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The Decline of Decline
Manufacturing Sector Closes 2013 With a Bang

Europe wasn’t the only place where manufacturing was up—the US ended 2013 with a months-long spree of good news for the manufacturing sector. Total factory output hit a two-year high in November, a hot streak which continued in December, when output grew nearly as fast. Manufacturing employment was going strong as well, hitting a high it hasn’t seen since 2011. The FT delivers the good news:

Americans are buying more cars and houses, fuelling factory output. At the same time companies are boosting purchases of large machinery and other equipment. The upbeat trends have spurred manufacturers to step up hiring and create jobs at higher pay grades, and raised hopes that a small American manufacturing renaissance that developed in recent years can be sustained.

The upbeat industrial data comes on the heels of an encouraging reading on US gross domestic product growth in the third quarter, which rose to an annual rate of 4.1 per cent, the best in nearly two years. The labour department’s employment report for December is due next week.

We’ve spoken before about America’s advantages in manufacturing: most notably a highly skilled workforce and access to relatively cheap energy as a result of the shale boom. Add to this the rising wages for low-skilled workers in countries like China and you have a recipe for a domestic manufacturing comeback. We may never return to the mass employment in manufacturing of the type we saw in the mid-20th century, but America’s manufacturing sector is well positioned to keep growing in the decades to come. If this data is any indication, that process has already begun.

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  • lukelea

    “Add to this the rising wages for low-skilled workers in countries like China . . .”

    Not to mention things like quality creep, or the danger of getting framed in a bribery scam. There is no rule of law in China. Hard to get around that inconvenient fact, as American companies are learning the hard way.

    I don’t buy the argument that rising wages are the main reason: China’s reserve army of the unemployed is vast. Average wage rates remain a small fraction of what they are here (and, besides, advertised wage rates aren’t the real ones: they lie about everything in China; everybody does it, it’s part of their culture — all the way back to Confucius.)

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