Posted on 09/15/2026 7:41:31 AM PDT by lasereye
In early 2025, almost no one predicted a recovery in American manufacturing. But manufacturing output has been recovering for a year and a half, and this year hiring finally joined it: factory employment stopped falling in December and has added 58,000 jobs in 2026. The recovery is narrow. Almost all of it, in output and in hiring, comes from advanced manufacturing: chemicals including pharma, machinery, computers and electronics, and transportation equipment. The rest of the sector is still flat or shrinking. The job gains are modest and probably always will be, because these are the most capital-intensive factories in the economy and another wave of automation is arriving soon. But the jobs that are coming pay about a third more than the ones manufacturing has been losing. Output growing fast, employment growing a little, better jobs than the old ones: after two decades of flat output and shrinking payrolls, I'll take it.
In early 2025, almost no one predicted a recovery in American manufacturing. The sector had been going nowhere for a long time: US factories produce about as much today as they did in 2000, and output was flat to down from 2022 through 2024. Then it turned. Year-over-year growth went from −1.7% in early 2024 to +2% last fall, and so far in 2026 output is growing at about a 4% annual rate, the strongest sustained growth since 2018 if you set aside the COVID rebound. For the first year and a half, this recovery was only about output. This year hiring joined. Manufacturing employment fell in 2024 and 2025, stopped falling in December, and has added 58,000 jobs in 2026. You can see it in the chart below: for the first time in years, output and employment are rising together.
The recovery is narrow. It comes almost entirely from what I'll call advanced manufacturing: chemicals including pharma, machinery, computers and electronics, and transportation equipment. These are the R&D-heavy subsectors. The grouping is rough (within transportation equipment, aerospace is booming while autos are roughly flat), but the split doesn't depend on exactly where you draw the line. Advanced output is up more than 3% over the past year. The rest of manufacturing is flat, and has been drifting down since 2022. The drivers are the ones you'd guess: semiconductors and computers riding the AI buildout, aerospace recovering, and power and grid equipment shipping from multiyear backlogs. What about tariffs? The industries older tariff rounds were meant to protect (apparel, furniture, textiles, paper) are still shrinking. The 2025 rounds do target chips, pharma, and autos, so tariffs probably help the advanced side. They push in the same direction as everything else here: more advanced production in the US.
Hiring splits the same way. Advanced manufacturing employs about 4.8 million people, 38% of all manufacturing workers, and has added 54,000 jobs this year. Employment in the rest of manufacturing is flat this year and down over the past 12 months. You can see it in the chart: advanced pulled ahead in the post-COVID hiring boom, gave some of it back, and is now growing again. The rest of manufacturing is still drifting down.
Let's not get too excited. Fifty-some thousand jobs in eight months is a modest number, and I doubt it will ever be a big one. These are the most capital-intensive factories in the economy. Semiconductor output has grown 15% a year for two years (some of that is quality adjustment, but the direction is clear) while semiconductor payrolls actually fell. And many of the buildout's jobs land in construction rather than on the factory floor: construction as a whole has added 87,000 jobs this year, in a year when plant, data-center, and substation building is booming. Still, modest growth beats the alternative, and it can last. The equipment makers are shipping from backlogs that stretch to 2030, and TSMC, Micron, and Lilly all have plants starting production next year.
The jobs are also better than the ones manufacturing has been losing. Advanced manufacturing pays $43.54 an hour on average, a third more than the $32.92 in the rest of the sector. The famous manufacturing pay premium is by now really an advanced-manufacturing premium: the rest of the sector pays below the private-sector average of $37.75, while every advanced subsector pays above it. Part of the gap is occupational mix, more engineers and fewer line workers, but that's exactly the point. The sectors adding jobs pay a third more than the sectors losing them.
Looking ahead, I expect the two lines in the first chart to keep separating. Advanced output should grow strongly for years. The backlogs and the plant openings all point that way. Employment, much less so, because another wave of automation is arriving soon. US robot installations are only now rebounding from a two-year slump, but the next generation, AI-driven and humanoid, is just entering factory pilots, and semiconductors show where this is heading: output up 15% a year, payrolls down. If robots thin out the production floor, the jobs that remain will skew even more toward engineers and technicians, better paid and fewer of them.
Data: Federal Reserve G.17, manufacturing (NAICS), July 2026 release; BLS Current Employment Statistics (August 2026 report). Advanced = NAICS 325, 333, 334, 336, an analytical grouping, not an official BLS category; output split uses the Fed's relative importance weights. Robot installations: IFR World Robotics 2025. Backlog and facility figures from company disclosures.
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The tariffs on computer chip imports, pharmaceuticals and other high-tech imports make sense. Those are high paying manufacturing jobs. It's also a bad idea to be dependent on imports of those things for national security reasons. The rest of the tariffs didn't reshore anything and those jobs pay a lot less anyway.
Trump's "tariffs on everything" policy, including food and clothing, is incompetent both economically and politically. The rising cost of living under Biden helped get him elected.
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