US manufacturing is experiencing a rebound, with companies adding workers amid strong consumer demand for products.
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WASHINGTON – Ever since American manufacturing entered a long period of automation and outsourcing in the late 1970s, every recession has resulted in factory job losses that have never returned. But the recovery from the pandemic recession has been different: American manufacturers have now added enough jobs to recoup everything they’re losing—and then some.
The revival has not been driven by companies bringing back factory jobs that had moved overseas, or the alarming industrial sectors and regions often brought up by President Biden, the former President Donald J. Trump and other manufacturing champions.
Instead, the machines in this restoration include pharmaceutical factories, craft breweries and ice cream makers. The new jobs are more likely to be located in the Mountain West and Southeast than in the classic industrial strongholds of the Great Lakes.
American manufacturers cut about 1.36 million jobs between February and April 2020, as Covid-19 shut down much of the economy. As of August of this year, manufacturers had added about 1.43 million jobs back, a net increase of 67,000 workers above pre-pandemic levels.
Data suggests that the rebound is largely a product of the unique circumstances of the pandemic recession and recovery. Covid-19 shrank global supply chains, making domestic manufacturing more attractive to some companies. Federal stimulus spending helped power a shift in Americans’ buying habits away from services like travel and restaurants and toward goods like cars and sofas, helping domestic factory production – and with it, job growth – bounce back much faster than it did in the previous two recessions.
Treasury Secretary Janet L. Yellen said that the recovery of manufacturing jobs is the result of the unique nature of the recession, which was triggered by the pandemic, and the robust federal response, including legislation such as the $1.9 trillion 2021 American Rescue Plan.
“We had a huge shift away from services and into goods that drove production and manufacturing and a very rapid recovery in the US economy,” Ms Yellen told reporters during a trip to Detroit this month. The support for local economies and small businesses included in Mr Biden’s rescue plan, he said, “has been extremely useful in restoring the health of the job market and given the change in spending patterns, I think that has been for the benefit of manufacturing. “
American manufacturers, like many industries, have struggled to find raw materials, components and skilled workers. Yet they have continued to create jobs at a rate that has surprised even some longtime champions of American factory employment.
“We have 67,000 more workers today than we had in February 2020,” said Chad Moutray, chief economist for the National Association of Manufacturers. “I didn’t think we’d get there, to be honest with you.”
In recessions over the past half century, factories have typically laid off a larger proportion of workers than other employers in the economy, and have been slower to add jobs back in recoveries. Companies have often used those economic inflection points to accelerate their pace of outsourcing jobs to foreign countries, where wages are significantly lower, and to invest in technology that replaces human workers.
This time was different. Factory layoffs roughly matched those in the service sector at the depth of the pandemic recession. Economists attribute that break in the trend to many US manufacturers being deemed “essential” during pandemic lockdowns, and the subsequent surge in demand for their products from Americans.
Manufacturing jobs rebounded quickly in the spring of 2020, then began climbing at a much faster pace than has been typical for factory job creation in recent decades. Since June 2020, under Mr Trump and Mr Biden, factories have added more than 30,000 jobs per month.
The sectors that were huge in employment during the recent recessions have fared much better in this recovery. Furniture makers, who shed a third of their jobs in the 2008 financial crisis and its aftermath, have almost returned to their pre-pandemic employment levels. So are textile mills, paper products companies and computer equipment manufacturers.
Manufacturers say the numbers could be even stronger, if not for their continued difficulties attracting and hiring skilled workers amid 3.7 percent unemployment.
Fernando Torres, vice president of operations for Greene Tweed, a Pennsylvania-based maker of materials and components used by the aerospace and semiconductor industries, said his company has had to become more flexible to attract new workers and offer more attractive wages and benefits. He has been looking for workers from different backgrounds that the company can train to develop the skills to fill open positions, and he said it has been difficult to retain staff because competitors are aggressively trying to lure them away.
But Mr Torres said Greene Tweed, which employs just under 2,000 workers, had no intention of giving up, given the demand for his company’s products.
“We are looking for a lot of workers,” said Mr Torres. “We’re not looking at slowing down.”
Chuck Wetherington, president of BTE Technologies, a Maryland-based medical device manufacturer, said he is looking to expand his workforce by about 40 by 10 percent. The lack of workers, he says, has become more of a problem than supply chain disruptions.
“Our backlog continues to grow,” said Mr. Wetherington at a briefing from the National Association of Manufacturers. “I can’t find the workers.”
Mr Biden has pushed a range of legislative initiatives to boost domestic manufacturing, including direct spending on infrastructure, tax credits and other subsidies for companies such as battery makers and semiconductor factories, and new federal procurement requirements that benefit manufacturers that have u located in the United States. Biden administration officials say those policies could play a decisive role in further encouraging factory job growth in the coming months and years, in hopes of continuing the expansion and possibly pushing factory employment back to pre-2008 levels.
Other factors could help spur more American manufacturing. Delivery delays, high air freight prices and other supply chain issues during the pandemic have prompted some top executives to think about moving production closer to home. The average price to transport a 40ft container internationally has fallen sharply in recent months, but it is still three times higher than it was before the pandemic, according to tracking by the freight ordering platform Freightos.
Businesses are also beginning to question the wisdom of producing so many goods in China, amid rising tensions between Washington and Beijing over trade and technology. The Chinese government’s insistence on a no-Covid policy, despite the severe disruption it has caused to the economy, has shaken the confidence of many executives in their ability to operate in China in particular. Mr Biden has also maintained many tariffs on Chinese imports imposed by Mr Trump.
“China’s pandemic response has definitely prompted more than a rethink on where to put new money. I think we’re actually starting to see action,” said Mary Lovely, a professor of economics at Syracuse University and a senior fellow at the Peterson Institute for International Economics. It was unclear how much of that investment came to the United States. “I don’t think anyone really knows,” he added.
Ed Gresser, vice president of global trade and markets at the Progressive Policy Institute, a left-leaning think tank, said the US has seen a marked increase in new manufacturing establishments since 2019, particularly in the pharmaceutical sector, which could be . response to the pandemic. Food and drink establishments have also continued to grow.
But while growth in the manufacturing sector in the United States was strong last year, so were imports of manufactured goods, Mr Gresser said. That suggests, he said, that manufacturing growth likely reflects strong US consumer demand through the pandemic, rather than a shift to US production.
Although attitudes towards doing business in China have soured quickly, production patterns have been slower to change. A survey of 117 leading companies released in August by the US China Business Council found that business optimism had hit an all-time low, but US corporations remained highly profitable in China, which still be home to the world’s most extensive factory ecosystem and a lucrative consumer market. .
Eight percent of the companies surveyed said they moved segments of their supply chain out of China to the United States in the past year, while another 16 percent moved some operations to other countries. But 78 percent of the companies said they had not moved any business away from China.
The Biden administration is hopeful that new policies — including the manufacturing competitiveness law and the climate law the president signed this summer — will encourage more companies to leave China for the United States, especially cutting-edge industries like clean energy and advanced computing.
Brian Deese, director of the National Economic Council, said in an interview that the laws are already changing the calculus for investment and job creation in the United States. In recent weeks, White House officials have promoted factory announcements from automakers, battery companies and others, which are directly related to the climate bill.
“One of the most impressive things we’re seeing now,” said Mr Deese, “is the number of companies – US companies and global companies – that are committing to building and expanding their manufacturing footprint in the United States, and do so based on their view that not only has the pandemic highlighted the need for greater resilience in their supply chains, but that the United States is creating a policy environment that makes long-term investment here in the US is more attractive. “
