Investing.com — The idea of a U.S. manufacturing resurgence has been a prominent topic in political discussions in recent years, with promises of reviving the industrial strength that once characterized the American economy.
Both the Trump and Biden administrations have introduced ambitious initiatives aimed at reshoring manufacturing, including tariffs, tax incentives, and substantial government investments, said analysts at Alpine Macro.
U.S. manufacturing has been in gradual decline for decades. In the early 1970s, manufacturing value added made up 23% of GDP, but today it stands at around 10%.
While a few key sectors have helped lift overall figures, median output across sub-industries has fallen by 20%.
This indicates that, rather than a broad recovery, the modest increases in output are concentrated in a small number of industries, such as semiconductors, leaving much of the manufacturing sector stagnant.
“In terms of employment, the secular drop in manufacturing payrolls has continued, although there has been a gain of 1.5 million manufacturing jobs since 2010,” the analysts said, this recovery is small in comparison to the 6 million manufacturing jobs lost in the 2000s.
With manufacturing jobs now making up just 8% of the workforce, the sector’s long-term decline continues, raising questions about claims of an industrial revival.
While there has been an increase in manufacturing investment, it has been restricted to specific industries like semiconductors. Overall capital investment in manufacturing has stagnated, with fixed asset formation flat for decades.
Capital outlays on equipment, which once accounted for 8% of GDP in the 1980s, have dwindled to a mere 5%. This slowdown in capital accumulation is closely tied to diminishing productivity in the sector, further undermining any claims of a renaissance.
In fact, Alpine Macro’s data show that productivity growth within manufacturing continues to lag behind other segments of the U.S. economy, making it unlikely that the sector will experience a broad-based recovery
The structural challenges facing U.S. manufacturing extend far beyond investment and productivity. As economies evolve, the transition from industrial-based growth to service-driven economies is inevitable.
Wealthier societies tend to shift their consumption patterns away from goods and toward services, diminishing the overall importance of manufacturing.
Even China, often regarded as the world’s…
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