American manufacturing output reaches new peak

By Morris Beschloss,

PVF Analyst

With all the sarcastic talk about the U.S. economy degenerating into a nation of “insurance salesmen and hamburger flippers,” it might surprise the readers to learn that America’s manufacturing sector is operating at a record pace, indicating a high of $1.5 trillion this year. It puts the United States close to the top among the world’s first-class production leaders.

These revenues, even after adjustment for inflation, are far ahead of where they were at the turn of the new century. A main reason for the popular misconception about the diminishing manufacturing sector is that most observers think in terms of traditional industries that have moved overseas due to losing their domestic competitive edge. This has also hit some areas of the country much harder than others.

Conversely, the reason why the United States is still near the top of its manufacturing game is that America has been on the cutting edge of most new technologies, which have been developed and expanded in such new manufacturing centers as Silicon Valley. At the same time, the Northeast and large parts of the Midwest have suffered the detrimental effects of traditional de-industrialization.

The manufacturing sector includes the output of all finished product conversions plus the generation by all mines and utilities throughout the 50 states. With natural resource production becoming increasingly profitable and utilities operating close to overload, the latter two categories have turned in record performances this year.

However, among those employed in our nation’s 150 million-strong workforce today, only 11% are considered part of the manufacturing sector.

To put these numbers in perspective, almost 40% of America’s labor force was employed in manufacturing at the end of World War II. This had slipped to 30% by 1950, at which time a quarter of this nation’s gross domestic product represented the output of the industrial sector.

Awsome productivity

Today, only a little more than one of ten non-farm workers are engaged in manufacturing, which produces only 12% of America’s $13 trillion plus gross domestic product total. This reflects the awesome productivity of which the American worker and his equipment are currently capable. It also indicates that even one-fourth of the 1946 percentage of the total workforce and its output must be measured against much higher absolute numbers.

In these statistics, however, lays the backbone of America’s production sector. Despite its diminishing percentage of workers, total U.S. output has never been greater. What has changed is the great diversity of products required by an overall economy that has tripled in the past 15 years. Although there has been an unprecedented tilt toward the service side, a third of the products in common use today did not even exist in 1990. Just think of cell phones, laptop computers, the latest fax machines, broadband, and the thousand others comprising the information highway.

Although the domestic automotive industry has shrunk considerably, this factor has been mitigated to some extent by the American-based manufacturing of foreign brands. Despite the decline of such basic industries as steel, textiles, machine tools and fabricated metals, TV’s, furniture, leather goods, electronics, defense spending, military and commercial aircraft, and the huge, growing health sector have more than made up for the decline of the traditional manufacturing sectors.

Also, small, privately-owned businesses have rapidly proliferated, providing niche products and components required to feed the rapidly expanding manufacturing sector.

Despite the general belief indicating a rapidly vanishing U.S. manufacturing sector, the absolute numbers prove that America continues to be numbered among the world’s leading industrial powers. As long as the United States stays at the cutting edge of technological progress, this top rank position should be maintained.

Will U.S. population growth facilitate economic dynamism?

As the U.S. population hit the 300 million mark in mid-October, the big question on the table was whether such continued expansion will accelerate the dynamic growth of the American economy.

Although some observers argue that the upward expansion of America’s fast growing population could adversely affect the nation’s standard of living, there are major reasons why the opposite should be true:

1. Unlike the Western European experience, epitomized by stagnating population growth and flat economic development, the U.S.’s impressive population expansion has been accompanied by an even more intense economic upswing.
   
   Although America’s exceptional results can be attributed to the accelerated growth of the consumer sector, the U.S. economy as a whole has benefited by this trend. The integration of the additional American population mass has had a much more positive economic impact than that experienced by Western Europe.
   
2. Although America’s population will continue to grow to over 400 million by 2040, its density will grow only slightly over most of the 21st century.
   
3. While India is projected to reach 1,500 people per square mile by mid-century, the United States will barely cross the 100 mark at that time. This is well below China, which is predicted to top out at 400 per square mile. Only Japan’s population, which lost 30,000 people last year, is expected to dip to under 750 per square mile in the next 40 years, among the world’s leading economies.
   
4. Although lower birth rates and a lull in immigration seemed to have indicated a slowdown in U.S. population growth in the late 1980s, America set a new course in the following 15 years because of a maintenance birthrate and an explosive rate of immigration growth. Since most of the recent immigration wave has emanated from Mexico and other Latin American nations, this circumstance has not only affected the population as such, but has increased family proliferation. Unlike Americans of European origins, along with today’s ethnic Western and Eastern European populations, Latino families still maintain offspring above the maintenance level.
   
5. The critical key to an orderly future development will be the utilization of the vast open spaces that make up most of the United States. If the new population growth will primarily contribute to already existing urban sprawl, such growth could eventually become counterproductive to America’s orderly expansion. Up to this point immigration has been reasonably well absorbed into the U.S. economic body politic. Although the debate about the growth of undocumented immigration continues unabated, America’s 4.6% unemployment rate reflects the fact that most of the newcomers have found gainful employment.
   
6. What may also have gotten lost in the current population debate is the benefits that fresh blood is bestowing on the future American work force. While even China is facing an increasingly disproportional number of retirees, an additional projected 100 million new Americans by 2040 will replace aging baby boomers in the work force, fill social security coffers and add to the economy’s vitality.

However, it will also put new stress on America’s infrastructure, put additional strains on natural resources and enhance the multi-cultural nature of America’s population base.

Such continued direction will also be reflected in a shift to small business and self-employment from a previous broad scale commitment to corporate life. This will further weaken the trade union movement, other than those relying on public institutions for membership. Corporate pension plans other than 401ks will likely become a thing of the past.

Politically, such diversity will also introduce a brand new ball game. Both major parties will be affected by immigrant newcomers, as well as upcoming young voters who will be attracted by platforms that deal more realistically with the problems of ongoing changes.    

Morris Beschloss, a 50-year veteran of the pipe, valve and fitting industry, is PVF and economic analyst for both Phc News and its sister publication, The Wholesaler.