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A Manufacturing Renaissance, Not In China But US

MICHEL MARTIN, Host:

And now a conversation about a surprising comeback story in the U.S. economy - manufacturing. According to April's employment report, the manufacturing industry has added more than 141,000 jobs since January. And some analysts expect this trend to continue. This reverses a long-standing trend that had become the stuff of conventional wisdom. That the U.S. manufacturing sector was losing jobs permanently to overseas factories with low-paid workers. So what's behind the change and will this upswing in manufacturing continue?

Joining us to talk about it is Peter Coy. He is the economics editor for Bloomberg Business Week. He recently wrote a report on the renaissance of manufacturing in the U.S. And he's with us from his home office in New Jersey. Peter, thanks for joining us.

PETER COY: Thank you.

MARTIN: So, why do you call this a renaissance?

COY: You know, I don't want to oversell this. The fact is that manufacturing is a shadow of its former self in this country. Employment is down 43 percent from its peak. We're never going to see the employment and manufacturing get back to its all time highs. We've just come too far for that. What we can hope for is that the output levels might start to grow back more towards a normal level.

MARTIN: So, within the manufacturing world, which industries are leading this?

COY: We're seeing gains in the higher value-added industries. For example, aircraft is a traditional strength of the United States. And that's been strong all along. So that's going to be probably continuing strength. Lately, autos are doing much better, which is really heartening. You know, we had all these giant automakers in Chapter 11. Now Ford is almost at the point where they're going to have an investment-grade credit rating again soon.

MARTIN: Now, General Motors recently announced that they're going to invest some $2 billion in their U.S. plants which they say will create about 4,000 jobs. Now, obviously, you know, 4,000 jobs is nothing to sneeze at. But in the big scheme of things, is that really significant?

COY: That's a good question. I mean, no. Four thousand jobs is not going to be even hardly noticed compared to all the who have lost work with GM over the years. It's certainly a positive trend when they're creating jobs in the U.S., but it's not going to be the huge employer of the future.

MARTIN: Now, what is behind this trend overall? Is it that manufacturing overseas is depressed because of various factors? Like, for example, you know, we had this terrible earthquake and tsunami in Japan which has certainly affected, you know, the auto industry there. Or is something happening in the U.S.?

COY: It's a combination of several things. One is that manufacturing in the U.S. is sort of artificially depressed by the deep, deep crisis in the economy. And after all, most manufacturing in the U.S. produces goods that are sold in the U.S. So when demand domestically fell, naturally sales fell. As the economy starts to climb out of that recession, albeit slowly, that's going to be good for U.S. manufacturing.

The tsunami in Japan is a factor, but it's a mixed factor because some of the U.S. products need components from Japan. The other thing is in the long term, China's wages are rising at a fairly fast clip, something like 17 percent a year. The Chinese yuan has been rising in value at the same time Chinese manufacturing wages have been rising. Now, it's still cheaper to make the goods in China than it is in the U.S., but the gap is narrowing.

MARTIN: Now, you know, as this recession has gone on, or as the economic difficulties in the U.S. have continued, a lot of places have tried to work on American consumers' attitudes. I know where we live here in the Washington, D.C. area, there's a big buy local push, for example. And I wonder whether some of that has taken hold around the country as well, as some of it is the attitude of the American consumer that they would prefer to buy local for whatever reason.

COY: I will say the government is increasing its buy American push. An air base in Alaska of all places was having trouble finding products that would satisfy the buy American requirements because so many mundane things are not made in the U.S. anymore. Things like shower curtains and screws and nails and kind of routine stuff like that. You know, but you don't care that much, really, if it's something like that. But what you worry about is when even the high tech products that are, you know, going into weapons and stuff like that, if we get those in the U.S., what happens when push comes to shove and we find ourself at war with the country that's our sole supplier of some kind of components, that could be disastrous.

MARTIN: So, finally, Peter, could you tie a bow on this for us? You know, for years Americans have been told not to look to manufacturing as a growth industry because they've been told, you know, certain goods will always be cheaper to produce overseas in countries that have regulation, where workers will accept less pay and certainly less benefits.

On the other hand, every election year, particularly every national election year, somebody talks about trying to stimulate U.S. manufacturing. So where are we in this continuum? Is this really kind of a pivotal, you know, moment, or do you think that this is just kind of an interesting blip in a long-term trend?

COY: I think on output there is a chance that we could stabilize at these levels and bounce back a little bit. I really don't think employment and manufacturing is ever going to be a huge growth source. It just can't be. It's certainly - again, all else equal, it's certainly a hopeful sign when you see a rebound in manufacturing employment and in output. We're going the right direction. The question is how much farther we have to go on this trajectory.

MARTIN: Peter Coy is the economics editor for Bloomberg Business Week. We caught up with him at his home office in New Jersey. And if you want to read the piece that he wrote that we've been talking about, we'll link to it on our website. Just go to NPR.org, click on the Programs tab and then on TELL ME MORE.

Peter Coy, thank you.

COY: Thank you. Transcript provided by NPR, Copyright NPR.