Automation Fair Press Room
Structural Costs, not a Slow Economic Recovery, Pose the Most Risk for US Manufacturers According to Manufacturers Alliance/MAPI Economist
Even though he declared both the manufacturing and general economic recession over, Manufacturer’s Alliance/MAPI economist Jeremy Leonard still worries about the fate of U.S. manufacturers.
"Unfortunately we have a lot of policies at home that make it difficult for our manufacturers to compete effectively," Leonard told a global forum of industry trade editors and analysts this week in Anaheim California at the 18th annual Automation Fair.
Leonard said a moderate manufacturing recovery is underway and that U.S. manufacturing remains an "engine for growth in the global economy." Productivity and wages have consistently outpaced the rates of other U.S. industries as well as foreign manufacturers. Manufacturing productivity has more than doubled in the last two decades, almost twice the growth for the overall economy.
"This is a boom for our competitiveness and the general prosperity of the economy," Leonard said. "Contrary to popular belief, the U.S. economy is not de-industrializing."
Leonard admitted that while the manufacturing industry does have fewer employees, he noted production volume is what matters. "Because of the efforts of companies like Rockwell Automation who are involved in process improvement and better plant control, we are simply producing more with fewer resources," the economist said. "That’s "a good thing" because it moves resources to other sectors important to the economy."
While U.S manufacturing is "more than holding its own," Leonard is concerned about the "high structural costs" U.S. manufacturers face relative to our other trading partners. Costs U.S. manufacturers do not control directly. These include one of the highest corporate tax rates in the industrialized world, which puts U.S. manufacturers at a "competitive disadvantage, as well as health care costs, tort liability and regulatory compliance.
"Were it not for these structural cost disadvantages, U.S. manufacturers would be internationally competitive," Lenard maintained. "Manufacturers are doing their part. The things that need to happen are from a policy standpoint and are dependent on what happens in Washington." Lack of sufficient government investment in basic and applied research and development needed for innovation is also problematic.
Leonard said the "actionable items" manufacturers need to focus on include capital intensity automation improvements and to start to reach out to emerging markets where capital intensive investments are growing. While he expects the overall economic recovery to be "tepid," Leonard forecasted that the manufacturing sector over the next two years will grow "quite a bit faster" than the economy as whole. The economist noted this is a typical post-recession pattern.