Data Download: West Leads In Advanced Manufacturing

Written by Dan Levine, Oxford Economics

Oxford Economics is one of the world’s leading providers of economic analysis, forecasts and consulting advice. During the past few months, we completed several studies that provide interesting insight into expected trends in corporate relocation, business investment, and economic development. For example, we provide economic forecasts for over 30 major cities in the United States.

Dan Levine, Practice Leader Location Strategies & Economic Development Oxford Economics, Inc.
Dan Levine, Practice Leader
Location Strategies & Economic Development
Oxford Economics, Inc.

During the forecast period of 2014-2018, we project that the GDP of these large U.S. metros will grow faster than national GDP as a whole (3.3% versus 3.1%, respectively). Stated differently, the largest American cities are expected to be engines of U.S. economic growth and this has some important implications for employers.

For example, many of the fastest growing communities (in terms of GDP) are places with rapidly growing populations of college educated workforces. As the large metro areas find themselves in an increasing competition for highly mobile talent and jobs, there will probably be continued convergence in community and economic development strategies; particularly in urban centers seeking to attract technology talent and promote business incubation. On the other hand, perhaps more economic development attention ought to be directed toward providing increased opportunities in areas outside of the largest metro regions.

In addition to the gap between the growth rates of the large metro areas and the rest of the country, there are even greater differences in projected growth rates among the various regions of the country. As the following table indicates, the great growth divide in the United States is not (as commonly assumed) between the North and South. The greater divide is between West and East; and viewed from that perspective, the West is winning.

Regional Forecasts (GDP) 2014-2018

National                              3.1%
Southwest/Mountain        3.6%
Pacific                                  3.5%
South                                    3.1%
East                                      2.8%
Midwest                              2.6%

At the metro level, the story is similar. The three cities with the strongest projected growth are all in the western regions: Portland, OR (5.0%); San Jose, CA (4.9%) and Phoenix, AZ (4.2%). However, one should not be totally misled by the South’s more moderate pace of growth—four out of five of that region’s major cities are forecast to be among the nation’s top 10 fastest growing metropolitan areas in terms of GDP (Tampa, Orlando, Charlotte and Atlanta).

Concentrations of advanced manufacturing are one key determinant of which regions are expected to experience above average growth. When one considers that manufacturing output growth is forecast to be higher than GDP growth over the next decade, some of these differences at the metro and regional levels might become even more pronounced.

Based on our industry projections, electronic components and boards, consumer electronics, and other precision equipment are expected to be the fastest manufacturing growth sectors. Communities that disproportionately capture growth in these sectors will likely continue to be among the top performers in terms of metro and regional level GDP growth.

Recruiting for advanced manufacturing (and technology in general) is already a challenge. In one survey conducted during a recent engagement, human resource executives were asked about the recruitment challenges that they currently confront. Number one on this list was the challenge of adapting to technological advancements.

Whereas technology companies can (and do) often expand in locations where technology talent is located, the same is not always easy to do for advanced manufacturing. Places where land, utility costs, tax structures and market access are conducive for a large capital intensive manufacturing plant are often not the same places where there is an abundance of the advanced technology talent required to run and maintain that plant. University-business partnerships are one way communities and advanced manufacturers are trying close this talent gap.

The other great challenge cited by human resource executives was globalization. This finding, too, is completely consistent with overall economic trends.

For example, in 1990 the total of the world’s exports and imports accounted for 30% of global GDP; today that figure has risen to 50%. Large manufacturers will likely continue to implement near-shore operations as one strategy to meet the challenges of globalization, but these large companies often have the human and physical infrastructure to support global trade through other means as well.

The same is not always true of small and mid-sized companies. These smaller companies often find it more difficult to identify trade opportunities or might lack the technical expertise necessary to export to certain regions. Helping small- and mid-sized companies identify and participate in global trade opportunities is an area of increasing interest to many local and regional economic development agencies.

