Facts About Manufacturing

Manufacturing value-added output increased from $2.329 trillion in the third quarter to $2.348 trillion in the fourth quarter, which was just 0.9% below the record pace seen in the fourth quarter of 2019 ($2.370 trillion). Overall, manufacturing accounted for 10.9% of GDP in the economy. Real value-added output in the manufacturing sector rose from $2.213 trillion at the annualized rate in the third quarter to $2.234 trillion in the fourth quarter, as expressed in chained 2012 dollars. This was the best reading in one year, with real value-added output in manufacturing totaling $2.236 trillion in the fourth quarter of 2019, an all-time high. The current reading is just shy of that amount, suggesting that activity in the sector has rebounded strongly after plummeting sharply last spring. In the latest data, real value-added output for durable goods increased from $1.230 trillion to $1.250 trillion, a record pace, with nondurable goods activity up from $982.4 billion to $982.8 billion, the best reading in four quarters. (Source: Bureau of Economic Analysis)

For every $1.00 spent in manufacturing, another $2.79 is added to the economy. That is the highest multiplier effect of any economic sector. In addition, for every one worker in manufacturing, there are another five employees hired elsewhere. For every $1 earned in direct labor income in the manufacturing sector, there will be another $3.14 in labor income earned elsewhere, including indirect and induced impacts. (Source: NAM calculations using 2019 IMPLAN data.)

With that said, recent research suggests that manufacturing’s impacts on the economy are even larger than that if we consider the entire manufacturing value chain plus manufacturing for other industries’ supply chains. That approach estimates that manufacturing could account for one-third of GDP and employment. Along those lines, it also estimated the total multiplier effect for manufacturing to be $3.60 for every $1.00 of value-added output, with one manufacturing employee generating another 3.4 workers elsewhere. (Source: Manufacturers Alliance for Productivity and Innovation)

The majority of manufacturing firms in the United States are quite small. In 2017, there were 248,039 firms in the manufacturing sector, with all but 3,914 firms considered to be small (i.e., having fewer than 500 employees). In fact, three-quarters of these firms have fewer than 20 employees. (Source: U.S. Census Bureau, Statistics of U.S. Businesses)

Manufacturing employment increased by 53,000 in March, the fastest monthly pace since September and rising for the tenth time in the past 11 months. Overall, the manufacturing sector remains a bright spot in the U.S. economy, with expanding demand and production and hiring moving in the right direction. With that said, manufacturing employment has fallen by 515,000 workers over the past 13 months, as the sector continues to recover from the COVID-19 pandemic. There were 12,284,000 workers in March, down from 12,799,000 in February 2020.

Meanwhile, the U.S. economy added 916,000 nonfarm payroll workers in March, up from 468,000 in February and the strongest monthly gain since August. Despite the solid increase in the latest data, nonfarm payrolls reported 8,403,000 fewer workers today than 13 months ago. The unemployment rate declined from 6.2% in February to 6.0% in March, with the number of unemployed workers dropping from 9,972,000 to 9,710,000. The so-called “real unemployment rate”—a term that refers to those marginally attached to the workforce, including discouraged workers and the underemployed—dropped from 11.1% to 10.7%. The labor force participation rate edged up from 61.4% to 61.5%. For comparison purposes, the participation rate registered 63.3% in February 2020. (Bureau of Labor Statistics)

In 2019, the average manufacturing worker in the United States earned $88,406, including pay and benefits. The average worker in all nonfarm industries earned $71,390. Looking specifically at wages, the average manufacturing worker earned more than $29.15 per hour in March, not including benefits, or for production and nonsupervisory workers, the average in the sector was $23.28. That represented a 3.1% increase over March 2020 for production and nonsupervisory employees. (Source: Bureau of Economic Analysis and Bureau of Labor Statistics)

Manufacturers have one of the highest percentages of workers who are eligible for health benefits provided by their employer. Indeed, 92% of manufacturing employees were eligible for health insurance benefits in 2020, according to the Kaiser Family Foundation. This is significantly higher than the 82% average for all firms. Of those who are eligible, 81% participate in their employer’s plans (i.e., the take-up rate). State and local government (90%) and trade, communications and utilities (86%) had higher take-up rates in 2020, with finance and wholesale experiencing the same rate as manufacturing. Meanwhile, the average annual cost of a family health care plan for a family of four in manufacturing was $20,383 in 2020. (Source: Kaiser Family Foundation)

Manufacturing labor productivity has been sluggish since the Great Recession, which has been frustrating, averaging a decline of 0.1% from 2011 to 2020. Nonetheless, manufacturers have continued to operate “leanly,” which has helped to make them competitive globally. Output per hour for all workers in the manufacturing sector has increased by more than 2.29 times since 1987. In contrast, productivity is roughly 1.91 times greater for all nonfarm businesses. Note that durable goods manufacturers have seen even greater growth, approaching 2.70 times the output per worker seen 34 years ago. (Source: Bureau of Labor Statistics)

