The New Switcharoo--Burst of Growth Continues for US Manufacturers

The Commerce Department's Report states that US manufacturing is growing at its most consistent pace. Major job growth in heartland states like Wisconsin, Indiana, and Michigan are coupled with a fledgling apparel and food manufacturing boom in Brooklyn, of all places.  This news and a contribution of 12.5 percent to GDP through 2013 adds to the widespread feeling that American manufacturing has not only recovered from the effects of the Great Recession, but has evolved into a dependent industry that differs from its pre-Recession identity since 1998 is of course very good news.  The numbers are healthy, no matter which way you look at it; 646,000 jobs created since 2010, with over 200,000 more needed to be filled.

In examining why, it's always crucial to look toward China's parallel trends, and it reveals just how joined at the hip (a hip the size of the Pacific Ocean) the two countries are.  Though most recent reports are showing an expansion in manufacturing on the continent, it's telling to see the average worker's wage rose exponentially by 187 percent in the past decade.  The trade-off of creating a middle class consumer society- higher wages- has finally rubbed out the labor advantage Chinese manufacturers enjoyed, to the point that the country is seeing its own outsourcing trend in nearby regions of  Cambodia, Myanmar, and Vietnam.  The shrinking wage discrepancy as well as the effect of automation and sustainability cycles adopted by American manufacturers all make that long supply chain across the Pacific not so cost-efficient anymore.  Not to be forgotten is the contradictory paths the nations' energy scenarios have taken.  China's electricity has risen in costs by 66 percent the past year, while US shale-gas innovation has kept costs contained well below that rate.

It all adds up to one massive role-swap.  US goods become cheaper to buy in China, especially as the yuan rises in value (30 percent since 2004) as the American manufacturing system becomes more efficient and cheaper to remain competitive.  The next decade may see China's middle class mimicking 20th century America's, buying goods produced by a steadily rising American manufacturing industry.  If this seems disheartening to the American worrying that a China with more capital to spend must mean a US with slave labor wages on the supply end, keep in mind China's true expansionist efforts are reflected in the over $14 billion it invested last year in the US.  There are still an abundance of Chinese manufacturers targeting American consumers and setting up factories and production centers all over the US.  The "who leads" argument may sound entertaining on CSNBC or Fox Business, but reality shows a growing interdependence in trade between both nations, which can translate very soon to substantial global growth.

Donal Thoms-Cappello is a freelance writer for Rotor Clip Company.