Breitbart Business Digest: The Surreal War Against America's Manufacturing Boom

It’s Getting Harder for the Media to Hide America’s Manufacturing Boom The American manufacturing sector’s renaissance was on clear display again in Tuesday’s durable goods release from the Census Bureau. New orders are up 8.0 percent year-to-date through September. Core capital goods orders—that is, orders for non-defense capital goods excluding aircraft—are up 10.9 percent. Primary metals orders are up 16 percent, fabricated metal products up 8.8 percent, machinery orders up 13.4 percent, electronic equipment and appliance orders up 6.5 percent, and computer and related equipment orders up a staggering 20.3 percent. Take a step back and look at the longer time horizon. Compared with the January through September period of 2024, President Biden’s final year in office, durable goods orders are up 15.9 percent. Core capital goods orders are up 13.9 percent. Even if we deflate these numbers by the producer price index for private capital equipment, core capital goods orders are up 6.4 percent since the final Biden year. The report, in other words, describes a boom in demand for American-made durable goods. And factories are meeting that demand. Shipments of durable goods, for example, are up 8.5 percent. Core capital goods shipments are up 8.8 percent. Computer shipments are up 18.8 percent. Media Credibility in a Free Fall Of course, you would never know this reading the media based out of our nation’s capital. Politico this week downplayed the factory revival as an “output bump” but warned that manufacturing construction is in a “free fall.“ Meanwhile, Axios declared that the manufacturing renaissance is “lopsided,” with traditional industries supposedly being left behind. Both stories are nonsense. Let’s start with Politico’s construction story: “But like a melting clock, economists say that the notion that tariffs are driving a U.S. manufacturing boom is a surrealist dream…U.S. manufacturing is in the midst of an output bump… But an uptick in manufacturing activity only tells part of the story. Productivity has also been rising, boosting firms’ potential output with the same resources, and the uptick is not necessarily indicative of surging manufacturing investments. Spending on manufacturing construction projects has been in free fall since late 2024, dropping from an annual rate of around $250 billion in November 2024 to $170 billion this August, the most recent month of data available, according to the St. Louis Fed. That’s the lowest level since the end of 2022.” That sure sounds awful. Fortunately, it’s bunk. In the first place, even after the decline, manufacturers were spending $168 billion annually on construction in August, more than twice the roughly $81 billion pace of August 2019. Those figures are in current dollars, but the increase is impressive even after accounting for inflation. Our calculations using the Bureau of Labor Statistics’ producer price index for industrial building construction show that real manufacturing construction spending was 37.5 percent higher than in August 2019. That’s a long way from a construction collapse. Perhaps more importantly, Politico completely leaves out the fact that the Biden administration’s massive spending on subsidies for technology and Green New Deal manufacturing plants was responsible for the surge. The CHIPS Act, Inflation Reduction Act, and infrastructure law helped unleash an extraordinary boom in semiconductor and battery-factory construction. Companies rushed to build expensive new facilities with the help of billions in federal subsidies and tax incentives. Those subsidies pulled forward spending from future years. Census Bureau data gives us some very direct evidence that this subsidized pulling forward is responsible for almost all of the decline. It shows that spending on construction of computer, electronics, and electrical equipment factories has fallen approximately $72.5 billion from September 2024. That’s nearly 90 percent of the entire $81 billion decline. In other words, the supposed collapse in factory construction is overwhelmingly concentrated in precisely the industries that experienced the extraordinary subsidy-driven boom. Nobody expected that pace of construction to continue indefinitely. If anything, the recent construction spending numbers are all the more impressive because so much spending was pulled into the 2022-24 period. Construction spending on facilities for fabricated metals, food and beverages, and transportation equipment remains above its 2019 level. Chemical-plant construction spending is actually up 5.6 percent over the past year. Data Centers, Investment, and Productivity What’s more, an important part of America’s industrial and construction boom is taking place outside of the government’s manufacturing category. Construction spending on data centers gets recorded as “office construction” rather than “manufacturing,” even though data centers are arguably closer to factories than traditional offices. Spending on data center construction reached an annualized $85 billion