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While both the durable and nondurable goods sectors have been hit hard since 2000, their recoveries have been very different. Nondurable goods manufacturing has been slow to recover, adding only 5,000 jobs (0.1 percent) in the past 26 months. As the recovery continues, however, this sector is likely to experience greater gains since it includes chemicals, petroleum refining and pharmaceuticals – all goods the U.S. exports.
In fact, chemicals represent the third fastest growing export to China. This is particularly good news for Ohio since chemicals are the state’s second-most manufactured product, according to the Ohio Manufacturers’ Association.
Durable goods have rebounded more strongly in the past 26 months, adding 454,000 jobs (6.7 percent). As domestic demand for motor vehicles and parts, machine tools, electronics and similar goods increases, this sector’s growth is likely to continue, although policies that reduce the size of the U.S. trade deficit would significantly hasten gains in both the nondurable and durable goods sectors.
The region’s manufacturing sector is also improving. The National Association of Purchasing Management-Cincinnati Report on Business from the Economics Center at UC indicates that its production index increased to 59 in March, up dramatically from 11 in February. The faster growth of the production index, combined with similar increases for new orders and backorders indices suggest that regional manufacturing will rebound significantly in the coming months.
The state and the region are very dependent on the viability of the manufacturing sector. Sixteen percent of the state’s output and 12.3 percent of its workforce are in manufacturing. Manufacturing’s disproportionate impact on R&D and economic growth, along with its role as an entrée into the middle class, make it a critical piece of the recovery.
As companies continue to “reshore,” bringing production and employment back to the U.S., and policy makers debate initiatives that would make the United States more competitive, manufacturing is poised for a rebirth.
Julie Heath, Ph.D., is director of the Economics Center and professor in economics at the University of Cincinnati’s Carl H. Lindner College of Business.
Source Article from http://news.cincinnati.com/article/20120506/BIZ/305060021/Manufacturing-s-demise-greatly-exaggerated
