CNN Says US Manufacturing is "Booming," but Data Doesn't Support that View

Presidential candidate Donald Trump is making the state of US manufacturing a centerpiece of his message to voters, saying during the last debate for example that "We don't make our product anymore. It's very sad. We've given it up."

So, is that true? Depends on whom you ask or what data you look at.

Supply Chain Digest Says... US manufacturing jobs, while rising a bit lately, are well down from 2008. Some of this is related to offshoring, some of it to significant gains in productivity. What do you say? Click here to send us your comments Click here to see reader feedback

Shortly after the third debate, CNN ran an article on its web site headlined "The manufacturing boom that Donald Trump ignores," claiming that "The nation's manufacturing sector is actually booming, even if many people don't realize it."

It cites as evidence for that claim the good times in several sectors, and offers this quote from Chad Moutray, chief economist with the National Association of Manufacturers. "We produce more today than we ever have. We made $2.1 trillion worth of products in 2015. There are sectors doing really well."

For example, CNN says US aircraft production - largely meaning Boeing - is at a record high and well ahead of the rest of the world.

CNN also cites the UD automotive sector, which it says is operating within 7% of record levels, making 12 million cars and trucks a year. It says "Not only have GM, Ford and Fiat Chrysler all been hiring and investing in U.S. plants, but foreign automakers are expanding operations here as well. The largest BMW plant in the world is now in South Carolina, and the plant exports most of the cars it builds there."

Finally, CNN cites chemical production, which is says hit a record $797 billion last year, up 30% in the last 10 years. The chemical boom has been fueled by the growth of US oil and natural gas production, which has made these key chemical feedstocks particularly cheap in here.

So does Trump just have it all wrong?

We're not sure where CNN or the National Manufacturing Association gets its data, but by one measure at least the US is not at peak production levels. The Federal Reserve's monthly manufacturing index, which tracks US manufacturing output based on a baseline of the average month in 2012 (index=100) came it at 103.1 in September, flat from last year and meaning US manufacturing output is just 3.1% above 2012 levels.

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What's more, almost 10 years later, US manufacturing output is still not back to peak year 2007 levels. That index topped out at 110.0 in December of 2007, meaning the September reading was about 7% below that top output level. However, by another measure of the value of US manufacturing output focused on "value added," Q1 of this year did set a record, which may be the number NAM's Moutray is referencing.

And chemicals? SCDigest is again not sure what data CNN is looking at, but by this same Fed measure, US chemical sector output came in at an index level of 101.0 in September, meaning output was just 1% above 2012 levels - but far, far from the index high of 121.0 in November of 2007.

The overall value-added number - which is indeed at record territory, just over 2007 levels - is also heavily influenced by growth in the computer and electronics industry, which importantly includes semiconductors.

Bloomberg wrote last week that If it weren't for computers and electronics manufacturing, US value-add would still be well below its 2008 peak and only 21% higher than in 1997. (See graphic below.)

Source: Bloomberg

What' more, the numbers in this sector are a bit deceiving. The most commonly cited numbers try to take into account the tremendous increase in processing power in chips over time. Without adjusting for this effective deflation, value-added in computer and electronics manufacturing is up 45% since 1997. With the adjustments, it's up 699% a figure that greatly influences the overall measure of US value-added.

Of course, US manufacturing jobs, while rising a bit lately, are well down from 2008. Some of this is related to offshoring, some of it (perhaps the majority) to significant gains in productivity.

The Reshoring Initiative, a non-profit group dedicated to help companies bring production back from offshore or keep it in the US, recently released data saying that the rise of reshoring has led to a stop in the loss of jobs due to offshoring. It estimates that in 2015, about 60,000 US manufacturing jobs were lost due to offshoring, while 67,000 were gained from reshoring and foreign investment in US factories.

That compares to a net loss from the same moves of 220,000 jobs in 2000-2003. (See A Manufacturing Day Look at US Manufacturing Data).

So SCDigest says the jury is still out. The reshoring movement has made a difference, but to say the US manufacturing sector is booming overall is quite a stretch.

What do you believe is the real state of US manufacturing? Can it ever rally come back in a big way? Let us know your thoughts at the Feedback section below.

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