Study: Manufacturing Key to Long-Term Economic Recovery

by Brittany M. Bond, US Department of Commerce

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As the country emerges from the Great Recession, which officially lasted from December 2007 to June 2009, recent US Department of Commerce research has found manufacturing plays a key role in the continued economic recovery for communities all over the country.

The manufacturing sector accounts for a significant share of earnings and employment for local economies, both directly and indirectly. It also provides additional economic benefits that exceed earnings and employment. Many of the communities are located in the Midwest and South, are small in terms of population and found in non-metropolitan areas.

Manufacturing has been one of the major bright spots in the economic recovery over the past few years, the research indicated. It contributed more than 25 percent of the overall growth in gross domestic product (GDP) between 2009 and 2011 and added roughly 500,000 new jobs between the beginning of 2010 and the end of 2012.

In 2011, the sector made up 11.9 percent of US GDP, up from 11.3 percent in 2009, and manufacturing accounted for more than 25 percent of the overall growth in GDP between 2009 and 2011. In addition, manufacturing accounts for 68 percent of all domestic investment on research and development in the US and 60 percent of the country’s total exports.

Other findings included the following:

  • There were 181 counties spread over 27 states where manufacturing jobs made up at least 20 percent of total employment. Indiana and Ohio had the largest number of such counties, at 26 and 16 respectively.
  • Employment growth in manufacturing during the recovery has been relatively strong, with roughly 500,000 new manufacturing jobs added between the beginning of 2010 and the end of 2012.
  • California is the state with the largest manufacturing economy in an absolute sense, as it alone accounted for 13.4 percent of all compensation earned by manufacturing workers and 11 percent of all US manufacturing jobs in 2010.
  • The share of a local economy that is related to manufacturing is a more telling indicator of the importance of manufacturing to a local economy relative to its importance in other parts of the country.
  • In Indiana, Wisconsin, Michigan, Iowa and Ohio, manufacturing accounted for over 15 percent of each state’s total earnings, while Kansas, Alabama, Arkansas, South Carolina and New Hampshire, manufacturing accounted for 14.5 to 15 percent of total earnings.
  • Manufacturing employment accounted for more than 10 percent of the workforce in Indiana, Wisconsin, Iowa, Arkansas and Ohio, while in Michigan, Alabama, Mississippi, Kansas and Kentucky manufacturing employment was between 9 and 10 percent of total employment.
  • Indiana and Ohio had the most counties where manufacturing accounted for at least 20 percent of total earnings (50 and 48 counties, respectively), followed by Tennessee (42 counties), Wisconsin (40 counties), Georgia (36 counties), Iowa (36 counties) and Kentucky (31 counties).
  • The last two years (2010 through 2012) represent the first extended period of US job growth in the manufacturing sector since the late 1990s. During this time, manufacturing employment rose by close to 4 percent, adding around 450,000 jobs to the manufacturing sector (through September 2012). The increase was largely shared across state lines, research indicated.
Brittany M. Bond is a research economist in the Office of the Chief Economist of the US Department of Commerce’s Economics and Statistics Administration.