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Recent Trends in Manufacturing

Since the Great Recession, manufacturing has experienced a period of growth. In our June 2014 report, Manufacturing Since the Great Recession, Ryan Noonan and I provided an overview of recent trends in manufacturing. This blog updates those facts.  What we find is that while manufacturing is still recovering, the rebound has slowed somewhat in recent months.

Monthly Changes in Manufacturing Shipments and Employment

In January 2013, manufacturing shipments surpassed their pre-recession level after declining 27 percent from July 2008 to April 2009. After peaking in July 2014, shipments, and also exports, generally have been falling, due largely to factors such as disruptions at West Coast ports, a strong U.S. dollar, and a harsh winter. As of March 2015, shipments in manufacturing stand at $482.7 billion. However, despite these declines, monthly shipments have continued to stay above or close to pre-recession levels. In addition, although growth has slowed since the middle of 2014, manufacturers remain optimistic, at least according to the Institute for Supply Management's Purchasing Managers' Index which has remained at or above 50, a reading that indicates expansion, since December 2012. However, the overall outlook from manufacturers is mixed according to the Federal Reserve's Beige Book which gathers anecdotal information on economic conditions from key business contacts, economists, market experts, and other sources.  In April, contacts in Boston, Philadelphia, Dallas, and Kansas City maintained a positive outlook on manufacturing conditions, while contacts in Cleveland and Atlanta reported more moderate expectations.

From an employment perspective, manufacturing is still 1.4 million jobs away from recovering those jobs lost during the recession, but the sector has experienced job growth over the past several years. From March 2010 through April 2015, manufacturing establishments have added 869,000 jobs—the first sustained period of job growth in manufacturing since the 1990s; after the 2001 recession, employment in manufacturing continued to fall during the overall economic recovery. More recently, job growth has been sluggish, with manufacturing employers adding only 4,000 jobs since January.

Other highlights from the sector include:

  • Manufacturing represents 12 percent of economic activity in the United States, as measured by nominal GDP.
  • The number of manufacturing establishments has grown for five straight quarters. This hasn't happened since the late 1990s.
  • 76 percent of the job gains in manufacturing have been in three durable goods industries: transportation equipment, fabricated metal products, and machinery.
  • 42 states have seen job gains in manufacturing through the third quarter of 2014, but more than 45 percent of the jobs added since the first quarter of 2010 were in five states: Michigan, Texas, Indiana, Ohio, and California.
  • Production workers in the manufacturing sector have averaged around 42 hours per week for the past three years (2012 through 2014)—their highest sustained level since the mid-1940s.
  • Although growth in shipments has returned in many manufacturing industries, just two have accounted for over 40 percent of the rise in shipments since 2009: transportation equipment and petroleum and coal products. From 2013 to 2014, however, the value of shipments of petroleum and coal products decreased by 4 percent, likely as a result of the decline in oil prices. Printing is the only industry with lower shipments now than in 2009.
  • Export sales account for a quarter of the rebound in shipments since 2009. Exports of U.S. manufactured goods totaled $1.2 trillion in 2014. Transportation equipment and refined petroleum (and coal) products accounted for 44 percent of the export gains from 2009 through 2014. Exports of manufactured goods have weakened, as noted above. Each quarter since the middle of 2014 has come with a decrease in exports of manufactured goods with the first three months of 2015 logging the lowest level since the second quarter of 2011.
  • Foreign investors also are helping rebuild the U.S. manufacturing sector. As of 2013, total direct investment in the U.S. from abroad totaled $2.8 trillion, of which $936 billion (34 percent) was placed in the manufacturing sector.

Capacity utilization in manufacturing stands at 78.0 percent as of March 2015 (average since 1972 is 78.5 percent). This means that manufacturers are employing about four-fifths of their available resources to produce output. This number has generally been on the rise since the end of the recession, emerging from an all-time low of 63.7 percent in June 2009.

Capacity Utilization and Employment in Manufacturing, January 1972 - April 2015

Higher capacity utilization has historically translated into more manufacturing jobs for the U.S. economy, although the last economic recovery after the 2001 recession was an exception. As noted earlier, this time around, the recovery is bringing with it more jobs and more factories.  As of March, manufacturers were advertising for 320,000 jobs.  To learn more about those jobs and career opportunities in manufacturing, it is not too soon to mark your calendar for Manufacturing Day, on October 2. We will continue to track trends in this sector and provide updates.

Jessica R. Nicholson, Economist


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