While the U.S. unemployment rate hangs high above 8%, manufacturing is one sector of the American economy that has seen substantial jobs growth over the last few years.
President Barack Obama said as much during his interview with 60 Minutes Sunday:
"The month I was sworn into office, we were losing eight hundred thousand jobs a month. We ultimately would lose nine million jobs during the height of that Great Recession. We came in, made some tough decisions....
And because of that we've now had thirty months of job growth, four and a half million new jobs, half a million jobs in manufacturing alone."
According to analysis by the Boston Consulting Group, manufacturing and supporting jobs will continue to grow by 5 million over the next decade. The firm previously projected a gain of 2 to 3 million jobs by 2020.
Hal Sirkin, a BCG senior partner and co-author of the ongoing series entitled "Made in America, Again" joined The Daily Ticker's Aaron Task to discuss the firm's latest findings and the details behind America's comeback.
What's the main driver behind the rebirth in American manufacturing?
Rising production costs in other industrialized and developing nations, including labor and energy costs, makes manufacturing in the U.S. less expensive for American companies.
Key findings from the report include:
- In less than three years, the U.S. will have a cost advantage of 5% to 25% over Germany, Italy, France, the U.K., and Japan in a number of industries, including machinery, chemicals, transportation equipment as well as electrical and appliance equipment.
- America's natural gas boom from shale (commonly referred to as "fracking") has provided this country with some of the cheapest natural gas prices around the world. For the foreseeable future, natural gas prices will remain 50% to 70% cheaper in the U.S. versus Europe and Japan.
- Labor costs in other developed economies will be 20% to 45% more expensive compared to the costs of hiring U.S. workers.
- The U.S. could grab additional exports from the aforementioned nations to the tune of $130 billion annually.
- Average manufacturing costs in China will only be 7% lower compared to in the U.S in 2015.
Some companies are already taking advantage of America's low-cost manufacturing environment. The following examples are cited in the BCG report:
- Toyota (TM) plans to assemble its Camry models in Kentucky and Sienna minivans in Indiana for export to South Korea. Honda (HMC) and Nissan are also ramping up U.S. production.
- Siemens (SI) is building gas turbines for export to the Middle East.
- Rolls-Royce recently began producing aircraft engine parts in Virginia.
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