Downward trends in U.S. manufacturing innovation pose a serious threat to America's long-term economic growth and living standards, according to a new report released today by the Council of Manufacturing Associations (CMA) and The Manufacturing Institute of the National Association of Manufacturers (NAM).

“America’s continuing leadership in innovation and the production of high-value manufactured goods is essential to our nation’s long-term economic growth, productivity gains and standard of living,” according to NAM President John Engler. “But America’s economic leadership will be at risk if trends continue.”

The report’s author, economist Joel Popkin, stated “Through the U.S. accounts for 40 percent of all R&D spending in the industrial, world, we cannot become complacent about this leadership position.”

According to the new report, "five clear warning signs" show that America's innovation process is at risk:

• Manufacturing output since the last recession lags that of earlier economic recoveries - its 15% growth is only half the pace averaged in recoveries of the past half-century.

• Manufacturing capacity remains underutilized, slowing investment in new plants and equipment. Since the last recession, total plant and equipment investment has risen at half the pace averaged in recoveries of the past half-century. Manufacturing capacity has grown at less than 1 percent annually (compared with 5% in the 1990s).

• The U.S. share of global trade in manufactured products has shrunk, falling from 13 percent in the 1990s to 10 percent in 2004. The U.S. now runs a trade deficit in Advanced Technology Products, and the U.S. share of global trade in some of the highest value-added export industries such as machinery and equipment is falling.

• U.S. manufacturing offers rewarding and desirable careers for highly skilled workers. Yet the widespread perception that manufacturing employment is unstable and lacks job opportunities discourages new worker entry. While manufacturing continues to pay better than other industries, the sector is experiencing a broadening shortage of skilled workers.

• America's long-standing leadership in R&D is being challenged. While the U.S. continues to spend more than any other country on R&D investment, U.S. growth in R&D has averaged only about 1% per year in real terms since 2000.

Popkin adds, "The broadening shortage of skilled workers threatens our nation's ability to compete in today's fast-paced and increasingly demanding global economy and will only worsen as the baby boomers retire.”
The complete report, "U.S. Manufacturing Innovation at Risk," by Dr. Joel Popkin is available at