WSJ: America Is Back in the Factory Business

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Production at U.S. factories rose last year, but few things were produced at a more furious pace than factories themselves.

Construction spending related to manufacturing reached $108 billion in 2022, Census Bureau data show, the highest annual total on record—more than was spent to build schools, healthcare centers or office buildings.

New factories are rising in urban cores and rural fields, desert flats and surf towns. Much of the growth is coming in the high-tech fields of electric-vehicle batteries and semiconductors, national priorities backed by billions of dollars in government incentives. Other companies that once relied exclusively on lower-cost countries to manufacture eyeglasses and bicycles and bodybuilding supplements have found reasons to come home.

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Manufacturing has always been an integral part of American life. Paul Revere opened a foundry that produced bells and cannons following his famous midnight ride. Henry Ford’s assembly line made cars affordable to the masses. And U.S. industrial might helped win World War II, when nearly half of private-sector employees worked in factories.

That portion plunged after the war, thanks to automation and U.S. companies seeking lower costs overseas. Production capacity, which had grown at about 4% a year for decades, flattened after China’s 2001 entry into the World Trade Organization.

But last year U.S. production capacity showed its strongest growth since 2015 after pandemic-driven shortages and delays caused manufacturers to rethink their far-flung supply chains, said UBS industrials analyst Chris Snyder.

“Covid kind of pulled the covers off and showed everybody how much risk they were exposed to,” Mr. Snyder said.

Today U.S. manufacturing employment is holding steady at about 10% of the private sector, according to the U.S. Bureau of Labor Statistics, with nearly 800,000 jobs added in the sector over the past two years. The total number, 13 million, was virtually unchanged in the latest BLS jobs report.

The industry is actually hurting for workers—about 800,000 more are needed, according to the National Association of Manufacturers—leading to concerns that labor shortages and other bottlenecks could short-circuit the boom.

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Huge government incentives are stoking the frenzy. The Biden administration, seeing electric vehicles and semiconductors as matters of national security, has devoted billions of dollars to expanding those industries in the U.S. States are kicking in billions more.

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Much of the nationwide manufacturing buildup aims to shorten the distance products travel between being made and sold. Danish toy maker Lego A/S, which supplies the Americas primarily from a factory in Mexico, said that is why it is building its first U.S. plant near Richmond, Va.

“This allows us to rapidly respond to changing consumer demand and helps manage our carbon footprint,” Chief Operations Officer Carsten Rasmussen said.

Tennessee-based nutritional supplement company Vireo Systems Inc. imports one of its key ingredients—creatine, an energy-boosting natural compound popular with weightlifters and athletes—from China. After the Covid-19 pandemic interrupted the flow, Chief Executive Mark Faulkner decided to build a plant in Nebraska.

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David Mindell, a professor of the history of engineering and manufacturing at the Massachusetts Institute of Technology who co-founded a venture-capital firm investing in industrial transformation, said major cycles, from the development of interchangeable parts to the rise of the microprocessor, typically play out over several decades. The factory boom signals that the U.S. is at the start of a new cycle, he said.

“Manufacturing has been part of the American story from the beginning,” he said. “I see what’s happening now as a return to a more traditional way of doing things.”

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