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The United States Experiences a Resurgence in Manufacturing- A Recession May Prove Inconsequential


Sep 9, 2023

On a warm Saturday morning in July, Kathie Leonard received a phone call while getting ready to go boating. The call was from the head of the Maine Department of Economic and Community Development, who asked if Leonard’s company, Auburn Manufacturing, would be interested in hosting President Joe Biden. Leonard was initially skeptical but eventually agreed, realizing it was a unique opportunity.

The following week, President Biden visited Auburn Manufacturing and spoke about the success of his economic agenda, particularly the rise in investments by manufacturers in construction projects. This growth in blue-collar work has been a cause for celebration for Biden, with construction spending increasing by 71% and an additional 106,000 employees in the manufacturing industry.

However, despite these positive indicators, there are concerns about the future of the US economy. The Federal Reserve recently approved raising interest rates to their highest level in over two decades in an effort to combat inflation. While economists are unsure about the impact of these rate hikes on the economy, the fiscal support provided by the government has been a significant boost for manufacturing.

Some manufacturing leaders, like Kathie Leonard, are confident that their companies can withstand a potential recession. Since taking office, President Biden has signed several spending packages aimed at supporting manufacturing, and this has allowed companies to plan for new factories and increased production. The injection of federal funds, combined with a shift towards renewable energy, is creating a manufacturing boom in the United States.

However, there are still concerns about weakening consumer demand. Surveys show that the US manufacturing sector has been contracting for several months, reflecting a decrease in consumer demand, shrinking backlogs, and difficulties in hiring. Consumers are feeling the pinch of higher interest rates and stubbornly high inflation, leading to decreased purchasing power.

While there is optimism about the US economy, it is not without its challenges. Economists argue that the combination of higher interest rates and a moderation in consumer purchases has led to weaker readings in short-term data. Historically, manufacturing has been heavily impacted during economic downturns, but public policies supporting infrastructure investments, manufacturing demand, and clean energy incentives may help prevent mass layoffs during a recession.

Manufacturers’ increased spending on building factories shows their confidence in the long term, even if short-term data suggests a slowdown in demand. However, it remains uncertain how certain manufacturers who do not directly benefit from federal funding would fare in a recession. Despite this uncertainty, some manufacturing leaders, like Kathie Leonard, are confident in their company’s ability to weather a recession based on past experiences.

While higher interest rates may affect manufacturers’ growth plans, there is still strong demand from manufacturers for leasing industrial space. Companies may be more cautious about making major investments until there is more clarity on interest rates and the overall economy. However, there is hope for a soft landing, where inflation slows without a sharp increase in unemployment or a recession, which would benefit manufacturers.

Overall, despite the potential challenges ahead, the US manufacturing industry remains in a good mood and optimistic about its future, supported by the government’s spending packages and the ongoing shift towards renewable energy.

By Editor

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