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What's Your Story Idea August 31, 2009, 10:00PM EST

A Grand Goal for More U.S. Manufacturing Jobs

GE chief Immelt says the U.S. should aim to have manufacturing jobs make up 20% of total employment. Is that realistic?

By Jessie Scanlon

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The idea for "A Grand Goal for More U.S. Manufacturing Jobs" came from BusinessWeek reader Rob Parkins, a director in the consumer and industrial products group at Deloitte. He describes himself as "passionate" about manufacturing.

When General Electric (GE) Chief Executive Jeffrey Immelt delivered a speech at the Detroit Economic Club in June, he sounded more like a Midwestern governor than the leader of a $143 billion company whose ultimate responsibility is to his shareholders.

"We should set a goal…to have manufacturing jobs be no less than 20% of total employment, about twice what it is today," Immelt said. "This is a national imperative." According to Susan Helper, chair of the economics department at Case Western Reserve University's Weatherhead School of Management, the speech turned heads. "GE had been a leader of offshoring, saying it was just too expensive to manufacture in the U.S., so to hear Immelt arguing that we need to rebuild our industrial base is significant," she says.

For those workers and communities hardest hit by the disappearance of manufacturing jobs in the U.S., Immelt's words offered a glimmer of hope in an otherwise bleak picture. The July employment report released on Aug. 7 by the Bureau of Labor Statistics, while better than expected, showed that the sector had lost 52,000 jobs in July. That brings the total drop since December 2007 to 2 million jobs, or roughly 14.2% of that sector's employment. A report released Sept. 1 by the Institute for Supply Management showing that the manufacturing sector expanded in August—a first since January 2008—suggested that the industry might have hit the bottom of this recession. But even before the current crisis, manufacturing faced immense challenges. The Alliance for American Manufacturing (which last month published a book, Manufacturing a Better Future for America, laying most of the blame for the current state of affairs on U.S. trade policy) estimates that more than 40,000 factories across the nation have closed in the past decade.

But how realistic is Immelt's claim that "good jobs can return to manufacturing centers across America," and what kinds of jobs would those be? What forces could reverse the decades-long trend of multinationals shipping low-value factory jobs, such as assembling circuit boards, to lower-wage regions? And if those jobs aren't coming back, will enough new ones be created in emerging sectors to realize his goal of manufacturing jobs making up 20% of all U.S. employment? Immelt thinks the bulk of new manufacturing jobs will be in clean energy and health care, not in more traditional, low-skill areas.

A Manufacturing Renaissance?

In the last six months, Wright Engineered Plastics, a small injection-molder in Santa Rosa, Calif., with clients in the medical and telecom industries, has signed three new clients that have decided to move production back to the U.S. "Their reasons ranged," says Wright President and CEO Barbara Roberts. "Higher transportation costs and rising wages in China are making it more cost-effective for some to manufacture here. Two, in particular, were having significant quality issues."

Some companies are moving production back to the U.S. simply to make their supply chains faster. "Companies these days want to keep their inventories lean, and they can't afford to let product sit for 30 days on a boat from China," says Richard Sinkin, a San Diego consultant who scouts manufacturing sites in the U.S., Mexico, and China for multinationals. "People used to talk about just-in-time manufacturing, but now we have just-in-time retailing and that changes the dynamics incredibly."

But don't expect a sudden return of low-skill jobs to the U.S.

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