistake about it, the driving force of much of this is little more than labor arbitrage with unintended consequences that will haunt us for years to come because those jobs arent coming back and we aren't manufacturing jobs to replace them. Employing more Americans which earn a better living than walmart cashiers and greeters, to produce more goods to sell to everyone else globally is a better economic situation for most Americans and us as a nation in the long run than the opposite scenario.

Feb 23 11:16 PM

[sheople:]

Amen, Rob


On Feb 22 06:08 AM Rob Viglione wrote:

> It's a shame that such strong productivity in the American labor
> market is not capitalized the way it should. Rather, excessive regulatory,
> tax, and union burdens render our capabilities less competitive in
> the global marketplace. Something as simple as the Fair Tax could
> revolutionize American manufacturing, making us the country companies
> flock to to produce goods.

Feb 23 11:29 PM

[otbricki:]

INTC is investing 7bil USD on US manufacturing of 32nm CPUs. 0 USD overseas. While Apple and HP assemble overseas many high value components like CPUs and software are US sourced.

US military hardware spending is high tech, but only represents 100bil USD per year. Private sector is 15 times larger.

To our friend in Germany - hard to imagine that you don't see Microsoft, Boeing and Intel from time to time. So cut out the baloney.

Feb 23 11:34 PM

[bosun.j:]

Rah rah rah..... Don't break your arm patting yourself on the back, Dr.!

So America is better than any other country in the world at making weapons! Now there is something to crow about!!

America, the biggest arms dealer in the world! Rah rah rah!

Yeah but, we're the best! No, really! We ARE!

Feb 24 06:06 AM

[bosun.j:]

What? Are you serious? YOU buy every damn one of that come off the line! Even the ones that are "sold" to foreign governments! Wake up and smell the "___"!!


On Feb 22 10:26 AM a. palmer jr. wrote:

> I can't remember the last time I bought a fighter plane.

Feb 24 06:12 AM

[bosun.j:]

OK, that brake rotor now costs $110 less. Yippee! Now, how much has it cost you, your children, and your grandchildren to transfer wealth from the middle class to the elites? $60,000.00! Divide that by the savings on the brake rotor.... that's 545 brake rotors you paid for but don't get to use!

Congratulations! You made it!


On Feb 22 06:29 PM The Proclaimer wrote:

twenty years ago cost for a GM model (86 Park AVE)
> brake rotor was over $125 at Advanced Auto. After NAFTA the same
> rotor was $18. I have saved Thousands since NAFTA on car parts
> alone.
>

Feb 24 06:30 AM

[bosun.j:]

Simple. Because the first is productive and the second is mere moneychanging.


On Feb 23 11:02 AM Chris B wrote:

> Why should any US venture capitalist invest in manufacturing, where
> they will be taxed at over 30%, when she/he could invest in derivitives,
> commodities, stocks, treasuries, and mortgage-backed-securi... and
> only be taxed at 15%?
>
> It seems that taxation incentives actually drive investment, which
> is what anyone with even a basic understanding of economics would
> predict.
>
> I suppose we should be asking the following questions:
>
> 1) How has our current incentive structure worked out for us so far?
>
> 2) Is asset-trading a more desirable economic activity than asset-producing,
> and does it deserve preferential tax treatment?
> 3) Are there risks involved with creating an economy based on electronic
> asset-trading, rather than physical asset production? What competitive
> advantages do we have in this area, and are those advantages durable?

Feb 24 06:41 AM

[bosun.j:]

Caterpillar. Made in America. Yep, except for the more than 50% that CAT produces outside USA. Huge assemblies and finished equipment pieces were loaded on my ship in La Havre every time I tied up there. Destination Dundalk Terminal, Baltimore, MD, USA..... Five ships on that route with the same port schedule and same cargoes.

Not to mention all the Liebherr heavy equipment, the NJ Transit locomotives (both directions) Benzes, Jags, BMWs, Roll-Royces, Wash. DC subway cars and on and on all from Europe to USA.

From US to Europe? Chrysler Neons three times a year..... POV's and household goods for active duty military transfers....

Farm equipment? Once. Took 43 M-F combines bound for St. Petersburg, Russia as far as Helsinki.

You finance types sure know what yer talkin' about.


On Feb 23 03:10 PM Ricard wrote:

> "The U.S. sold more than $200 billion worth of aircraft, missiles
> and space-related equipment in 2007. And $80 billion worth of autos
> and auto parts. Deere & Co. (seekingalpha.com/symbo...)
> sold $16.5 billion worth of farming equipment last year, much of
> it to the rest of the world. Then there's energy products like gas
> turbines for power plants made by General Electric (seekingalpha.com/symbo...),
> computer chips from Intel (seekingalpha.com/symbo...) and
> fighter jets from Lockheed Martin (seekingalpha.com/symbo...).
> Household names like GE, General Motors (seekingalpha.com/symbo...),
> IBM, Boeing (seekingalpha.com/symbo...), Hewlett-Packard
> (seekingalpha.com/symbo...) are among the largest manufacturers
> by revenue."
>
> Parse:
>
> GE is now a laughing stock due to its complicity in the credit crisis.
>
>
> GM has been a laughing stock for years, and is now on the brink of
> bankruptcy.
>
> INTC and HPQ have the majority of their manufacturing activity OVERSEAS.
>
>
> BA and LMT sell chaos and destruction. A worthy export indeed.<br/>
>
> Out of your list of prominent companies, I can only count Deere (and
> I will add Caterpillar) as paragons of American capitalism, MADE
> IN AMERICA.
>
> The rest of this list contains the very elements you so vehemently
> object.
>
>

Feb 24 06:54 AM

[bricki:]

Caterpillar breaks ground on new manufacturing facility - in Texas:

governor.state.tx.us/n.../

Caterpillar exports $16 billion, more than 50% of it's US manufacturing:

www10.mcadcafe.com/nbc...

Since Caterpillar's total revenues are about 50 billion it is hard to see how a US manufacturing level of $30 billion would result in less than 50% US manufacturing.

Your claim that Caterpillar does more than 50% of it's manufacturing offshore doesn't fit with Cat's revenue numbers. Got a reference for that?

Caterpillar plans new facility in Little Rock:

www.arkansasbusiness.c...

The fact is that no global company like Caterpillar has manufacturing operations centered in any one country. Look at Toyota. They manufacture all over the world. But they are still considered to be a Japanese manufacturing company. Their manufacturing expertise is fundamentally Japanese. As Caterpillar's is American.

On Feb 24 06:54 AM bosun.j wrote:

> Caterpillar. Made in America. Yep, except for the more than 50% that
> CAT produces outside USA. Huge assemblies and finished equipment
> pieces were loaded on my ship in La Havre every time I tied up there.
> Destination Dundalk Terminal, Baltimore, MD, USA..... Five ships
> on that route with the same port schedule and same cargoes.
>
> Not to mention all the Liebherr heavy equipment, the NJ Transit locomotives
> (both directions) Benzes, Jags, BMWs, Roll-Royces, Wash. DC subway
> cars and on and on all from Europe to USA.
>
> From US to Europe? Chrysler Neons three times a year..... POV's and
> household goods for active duty military transfers....
>
> Farm equipment? Once. Took 43 M-F combines bound for St. Petersburg,
> Russia as far as Helsinki.
>
> You finance types sure know what yer talkin' about.

Feb 24 06:08 PM