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Michael Brush

Company Focus5/20/2009 12:01 AM ET

The myth of US industry's demise

Products at Wal-Mart and Target may come from overseas, but the US is still the world's No. 1 manufacturer. For many American companies, there's still no place like home.

[Related content: stocks, manufacturing, aerospace, drugs, Boeing]
By Michael Brush
MSN Money

Chrysler bankrupt, General Motors (GM, news, msgs) on the brink, layoffs almost too deep to count. No wonder the recession has brought out a chorus of hand-wringers lamenting that America "doesn't make anything anymore" and that all the good jobs have been outsourced.

Few myths could be further from the truth. Despite headlines about low-wage workers in China and our factory jobs going to India -- which has happened in a lot of industries -- the U.S. is still far and away the biggest manufacturer in the world.

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10 US companies that haven't moved away © Jason Cohn/U.S. Steel
10 US companies that haven't moved away
Some of America's biggest industrial names are thriving right here at home.

U.S. workers produce 21% of all factory goods made globally, or about $1.7 trillion worth per year. That's significantly lower than the peak of 28% in 1985 but only slightly below the long-term average of 23% for 1970 through 2006.

China, the second-biggest global producer, doesn't even come close. It makes just 13% of the world's stuff, or $1 trillion worth. Japan is next with 11%. And Germany, the vaunted workshop of Europe, comes in fourth with a paltry 7.4%.

OK, so these numbers are from 2006, the latest data from the United Nations, which keeps track of these things. But China, the hottest contender for factory jobs, has been grabbing jobs from other Asian countries for the most part and not from the United States, says economist David Huether of the National Association of Manufacturers. So the U.S. lead over China in factory jobs may not have changed much since 2006.

Here's other evidence of the strength of the U.S. manufacturing base:

  • During the previous economic boom, manufacturing contributed more to U.S. growth than any other sector, Huether says.

  • Though lots of factory workers have lost their jobs in the recession, U.S. manufacturing still employed 12.1 million people as of the end of April.

  • Factory workers' daily toil contributed to 11.5% of the United States' product last year.

  • Many U.S. factory employees are big earners, which lets them consume more, contributing more to growth. They made an average of $71,000 in 2007, counting wages and benefits, or 20% more than the average of all other workers combined. States with the most factory jobs are California, Texas and New York.

To be sure, this recession hasn't been easy on manufacturers or their workers. Hours have been cut and workers furloughed. Since December 2007, 1.6 million out of the 5.7 million job losses in the U.S. have been in manufacturing. But the big picture isn't all bleak.

Not the small stuff

If the U.S. is still the world's greatest producer, why do so many people have a different perception?

Let's call it the Wal-Mart (WMT, news, msgs) effect. Most people do their "research" on the U.S. manufacturing base by turning over the tags on the stuff they buy. They naturally notice that most clothing and toys at retailers such as Wal-Mart come from abroad -- because those are two of the industries where production has moved abroad, in a big way.

The catch here is that most of what's made in the U.S. is purchased by companies, not consumers. So unless consumers also happen to work as buyers at companies, they miss the fact that machinery, chemicals, fabricated metals and other sophisticated products are still manufactured in the U.S.

Continued: It's all about the work force

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