in August, compared with less than $9 billion in August 2019. Combine data centers and factories, and we’re looking at approximately $253 billion in annual construction spending. That’s nearly three times the combined pre-pandemic figure in nominal dollars. Of course, construction is only one part of industrial investment. Businesses also invest in machinery and equipment. According to the Bureau of Economic Analysis, real investment in industrial equipment surged at a 27 percent annualized rate in the second quarter, following a 5.2 percent increase in the first. That’s an extraordinary acceleration for an economy supposedly suffering a manufacturing investment collapse. One of the odder parts of the Politico story is its treatment of productivity. The article acknowledges that manufacturing productivity is rising but presents this as a reason to discount the increase in output. Apparently, producing more goods with the same resources is now something to be suspicious of. Of course, that’s precisely what productivity growth is. It’s also how an economy raises living standards. Factories that produce more with fewer workers can pay higher wages, lower prices, and expand production without continually expanding their payrolls. A manufacturing renaissance accompanied by rising productivity is exactly what we should hope for. And that’s even more true when we have a slowly growing or contracting labor force. Traditional Manufacturing Is Booming Too The Axios story is no better. Its central complaint is that the renaissance—at least as far as employment goes—has been concentrated in so-called advanced manufacturing, leaving traditional industries behind. As Alan Tonelson pointed out, this is a peculiar standard. For decades, economists have insisted that labor-intensive industries such as apparel and textiles belong in low-wage countries. Now their failure to lead the American manufacturing renaissance is being treated as evidence that something has gone wrong. Axios cited an analysis by Gad Levanon, chief economist at the Burning Glass Institute, showing that while American manufacturers added 40,000 jobs over the year ending in September, the gains were concentrated in advanced manufacturing industries, including chemicals, machinery, computers and electronics, and transportation equipment. Those industries, which account for just 38 percent of manufacturing employment, added 56,000 jobs, while the rest of manufacturing lost 16,000. Axios also pointed to an ISM survey showing that although five of the six largest manufacturing industries reported rising new orders in September, only two reported increased employment. But the distinction between advanced and traditional manufacturing conceals something important: many traditional manufacturing sectors are adding jobs. Over the past year, fabricated metals added 24,400 jobs, electrical equipment added 17,300, and primary metals added 5,700. That’s 47,400 jobs in just three traditional manufacturing industries, more than the 40,000 net jobs added by the entire manufacturing sector. Apparently, these traditional manufacturing industries being left behind didn’t get the memo. What happened is that many of the nondurable manufacturers shrank payrolls. Think paper products, apparel, printing, and food manufacturing. It’s very likely that at least some of these reductions do not reflect voluntary reductions in headcount but are the result of deportations and the growing industries poaching workers. Factory output in traditional manufacturing is also rising. Our calculations using Federal Reserve industrial production data, and the Fed’s own industry weights show that overall traditional manufacturing output increased 0.5 percent over the past year. Within that category, traditional durable manufacturing—which is what almost everyone is talking about when they talk about reviving American manufacturing—grew 2.4 percent. This was offset by a one percent decline in traditional nondurables, which explains some of the headcount contraction. Advanced manufacturing output rose 2.6 percent, not much more than traditional durables. And the gains in traditional durables aren’t just coming from one lucky industry. Production of fabricated metals increased 3.4 percent, primary metals rose 1.3 percent, and electrical equipment climbed 5.4 percent. Machinery production, which falls into the advanced category, surged 6.9 percent. It’s hardly a failure of Trump’s economic program of tariffs, tax cuts, deregulation, and energy production that apparel and food processing aren’t suddenly going to become America’s growth engines. Certainly, their failure to add jobs should not overshadow the renaissance in industries that make metals, machinery, and electrical equipment. American manufacturers are building factories at historically elevated rates, buying more industrial equipment, receiving and filling orders at a breakneck pace, increasing production, and adding workers in industries that many people had written off years ago. The surrealism is in the distorted image of this boom painted by the likes of Politico and Axios.