The Complete Picture: Manufacturing’s Contribution to the U.S. Economy

This week, several national news outlets — including Bloomberg — made much ado about a new federal report showing U.S. manufacturing fell to “11% of gross domestic product in the second quarter,” the smallest share in data going back to 1947. (Note: In Ohio, manufacturing comprises nearly 17% of the state’s GDP.)

Unfortunately, this is a woefully incomplete picture. Excluded from this GDP report are ancillary manufacturing activities such as R&D, corporate management, logistics operations, and advertising and branding. As a result, news media all too often fail to mention key facts such as the following:

• For every one worker in manufacturing, there are another four employees hired elsewhere. (Source: NAM)
• For every $1 spent in manufacturing, another $1.82 is added to the economy — the highest multiplier effect of any sector. (Source: NAM)
• The inflation-corrected “real GDP” for the manufacturing sector shows solid growth from Q4 of 2016 through Q1 2019. (Source: Federal Reserve Bank of St. Louis)

Finally, it should be noted that compared to other industries, manufacturing is efficient in adding value — certainly much more today than in 1947. The MAPI Foundation reports it takes 5.8 full-time equivalent manufacturing jobs to achieve $1 million in value added, compared to 7.7 for both transportation and services, and 16.9 for retail trade. 10/31/2019