The importance of manufacturing

Snapshot for February 12, 2008.

The importance of manufacturing
by Robert E. Scott with research assistance from Lauren Marra

While U.S. manufacturing has been hit hard by a decade of rapid import growth and job loss, the manufacturing sector remains a vital part of the U.S. economy. The manufacturing sector supported 14 million jobs in 2007, or about 10.1% of total employment.

Manufacturing industries are also responsible for a significant share of U.S. economic production, generating $1.6 trillion in GDP in 2006 (12.2% of total U.S. GDP). Because manufacturing firms also use trillions of dollars worth of commodities and services as inputs, the sector is responsible for an even bigger share of total output. U.S. manufacturing had gross output1 of $4.5 trillion in 2005, and it is by far the most important sector of the U.S. economy in terms of total output (Bureau of Economic Analysis 2008¹).

Manufacturing plays a large part in the economy in individual states, too, generating 28% of GDP in Indiana in 2006 ($70 billion), and more than 20% in Iowa (21%, $26 billion), Louisiana (21%, $41 billion), and Wisconsin (20.8%, $47 billion) (see Figure). California (9.8%, $169 billion) and Texas (13.1%, $140 billion) each generated more than $100 billion in manufacturing GDP in 2006.

U.S. manufacturing firms also led the way on trade, exporting $923 billion in manufactured goods, 64% of all U.S. goods and services exported in 2006. Although export growth slowed in the fourth quarter, manufacturing provided one of the few bright spots for the economy in the otherwise bleak fourth-quarter GDP report (see EPI GDP Picture). While the U.S. housing sector is likely to exert a drag on the economy for some time to come, exports from the manufacturing sector should continue to add to growth in the coming year. Reinvestment in U.S. manufacturing could stimulate growth in a wide swath of states in the heartland that have been hardest hit by the manufacturing and housing crises.

(See EPI Event on Wednesday, February 13 on Remaking Manufacturing for further information on manufacturing in America.)

Note
1. Gross manufacturing output is equal to total shipments less purchased manufactured inputs. Manufacturing output was 36% of U.S. GDP in 2005.

Check out the archive for past Economic Snapshots.

A weekly presentation of downloadable charts and short analyses designed to graphically illustrate important economic issues, Snapshots are updated every Wednesday.