The Changing Landscape of U.S. Manufacturing

The Changing Landscape of U.S. ManufacturingAccording to a December 2015 report by the Bureau of Labor Statistics, the U.S. manufacturing industry makes up little more than 8% of the workforce. They projected the continued decline in manufacturing, as more manual labor factory jobs move overseas or are replaced by automation. Since 2000, automation has been attributed to the loss of over 5 million manufacturing jobs. With recent emphasis on the creation of new jobs and new trade agreements, we could see an upswing in manufacturing, although those manufacturing jobs could look different than what is typically associated with the industry.

Manufacturing is Changing

While companies in Rust Belt states are closing factories and moving to Mexico, others are thriving and growing. One such company is Micropulse, which employs 306 workers and manufactures specialized medical equipment, including implants and surgical tools. In five years, they have almost doubled their number of employees. “I am bullish on manufacturing here,” says CEO, Brian Emerick. “There’s always going to be a certain amount of jobs you can’t automate away.”

What sets Micropulse and other growing manufacturers apart is the fact that they create highly specialized products that require advanced manufacturing skills to produce. In addition, manufacturing jobs that produce highly regulated products, such as medical implants and equipment, have remained stateside. Often, these specialized facilities require significant use of computer design and aided manufacturing techniques. As a result, their employees are more specialized and computer savvy. In many cases, these employees are college graduates, with many holding advanced certifications.

Another growing U.S. company is Voodoo Manufacturing, located in Brooklyn, N.Y. Their workers do not perform the manual work typical in manufacturing. Rather, their offices resemble a high-tech startup rather than a manufacturing facility. Their employees design and oversee 160 computerized 3D Printers that manufacture products and displays for such companies as Nike and Apple (iPhone cases), in addition to creating prosthetic hands for amputees. Positions at Voodoo Manufacturing require critical and creative thinkers.

According to Michael Hicks, an economics professor at Ball State University, it is a misnomer that the U.S. has lost good-paying jobs overseas. Instead, what has occurred is that lower income jobs, which are more manual in nature, have gone to other countries, while U.S. manufacturers have gained higher income positions. Backing up Mr. Hicks’ point, the Congressional Research Service found that while manufacturing jobs for high-school educated employees fell 44% between 2000 and 2013, those with associate degrees are up 17%, while those with graduate degrees grew 32% during the same period.

The State of Manufacturing

The Institute for Supply Management creates a manufacturing report each month. The report tracks the Purchase Management Index (PMI), which is an indicator of the overall economic health of the manufacturing sector. The PMI is based on five factors: new orders, inventory levels, production, supplier deliveries, and the employment environment. Any PMI over 43.3% is an indicator of growth. As of April, the reported PMI was 54.8%, making it eight straight months of growth. In particular, new orders, production, and employment are showing the most growth.

Even with all the press and reports of loss of unskilled jobs, manufacturing still accounts for 12.5% of our domestic product. This is unchanged since 1960. As a result, the manufacturing sector continues to be the backbone of our economy.

Best Manufacturing States

There are many location drivers when it comes to manufacturing. An October 2016 report from the Site Selection Group, which helps companies identify where to locate, identified the best states for manufacturing. Their analysis of all 50 states weighed factors typically utilized in industrial projects. These factors include labor availability, logistics, tax climate, utility costs, labor costs, and union climate.

Their top ten states for manufacturing are:

  1. North Carolina
  2. Utah
  3. Indiana
  4. Arizona
  5. Georgia
  6. Flordia
  7. Michigan
  8. South Carolina
  9. Oklahoma
  10. Illinois

Historically, South Eastern states such as North and South Carolina rank well, as have states like Indiana and Michigan. However, in the past year, a couple of Western states, Arizona and Utah, jumped into the top ten.

Utah is also a rapidly growing high-tech hot bed for many of the same reasons for manufacturing growth. In fact, 14% of Utah’s domestic product output is a result of manufacturing. As manufacturing becomes more specialized, Utah provides a highly educated, STEM-oriented workforce with graduates from five universities. Arizona also enjoys a highly-educated workforce, thanks to several universities. With the recent announcement that Intel is investing $7 billion in an Arizona plant, Arizona will continue to rise in the manufacturing state rankings.

Eco-Friendly Manufacturing

Interestingly, some of the least eco-friendly states are also considered some of the best manufacturing states, such as Indiana and Oklahoma. However, there are some exceptions. North Carolina, for example, is a strong state for manufacturing, while also ranking #17 for being eco-friendly. Florida ranks high for manufacturing as well while ranking #16 for eco-friendly standards.

As manufacturing in the U.S. transitions to using advanced manufacturing techniques requiring highly skilled workers, it is likely that manufacturing will be located in eco-friendly states since much of the skilled workforce typically lives in eco-friendly urban areas.

However, according to Journalist’s Resource, economists have found little to no correlation between state environmental regulations on employment. That is likely why the U. S. continues to see strong employment in manufacturing, albeit with a changing profile. The study concluded that the overall health of the economy is of greater impact on employment than environmental regulations.

How to Use this Information

As manufacturing evolves and the need for highly skilled workers increases, eco-friendly practices and advanced technology experience may play an increasingly significant role in attracting and retaining new talent in your organization. For more than 16 years, Executives Unlimited has been committed to helping our clients develop their strategic executive workforce planning, and we’d be happy to help you with your changing needs. For information about our services, please call us at (866) 957-4466 or contact us online today.

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