#576 – So, About that U.S. Manufacturing Renaissance…

We came across the following when looking to update our manufacturing productivity figures. We are sharing the first part of the article with you.

So, About That US Manufacturing Renaissance …
Bloomberg View, Justin Fox, 2016-03-18

After a brutal period of downsizing and reorganizing, the U.S. manufacturing sector has become the most competitive in the world.

Output per worker is higher than in any other major manufacturing country. Labor costs per unit of output are lower than in Brazil, Canada and Germany, and only slightly higher than in China. What’s more, writes Gregory Daco of Oxford Economics in the new report from which the above facts are taken, “the U.S. is ‘gifted’ with a stable regulatory framework, a flexible labor market, low energy costs and access to a large domestic market.” So that’s great! Time for a manufacturing renaissance, right?

Well, maybe.

Eventually.

But — and Daco notes this in his report — there are few signs of it actually happening yet. Yes, there are the almost 900,000 manufacturing jobs added in the U.S. since early 2010. But it’s important to see that for what it is — a modest rebound after a spectacular collapse.

There has also been a big decline in the trade deficit, from 5.6%of gross domestic product in 2006 to 3% in 2015. But that turns out to be a product of (1) an increase in the trade surplus in services and (2) the huge boom in domestic oil-production and accompanying fall in global oil prices. Strip out petroleum and petroleum products, in fact, and the trade deficit in goods is only down a little from its peak, and has grown markedly over the past two years.

This seems like a good spot to mention that running a trade deficit isn’t necessarily a bad thing. The growth in the deficit in 2014 and 2015 is due in part to the strength of the U.S. economy — faster growth than in other major economies and a strengthening dollar have led to more imports and fewer exports.

To view the entire article, visit here.