The State Of U.S. Manufacturing - MAPI Publishes A Report
With all the gloom and doom we
have been hearing about the U.S. economy and the manufacturing sector
specifically, it is nice when someone - The Manufacturers Alliance (MAPI) -
releases a study based on real numbers - not suspicions, suppositions or rumor.
MAPI published a report, “Ten Talking Points of U.S. Manufacturing,” in July
2009. Not all the news is bad, but not all is good either. And it is important
for us to keep in mind the data in this study is for all U.S. manufacturing,
not specifically the pipe, valves and fittings sector. Still, the findings are
illuminating and give us a means by which to assess our own performance.
1) The quantity of manufactured goods produced in the U.S. has kept pace with overall economic growth for the past 90 years. Employment in manufacturing has steadily declined - though one in six private sector jobs are related to manufacturing. This is no surprise. Factories of all types have gotten more efficient.
2) In terms of value-added production, manufacturing is 12% of GDP compared to 27% in the 1950s. Between 1987 and 2008, manufacturing productivity grew more than 100%. Thanks to international competition, prices have risen only 2%/year since 1960. This is more telling: Even with all the efficiencies gained over the years, some at great cost, manufacturing has not been able to cash in on these improvements.
3) Due to increased productivity, unit labor costs have declined 40% when compared to the 14 principal international competitors since 1986. Basically, this is telling us that the quality American worker is not being overpaid - not when compared to our principal competitors.
4) The U.S. continues to be the source for innovation. Four manufacturing segments account for 56% of all private sector R&D: computers/electronics, chemicals, aerospace and automotive. I would guess these sectors are robust and growing. Something to think about.
5) Manufacturing consumes more than 1/5 of all the energy in the U.S. This isn’t a big surprise either, though it is a pretty big number. It would be interesting to know which industries have made the greatest strides to use less. Furthermore, I would like to know what it cost them to do it and what the benefit was (in dollars). Where are PVF manufacturers and the warehouses on smart energy use?
6) Manufacturing production fluctuates more than GDP. The current recession has affected manufacturing worse than the overall economy. MAPI forecasts a decline of 12% in manufacturing for 2009, but only a 3% decline for GDP. This does not bode well for us. Fluctuations this severe can take companies down so low that they can never recover. This can damage whole industries.
7) U.S. manufacturers have a higher tax burden than any other competitor country except Japan. This came as a surprise to me. I was certain (and wrong) that most European companies had higher tax rates. This isn’t going to get better anytime soon with the bail-out and universal health care to pay for.
8) U.S. manufacturing pays premium wages and benefits. They add up to about $32/hour. Please note: Even though we pay a premium wage, we get value and productivity for those wages. If we are not competitive, it is NOT because of the workers.
9) Manufactured goods account for 57% of all U.S. exports, but U.S. manufacturers are losing market share in Asia to the EU and China. I would like to know the numbers for PVF.
10) More than 75% of U.S. Foreign Direct Investment is in high wage regions/countries such as Europe, Japan, Australia, New Zealand and Singapore. U.S. firms sell nearly $4.7 trillion abroad, much more than the $3 trillion in sales by foreign companies in the United States. I am happy to see this big fat number. How much PVF do we manufacture abroad and sell abroad? Has FDI been part of the PVF growth strategy?
The study raised more questions than answers for me. I will be looking into specific numbers for PVF in an article coming soon.
1) The quantity of manufactured goods produced in the U.S. has kept pace with overall economic growth for the past 90 years. Employment in manufacturing has steadily declined - though one in six private sector jobs are related to manufacturing. This is no surprise. Factories of all types have gotten more efficient.
2) In terms of value-added production, manufacturing is 12% of GDP compared to 27% in the 1950s. Between 1987 and 2008, manufacturing productivity grew more than 100%. Thanks to international competition, prices have risen only 2%/year since 1960. This is more telling: Even with all the efficiencies gained over the years, some at great cost, manufacturing has not been able to cash in on these improvements.
3) Due to increased productivity, unit labor costs have declined 40% when compared to the 14 principal international competitors since 1986. Basically, this is telling us that the quality American worker is not being overpaid - not when compared to our principal competitors.
4) The U.S. continues to be the source for innovation. Four manufacturing segments account for 56% of all private sector R&D: computers/electronics, chemicals, aerospace and automotive. I would guess these sectors are robust and growing. Something to think about.
5) Manufacturing consumes more than 1/5 of all the energy in the U.S. This isn’t a big surprise either, though it is a pretty big number. It would be interesting to know which industries have made the greatest strides to use less. Furthermore, I would like to know what it cost them to do it and what the benefit was (in dollars). Where are PVF manufacturers and the warehouses on smart energy use?
6) Manufacturing production fluctuates more than GDP. The current recession has affected manufacturing worse than the overall economy. MAPI forecasts a decline of 12% in manufacturing for 2009, but only a 3% decline for GDP. This does not bode well for us. Fluctuations this severe can take companies down so low that they can never recover. This can damage whole industries.
7) U.S. manufacturers have a higher tax burden than any other competitor country except Japan. This came as a surprise to me. I was certain (and wrong) that most European companies had higher tax rates. This isn’t going to get better anytime soon with the bail-out and universal health care to pay for.
8) U.S. manufacturing pays premium wages and benefits. They add up to about $32/hour. Please note: Even though we pay a premium wage, we get value and productivity for those wages. If we are not competitive, it is NOT because of the workers.
9) Manufactured goods account for 57% of all U.S. exports, but U.S. manufacturers are losing market share in Asia to the EU and China. I would like to know the numbers for PVF.
10) More than 75% of U.S. Foreign Direct Investment is in high wage regions/countries such as Europe, Japan, Australia, New Zealand and Singapore. U.S. firms sell nearly $4.7 trillion abroad, much more than the $3 trillion in sales by foreign companies in the United States. I am happy to see this big fat number. How much PVF do we manufacture abroad and sell abroad? Has FDI been part of the PVF growth strategy?
The study raised more questions than answers for me. I will be looking into specific numbers for PVF in an article coming soon.
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