The Return of US Manufacturing and New York State

2. The Return of
Manufacturing to the
United States and its
Impact on New York State
By: Jason Madison
ENG 302.51 Intro to Business Writing
Summer 2014

7. Historical Trends

8. On a national level jobs in manufacturing amounted to just less
than fifty percent of all private industry employment after World
War Two, only to fall to about eleven percent in our present time. In
the summer of 1979 United States employment in manufacturing
peaked at 20 million people only to continuously decline to 11
million in 2010.

9. This trend is further reflected by the decline in the number of
factories that employ a large amount of workers. In 1977 there
were 2,061 factories in the United States that had more than 1000
workers employing 5.1 million people. By 2007 the number of
large factories fell to 1,014 employing 2.1 million people

10. The North American Trade Agreement (NAFTA) created
the first big wave of job relocation from the U.S. to
Mexico’s cheaper labor pool. Then China entered into the
world stage and opened its vast population to
manufacturing companies. According to Steve Maurer,
managing director of the consulting firm AlixPartners, "If
you go back to 2005, it was pretty common for landed cost
from China to be 25 to 30 percent less than the cost of
manufacturing in the United States.”

11. After a 35% decline in the number of manufacturing jobs between
1998 and 2010, the tally has since risen by 489,000, or 4.3%, to 11.9
million. IHS Global Insight, an economic research firm, forecasts
that the number of manufacturing jobs will climb 3.2% this year
compared with a 1.6% increase in all jobs

12. Reasons For This Trend

13. In 2006 the unit labor cost was approximately $17 in favor of China
over the USA. Now the gap is much closer to $7 making the USA
much more competitive (Trade Finance Magazine, 2014). Wages in
the USA have stayed stable or have lowered some compared to a
12% annual wage growth in China while at the same time China’s
currency has appreciated by 25% against the US Dollar.

14. On top of the smaller gap in wage costs, there is also the effect of
worker productivity. American workers due to their higher skill
training, experience and technological innovation tend to be more
productive then their Chinese counterparts. This increase in
productivity among US workers is also shown that despite the
loss of almost 50% of the manufacturing workforce, labor
productivity growth in the manufacturing sector has increased by
an average of 3.7 percent per year since 1995

15. Another big factor in the return of USA Manufacturing is the recent
natural gas production boom due to hydro fracking of shale in this
country. In late 2013, the Boston Consulting group did a study that
indicated that 50% of the 600,000 to 1.2 million new manufacturing
jobs between now and 2020 are the result of the shale energy boom

16. Nearshoring is the practice of importing product components
from regions that have the lowest cost per unit, to be assembled
in the home country. This is especially useful when the final
product is heavy and bulky.

17. Impact on New York
Yay for
us!

19. At one time New York State was a huge manufacturing state at one
time with over 2 million employees working in factories. By 2009
that number had dropped to under 500,000 workers. And despite the
overall growth of manufacturing on a national level, the
employment rate in the manufacturing field in New York still
continues its downward trend. If one was to only look at this fact, it
would seem that New York is a manufacturing has been with no
hope of a return to economic good times.

20. Despite the amount of job losses overall on a State level, actual
manufacturing output has risen indicating an increase in
production efficiency. Manufacturing rate of growth to the New
York’s GDP grew by 20 percent, the same rate as the rest of the
nation from 2003 through 2008. Manufacturing in New York is also
a high-value enterprise, with value added per dollar of final
shipments 27 percent above the national average.

21. Another key point is that New York manufacturing plants tend to
be small and medium-sized businesses with the average
employment in the 18,888 establishments is 25 jobs. Computers and
electronics represent the largest manufacturing subsector in the
state with more than 64,000 jobs

22. New York manufacturing is becoming based on small entrepreneurial
endeavors that require highly skilled and educated employees that
demand a high salary. Although this seems to be mostly driven by high
tech industries, I have personally seen much growth, especially in
upstate, in the manufacture of specialized foodstuff, such as yogurt,
wineries, and small breweries, all of which utilize the strength of
upstate agriculture.

23. In a survey done by the New York Fed in July of 2014, New
York manufacturers said business conditions in July were the
most favorable in four years, and The Empire State's business
conditions index increased to 25.6 in July from 19.3 in June

24. In Conclusion
New York is still in a position to remain a leader with
using its strengths in education, innovation, and it
tradition in world leading entrepreneurialism. But in
order to do that it must be willing to make the
governmental policy adjustments needed in today’s
changing global manufacturing environment and to
shake off the negative mindset that became prevalent
during the time of industry losses in the past.

25. References
Economic Trends in New York State. (n.d.) Office of the State Comptroller.
Retrieved May 1, 2012, from http://www.osc.state.ny.us/reports/economic/economic_trends_in_nys_22013.pdf.
Trade Finance Magazine (March 2014). The tide turns for American manufacturing. Trade Finance, Retrieved from www.lexisnexis.com/hottopics/lnacademic.
Aeppel, T. (2014, Jul 17). The hard business of restarting U.S. factories; wal-mart's made-in-america initiative takes it one memory board at a time. Wall Street
Journal (Online) Retrieved from https://ezproxy2.drake.brockport.edu/login?url=http://search.proquest.com/docview/1545673951?accountid=26985
Dobby, Christine (May 6, 2011 Friday). Outsourcing to decline by 2015: study; China more costly. National Post's Financial Post & FP Investing (Canada),
Retrieved from www.lexisnexis.com/hottopics/lnacademic.
Hagerty, J. R. (2012, May 22). Remade in the USA: Once made in china: Jobs trickle back to U.S. plants. Wall Street Journal Retrieved from
https://ezproxy2.drake.brockport.edu/login?url=http://search.proquest.com/docview/1015084593?accountid=26985
Holmes, T. J. (2011). The Case of the Disappearing Large-Employer Manufacturing Plants. Region (10453369), 25(3), 6-17.
Jacoby, T. (2014, Jul 18). This way up: Mobility in America; economic mobility is alive and well for Americans who pursue technical or practical training. Wall
Street Journal (Online) Retrieved from https://ezproxy2.drake.brockport.edu/login?url=http://search.proquest.com/docview/1545885820?accountid=26985
Kliesen, K. L., & Tatom, J. A. (2013). U.S. Manufacturing and the Importance of International Trade: It's Not What You Think. Review (00149187), 95(1), 27-49.
LeBeau, P. (2013, April 18). By 2015, Producing in China Will Be as Costly as US. CNBC. Retrieved August 3, 2014, from http://www.cnbc.com/id/100651692#.
Timiraos, N. (2014, Jul 16). Industrial production rises modestly in June; indicator points to steady improvement in consumer, business spending. Wall Street Journal
(Online) Retrieved from https://ezproxy2.drake.brockport.edu/login?url=http://search.proquest.com/docview/1545261586?accountid=26985
Ward, Robert B.. & Dadayan, Lucy (2010). Manufacturing Research Institute of New York State: Twenty-First-Century Manufacturing:. Albany, NY: The Nelson
A. Rockefellar Institue of Government University at Albany.
Wessel, D., & Hagerty, J. R. (2012, May 29). Remade in the USA: Flat U.S. wages help fuel rebound in manufacturing. Wall Street Journal Retrieved from
https://ezproxy2.drake.brockport.edu/login?url=http://search.proquest.com/docview/1016822155?accountid=26985