American manufacturing is in the midst of a renaissance. While the sector has been riding a wave of automation, increased efficiencies and changing macroeconomic forces, manufactures say the Trump administration could help fuel further growth with a reduction in regulations and new tax incentives.

Economic development commissions (EDCs) across the country say manufacturing is thriving with new expansions and investments being driven by local tax incentives, access to quality talent, and a value proposition making it increasingly cost-effective to produce products in the United States. On a national scale, support for innovative technologies, workforce development, and a pro-business environment have the potential to drive American manufacturing to new levels.

Growth in many subsectors and regions

The manufacturing sector is experiencing robust growth across the country. Major manufacturers such as Ford, GM, and Carrier have announced new investments, while the Labor Department revealed the country added 28,000 manufacturing jobs in February. National Association of Manufacturers President and CEO Jay Thomas attributes the surge to a “Trump bump” of positive economic activity and says that “confidence is high, and business optimism continues to soar” due to a focus on pro-business policies. President Trump said in late -January that he wants to cut regulations by 75 percent and that there will “be advantages” for manufacturers to operate in the United States.

American manufacturing has been growing on an impressive scale. NAM reports the top five states for manufacturing growth are Indiana, Wisconsin, Michigan, Iowa and Alabama. Greg Canfield, Secretary of the Alabama Department of Commerce, says the sector remains a “core strength” of the state’s economy, generating 17 percent of state GDP ($35 billion) and 13 percent of the state’s jobs. Canfield notes that Alabama exported a new annual record of manufactured goods in 2016, totaling $10.7 billion in shipments.

“Alabama’s manufacturing climate has been thriving in the past few years, with steady gains in employment, rising productivity, and increasing sophistication among manufacturers,” said Canfield.

He adds that while there has been a sharp decline in apparel, textile and steel manufacturing due to offshoring and automation, automobile manufacturing has been on the rise. While there was virtually no automotive manufacturing twenty years ago in Alabama, there are now  facilities across the state operated by Honda, Hyundai and Mercedes-Benz that  produce more than 1 million vehicles annually.

Up in Michigan, American manufacturing is surging. Detroit emerged from bankruptcy last year and has leveraged manufacturing growth as a pathway to continued recovery. Jennifer Nelson, executive vice president of the Michigan Economic Development Corp., says there has been strong investment in automotive manufacturing, totaling close to $30 billion over the past five to seven years. Michigan has remained the top state for automotive related jobs in recent years, adding more than 200,000 jobs since 2009.

Ryan McCrady, president of the Economic Development Corp. of Decatur & Macon County in Decatur, Illinois., says they have seen new investments in the region. This includes a $200 million investment by Chinese company Fuyao Glass. During its consolidation, Caterpillar also moved 500 jobs to the region to manufacture wheel loads and compactors. And by the end of 2017, Akron Pharmaceuticals will have injected $75 million in the region for recent expansions.

“Decatur has been around 177 years, and manufacturing has been our legacy. [Manufacturers] feel comfortable here and there’s this legacy of workforce where people’s parents and grandparents worked in these settings. They really have pride in what they make here,” says McCrady.

New skills for a new age of manufacturing

Massive job losses over the years can distort the productivity of American manufacturing. According to the Bureau of Labor Statistics, the manufacturing industry lost roughly 5 million jobs between 2000 and 2015. Yet it remains the largest sector in the U.S. economy, having contributed more than $2.17 trillion to the GDP in 2015. Experts say it’s not necessarily that manufacturing has left, it’s that it has changed processes to become more efficient by requiring less human capital.

The U.S. manufacturing sector remains one of the most competitive in the world with output per workers higher than that in any other manufacturing country. The Dallas Federal Reserve manufacturing index also rose to 24.5 in February 2017, the highest reading in more than 10 years.

While unskilled factory line workers have lost jobs over the years due to automation and offshoring, manufacturers have a growing need for skilled workers. Deloitte Consulting projects that at the current rate, 2 million of the 3.5 million jobs expected in the coming decade will go unfilled. More than 80 percent of manufacturing executives surveyed by Deloitte said there is a talent shortage for U.S. manufacturing, and six out of 10 said that production positions were unfilled due to a talent shortage.

American EDCs know that aside from utilities, labor is now often the single most important factor for manufacturers in site selection. New initiatives at the federal, state and local levels are pushing trade schools and training programs to prepare the workforce.

Nelson says that from an economic development perspective, the state that “gets the talent equation correct is going to be the leader.” Two years ago, Michigan Governor. Rick Snyder announced a $50 million grant program to help 18 community colleges boost their skilled trades curriculums.

