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Manufacturers stabilizing, some returning work to U.S., survey says

January 10, 2013|By Don Lee
  • An employee works on an assembly line at Generac Power Systems Inc. in Whitewater, Wis.
An employee works on an assembly line at Generac Power Systems Inc. in Whitewater,… (Nam Y. Huh / Associated Press )

WASHINGTON -- The sharp slowdown in U.S. manufacturing that began last spring appears to be over, setting the stage for moderate expansion -- and hiring -- in the factory sector in coming months, according to a survey released Thursday.

Although exports and backlog orders continued to weaken in December, manufacturers reported increasing shipments, and U.S. investment heading into the new year, according to a quarterly survey by the Manufacturers Alliance for Productivity and Innovation, a trade group.

The group's latest survey -- broadly in line with other industry measures -- also found that 17% of companies with manufacturing operations abroad had brought some of that work back to the U.S. in the last two years. 

Such reshoring or in-sourcing, as some people call the return of manufacturing from overseas, has been reported in isolated cases over the last few years, but there's been little in the way of comprehensive data about this phenomenon. The Manufacturers Alliance's survey sample was small -- 42 large companies with operations abroad -- but its findings are nonetheless revealing of what looks to be a continuing trend. 

The survey showed that the seven companies (out of 42) that brought back some operations to the U.S. returned it to existing plants, rather than new ones. All of them said the work that was reshored was relatively small or moderate in terms of investment and jobs to the U.S. As expected, America's gain came at the expense mainly of China, where those operations were located.

China's labor costs especially in coastal manufacturing hubs have been rising sharply in recent years, but U.S. companies moving production back also cited increasing shipping costs and, most notably, "a desire to reduce supply chain uncertainty," according to the Manufacturers Alliance study. Concerns about supply chain stability grew after Japan's massive earthquake and tsunami in March 2011 knocked out vital parts makers in auto, semiconductor and other electronics industries. (Lower U.S. natural gas prices and other energy costs weren't mentioned in the reshoring.) 

Only six firms (including four that already reshored in the last two years) said they would bring back some operations in 2013. The main reason most others have no such plans: "Our activity abroad is geared toward foreign markets and we need a production platform in these markets."

The bottom line: Don't count on reshoring to create a whole lot of domestic jobs or investment any time soon.

"You're not talking about huge operations coming back; it's chipping away at the edges," said Don Norman, the manufacturing group's senior economist.

Still, any little bit will help. American manufacturing employment has been trending down for decades amid productivity gains and growing foreign competition. The country has added 530,000 factory jobs since early 2010, but growth slowed last year and manufacturing payrolls are down 1.75 million from five years ago and nearly 3 million from the end of 2002.

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