By Andria Cheng
NEW YORK (Market Watch)--Made in the U.S.A. is hot again, and
the number of manufacturing jobs that are returning to the U.S.--or
coming to the U.S. for the first time--from overseas has hit a
record level.
Sixty thousand manufacturing jobs were added in the U.S. in
2014, versus 12,000 in 2003, either through so-called reshoring, in
which American companies bring jobs back to the U.S., or foreign
direct investment, in which foreign companies move production to
the U.S., according to a study from the Reshoring Initiative. In
contrast, as many as 50,000 jobs were "offshored" last year, a
decline from about 150,000 in 2003.
Why is this significant? 2014's net increase of at least 10,000
jobs was the first net gain in at least 20 years, Harry Moser, the
Reshoring Initiative's founder and president, told MarketWatch.
"The trend in manufacturing in the U.S. is to source domestically,"
Moser said. "With 3 [million] to 4 million manufacturing jobs still
offshore, we see huge potential for even more growth."
One big catalyst behind the trend: Escalating wages in
traditionally lower-cost countries, including China, have pushed
companies to reconsider sourcing strategies.
To meet consumer demand, companies increasingly want to make
products closer to where their customers are and react to trends
and ship faster. Additionally, there are shipping costs and import
duties to contend with when a company manufactures the products
that it intends to sell into the U.S. market overseas. Meanwhile,
such variables as environmental issues, product-quality scandals,
and incidents like the 2013 Bangladesh garment-factory collapse or
this year's West Coast port slowdown have made domestic production
more appealing. Government incentives and a relatively skilled U.S.
workforce are also among top factors.
In fact, among the world's top 10 export economies, the U.S.
last year ranked No. 2--behind only China--for cost
competitiveness, according to the Boston Consulting Group, with
real estate and natural gas and other energy prices tending to
apply downward cost pressure in the U.S.
Patriotism and the pursuit of positive corporate images as
standing behind the U.S. economy is another factor for companies
opting to bring manufacturing stateside. A 2013 Gallup poll found
45% of Americans saying they had made a special effort to buy
U.S.-made products. The survey showed 64% said they would be
willing to pay more to buy a U.S.-made product than a similar item
made overseas.
Retailer Wal-Mart Stores Inc. (WMT) is a key driver of the
trend, the Reshoring Initiative's study showed. Wal-Mart in early
2013 said it would buy an additional $250 billion in U.S.-made
products over the next 10 years. General Electric Co. (GE) is one
supplier that has taken up Wal-Mart's call to make more
energy-efficient light bulbs domestically; Wal-Mart sells a GE bulb
line exclusively at its stores.
Boston Consulting Group estimated Wal-Mart's move could create
up to 1 million direct and indirect American jobs. On Wal-Mart's
website, there is a special section displaying its "Made in the
U.S.A" products. Wal-Mart has said that creating jobs in the U.S.
makes economic sense in that it boosts the spending power of its
customers.
"Our model suggests the U.S. can offer very competitive
manufacturing options, especially given many rising cost variables
overseas," according to a Wal-Mart statement on the initiative. The
company pointed to 500 "active initiatives" involving product
categories as diverse as tires, bicycles, home textiles, toys and
cookware.
In addition to its light-bulb deal with Wal-Mart, GE has brought
back the manufacturing of some appliances and water heaters, the
Reshoring Initiative reported. Among other companies getting in on
the emergent reshoring trend, Apple Inc. (AAPL), for instance, has
pledged a Made in the U.S.A. push through which it aims to produce
Mac Pro personal computers on U.S. soil.
CEO Jeff Immelt of GE has said the U.S., on a relative basis,
has never been more competitive. For instance, he has said it takes
three hours or less to make a refrigerator, so the total cost can
be lower to have it made domestically versus in China or Mexico
when factoring in other costs including transportation.
And it's not just hard goods. Fashion is also a key reshoring
industry. Brooks Brothers, which also has a website section touting
U.S.-made clothing and accessories, has told MarketWatch it has
increased the percentage of its merchandise that is domestically
sourced.
Producing domestically also means manufacturers don't have to
commit to outsized orders. Lingerie designer Cosabella, whose
products are sold at retailers including Nordstrom Inc. (JWN), for
the first time last fall began making lounge and sleep wear in Los
Angeles that was previously being made in Italy and Peru, CEO Guido
Campello told MarketWatch. We've been "able to hit the relative
market price points and have much less production minimums to deal
with when compared to producing in Peru," he said.
As to foreign companies manufacturing in the U.S., BMW is one
prominent example. Its Greer, S.C., car-assembly plant, with more
than 7,000 employees, makes it one of the biggest employers in that
state.
Write to Andria Cheng at acheng@marketwatch.com
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