Over the next decade, 4.6 million manufacturing jobs will likely be needed, and 2.4 million are expected to go unfilled due to the skills gap. Moreover, according to a recent report, the lack of qualified talent could take a significant bite out of economic growth, potentially costing as much as $454 billion from manufacturing GDP in 2028 alone. Between now and 2028, a persistent skills shortage could cost $2.5 trillion in reduced output. (Source: Deloitte and The Manufacturing Institute)

After nearing an all-time high in 2018, the global economy has weakened on trade policy and COVID-19 challenges. Yet, the longer-term trend line has been encouraging, especially if—as expected—trade volumes rebound in 2021 and beyond. In 1990, for example, U.S. manufacturers exported $329.5 billion in goods. By 2000, that number had more than doubled to $708.0 billion. In 2018, it was just shy of the all-time high reached in 2014, which was $1.403 trillion. U.S.-manufactured goods exports have declined from $1,399.7 trillion in 2018 to $1,365.3 trillion in 2019 to $1,171.4 trillion in 2020. Even at that lower level, however, total U.S.-manufactured goods exports in 2020 were 3.55 times the levels seen three decades ago. (Source: U.S. Commerce Department)

Manufactured goods exports have grown substantially to our largest trading partners since 1990, including to Canada, Mexico and even China. The North American market remains vital for manufacturers in the United States. Indeed, Canada and Mexico purchase more manufactured goods from the U.S. ($483.8 billion in 2019) than from our next 10 largest trading partners combined ($460.3 billion in 2019). Meanwhile, U.S.-manufactured goods exports to China have nearly tripled from $31.9 billion in 2005 to $87.5 billion in 2019. (Source: U.S. Commerce Department)

World trade in manufactured goods has multiplied 2.67 times between 2000 and 2019—from $4.8 trillion to $12.75 trillion. The U.S. share of world trade in manufactured goods was 8.1% in 2019. (Source: World Trade Organization)

World trade in manufactured goods has more than doubled between 2000 and 2017—from $4.8 trillion to $12.2 trillion. The U.S. share of world trade in manufactured goods has grown from 7.6% in 2002 to 8.7% in 2017. (Source: World Trade Organization)

Taken alone, manufacturing in the United States would be the eighth-largest economy in the world. With $2.27 trillion in value added from manufacturing in 2019, only seven other nations (including the U.S.) would rank higher in terms of their GDP. Those other nations with higher GDP in 2019 were (in order) the U.S., China, Japan, Germany, India, the United Kingdom and France. After manufacturing in the U.S., the next five economies would be Italy, Brazil, Canada, Russia and South Korea, in that order. (Source: Bureau of Economic Analysis, International Monetary Fund)

Foreign direct investment in U.S. manufacturing reached a new record level in 2019. Overall, foreign direct investment has jumped from $499.9 billion in 2005 to $1,785.7 billion in 2019. The manufacturing sector comprised 40% of total foreign direct investment in 2019, as expressed on a historical cost basis. These data should continue to grow over the coming years, with the sector increasingly more competitive globally, and yet, it would not be a surprise if foreign direct investment was lower in 2020 due to COVID-19 and the global economic recession. (Source: Bureau of Economic Analysis)

U.S. affiliates of foreign multinational enterprises employed nearly 2.5 million manufacturing workers in the United States in 2016, or roughly one-fifth of total employment in the sector. In 2016, the most recent year with data, manufacturing sectors with the largest employment from foreign multinationals included motor vehicles and parts (407,300), chemicals (364,400), food (301,000), machinery (228,100), primary and fabricated metal products (168,000), plastics and rubber products (156,900) and computer and electronic products (152,900). Total compensation in the manufacturing sectors from these affiliates was $228.2 billion, and those entities spent $43.0 billion in research and development. (Source: Bureau of Economic Analysis)

Manufacturers in the United States perform 61.8% of all private-sector R&D in the nation, driving more innovation than any other sector. R&D in the manufacturing sector has risen from $184.2 billion in 2000 to $293.6 billion in 2019. In the most recent data, pharmaceuticals accounted for 30.6% of all manufacturing R&D, spending $89.8 billion in 2019. Computer and electronic products (17.9%), semiconductor and other electronic components (12.6%) and motor vehicles and parts (9.2%) also contributed significantly to R&D spending in 2019. (Source: Bureau of Economic Analysis)

Manufacturers consume more than 30% of the nation’s energy consumption. Industrial users consumed 32.3 quadrillion Btu of energy in 2018, or 32.3% of the total. (Source: U.S. Energy Information Administration, Annual Energy Outlook 2019)

The cost of federal regulations falls disproportionately on manufacturers, particularly those that are smaller. Manufacturers pay $19,564 per employee on average to comply with federal regulations, or nearly double the $9,991 per employee costs borne by all firms as a whole. In addition, small manufacturers with fewer than 50 employees spend 2.5 times the amount of large manufacturers. Environmental regulations account for 90% of the difference in compliance costs between manufacturers and the average firm.