US Manufacturing Stuck in Rut Despite Government Efforts

Strategic Insights -

For nearly three years, the US has been unable to stem the decline of its manufacturing sector, despite efforts by President Biden to provide subsidies and President Trump's tariffs on imported goods. The US Labor Department reported that American factories shed 7,000 jobs in June, with manufacturing employment on track to drop for the third straight year. The Institute for Supply Management noted that manufacturing activity in the US has shrunk for four straight months. A survey of purchasing managers found that customers are hesitant to make commitments due to tariff uncertainty.

Key Takeaways:

  • The US manufacturing sector has been in decline for 30 of the 32 months since October 2022, according to the Institute for Supply Management.
  • Manufacturing employment is on track to drop for the third straight year, with the US Labor Department reporting a loss of 7,000 jobs in June.
  • President Biden's tax incentives for semiconductor and clean energy production triggered a factory-building boom, but the investment spree has faded as the Trump administration launched trade wars and ended subsidies for green energy.
  • Mark Zandi, chief economist at Moody's Analytics, predicts that manufacturing production will continue to flatline, suggesting that manufacturing employment will continue to slide.
  • Manufacturing is likely to suffer a recession in the coming year, according to Zandi.
  • President Trump's tariffs on imported goods can give US factories an edge, but can also drive up costs and make US producers less competitive in world markets.
  • U.S.-made steel prices are so high that some companies, like Pilot Precision Products, have continued to buy steel from foreign suppliers and pay the tariff.
  • Manufacturers have voiced their complaints about tariff uncertainty, with one company stating that customers do not want to make commitments in the wake of massive tariff uncertainty.
  • Some may argue that things aren't necessarily bad for US manufacturing, but the sector has not returned to its pre-pandemic momentum, with factory payrolls last month coming to 12.75 million, almost exactly where they stood in February 2020.

Statistics:

  • 7,000 jobs lost in June by American factories, according to the US Labor Department.
  • 12.75 million factory payrolls last month, almost exactly where they stood in February 2020.
  • 379,000 jobs added in the manufacturing sector in 2021, the most since 1994.
  • 357,000 jobs added in the manufacturing sector in 2022.
  • 30 of the 32 months since October 2022 that US manufacturing has been in decline, according to the Institute for Supply Management.
  • 11 times that the Federal Reserve raised interest rates in 2022 and 2023 to combat inflation.

Sources:

  • "US Labor Department reports" (no date mentioned)
  • "Institute for Supply Management" (no date mentioned)
  • Paul Wiseman, "US Manufacturing Stuck in Rut Despite Government Efforts" (no date mentioned)