U.S. factories maintain edge

WASHINGTON -- U.S. factories are closing. American manufacturing jobs are reappearing overseas. China's industrial might is growing each year.

And it might seem as if the United States doesn't make world-class goods as well as some other nations.

"There's no reason Europe or China should have the fastest trains, or the new factories that manufacture clean energy products," President Obama said in his State of the Union address last week.

Yet America remains by far the No. 1 manufacturing country. It out-produces No. 2 China by more than 40 percent. U.S. manufacturers cranked out almost $1.7 trillion in goods in 2009, according to the U.N.

The story of American factories essentially boils down to this: They have managed to make more goods with fewer workers.

The U.S. has lost almost 8 million factory jobs since manufacturing employment peaked at 19.6 million in mid-1979. U.S. manufacturers have ranked near the top of world rankings in productivity gains in the past three decades.

"You can add more capability, but it doesn't mean you necessarily have to hire hundreds of people," said James Vitak, a spokesman for chemical maker Ashland Inc.

The industry's fortunes are brightening enough that U.S. factories finally are adding jobs after years of shrinking their payrolls. Not a lot. But even a slight increase shows manufacturers are growing more confident. They added 136,000 workers last year -- the first net increase since 1997.

What's changed is that U.S. manufacturers have abandoned products with thin profit margins, such as consumer electronics, toys and shoes. They have ceded that sector to China, Indonesia and other emerging nations with low labor costs.

Instead, American factories have seized upon complex and expensive goods requiring specialized labor: industrial lathes, computer chips, fighter jets, health care products.

Still, economist Cliff Waldman of the industry research group Manufacturers Alliance/ MAPI doubts that U.S. factories will continue to expand payrolls in the long run. Manufacturing, he said, is "not a job creator for the U.S., basically."