Manufacturing value-added output reached an all-time high in the fourth quarter of 2019 ($2.370 trillion), but it has pulled back sharply since then, dropping to $2.346 trillion and $2.054 trillion in the first and second quarters, respectively. Overall, manufacturing accounted for 10.5% of GDP in the economy. Real value-added output in the manufacturing sector plummeted by an annualized 36.6% from $2.200 trillion in the first quarter to $1.963 trillion in the second quarter, as expressed in chained 2012 dollars. This extends the 6.4% decline in the first quarter, pulling back from the all-time high for real value-added output in the sector in the fourth quarter of 2019, which registered $2.236 trillion. In the latest data, real value-added output for durable goods dropped from $1.223 trillion to $1.061 trillion, with nondurable goods activity down from $976.4 billion to $902.5 billion. (Source: Bureau of Economic Analysis)
The Top 18 Facts You Need to Know
For every $1.00 spent in manufacturing, another $2.74 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. (Source: NAM calculations using 2018 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)
Manufacturers added 66,000 workers in September. Despite increases over the past five months, the labor market remains well below its pre-COVID-19 pace, with manufacturing employment down by 647,000 in September relative to the level in February. As such, sizable challenges in the economic environment continue despite movement in the right direction. The current outlook is for manufacturing employment to bounce back to roughly 12,350,000 workers by year’s end, up from 12,205,000 in September but down from the pre-pandemic pace of 12,852,000 in February.
Meanwhile, the U.S. economy added 661,000 workers in September, slowing from the gain of 1,489,000 in August but expanding for the fifth straight month. The unemployment rate dropped from 8.4% in August to 7.9% in September, with the number of unemployed workers falling from 13,550,000 to 12,580,000. In addition, the so-called “real unemployment rate”—a term that refers to those marginally attached to the workforce, including discouraged workers and the underemployed—declined from 14.2% to 12.8%. The participation rate in the labor force decreased from 61.7% to 61.4%.
With that said, the percentage of the unemployed suggesting that they lost their job permanently rose from 3,411,000 in August to 3,756,000 in September, the highest since May 2013. This is yet another sign that the labor market remains highly challenged and elevated, even as the unemployment rate improved to the best reading since February (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 $28.92 per hour in August, not including benefits, or for production and nonsupervisory workers, the average in the sector was $22.82. (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 2018, according to the Kaiser Family Foundation. This is significantly higher than the 79% average for all firms. Of those who are eligible, 82% participate in their employer’s plans (i.e., the take-up rate). There are only three other sectors—state and local government (85%), trade, communications and utilities (85%) and wholesale (84%)—that have higher take-up rates. (Source: Kaiser Family Foundation)
Manufacturing labor productivity has been sluggish since the Great Recession, which has been frustrating, averaging a decline of 0.2% from 2011 to 2019. 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 2.19 times since 1987. In contrast, productivity is roughly 1.85 times greater for all nonfarm businesses. Note that durable goods manufacturers have seen even greater growth, exceeding 2.52 times the output per worker seen 33 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)
Over the past 28 years, U.S.-manufactured goods exports have quadrupled. 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. Despite a stronger dollar, slowing global growth and lingering trade uncertainties, U.S.-manufactured goods exports were up 4.7% and 5.6% in 2017 and 2018, respectively. (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)
Manufacturers in the United States export nearly half of U.S. manufacturing output. Of total U.S.-manufactured goods exports, nearly half were sold to nations with which the United States has free trade agreements. In 2019, manufacturers in the United States exported $659.5 billion in goods to FTA countries, or 48.3% of the total. (Source: U.S. Commerce Department)
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 $2.18 trillion in value added from manufacturing in 2017, only seven other nations (including the U.S.) would rank higher in terms of their GDP. Those other nations with higher GDP in 2017 were (in order) the U.S., China, Japan, Germany, India, the United Kingdom and France. (Source: Bureau of Economic Analysis, International Monetary Fund)
Foreign direct investment in U.S. manufacturing reached a new record level in 2018. Across the past decade, foreign direct investment has jumped from $569.3 billion in 2006 to $1,771.6 billion in 2018. Even with a challenging economic environment over the past few years, that figure is likely to continue growing over the coming years, especially considering the increased competitiveness in the sector globally. (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.