For a generation American manufacturing has been widely seen as a “declining sport.” Yet its demise has been largely overplayed. Despite the many jobs this sector has lost in the past generation, manufacturing remains remarkably resilient, with a global market share similar to that of the 1970s.
More recently, the U.S. industrial base has been on a powerful upswing, with employment climbing steadily since 2009. Boosted by productivity gains and higher costs in competitors, including China, U.S. manufacturing exports have grown at their fastest rate since the late 1980s. In 2011 American manufacturing continued to expand, while Germany, Japan and Brazil all weakened in this vital sector.
To determine the best cities for manufacturing my colleague Mark Schill at Praxis Strategy Group measured the 51 largest regions in the country in terms of how they expanded their “heavy metal” sector — think automobiles, farm and energy equipment, aircraft, metal work and machine shops. We averaged absolute growth rate and momentum in 148 heavy metal manufacturing industries over ten-, five-, two-, and one-year time frames.
Our top ranked area, Houston, is one of only four regions that enjoyed net job growth in manufacturing in the past 10 years. This year its heavy manufacturing sector expanded by almost 5%. Houston’s industrial growth is no fluke; over the past year its overall job growth has been about the best among all the nation’s major metros.
Houston’s industrial success owes much to the city’s massive port and booming energy sector, says Bill Gilmer, senior economist at the Federal Reserve office of Dallas. “Houston is about energy — it’s about fabricated metals and machinery,” he says. “It’s oil service supply and petrochemicals. It’s all paced by a high price of oil and new technology that makes it more accessible.”
This shift towards domestic energy augurs well for a huge and economically beneficial shift in America’s longer term economic prospects, he points out. Cheap natural gas, for example, makes petrochemical production in America more competitive than anyone could have imagined a decade ago. Linkages with Mexico in terms of energy as well as autos has made Texas — which is also home to No. 4 ranked San Antonio and No. 15 ranked Dallas — the nation’s primary export super-power, with current shipment 15% to 20% above pre-crisis levels.
The energy and industry connection also can be seen in No. 10 Oklahoma City, where heavy industry has been booming through much of the recession due to its strong fossil fuel industry. This synergy between energy and manufacturing could also spread to other regions, including many not associated with large fossil fuel deposits New finds in the Utica shale in Ohio, for example, could be worth as much as $500 billion; one energy executive called it “the biggest thing to hit Ohio since the plow.”
These gas finds may help ignite the heavy metal revival. As coal-fired plants become more expensive to operate due to concerns over greenhouse gas emissions, the region will have a new, cleaner and potentially less expensive power source.
Already the boom in natural gas has sparked a considerable industrial rebound in parts of eastern Ohio including the building of a new $650 million steel plant for gas pipes in the Youngstown area. Karen Wright, whose Ariel Corporation sells compressors used in gas plants, has added more than 300 positions in the past two years. “There’s a huge amount of drilling throughout the Midwest,” Wright says. “This is a game changer.”
But the industrial rebound is not only about energy. Another critical factor is rising wages in East Asia, including China. Increasingly, American-based manufacturing is in a favored position as a lower-cost producer. Concerns over “knock offs” and lack of patent protection in China may also spark a growing “Made in the USA” trend.
Via: Forbes
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