For the last three years, manufacturing has been the hero of the U.S. economic recovery. While housing and consumer spending have been slow to come back, manufacturing activity has outpaced the rest of the economy ever since the recession ended in June 2009. Capital expenditures and exports have contributed close to 75 percent of all gross domestic product growth since then. That’s led to 500,000 new jobs in the last two years. That’s not enough to replace the 1.8 million manufacturing jobs lost since 2007, but it gave President Obama some nice campaign fodder and fueled excitement that a manufacturing renaissance was under way in America.
The truth is starker. Industry has essentially flat-lined since the end of the first quarter of 2012, and recent data suggest manufacturing may be in a recession. In November, the Institute for Supply Management’s Purchasing Managers Index, a broad measure of manufacturing activity, fell for the fourth time in six months; it’s at its lowest level since the recession ended. Manufacturing has shed 24,000 jobs since July, including 7,000 in November. Exports are falling faster than expected, leading to a record monthly manufacturing trade deficit with China in October, the second record monthly high since July. Even points of strength are starting to weaken: New orders for defense and transportation equipment fell in October. General Motors may have to cut production to reduce its inventory of unsold trucks, which is double the normal levels.