U.S. manufacturing growth boosts economy

Posted on February 17, 2012

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 21/2 years ago, factories have been contributing disproportionately to the recovery in hiring and the overall economy.

A big reason, economists say, is that individuals and businesses are making major purchases they delayed during the Great Recession and its aftermath. Consumers are buying more cars and appliances. Companies are investing in industrial machinery and computers.

The release of that pent-up demand gives manufacturing a kick that isn’t visible in some other corners of the economy. Manufacturing was hit particularly hard by the recession. Consumers postponed purchases ofcars, refrigerators and flat-screen TVs.

“Manufacturing has punched above its weight, but that’s because it was punched in the stomach in the recession,” Michael Montgomery, a senior economist at IHS Global Insight, said.