Taken together, these observations have several implications for corporate location strategies. Recruitment for technical expertise will remain highly competitive and increasingly global in nature. Already in some communities (e.g., the Bay Area) small- to mid-size technology companies are finding it very difficult to compete against large employers-of-choice for highly recruited talent. University-business partnerships might be become a more critical and common strategy for expanding the talent pipelines in some of these highly competitive communities. However, one thing is certain—companies will continue to locate new technology facilities wherever and whenever they have an opportunity to intercept and recruit talent.

Accessing the human and physical infrastructure necessary to support global trade will similarly remain a key driver of corporate location strategies. Whereas large manufacturers will likely continue to avail themselves of near-shoring opportunities, many small- and mid-sized companies might need some help in overcoming the considerable technical and marketing hurdles (i.e., human capital) that limit their access to ever increasing global trade opportunities. This will be an important issue for economic development agencies seeking to promote advanced manufacturing in their communities. Globalization will continue to influence office projects as well. In addition to attracting the talent required to compete globally, direct international air service to specific destinations will continue to remain core requirement in many of these projects.

The following tables provide some insight into how specific industries are currently forecast to grow (or shrink) over the next several years.

U.S. – Top 10 Fastest Growing Industries
(Annual percentage changes unless specified, 2010 prices)

U.S. – Top 10 Fastest Growing Industries
(Annual percentage changes unless specified, 2010 prices)
Last yearChangeNext five yearsChange
Paints, varnishes, etc.

12.2Consumer electronics8.9
Electric components & boards

11.4Electric components & boards8.1
Computers & office equipment

9.1Medical & surgical equipment6.4
Motor vehicles

Ships, rolling stock & etc.

8.7Cement, plaster, concrete etc.6.3
Wood & wood products

8.7Other precision equipment6.1
Pesticides & other

7.5Other special purpose machinery5.7
Domestic appliances

7.5Telecommunication equipment5.6
Motor vehicle bodies & parts

Non-ferrous metals

6.3Wood & wood products5.0

US – Top 10 Slowest Growing Industries
(Annual percentage changes unless specified, 2010 prices)

US – Top 10 Slowest Growing Industries
(Annual percentage changes unless specified, 2010 prices)
Last yearChangeNext five yearsChange
Consumer electronics

-7.7Man-made fibers-3.3
Printing & recorded media


-3.7Garments, etc.-2.1


-1.7Leather goods-1.5
Iron & steel

-1.3Pulp & paper0.3

-1.0Printing & recorded media0.8
Pulp & paper

Basic chemicals & fertilizers

-0.7Pesticides & other2.1
Telecommunication equipment


Industrial Forecast for U.S. – Main Industries
(2010 Prices)

Industrial Forecast for U.S. – Main Industries
(2010 Prices)
% of Manufacturing (2013)$Billion (2013)Ave % Growth 2009-2013Ave % Growth 2014-2018
Consumer non-durable goods
Food, beverages & tobacco

Textiles, leather & clothing

Printing & recorded media


Soaps, detergents etc.

Consumer durable goods
Domestic appliances

Consumer electronics

Furniture manufacturing

Other manufacturing n.e.c.

Intermediate goods
Wood & wood products

Pulp & paper

Coke & refined petroleum products

Basic chemicals & fertilizers
Pesticides & other agrochemicals

Paints, varnishes etc.

Other chemicals n.e.c.

Man-made fibers

Rubber & plastics
Non-metallic minerals

Basic metals

Electric fittings

Other electrical equipment

Electric components & boards

Repair & installation of machinery

Investment goods
Metal products n.e.c.

General purpose machinery

Special purpose machinery

Computers & office equipment

Motors, generators & transformers

Other Misc Categories
Telecommunication equipment

Precision & optical instruments

Motor vehicles & parts

Other means of transport

All Manufacturing


Dan Levine is the Practice Leader, Location Strategies and Economic Development at Oxford Economics, Inc.