Skip to main content
The Globe and Mail
Get full access to globeandmail.com
Support quality journalism
Just $1.99 per week for the first 24weeks
Just $1.99 per week for the first 24weeks
The Globe and Mail
Support quality journalism
Get full access to globeandmail.com
Globe and Mail website displayed on various devices
Just$1.99
per week
for the first 24weeks

var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){console.log("scroll");var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))}pencilInit(".js-sub-pencil",!1);

A Wal-Mart store in Springfield, Ill.

Seth Perlman/AP

The U.S. manufacturing renaissance is real. But is it real enough to make a big difference to the country's economic recovery? Probably not.

Wal-Mart Stores Inc.'s announcement Tuesday that it will purchase an additional $50-billion (U.S.) of American made goods over the next decade added to the growing body of anecdotal evidence that the "reshoring" trend is picking up speed.

Apple Inc. said late last year that it would bring home some of its Asian production, and General Electric Co.has been building new factories in the United States for at least a couple of years. There are dozens of other examples. "Made in America" is back.

Story continues below advertisement

There are many reasons for the renewed interest in American factory production. One is the narrowing of the gap between labour costs in the United States, where the recession has dramatically lowered average wage rates, and Asia, where workers are demanding better pay. Klaus Kleinfeld, the chief executive officer of Alcoa Inc., told an audience in Washington Tuesday that wages essentially have become a non-issue in selecting locations for production facilities. "That's so old school," he said during a panel discussion on manufacturing hosted by the Brookings Institution. "It's so not an issue any more."

Another reason for the shift is a realization that it's beneficial to locate production and research in the same place. (Engineers can come up with the whiz-bang ideas, but if they don't translate to the shop floor, they only are ideas – and you can't put ideas on a shelf.) And perhaps the most important factor behind the U.S. manufacturing resurgence is the country's much heralded energy boom. Natural gas, a power source for factories, in the United States can be purchased at a quarter of the world price. That's real money. A Texas facility that Alcoa once used mostly as a backup now is one of the company's most efficient operations, Mr. Kleinfeld said.

Factory production increased 0.8 per cent in December, after a 1.3 per cent increase in November, the Federal Reserve reported Wednesday in its latest monthly review of industrial production. At 95.1, the Fed's manufacturing index was the highest in December since the end of the recession. On the year, factory output increased 1.5 per cent.

All of this is to the good. But manufacturing can't really be described as a major driver of economic growth in the United States. Factory production grew at an annual rate of 9.8 per cent in the first quarter of 2012, and then slowed dramatically to a rate of less than 1 per cent over the rest of the year, according to Erik Johnson, the U.S. economist at IHS Global Insight.

The domestic market isn't as robust as it used to be, and U.S. exports haven't yet made up the difference. The industry has added more than 500,000 positions since February, 2010, about a quarter of all jobs created during that period. Still, factories cut more than 2.2 million positions during the recession. Mr. Johnson and other economists are skeptical those jobs will be replaced any time soon. IHS predicts manufacturing growth of only 2 per cent in 2013.

That's why the tone of the Brookings discussion on manufacturing was more hopeful than triumphant.

The factory renaissance faces barriers beyond sluggish economic growth. A recurring concern raised by Mr. Kleinfeld and his fellow panelists was a shortage of qualified workers. Greg Fischer, the mayor of Louisville, Ky., said 12,000 people applied for 1,000 jobs at a new General Electric plant in his municipality. Only about a quarter of the applicants had the skills for the jobs on offer, said Mr. Fischer, who has put an emphasis on training programs geared to employers' needs.

Story continues below advertisement

A byproduct of the "offshoring" era is that the U.S. lost a generation of the highly skilled machinists that make factories run. This is an acute issue because the existing factory work force is aging. The problem is there aren't a lot of replacements in the pipeline because younger students have no idea there are good jobs to be had in manufacturing, Mr. Kleinfeld said.

"You have to make manufacturing sexy again," he said.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies