Manufacturing value-added output increased from $2.054 trillion in the second quarter to $2.329 trillion in the third quarter, which was 1.7% below the record pace seen in the fourth quarter of 2019 ($2.370 trillion). Overall, manufacturing accounted for 11.0% of GDP in the economy. Real value-added output in the manufacturing sector jumped from $1.963 trillion at the annualized rate in the second quarter to $2.213 trillion in the third quarter, as expressed in chained 2012 dollars. As such, activity in the sector rebounded strongly after plummeting in the first half of 2020, with real manufacturing value-added output down just 1.0% from the all-time high recorded in the fourth quarter of 2019 ($2.236 trillion). In the latest data, real value-added output for durable goods increased from $1.061 trillion to $1.230 trillion, with nondurable goods activity up from $902.5 billion to $982.4 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 38,000 workers in December, rising for the eighth straight month. Despite gains since the spring, the labor market for the sector remains well below its pre-COVID-19 pace, with manufacturing employment down by 543,000 in December relative to the level in February. The manufacturing sector had 12,309,000 workers in December, down from 12,852,000 in February but a definite improvement from 11,489,000 employees in April. Overall, the manufacturing sector lost 557,000 workers in 2020, the largest annual decline since 2009 and ending three years of gains.
In December, durable and nondurable goods employment increased by 25,000 and 13,000, respectively. Employment increased in every manufacturing sector except for three: miscellaneous nondurable goods (down 11,200), primary metals (down 2,100) and textile mills (down 100). In contrast, the largest gains for the month included plastics and rubber products (up 6,900), nonmetallic mineral products (up 6,100), food manufacturing (up 5,500), transportation equipment (up 5,200) and apparel (up 4,000). All the major sectors continued to experience reduced employment in December relative to February. The following sectors experienced the largest decreases over that 10-month period: transportation equipment (down 124,500), fabricated metal products (down 80,500), machinery (down 59,400) and printing and related support services (down 47,600). At the other end of the spectrum, plastics and rubber products (down 1,400), computer and electronics products (down 5,600), textile product mills (down 7,500) and paper and paper products (down 8,200) fared better, with the smallest declines in employment since February.
Meanwhile, the U.S. economy lost 140,000 workers in December, the first monthly decline in nonfarm payroll employment since April and weighed down by weaknesses in the service sector, specifically in leisure and hospitality (down 498,000) and educational services (down 62,500). The recent surge in COVID-19 cases has led to more restrictions, hurting those sectors. In addition, state and local governments continue to struggle financially, with 51,000 fewer workers in December. Overall, there continue to be 9,839,000 fewer nonfarm payrolls today than in February. The unemployment rate remained flat at 6.7% in December, with the number of unemployed workers little changed from 10,728,000 to 10,736,000. 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 12.0% to 11.7%. The labor force participation rate also remained at 61.5%, but for comparison purposes, the participation rate registered 63.3% one year ago. (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 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 0.2% 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 seventh-largest economy in the world. With $2.35 trillion in value added from manufacturing in 2019, only six 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, the United Kingdom and France. After manufacturing in the U.S., the rest of the top 10 includes India, Brazil and Canada, in that order. (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.