Small manufacturing businesses play a crucial role in the U.S. economy, comprising the vast majority of manufacturing firms and significantly contributing to economic output and employment. We need to refocus on manufacturing in the US providing more support for Made In America.

Prevalence and Economic Impact

Dominance of Small Firms: Approximately 98.6% of all manufacturing companies in the U.S. are small businesses, with 75.3% having fewer than 20 employees. These small manufacturers are involved in a wide range of industries, producing a significant portion of various goods. For instance, businesses with fewer than 20 employees manufacture 22.9% of apparel and 18.4%of furniture and related products.

Economic Contribution: In 2023, the manufacturing sector added $2.89 trillion to the U.S. economy, representing 10.3% of the GDP. This sector employed 13 million people, accounting for 8.3% of all U.S. jobs.

This segment is under pressure due to economic conditions, interest rates, and regulations.

Challenges and Opportunities

Employment and Skills Gap: Despite employing 12.75 million people, the sector faces a significant skills gap, with 89% of manufacturers unable to fill job openings. This shortage is attributed to shifting skill sets due to advanced technologies, misperceptions of manufacturing jobs, and the retirement of baby boomers.

Technological Advancements: Advances in technology and artificial intelligence offer new automation opportunities for small manufacturers, potentially increasing efficiency and production capabilities.

Future Outlook

Growth Projections: The manufacturing sector is expected to grow, with output projected to increase by 1.5% in 2024 and 3% in 2025, before stabilizing at 2.5% growth in 2026. This growth is anticipated in an environment of lower interest rates, a slightly weaker dollar, and rising business confidence. A critical factor is the cost of capital and debt as a result of CIVID and the Government infusing capital that did not result in productivity for the businesses themselves.

Government Support: Legislative measures such as the CHIPS Act and the Innovation and Competition Act are expected to bolster high-tech manufacturing, while the Infrastructure Investment and Jobs Act aims to expand construction activities, further boosting manufacturing.

August 26, 2024

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