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American Manufacturing Is Booming

Monday January 15, 2018 comments

In the decade since the beginning of the Great Recession, industrial production (manufacturing, mining and electricity production) has been a political football of both the left and right. It’s time to stop playing that game, and a good way to start is to review some facts about these industries, which continue to provide a significant share of the Midwestern economy.

We are now at the peak of industrial production in the United States. By every measure of production, we are at record levels. The industrial production index peaked in December 2007, then dropped by roughly 15 percent by the summer of 2009. It took five years to recover to a second peak in 2015. As the world economy dipped in 2015 and 2016, so too did U.S. industrial production. We are back at a record level of industrial output. It’s worth noting that total U.S. industrial production is more than twice what it was back in 1979, when employment peaked. And yes, of course, that is adjusted for inflation.

Other measures tell the same story. Inflation-adjusted manufacturing GDP will peak in the fourth quarter, both in dollar and quantity index measures. Importantly, new data on value-added of manufacturing offers an even more interesting insight into America’s manufacturing strength. Value-added is a measure of production that subtracts all the goods used in production. By making this calculation across all manufacturing, we omit all the spending by factories on imported parts. That number is at a record high now, a full decade after the start of the Great Recession.