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Manufacturing Remains Critical to the State’s Economy

| Manufacturing

By Ted Abernathy, policy advisor to the North Carolina Chamber Foundation

North Carolina Manufacturing: Fun Facts

  • NC manufacturing jobs grew 2.7% in 2015
  • Manufacturing is almost 21% of NC’s GDP
  • The average compensation is almost $68,000
  • Plastics, motor vehicle parts and furniture are all adding jobs

This Friday, Oct. 7, is National Manufacturing Day. The purpose of a day devoted to manufacturing is to educate students, policymakers and the general public about today’s new, advanced manufacturing and how important it remains to our country’s economic future. Manufacturers across the United States will open their doors to the public to showcase manufacturing careers and give everyone a peek at an industry that has been experiencing rapid change.

Discussion about manufacturing is often tinged with a nostalgic look back and persistent concern about the industry’s future. The data, as it often does, reveals a more complex story. Despite what you hear, American manufacturing is well positioned for success in the future.

In its 2016 study, Global Manufacturing Competitive Index, Deloitte Touche Tohmatsu Limited and the U.S. Council on Competitiveness found that the United States, China and Germany continue to be the top countries in the world for manufacturing and are expected to remain so in the coming years. The study predicts that the United States, currently ranked second, will retake the top global spot by 2020. Another recent study by the Boston Consulting Group found that the United States has the highest manufacturing worker productivity in the world. The study combined two measures of factory productivity: manufacturing GDP per worker and manufacturing value added. China’s productivity measured a third of the rate of the U.S.

How often have you heard someone say, “We don’t make anything anymore”? Today, according to the Federal Reserve, U.S. factories produce twice as much they did in the mid-1980s. The big difference is that we can produce those goods with one-third fewer workers.

Between 1990 and the end of 2015, manufacturing employment in the United States dropped from 17.8 million jobs to 12.3 million, a loss of about 31 percent. North Carolina has been especially hard hit, losing almost 44 percent of its manufacturing jobs over the past 25 years. Those job losses were due to technological efficiency gains and also to global outsourcing. North Carolina had thousands of manufacturing jobs that were in the hard-hit subsectors of textiles, furniture and tobacco.

Despite those job losses, manufacturing remains critical to the North Carolina economy. As can be seen in the two charts below, from the Manufacturing Institute, the contribution of manufacturing to the state’s gross product remains one of the highest in the south and is significantly higher than the national average. Compensation from manufacturing jobs also remains higher than most sectors, North Carolina’s manufacturing average compensation is $67,889 annually.

A closer look at North Carolina’s data shows that manufacturing has been recovering since the Great Recession. From 2010-2015 manufacturing jobs in the state grew by 6.8 percent, adding back almost 30,000 net new jobs.

Across the state results varied widely, with some counties still losing jobs while many others added new manufacturing jobs at more than double the state’s 6.8-percent average. The fastest percentage growth counties were Lenoir, Davie, Camden, Yancey and Dare. In gross numbers the leaders were Wake, Gaston, Lenoir, Mecklenburg and Guilford.

In 2015, North Carolina manufacturing jobs grew at 2.7 percent, the best growth since the recession.

Changes in the sector are reflected in specific types of manufacturing operations where the state experiences gain and losses.

For business leaders and policy makers the key question is, what can we do to support manufacturing and make sure that it continues to contribute to the state’s economy? Looking toward 2030, a typical manufacturing enterprise will have workers who require more skills, more sophisticated automation, require more advanced infrastructure, and depend on new innovations and access to global markets to succeed. If North Carolina wants to remain competitive we need to anticipate the future needs of manufacturing companies. KPMG, in Global Manufacturing Outlook: Preparing for Battle: Manufacturers Get Ready for Transformation 2015, states, “Constant disruption, rising pricing pressures, volatile input costs, intense competition and continuous innovation have all forced manufacturers to rethink their business models and long-term growth plans.” We will all need to keep a close watch on the implications of these changes and continue to adjust our public policy.

This year has brought a global economic slowdown, a stronger dollar and a big dose of geopolitical uncertainty. American and North Carolina manufacturing will feel the impact. Between now and 2030, it is impossible to know whether artificial intelligence, additive manufacturing, the Internet of Things, or virtual reality will have the most impact on manufacturers. Each will bring disruption and change – and opportunity. But the competitive pillars detailed in the North Carolina Chamber Foundation’s North Carolina Vision 2030 – Education & Talent Supply, Competitive Business Climate, Infrastructure & Growth Leadership, and Entrepreneurship & Innovation will remain important in the future.

This report from the North Carolina Association of Manufacturers was created in collaboration with the North Carolina Chamber Foundation. Ted Abernathy is a policy advisor to the North Carolina Chamber Foundation and managing partner of Economic Leadership LLC. If you would like to receive updates on additional business issues, please sign up here