What Manufacturing Renaissance?

It is now become accepted wisdom in economic circles that America is enjoying a manufacturing renaissance. As the general theme goes: American companies are no longer offshoring factories; foreign companies are building new factories here; cheap energy is allowing manufacturers in the United States to expand; and groups like the Boston Consulting Group are telling everyone not to worry, manufacturing will rebound. Wish that it were so. Unfortunately, reality appears to be more troubling

If a manufacturing resurgence was truly occurring we would see it in an expanded number of factories. In fact, according the U.S. Bureau of Labor Statistics (BLS) there are fewer U.S. factories today than there were two years ago. Moreover, the BLS’ Business Employment Dynamics survey indicates that net new manufacturing establishment openings (openings minus closings) has been negative every year since 1999. In 2012 alone, 3,000 more manufacturing establishments closed then opened. This is not to mention the fact that manufactures in America face one of the highest effective corporate tax rates in the world, while the federal government doesn’t support pre-competitive manufacturing research centers like our competitor nations (e.g. Germany, Japan, etc…)

To be sure this is better than what was going on in the mid-2000s when the net loss rate for factories was more than 10,000 per year. So while American manufacturing does not appear to be going through the hemorrhaging loss rates of the last decade, it’s way too early to break out the champagne and go back to sleep. We won’t get the true robust growth that we need (as opposed to stagnation) without new policies. One good place to start is for Congress to pass the bipartisan Revitalize American Manufacturing and Innovation Act.