Mendoza School of Business

Manufacturers are providing an outsize boost to economy’s recovery

Published: February 15, 2012 / Author: Christopher Rugaber

American factories are humming – and driving the economy forward.

Manufacturers have been hiring more consistently than other employers, for jobs with better-than-average pay. They just had their best month of growth in five years. And more factory output has raised demand in some other industries, such as shipping, leading to further hiring.

“The manufacturing sector is on a tear,” said Paul Ashworth, an economist at Capital Economics.

It’s an optimistic theme that serves President Barack Obama’s political needs. On Wednesday, Obama traveled to Milwaukee to salute a company that brought jobs back to the United States. The president has promoted the nation’s manufacturing base as an engine of growth and as evidence of a recovering economy.

No one thinks manufacturing will return to its 1950s peak. After all, the factory sector now makes up barely one-tenth of the economy.

But since the recession ended more than 2 1/2 years ago, factories have been contributing disproportionately to the recovery in hiring and the overall economy.


Jeffrey Bergstrand, a finance professor at Notre Dame University, calls it “factory nostalgia” but says that it is “economically legitimate.”

“It reminds us of the period of the greatest growth we had in the U.S. economy,” Bergstrand said. “It’s also … an association with the boom in the middle class, (when) they were all sharing in that economic boom.”

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