The Great American Factory Comeback
America’s manufacturing sector is booming.
Orders are rising, factories are turning out more capital equipment, job openings are soaring, and purchasing managers say the expansion continued in August. Four reports released over the past few weeks approach the factory sector from different directions. All of them found accelerating strength in durable goods, the core of U.S. manufacturing.
The latest evidence comes from the Census Bureau’s report on factory orders. On Wednesday, Census told us that new factory orders rose 0.9 percent in July to $663.6 billion. That trounced expectations for 0.5 percent growth. Through the first seven months of the year, orders were 6.5 percent higher than during the same period last year. Strip out transportation, where aircraft orders can make the headline jump around, and growth improves to 6.9 percent. Durable-goods orders are up 7.6 percent.
The industrial core is considerably hotter. Primary metals orders are up 14.4 percent year to date. Machinery is up 12.3 percent. Computers and electronics are up 14.3 percent. Orders for industrial machinery and nondefense communications equipment have risen around 40 percent.
The Factory Production Surge Is Real
Those figures are measured in dollars, so higher prices account for some of the increase, particularly in metals. The Federal Reserve’s industrial production indexes, which measure real physical output, demonstrate that the boom is real and not merely nominal. Business equipment production rose 0.8 percent in July, its sixth consecutive monthly gain, and is up 6.6 percent from a year ago. It grew at a 12.7 percent annual rate in the second quarter.
The turnaround is dramatic. Business equipment output fell one percent in 2023 and 6.8 percent in 2024, the final year of Biden’s presidency, before rising 10.7 percent last year. The index has now climbed above its 2017 average.
Information processing equipment output is up 8.9 percent over the past year, transit equipment 10.9 percent, and industrial and other equipment 3.4 percent. Computer and electronics production is up 9.9 percent. Machinery has gained 4.4 percent. Electrical equipment is up 6.2 percent.
Importantly, this is a durable goods boom. Durable manufacturing output has risen 3.9 percent over the past year, while nondurable output has fallen 1.6 percent. Weakness in paper, chemicals, food, and other nondurables holds overall manufacturing growth to 1.2 percent and disguises the strength of the capital equipment economy.
Jobs Are Returning to the Factory Floor
With all this activity, it is no wonder that factories are looking for workers to keep up. Manufacturing job openings rose to 580,000 in July, up 35 percent from a year ago. Durable goods manufacturers had 429,000 openings, an increase of 68 percent. Their job opening rate has jumped from 3.2 percent to 5.2 percent.
Durable manufacturers have added 72,000 jobs since December, an annualized pace of around 123,000 jobs, or 1.6 percent. They have added workers during every month of 2026. This is all the more remarkable because the economy is at full employment and labor force growth is sluggish, so these workers are being drawn in from other areas of the economy.
The boom is also generating efficiency gains. Durable manufacturing productivity rose at a 2.7 percent annual rate in the second quarter as output surged 7.3 percent, outpacing a 4.5 percent increase in hours worked. Unit labor costs fell 1.6 percent, a powerful sign that manufacturing is a disinflationary force in the economy right now.
The August survey from the Institute for Supply Management, released on Tuesday, says the momentum carried into last month. The manufacturing index registered 54.6, its eighth consecutive month of expansion. Production came in at a roaring 58.3 and has now expanded for 10 consecutive months. New orders and backlogs grew, export orders increased, and customer inventories remained “too low,” pointing toward further production.
Fifteen industries expanded, and only two contracted. Primary metals ranked first and electrical equipment second. Transportation equipment, fabricated metals, computers and electronics, and machinery all grew. Five of the six largest manufacturing industries expanded. The two industries reporting contraction were chemical products and wood products, with the latter likely reflecting the continued sluggishness of the housing market.
The manufacturing renaissance is concentrating exactly where it should: metals, machinery, computers, electrical equipment, communications gear, and transport. America is making more of the machines used to make everything else.
Just a few months ago, the business press was running a nonstop series of headlines claiming that tariffs were hurting manufacturers. The data now show that was pretty much the opposite of the truth. Manufacturing is surging thanks to the Trump administration’s potent economic cocktail of expansionary tax cuts, regulatory rollbacks, and a pro-manufacturing trade policy enabled by tariffs.
Read the full article here