A ‘Bidenomics’ Factory Boost, But Maybe Not in Reshoring

To get Brooke Sutherland’s newsletter delivered directly to your inbox, sign up here . President Joe Biden has made a revival of US factory jobs and industrial prowess a key pillar of his economic agenda. Thanks in large part to the scarring circumstances of the pandemic and a bazooka of government money aimed at encouraging companies to play along, this latest attempt at fostering a revitalization of America’s manufacturing might appears to have gained more traction than the myriad other iterations of reshoring policies over the past decade. But the degree to which this long-awaited US manufacturing renaissance actually manifests in increased sales for industrial companies and more jobs for Americans remains murky. Bloomberg opinion Supreme Court’s Student Debt Rebuff Exposes Its Judicial Activism Russia and the Known Unknowns First, some history. In 2010, President Barack Obama laid out a plan to double US exports in five years. That didn’t happen , although there was a boost. In 2015, a survey of manufacturing and distribution company executives by AlixPartners found that 40% of North American respondents had recently nearshored production close to the ultimate end market or were in the process of doing so. A separate report later that year from another consultant, A.T. Kearney, found that “the reshoring phenomenon appears to have been more a one-off aberration than an inexorable trend.” 1 President Donald Trump also pledged to bring manufacturing work back to the US and launched a trade war with China to force the issue . There was some improvement in factory investment and employment, but then the pandemic happened. The US International Trade Commission, a bipartisan independent agency, found recently that American importers bore almost the entire burden of tariffs placed on $300 billion of Chinese goods. Now we have Biden’s economic doctrine — called “Bidenomics” and defined in part by billions of dollars of government largesse meant to fund investments in infrastructure and increase domestic production of semiconductors and clean-energy technologies. Bidenomics “means the industries of the future are going to grow right here at home,” the president said this week during a speech in Chicago. The policy “is working,” he said. Executives at large established companies don’t tend to restructure their businesses based on whatever the economic theme of the month might be. This may not be a politically convenient conclusion, but credit for whatever reshoring, nearshoring or friend-shoring phenomenon is underway seems logically due to the cumulative effect of stubborn geopolitical tensions; the rise of local-for-local production strategies; a need to rewire global supply chains to bolster resiliency ; the collapse of the Asian labor arbitrage as local wages rise and automation technology becomes more capable; and the impact of the monumental amount of stimulus floating around. In other words, we’re more like 13 years into the reshoring process rather than three. “I think that that’s sort of a long cycle thing that we’re going to look back 10 years from now and say it happened or it didn’t happen,” Daniel Florness, chief executive officer of industrial distributor Fastenal Co., said of reshoring last July. “I don’t know how you identify that in a given quarter or frankly even a given year that that trend is in place.” Nevertheless, manufacturing investments have exploded. Read more: Manufacturers Find There’s No Place Like Home In January 2022, the Census Bureau’s gauge of construction spending on manufacturing facilities reached the highest monthly level in data stretching back to 2002. The metric has set records every month since except for three. Adjusting for inflation, construction spending on manufacturing has doubled since the end of 2021, with the majority of the growth being driven by facilities to support computer, electronic and electrical production, according to a Treasury Department analysis published this week. Melius Research has tabulated some $550 billion of “mega-projects” — defined as an investment greater than $1 billion — announced cumulatively since January 2021 with around 60% of those planned facilities already breaking ground. Examples include electric vehicle and semiconductor plants but also airports, hospitals and wastewater projects. Employment in the US manufacturing sector has inched up toward 13 million this year, the highest level since 2008, according to data from the Bureau of Labor Statistics. The spike in manufacturing construction has primarily been driven by the computer, electronics and electrical industry Source: Census Bureau Technically, this is evidence of a spending boom, not a reshoring boom. As you might imagine, those airports, hospitals and wastewater projects are not being relocated from China. Even when manufacturing […]

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