The search for talent is also forcing manufacturers to look outside of the traditional hubs. San Angelo, Texas, has seen notable growth in manufacturers setting up shop in the region. San Angelo Vice President of Economic Development Michael Looney says continuing to build a talented workforce is the primary need that the sector needs to grow on a national scale. He stresses the importance of encouraging more kids to enter the trades and proposes a “European model” of testing and moving certain students into the trades. “The creation of many products still has to be done by sharp minds and skilled hands. Fortunately for our region, we are home to thousands of skilled fabricators,” says Looney.

Nelson says Michigan is retaining its heritage and legacy of traditional auto manufacturing while also trying to remain competitive in the environment of new advanced manufacturing. She says that as assembly line workers are “somewhat a thing of the past,” the state is trying to ensure its labor pool can meet the need for technicians, operators and machinists. “Automation can be good. We just need to make sure that we are training our folks here within Michigan to be able to work on the more automated technology that’s coming out,” says Nelson.

U.S. leading through innovation and flexibility

The U.S. has also grown to be a world -leader in manufacturing innovation. Since 2014, the Manufacturing USA institute network has been bringing together industry, federal partners and academia to boost U.S. manufacturing competitiveness and promote a national infrastructure. The network has a goal of establishing 15 manufacturing hubs where public-private partnerships can advance new technologies. Hubs already in operations include the Smart Manufacturing Innovation Institute in Los Angeles, the Next Generation Power Electronics Innovation Institute in Raleigh, North .Carolina., and the new Advanced Robotics Manufacturing (ARM) Innovation Hub in Pittsburgh, Pennsylvania.

American manufacturing hubs are also evolving to meet the changing needs of the global economy. Kian Kamas, vice president of Economic Development at the Tulsa Regional Chamber of Commerce, says despite the downturn in oil prices in the energy-driven state, manufacturing has continued to grow in sub-sectors such as aerospace. Port Catoosa, the most inland, ice-free port in the U.S. with access to the Mississippi River, has also diversified in recent years. Kamas says the growing port is an asset that allows manufactures to move materials and product in and out of the city “at a tremendously low rate.”

“Our central location continues to make Tulsa a great location for manufacturers. The port offers a tremendous advantage when it comes to steel-based industries, because it just makes it so much more competitive to move steel here,” says Kamas.

Flexibility and innovation is increasing the attractiveness of many states. In Indiana, leading manufacturers— such as GE Aviation, Rolls-Royce, Alcoa, Raytheon and Praxair— have announced plans to invest more than $900 million in the state and to create more than 1,200 jobs. Indiana Secretary of Commerce Jim Schellinger, says the manufacturing growth is being driven by its balanced budget, AAA credit rating from all three agencies, and overall positive business climate.

Indiana also has strong facilities and programs to drive innovation, such as the Purdue Research Park and Aerospace District. The state also recently joined forces with the city of Fishers to form the Indiana IoT Lab-Fishers, a 24,000-square-foot lab designed to help businesses use of the Internet of Things in ideation, cloud data, edge software, and development.

U.S. companies coming back, foreign direct investment increasing

America’s manufacturing renaissance is also attracting record amounts of direct foreign investment. The non-profit advocacy group Reshoring Initiative says more American companies have been moving manufacturing operations back to the U.S. either for practical or public relations reasons. Rising wages in Asia, higher tax burdens abroad, high international shipping costs, and the desire to be closer to markets are driving many companies to the States.

Canfield says that in 2015 alone, Alabama attracted a record $3.4 billion in investments from foreign companies, making it one of the top states for foreign investment. Since 1999, the state has attracted $25 billion in FDI and generated 77,000 jobs through projects from 32 countries, including Germany, South Korea and Japan. Canfield credits the state’s global reputation and attractiveness to its workforce and business environment.

While the U.S. is attracting more foreign investment there’s also news that manufacturers that would have otherwise moved expansions offshore are keeping them at home. In mid-January, a number of companies— including General Motors, Hyundai, Bayer AG, and Walmart—announced billions of new U.S. manufacturing investments.

Many in the industry say a reduction in red tape and regulations could fuel further growth in American manufacturing. A Q3 2016 survey by the National Association for Manufacturers found that nearly 74 percent of manufacturers reported an unfavorable business climate, including taxes and regulations, were their primary concern.

The Department of Commerce is currently surveying domestic and foreign manufacturers to learn how federal regulations impact businesses and about how it can streamline permitting and simplify regulatory compliance. The Trump administration has promised to cut regulatory burdens by as much as 75 percent, and in late -January, it formed a council with more than 25 manufacturing CEOs to advise the president on manufacturing growth.

Emerson Electric Co. CEO David Farr, who serves as a board chair of the National Association of Manufacturers, wrote in a blog post that federal regulations are “the biggest obstacle” for manufacturers and can cost up to nearly $35,000 per employee per year. Like many manufacturing executives, Farr has generally expressed optimism about the future of the industry.

“It is encouraging to have an administration that will take the time to sit down with manufacturers and hear what we have to say,” Farr says. “… Manufacturers have the solutions. We just need our leaders to get the work done.” said Farr.