The common image of American manufacturing, as Harold L. Sirkin wrote in Bloomberg Businessweek, is of huge plants with waves of assembly-line workers producing cars and refrigerators. But there’s a whole other world of niche manufacturers in the U.S., and these small firms are more typical — and should be more of a priority, Sirkin argued — than you might think.
Some 250,000 manufacturers in the U.S. have fewer than 500 employees. Studies show these smaller businesses produce more innovations per employee than large manufacturers. And truth be told, it is generally from these small companies that the jobs of the future will spring. Indeed, as David Rocks and Nick Leiber observed last summer, smaller manufacturers have been leading the “reshoring” wave that my colleagues and I have been writing about.
The average manufacturing establishment was home to 35.3 jobs in 2012, according to EMSI’s 2013.2 dataset. That’s larger than retail trade (14.4 jobs per establishment), finance and insurance (11.9), and the average size across all industries (15.7 jobs, as the following chart from the BLS shows).
But like all establishments, manufacturing work sites are getting smaller — dramatically smaller, in fact, over the last 12 years.
Note: An establishment is a single physical location of some type of economic activity — in other words, a business. A single company may have multiple establishments.
In 2001, the average manufacturing establishment had 41.8 jobs. By 2007, it was 38.3. And in 2012, as we mentioned, it was 35.3.
Part of the substantial drop in the last five years is likely the result of the recession — a period in which many employers go through a “cleansing,” as mentioned in a 2012 paper by the Eleanor Choi and James Spletzer of the BLS. The two economists also concluded, when looking across the board, that “establishments are starting smaller and staying smaller. The average size of establishment births (new startups, excluding seasonal businesses) in the 1990s was around 7.6 employees, whereas the average size of births fell from 6.8 employees in 2001 to 4.7 employees in 2011.”
Another notable trend: Since 2010, job growth in manufacturing has predominantly been in sub-sectors with larger-than-average establishment sizes. Consider this table:
| NAICS Code | Description | 2012 Jobs | 2010-12 % Job Change | 2012 Establishments | Jobs Per Establishments (2012) |
|---|---|---|---|---|---|
| Source: QCEW Employees - EMSI 2013.2 Class of Worker BETA | |||||
| 331 | Primary Metal Manufacturing | 399,767 | 11% | 5,658 | 70.7 |
| 333 | Machinery Manufacturing | 1,090,723 | 10% | 29,015 | 37.6 |
| 336 | Transportation Equipment Manufacturing | 1,445,062 | 9% | 14,282 | 101.2 |
| 332 | Fabricated Metal Product Manufacturing | 1,391,954 | 9% | 58,067 | 24.0 |
| 316 | Leather and Allied Product Manufacturing | 29,436 | 5% | 1,255 | 23.5 |
| 335 | Electrical Equipment, Appliance, and Component Manufacturing | 370,810 | 4% | 7,341 | 50.5 |
| 326 | Plastics and Rubber Products Manufacturing | 641,042 | 3% | 13,090 | 49.0 |
| 312 | Beverage and Tobacco Product Manufacturing | 189,476 | 3% | 5,918 | 32.0 |
| 339 | Miscellaneous Manufacturing | 575,852 | 2% | 30,936 | 18.6 |
| 311 | Food Manufacturing | 1,457,721 | 1% | 29,334 | 49.7 |
| 334 | Computer and Electronic Product Manufacturing | 1,096,643 | 0% | 18,795 | 58.3 |
| 325 | Chemical Manufacturing | 784,101 | 0% | 16,180 | 48.5 |
| 324 | Petroleum and Coal Products Manufacturing | 111,472 | 0% | 2,387 | 46.7 |
| 313 | Textile Mills | 118,205 | -1% | 3,065 | 38.6 |
| 321 | Wood Product Manufacturing | 334,995 | -1% | 14,594 | 23.0 |
| 327 | Nonmetallic Mineral Product Manufacturing | 365,302 | -1% | 16,575 | 22.0 |
| 337 | Furniture and Related Product Manufacturing | 351,304 | -1% | 18,743 | 18.7 |
| 322 | Paper Manufacturing | 380,900 | -3% | 5,714 | 66.7 |
| 314 | Textile Product Mills | 115,898 | -3% | 7,198 | 16.1 |
| 315 | Apparel Manufacturing | 149,036 | -5% | 7,279 | 20.5 |
| 323 | Printing and Related Support Activities | 461,503 | -5% | 30,499 | 15.1 |
| Total | 11,861,203 | 3% | 335,924 | 35.3 | |
Primary metal manufacturing, which includes foundries and steel mills, grew the most from 2010 to 2012 — 11%, which equates to nearly 39,000 new jobs. It has the second-most jobs per establishment (70.7) among all manufacturing sub-sectors. Transportation equipment manufacturing had the third-fastest growth rate, at 9%, and it has the most jobs per establishment (101.2).
At the bottom of the table are printing and related support activities, apparel manufacturing, and textile product mills. All three have jobs-per-establishments ratios of 20.5 or fewer, far below the 35.3 average.
This isn’t to say that there’s a clear relationship between establishment size and employment growth; the results are too varied to make that declaration (see fabricated metal product manufacturing), and statistical analysis doesn’t bear that out. But at a time when establishments are shrinking, most of the best-performing manufacturing industries are ones that still have sizable establishments.
Joshua Wright is an editor at EMSI, an Idaho-based economics firm that provides data and analysis to workforce boards, economic development agencies, higher education institutions, and the private sector. He manages the EMSI blog and is a freelance journalist. Contact him here.