U.S. Secondary Sector – Latest data

Yet America remains by far the No. 1 manufacturing country. It out-produces No. 2 China by more than 40 percent. U.S. manufacturers cranked out nearly $1.7 trillion in goods in 2009, according to the United Nations.

The United States has lost nearly 8 million factory jobs since manufacturing employment peaked at 19.6 million in mid-1979. U.S. manufacturers have placed near the top of world rankings in productivity gains over the past three decades.

That higher productivity has meant a leaner manufacturing force that’s capitalized on efficiency.

What’s changed is that U.S. manufacturers have abandoned low cost (low skilled) products with thin profit margins, like consumer electronics, toys and shoes. They’ve ceded that sector to China, Indonesia and other emerging nations with low labor costs.

Instead, American factories have seized upon complex and expensive goods requiring specialized labor: industrial lathes, computer chips, fighter jets, health care products.

Consider Greatbatch Inc., which makes orthopedics and other medical goods. The company is expanding its manufacturing operations near Fort Wayne, Indiana. Greatbatch wanted to take advantage of a specialized work force in northeastern Indiana, a hub of medical research and manufacturing.

Global competition will always force factory managers to try to replace expensive workers with machines or with low-wage labor overseas, Waldman says.

Mark Perry, a visiting scholar at the conservative American Enterprise Institute, likens the loss of manufacturing jobs to the exodus of workers from farms between the 19th and 20th centuries. If that migration hadn’t happened, Perry says, “we’d still have millions of people working in agriculture. Now, we can employ fewer people in factories.”

The U.S. remains No. 1 in global manufacturing, accounting for 18 percent of global manufacturing output in 2008. But China is catching up. Its share of manufacturing output jumped from about 6 percent in 1998 to 15 percent in 2008.

Critics have a ready explanation for that: unfair competition.

Robert Scott of the left-leaning Economic Policy Institute says China is cheating in world markets — keeping its currency artificially low to make Chinese products less expensive overseas and unfairly subsidizing its exporters.

Scott and other critics want to see the Obama administration support U.S. manufacturers by pressuring Beijing to drop the subsidies and let its currency rise freely. A higher-valued Chinese currency would make U.S. exports cheaper for Chinese consumers.

Centerline CEO Dietzen says she isn’t fazed by Chinese manufacturing. Some of her customers have placed orders with Chinese companies, she says, only to return, frustrated, to her company.

Chinese factories want mainly big orders. And they demand lots of time to fill them.

Dietzen says her clients are “finding when they get their parts back from China, they’re not always what they want. So we end up doing the work anyway.”

“A common misperception,” Greatbatch CEO Hook says, is that the United States doesn’t make anything anymore.

The reality is rather different.

“We need a highly skilled work force,” Hook says. “So it’s very advantageous to be in a country like the United States where people are educated and ready to be hired.”

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