If you want to make it in America, aim for the middle.
Manufacturing companies represent 3.1 percent of all commercial firms in the nation, according to a recent report from American Express and Dun & Bradstreet. But amid decades of decline, the past five years have seen the sector outpace other business categories in growth of revenue, employment and number of companies.
And much of that growth has been in a part of the sector some might not expect.
“Small businesses get a lot of the attention,” said Nalanda Matia, lead economist for econometrics solutions at Dun & Bradstreet. But what the report shows, she noted, is that nearly 18 percent of U.S. manufacturing falls into the middle market range. That’s the segment between $10 million and $1 billion in annual revenue.
But whatever you make — and however big your company — the nation’s trade deficit with international partners, as well as the strength of the U.S. dollar, remain key considerations affecting the health of U.S. manufacturing.
Size matters
Just 3 percent of manufacturing is carried out by small firms, those earning under $10 million. And while large firms — those with more than $1 billion in annual revenues — represent nearly 28 percent of the total, the middle market manufacturers are leading the national commercial economy in overall growth, revenue, and employment.
To put that in local perspective, consider the midstate’s top 100 private companies of 2015, as recently ranked by CPBJ. Of that group, 98 fall into that middle range, with revenues between $26 million and $643 million.
And it’s a diverse group. From a manufacturing perspective, some of those companies include Utz Quality Foods ($626 million), Tim-Bar Packaging and Display ($331.5 million), Dutch Gold Honey ($192.45 million), truck and trailer manufacturer M.H. Eby Inc. ($109 million), candy maker The Warrell Corp. ($63 million), Mount Joy Wire Corp. ($33.72 million) and aquaculture feed manufacturer Ziegler Bros. Inc. ($29 million).
What stands out, however, is the importance of food and agricultural manufacturing among the region’s middle-market manufacturers.
National performance
The sector did well overall. Amid years of declines, U.S. manufacturing between 2011 and 2016 recorded 159 percent revenue growth, 127 percent employment growth and nearly 127 percent growth in the number of firms. For American commerce overall during the same period, the total number of firms declined 17 percent, while revenue increased 52.8 percent and employment was up 35.6 percent.
Nationwide, Dun & Bradstreet found a high degree of middle-market manufacturing specialization in two areas: industrial and commercial machinery and computer equipment (home to 15 percent of middle-market manufacturers, compared to 10 percent of manufacturing firms overall) and fabricated metal products (14 percent of middle-market manufacturers, but 4 percent of all manufacturers overall).
The Dun & Bradstreet analysis also found that “industrial and commercial machinery is one of the manufacturing subsectors that is currently feeling the greatest negative effects of lower energy prices and weaker exports.”
And that touches on another issue Matia raised: currency, and how foreign trade and affairs affect American manufacturing — an issue for all manufacturers, including those in the middle range. Even with the recent growth, a strong U.S. dollar can dampen exports, and by extension, manufacturing production, as American goods become more expensive for international customers.
Currency concerns
That is critical for Pennsylvania, the nation’s 10th highest exporting state. Its companies sold $39.43 billion worth of goods abroad last year.
The state’s top five export industries, according to U.S. Department of Commerce statistics, are chemicals ($7.94 billion), transportation equipment ($4.25 billion), computer and electronic products ($4.21 billion), machinery ($4.03 billion) and primary metal manufacturing ($3.05 billion).
The state’s top three export destinations are Canada ($11.68 billion), Mexico ($4.18 billion) and the United Kingdom ($2.34 billion).
In that vein, Matia said she is keeping an eye on the United Kingdom’s decision to leave the European Union. The decision, dubbed Brexit, has resulted in the British pound falling against the dollar as UK politicians debate how to leave the union.
Already weak, the pound fell to $1.28 on Oct. 3 after British Prime Minister Teresa May announced that she would initiate the process by the end of March 2017, which BBC News indicated to mean the UK would be likely to leave the EU by mid 2019.
While the pound had dipped into the $1.27 range as recently as July 6, it had rebounded to the $1.34 range in early September before falling again over the past month as talk of Brexit negotiation plans swirled. Its one-year high was in the $1.54 range, seen last October, and the currency was as high as $1.71 as recently as summer 2014.
Of course, Britain isn’t the only country America trades with. The dollar also has been exceptionally strong against many other currencies over the past year, including Canada, whose dollar was worth just 76 U.S. cents on Monday (the pair were at par as recently as January 2013).
These factors, as noted, can create a trade deficit for the U.S. And those issues concern Harry Moser, founder of the Illinois-based Reshoring Initiative.
He sees progress in the effort to bring U.S. manufacturing jobs home, but also much room to improve.
Eliminating the trade deficit, which stood at $39.5 billion in September, would produce 4 million manufacturing jobs and 5 million to 15 million related jobs, Moser predicted.
He is a big advocate of improved education and skills training for workforce development, as a means of making American workers more productive and thereby helping reduce the deficit.
But Moser also believes that selling more goods overseas isn’t the only consideration for improving America’s trade imbalance, saying the country needs “to place more emphasis on reducing imports as opposed to increasing exports.”
In a year when trade talk has been a key theme in the presidential race, the idea of importing less to make American manufacturing great again is not limited to Moser.
