The ongoing debate about whether the US is experiencing a manufacturing renaissance heated up again this week when Goldman Sachs’ chief economist, Jan Hatzius, issued a report, “The U.S. Manufacturing Renaissance: Fact or Fiction?”
Hatzius’ answer is “nope.”
BusinessInsider writes that in his report, Hatzius has a sober analysis of the U.S. manufacturing renaissance. “Evidence for a structural renaissance is scant so far….Measured productivity growth has been strong, but US export performance arguably a more reliable indicator of competitiveness remains middling at best. And at least so far, there is not much evidence for large positive spillovers from the U.S. energy cost advantage to broader manufacturing output.”
Hatzius continues: “We have not yet seen a material pickup in output in the parts of the manufacturing sector that should benefit most from low natural gas prices, such as aluminum, steel, plastics, basic chemicals, and fertilizer and other agricultural products.”
Over at Time Magazine, Curious Capitalist blogger Rana Forooha raises doubts about Hatzius’ downer opinion on manufacturing: “…one immediate question is whether exports really do provide a more accurate picture, as the report suggests. It may be that more goods manufactured in the U.S. are staying in the U.S. As weve traveled around the country reporting on this topic over the last couple of years, a number of big industrial firms have pointed to growing demand for their products here at home Caterpillar, which makes an increasing amount of its large earth-moving equipment for domestic mining, agriculture, and energy operations, is a great case in point.Forooha continues: “Then there’s the question of how to look at the productivity numbers. While U.S. productivity is up over the last several years relative to, say, China, which has been flat (and also suffers from rising wages), the big question is how much more it can go up. We feel there’s reason to be bullish on the growth potential there, given how materials science and the evolution of the ‘industrial internet’ are fundamentally reshaping manufacturing in the U.S.’s favor. The once separate steps of designing a product, making or buying the parts, and then putting everything together are beginning to blend — a consequence of technologies such as additive manufacturing and 3-D printing. It means that manufacturing wants to be closer to engineering and design — a dynamic that would likely benefit the U.S., which still rules those high-end job categories. Add the ability to include sensors in every part and process, and you’ve got a whole new manufacturing ecosystem that allows companies to accelerate product development cycles and deliver more variety and value more quickly to ever more fickle consumers.”
“In short,” concludes Forooha, “manufacturing’s value can be measured in many different ways. The ability to make things is fundamental to the ability to innovate things over the long term, says Willy Shih of Harvard Business School and co-author of Producing Prosperity: Why America Needs a Manufacturing Renaissance. When you give up making products you lose a lot of the added value. Thats as good a reason as any to care about the future of manufacturing. (Farooha’s full blog post is here.)
A National Public Radio report looked at both sides of this debate. In her story, Marilyn Geewax said, “Economic historians eventually will look back and decide which assessment proved true, but for now, the ‘manufacturing renaissance’ theory has broad support, both from business leaders and from most economists. They say manufacturing’s future is getting brighter because of ‘fracking’ an increasingly popular drilling technique used to recover natural gas from shale formations. Fracking is helping guarantee factory owners access to cheap, reliable and abundant energy sources.”
At FABTECH, we tend to side with the optimists. We saw a record one day attendance and a great turnout at our show in Las Vegas and expect to break several records. Our booth sales for the November 18-21 show in Chicago are brisk and we anticipate more than 35,000 attendees and over 1,500 exhibiting companies throughout 550,000 net square feet of floor space at McCormick Place.
What do you think? Are we experiencing an American manufacturing renaissance? Leave a comment below.