The Multiplying Effect of Manufacturing

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"We are looking for businesses and universities that are willing to partner together to help their region, help turn their region into global centers of high-tech jobs. Because we want the next revolution in manufacturing to be '"Made in America.'" -- President Barack Obama on May 9, 2013

Manufacturing in the United States has rebounded significantly since the Great Recession, breathing confidence back intoan industry and a nation. In 2014, the manufacturing sector added about 18,000 workers per month, according to the Bureau of Labor Statistics, and while 2015 has some second guessing – with numbers showing 2 million fewer jobs compared to 2007 – manufacturing remains the backbone of the American economy.

Why? Because manufacturing boasts a uniquely robust sectoral multiplier effect, one that greatly affects and often informs industries existing around it. For instance:

  • Construction employment in 2015 has increased by 259,000 jobs, up an average of 281 jobs per month in the same period of 2014
  • 2015 transportation and warehousing employment has risen by an average of 155.5 jobs compared to the first six months of 2014
  • And the retail sector has added an average of 302 more jobs per month than in 2014

All of this has happened while manufacturing job rates have remained steday at an average of 6,000 jobs per month for the past six months. And the reason is because as manufacturing supply chains expand, so do inter-industry interactions that ultimately create fluctuating spheres of economic stimulation. Links working within and extending beyond these spheres form complex input-output structures that map relationship and reach.

These backward linkages lead to the growth of not only one industry, but all of those that supply it and that industry supplies. Here, value added cost is measured: Fuel consumed to mine aluminum for the manufacture of cars; transportation allocation and fleet maintenance to move product from A to B; and warehousing costs in conjunction with the cost of electricity to keep the lights on.

So, in theory and in practice, a Tier 1 supplier grows because Ford grows, and a car dealership in suburban Chicago keeps its doors open because Ford churns out cars and trucks. It’s a cyclical, symbiotic relationship based on supply chain synergy that branches in many directions.

textConsequently, this ripple effect produced by manufacturing can and does have a massive impact on millions of jobs, many in both upstream and downstream production industries. 

"Manufacturing plants ... have a powerful and positive impact on economic development. Every dollar in final sales of manufactured products supports $1.33 in output from other sectors [in 2014], the largest multiplier of any sector.” according to The Manufacturing Institute, What’s more, research shows manufacturing “has the highest backward linkage among the major sectors. As the demand for manufacturing grows, it in turn spurs the creation of jobs, investments, and innovations elsewhere.”

in short, dynamic, interconnected supply systems and emerging technologies that drive upward mobility and growth lie at the center of the manufacturing bioshpere. Manufacturing in the United States is not dead or even dormant. In fact, it is alive and well and you are a part of it. 


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