U.S. Manufacturing Can Be the Foundation of Economic Strength and Innovation
Brief rundown on how manufacturing has evolved over the past 40 years. Moving from solely Labor to less Labor at a higher value. One worker at a CNC machine can do the manufacturing of multiple workers at separate stations performing one or two functions. Lower Labor cost, faster throughput, and a promise of less inventory in a manufactured status. Manufacturing throughput can match sales in a shorter period of time.
“Three on Thursday,” First Trust Economics
No, America Did Not Stop Making Things
In this week’s edition of Three on Thursday, we dig into the true state of U.S. manufacturing. A sector often written off with the tired claim that “America doesn’t make anything anymore.” The narrative simply does not match reality. While growth in manufacturing has moderated in recent years, U.S. manufacturing continues to be a pillar of economic strength and innovation. Manufacturing in America did not die, it evolved. It’s leaner, smarter, higher-tech, and more essential to our future than ever before. The three charts below help put today’s manufacturing landscape in perspective.
One of the biggest drivers behind the myth U.S. mfg. is in decline is the shrinking share of manufacturing jobs. Back in the early 1940s, nearly 39% of American workers were employed in manufacturing. Today, that figure has fallen to just 8%. At first glance, it may look like the sector has collapsed. That is a misread of the data. Over the same period, U.S. manufacturing output has surged more than 12-fold. The real story is not about decline. It is about extraordinary gains in productivity. America is making more than ever, just with fewer workers, thanks to advances in technology, automation, and efficiency
Fifteen years ago, China overtook the United States as the world’s largest manufacturer. A symbolic shift fueling the belief
America no longer makes anything. But the perception does not match the facts. The U.S. remains the world’s second-largest manufacturer and it’s not even close. In 2024 alone, U.S. manufacturing output was so substantial that you would need to combine the next three countries of Japan, Germany, and South Korea to match it. Far from being hollowed out, the United States industrial base remains one of the most powerful and productive in the world.
It’s true that some low-cost industries such as toys and apparel
have shifted offshore. The U.S. didn’t exit manufacturing; it
moved up the value chain. Today, the U.S. excels in high-tech, high skill production, specializing in complex goods such as aircraft, semiconductors, biotech, defense systems, and advanced industrial equipment.
When it comes to manufacturing productivity, the U.S. ranks among the global elite. American factories benefit from advanced automation, cutting-edge software, lean operational models, and a deeply integrated innovation ecosystem. While nations such as Germany, South Korea, and the UK also perform strongly. Much of the developing world remains dependent on low-cost labor rather than efficiency. Considering China? In 2023, real manufacturing output per worker was ~$22,410. Real manufacturing output in the U.S. was $143,394. The average American manufacturing worker produced over six times more than their Chinese counterpart. In short, the U.S. is not just competitive—it is dominant in high-value manufacturing.
Sources: International Labour Organization, United Nations Industrial Development Organization, First Trust Advisors. Annual data for 2023. This report was prepared by First Trust Advisors L.P. It reflects the current opinion of the authors. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
AS taken from: First Trust Advisors L.P. First Trust – www.FTPortfolios.com