A Resurgence in U.S. Manufacturing

1790. It was the embryonic year of American manufacturing, which would eventually launch the United States into becoming a world superpower in the 20th century.

On April 10, 1790, President George Washington signed a bill that created the U.S. patent system. Later that year, Philadelphian Samuel Hopkins received the country’s first patent, which he earned for his new method of making a fertilizer ingredient.

For the first time, inventors could safeguard the legal rights to their ideas, creations, and intellectual property.

That same year, a British-born former industrial spy named Samuel Slater revolutionized the future of manufacturing by building a water-powered cotton-spinning mill that workers first powered by walking on a treadmill.

Workers were now using a machine to dramatically increase their productivity and consistency in spinning cotton into thread. Historians call it America's first true factory.

But it was Henry Ford's innovation in his use of mass production to manufacture automobiles that truly revolutionized industrial work by perfecting the assembly line. It enabled him to lower the Model T's price from $850 in 1908 to $300 in 1924, making car ownership a real possibility for a large share of the population.

Two decades later, U.S. industrial might would help win World War II, when nearly half of all private-sector employees worked in factories.

That portion plunged after the war, thanks to automation and U.S. companies seeking lower costs overseas.

My first manufacturing job in the mid-1970s fit right into perceptions that many people have had about manufacturing. I worked in a grey iron foundry in Waukesha, Wisconsin, during the interim years between high school and college. It wasn't Dante's Inferno, but it was hot, dirty, somewhat dimly lit and, yes, even dangerous if you were not alert. That work went a long way in convincing me to go to college.

The U.S. pretty much stayed on a roll with manufacturing, growing at about 4 percent a year for decades, until China’s 2001 entry into the World Trade Organization. That had a devastating effect on the U.S. manufacturing scene, causing the loss of millions of jobs and essentially gutting the local economies of much of small-town Middle America. The effects are still evident.

U.S. Manufacturing Resurgent

But manufacturing is hardly dead in this country. Last year U.S. production capacity showed its strongest growth since 2015 after pandemic-driven shortages and delays caused manufacturers to rethink their far-flung supply chains, said UBS industrials analyst Chris Snyder.

New factories are being built, with much of the growth coming in the high-tech fields of electric-vehicle batteries and semiconductors, national priorities backed by billions of dollars in government incentives.

Companies have committed more than $200 billion to U.S. manufacturing projects since Congress passed sweeping subsidies last year, as President Joe Biden’s effort to spark a new industrial revolution gains momentum.

The investment in semiconductor and clean tech investments is almost double the commitments made in the same sectors in the whole of 2021, and nearly twenty times the amount in 2019, according to data compiled by the?Financial Times.

While the FT identified four projects worth at least $1 billion each in these sectors in 2019, there were 31 of that size after August 2022. There has been more than $40 billion in planned capital spending since the start of the year.

Asian giants LG, Hanwha, and LONGI have all announced deals in the past month, taking total large-scale investments to $204 billion on April 14.

“We see right now the tectonic plates are shifting with respect to investment in the United States,” said U.S. energy secretary Jennifer Granholm this week, referring to the surge of investment in recent months.

The Inflation Reduction Act, which became law last August, includes $369 billion of tax credits for clean technologies as the Biden administration of pledges to decarbonize the US economy.

Another law passed last August, the Chips and Science Act, includes $39 billion in funds to stimulate semiconductor manufacturing and $24 billion worth of manufacturing tax credits. Both are also designed to break US dependence on Chinese supply chains.

While most US manufacturing commitments since August have come from domestic suppliers, roughly a third are from foreign-headquartered companies, according to the FT’s data. Taiwan, South Korea, and Japan make up the bulk of the foreign investment.

The FT tracked more than 75 manufacturing projects worth at least $100 million each for plants to make semiconductors, electric vehicles, batteries, and renewable energy components, which have been announced since the bills became law in August.

The announcements would create about 82,000 jobs, according to the analysis. More projects are expected to be announced in the coming months as the U.S. government provides more guidance on the tax credits.

Construction spending related to manufacturing reached $108 billion in 2022, Census Bureau data show, the highest annual total on record—more than was spent to build schools, healthcare centers, or office buildings.

Other companies that once relied exclusively on lower-cost countries to manufacture eyeglasses and bicycles and bodybuilding supplements have found reasons to come home.

The Wall Street Journal?reported that the pursuit of speed and flexibility prompted sock manufacturer FutureStitch Inc., which has factories in China and Turkey, to open a new one in Oceanside, Calif., last summer—the company’s first in the U.S.

Chief Executive Taylor Shupe said retailers don’t want to carry excess inventory in their stores, and the U.S. factory allows the company to quickly replenish stock.

He said the company is keeping its overseas factories but is adding a second in the U.S.—and maybe eventually a third—as it develops new products.

“There is more and more equity around ‘Made in the USA,” Shupe told The Journal. “To me, this is here to stay.”

Today U.S. manufacturing employment is holding steady at about 10 percent of the private sector, according to the U.S. Bureau of Labor Statistics, with nearly 800,000 jobs added in the sector over the past two years. The total number, 13 million, was virtually unchanged in the latest BLS jobs report.

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