Since the Great Recession of the mid-2000s began, the American manufacturing industry has been contracting, despite the predictions of many economists and manufacturing experts.
This was supposed to be the time for rebirth in the U.S. manufacturing industry. This manufacturing Renaissance was to be fueled by China experiencing rising labor costs as well as high costs for domestic oil and natural gas.
Americans have been told time and time again, that our country is now enjoying or will soon enjoy a surge in manufacturing — that a great reshoring of jobs will return to the U.S. However, data from the industry simply does not support these claims.
The manufacturing Renaissance simply never happened.
Statistics show us instead a picture of economic pain as far as the manufacturing sector is concerned. Since 2007, 15,000 manufacturing facilities have shut down, and there has been an overwhelming job loss of 2 million factory jobs. Overall, the manufacturing sector was down 3.2 percent in 2015 — with little relief on the horizon.
The February Purchasing Managers Index (PMI) reported by the Institute of Supply Management was 49.5 percent. And, it has been hovering below 50 for some time. A below 50 index is a sign that manufacturing is in contraction.
A new report by Deloitte and the Manufacturers Alliance for Productivity and Innovation (MAPI), called Footprint 2020, discusses the "real phenomenon" of reshoring, which happens en masse to indicate manufacturing is growing. The report shows jobs coming back to North America, but not the United States:
"[A] common misconception is it represents a return of previously offshored operations to US soil. In practicality, reshoring may include returning operations to Mexico. This offers greater access to the U.S. market but allows companies to maintain advantageous operating cost structures.
"Sixty-six percent of survey respondents offshored their operations in the past 20 years, and a third are now considering bringing them back to North America. These moves focus on primary production and assembly operations currently located in China, India and/or Brazil. Mexico is the first choice destination to reshore operations, followed by the U.S."
The report also discusses that North America's appeal to American-owned companies increased only slightly, while Asia's (meaning largely China) "nearly doubled."
Another reason for the lack of an American manufacturing improvement is the continuing drop-off in exports occurring simultaneously with plummeting domestic orders. This resulted in February being the lowest month for manufacturing since the beginning of 2013, and it shares the honor of the lowest month for manufacturing output in the United States with October 2009.
Currency manipulation by trading partners such as Japan, Malaysia, Singapore, Mexico and Korea is partly to blame. And these countries will all be signing the Trans-Pacific Partnership (TPP), which many manufacturers fear will negatively affect U.S. operations.
America's largest trade partner, China, is not part of the TPP. Yet China continues to manipulate its currency to the detriment of U.S. manufacturing.
