How the Energy Boom Affects Manufacturing

When the recession hit in earnest in 2008, many industries took big knocks, including manufacturing. The industry had already been battered by the steady stream of jobs going overseas for cheaper labor, so the recession was particularly rough. Thankfully, the recent energy boom is helping the US gain energy independence and has had a hand in the recent surge in manufacturing jobs.

There are lots of shale deposits in North America, but some of them were unreachable by standard gas production methods, so those deposits went untouched for years. Recent technological developments in the industry have made those shale deposits reachable, which means a huge increase in the amount of natural gas being produced. This in turn fueled the energy boom that has made natural gas more affordable again. With this form of energy manufacturing costing less, industries that are dependent on energy sources for production such as metal, plastics, and carmakers can now increase production on the cheap, spurring the recent uptick in manufacturing hires.

The surge in natural gas production has also created more manufacturing jobs in the energy sector. In order to process those shale deposits, refineries must be built, which helps the construction industry quite a bit. In fact, research firm IHS estimates that new energy manufacturing helped to add a whopping 2.1 million jobs to the economy last year. Even the petroleum and coal industries are getting in on the energy boom, helping to create a 10 percent increase in manufacturing growth since June.

The energy boom shows no signs of stopping, with industry experts predicting that $2.4 trillion will be invested in various energy pursuits over the next decade. In addition, more companies may begin choosing to keep current jobs in the US, rather than shipping them overseas to save money. Countries like China had traditionally been able to produce goods cheaply because of low labor costs, but the increasingly younger Chinese workforce is now demanding higher salaries. This means that the cost advantage China has enjoyed for years is quickly disappearing, especially since extra money must be spent to ship the goods stateside. Increasing labor and shipping costs in China, combined with decreasing energy costs stateside means that it is becoming more cost effective to keep jobs in the United States. This means the energy boom is not only creating jobs, but helping already-employed individuals stay that way.

As the technology for securing natural gas deposits gets better, the cost of energy continues to plummet. This in turn helps manufacturers keep their costs down, which encourages them to expand production and hire people. This energy boom could not have come at a better time, as it is helping people find and keep their jobs during the slow economic recovery.

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