AT A gleaming Rolls-Royce factory in Indianapolis (pictured), a team of workers produces “LiftFans”, gadgets that help fighter planes take off and land without needing much of a runway. This plant is a far cry from the hot, smelly, noisy places that people normally associate with manufacturing. Workers in goggles hand-build the LiftFans, which sell for millions of dollars, with the help of state-of-the-art machinery. Computers quietly hum. The atmosphere is disarmingly serene.

America has some of the world’s most impressive manufacturing facilities. But talk of a “renaissance” is certainly overblown. Growth is being driven by a small number of industries, which are hiring few new workers. And even high-tech operations, at which America should excel, are struggling.

Manufacturing’s golden years were the late 1970s, when employment in the sector hit nearly 20m (see chart 1). That was a fifth of the labour force at the time. From then until the millennium, though, the number of jobs dropped by around 2m. Foreign competition, from Japan and especially China, took its toll. One paper found that a quarter of the employment decline in American manufacturing from 1990 to 2007 was caused by Chinese import competition. Then the recession came, which for many firms proved a killer blow. At its nadir in 2010, manufacturing employed 9% of the labour force.
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When the recession ended in mid-2009, the stage seemed set for a turnaround. From 2009 to 2013 manufacturing workers became cheaper relative to the private-sector workforce as a whole; after taking inflation into account, average hourly earnings in manufacturing were flat.

The boom in cheap shale gas has boosted investment in new factories. Meanwhile, Chinese wages have been rising fast. And until recently the dollar was weak, which made American exports more competitive. No wonder, then, that stories abound of big companies bringing factories back to America. According to a paper from the International Monetary Fund (IMF), America’s manufacturing output bounced back from the recession of 2008-09 faster than after other recent ones (see chart 2). There have been 18 straight months of job growth in manufacturing.

Those who long for a new wave of industrialisation in America will cheer. What they have in mind is better pay. Since wages tend to track productivity, many of those working in factories earn more than their peers in shops and restaurants. Economists at the Brookings Institution, a think-tank, analysed wages in manufacturing and non-manufacturing jobs between 2008 and 2010, controlling for factors that influence earnings, such as sex and education. After doing so, they found that manufacturing workers earned a weekly average of $605, 8% higher than those in other industries. Others reckon that a thriving manufacturing sector would boost America’s exports. MIT’s Task-Force on Production and Innovation suggests that if America is ever to reduce its gaping trade deficit, manufacturing needs to do well.

No exceptionalism
 
Certainly, bits of America are great at making things. Indiana is bursting with high-tech factories like the Rolls-Royce plant. But dig a little deeper, and the figures are not so good.

During the recession, as usual, durable and non-durable goods behaved in different ways. Production of durable goods—cars, furniture, appliances and so on—plunged (see chart 3).

That was unsurprising, since it is fairly easy to put off buying such things. After the recession, people made up for lost time. By mid-2013 output of durables had passed its 2007 peak.

Meanwhile, non-durable goods—groceries, clothes, chemicals and textiles, purchases of which are harder to postpone—were less volatile.

However, the past few years have seen exaggerated performances from both sectors. According to an IMF paper, the recovery of the non-durables sector was weaker than after the recessions of the early 1990s or early 2000s. Durable goods did better: the recovery in output beat those seen after the previous two recessions.

The boom in the durables sector, though, is largely owing to a few industries. Cheap credit, for instance, spurred demand for new motors and rapid growth in carmaking. That sector accounted for over a third of durables growth from 2009 to 2013. (Others, like furniture and computer-manufacturing, barely grew.) This reliance on the American consumer’s appetite for new stuff is worrying, says a report from the Information Technology and Innovation Foundation, a think-tank. It suggests that when pent-up demand is satisfied, a few big industries will suffer. At that point, overall output is likely to stall.

Data on jobs also suggest that manufacturing is not entering another golden age. That is less surprising, since with better technology manufacturing is becoming ever less labour-intensive.

Nonetheless, the post-recession rise in manufacturing employment is one of the weakest in memory. According to the Economic Policy Institute, a think-tank, if employment had followed the trend of the average recovery in the years since 1945, then an extra 1.2m manufacturing jobs would have been created by the third quarter of 2014. In fact, 800,000 or so appeared. Manufacturing-job growth, though it has seen a few brisk years, has barely kept up with that of the workforce as a whole.

Trade optimists will hope American industry shifts towards its relative strengths. As leaner and meaner firms emerge from the ashes of the recession, the argument goes, America will shed low-tech industries and excel at the fancier stuff. It already relies heavily on “advanced manufacturing”—activities that involve lots of science and maths. That sector’s output in 2013 was well over $1 trillion. Exports of this sort reached $900 billion each year, accounting for nearly half of America’s total.

But even here, all is not well. In a few advanced industries, notably aerospace and industrial-machine production, America exports more than it imports. But many industries that have been strong historically are now running big trade deficits: America imports about $40 billion more in pharmaceuticals than it exports, and a similar gap appears in semiconductors. Other areas of supposed expertise, like communications equipment and computers, run even bigger deficits. If America cedes leadership in advanced industries, says Mark Muro of Brookings, it will struggle as the best innovation, labour and investment go elsewhere. That may be happening now: since 2000, advanced-manufacturing jobs have dwindled as a share of America’s total employment.

A few things must happen for manufacturing to flourish. The 2015 Economic Report of the President, released on February 19th, suggests reforming the tax system, which hits manufacturing firms hard. Mr Muro hopes the federal government will double its investment in basic research and development, as Barack Obama has promised. And schools and colleges need to improve. America ranks a miserable 13th in the OECD, a club of mostly rich countries, in the proportion of the population graduating in science, maths and engineering. Without big improvements, manufacturing will soon flounder again.