More signs of a potential manufacturing uptick
One reason why manufacturing is so important to the U.S. economy is its "job multiplier" effect. Not only do manufacturing jobs pay better than comparable service work, but they tend to support other jobs throughout the surrounding economy.
This is especially clear when it comes to small manufacturers and the various parts suppliers that support larger assembly work. For example: 75% of manufacturing jobs in the U.S. auto sector reside in the parts chain. A good way to envision this is that one shop builds brake pads, another builds brake shoes. Yet another makes the cardboard boxes used to ship these brake pads and shoes to the final car assembly plant. And if you extend this out even further, someone is making the strapping tape for the boxes, the labels for the boxes.
Essentially, there's a huge and very dynamic interconnection between all these manufacturing elements.
The good news is that many of these smaller shops are seeing an uptick in work, which indicates a potentially larger rebound for the U.S. manufacturing sector. As the Associated Press's Joyce Rosenberg reports, this "upswing" could be an ecouraging note for the wider U.S. economy:
This small manufacturer machinery boom may seem at odds with an economy that is suffering from slow job growth following the worst recession many can remember. But the increase in demand for gear that businesses use to make a variety of machines, parts, tools and devices is a sign that companies are more confident and are willing to spend. They're also getting loans from banks to buy the equipment — evidence that lenders are feeling more secure.
Last year, industrial and materials manufacturers had a 37 percent increase in big equipment purchases, according to PayNet, a company that tracks lending to small businesses. That compares to an average of 17 percent for all the industries PayNet follows.
Ironically, the sources of this reinvigoration for manufacturing are a bit varied. Rosenberg says that baby boom retirees are increasing the demand for medical equipment. New oil and natural gas production require more equipment. And, the aerospace industry is building new, fuel-efficient engines.
All of this adds up to new demand for manufacturing, which ripples out toward hundreds of smaller manufacturers. Hopefully this growth will continue as manufacturing drives a revived economy.
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