New forecast shows potential for manufacturing resurgence in coming decade
Today The Aspen Institute and the Manufacturers Alliance for Productivity and Innovation (MAPI) released a new econometric forecast model showing that there is ample potential for U.S. manufacturing to undergo a resurgence that by 2025 would lead to significantly more good paying manufacturing jobs, add to GDP growth, and help create the first surplus in the nation’s goods and services balance of trade since 1975.
The study was sponsored jointly by The Aspen Institute’s program on Manufacturing and Society in the 21st Century and MAPI. The economic model and expert advice used for the projections were provided by the University of Maryland’s Interindustry Forecasting Project (Inforum).
Thomas J. Duesterberg, Executive Director of The Aspen Institute’s Manufacturing and Society program and the reports’ author, said: “The robust results presented in the study are achievable with only modest acceleration of current trends, and none of the policy recommendations mark a radical departure from current policy trajectories. But they require a willingness to change in a disciplined way.”
Stephen Gold, MAPI President and CEO, concurred: “With no changes in public policy the manufacturing base will continue to shrink as a share of GDP as it has for the past decade. With just a few policy shifts, however, manufacturing in America can experience a resurgence that will ensure new innovation, increased productivity, more jobs, and a rise in living standards on our shores.”
Inforum was commissioned to make projections based on a target of moving manufacturing’s share of GDP back to the level last seen in 1998 (approximately 15 percent), before the “dot-com” recession and the “Great Recession.” Results were projected to 2025. Various scenarios were tested to determine what economic trends could power a change. The “manufacturing resurgence” scenario was then contrasted with a baseline forecast where the manufacturing value-added share would remain at today’s level, approximately 11.5 percent.
The study found that by focusing on key drivers—exports and imports; capital investments; energy supplies; regulatory and tax policy; and the skills gap for manufacturing workers and researchers—the growth path for manufacturing and the U.S. economy could improve dramatically.
· The manufacturing share of value-added in the resurgence scenario would grow to 15.8 percent of GDP in 2025, a proportion not seen since 1998, compared to 11.1 percent in 2025 under the baseline forecast;
· Manufacturing employment in the resurgence scenario would grow by 307,000 per year, or an increase of 3.7 million jobs by 2025 compared with essentially flat growth, or 23,000 workers per year, in the baseline scenario;
· Under such a scenario, by 2025, the nation’s GDP would be $1.5 trillion larger than under “business as usual,” with most of the increase coming from the manufacturing sector;
· The balance of trade in goods and services would see a dramatic transition under a manufacturing “renaissance,” from its current deficit of $500 billion to a surplus of about $700 billion, including nearly $200 billion in manufactured goods. Under a baseline scenario, the country’s balance of trade would continue to run deficits; and
· Capital investment in equipment and software, one driver of innovation and productivity growth, would increase by 12.1 percent by 2025, relative to the baseline.
“At a minimum, this forecasting exercise ought to lend some hope that we can indeed look ahead to a manufacturing resurgence and the sustainable economic gains that it brings, if we choose to follow this path,” Duesterberg concluded.