By Kimberly Amadeo
U.S. manufacturing is the transformation of raw materials into new products. The process is mechanical, physical, or chemical. The raw materials include commodities or components. It is the second stage of the supply chain.
Manufacturing businesses include plants, factories, and mills. They make their products with power-driven machines and equipment. It also includes small and home-based businesses that make things by hand. They include bakeries, candy stores, and custom tailors.
Manufacturing also includes companies that contract with others to make the goods. In the United States, it doesn’t include housing and commercial construction.
U.S. manufacturing is the largest in the world. It produces 18.2 percent of the world’s goods. That’s more than the entire economic output of Canada, Korea, or Mexico. But America’s leadership position is threatened by high operating costs. That gives a competitive edge to other countries. First among these is China. Its low-cost factories manufacture 17.6 percent of the world’s products.
Importance of Manufacturing in the U.S. Economy
Manufacturing is an essential component of gross domestic product. In 2016, it was $2.25 trillion. That drove 11.7 percent of U.S. economic output. Manufactured goods comprise half of U.S. exports.
Manufacturing adds a lot of value to the power of the U.S. economy. Every dollar spent in manufacturing adds $1.89 in business growth in other supporting sectors. These include retailing, transportation, and business services.
The United States has 12.5 million manufacturing jobs. That employs 8.5 percent of the workforce. These jobs pay 12 percent more than all others. In 2015, they earned an average of $82,023 per worker. This includes benefits. That’s $26.50 per hour. Yet, more than 600,000 jobs are still waiting for workers with the right skills.