New data from Sarasota, Fla.-based Reshoring Initiative estimates that 2022 will see a record 350,000 new jobs directly related to domestic companies bringing work back to the U.S. and offshore companies committing foreign direct investment (FDI) to their U.S.-based divisions and facilities.

This follows on the previous record in 2021 of 260,000 new jobs created from onshoring and FDI. To put this in perspective, the number of new jobs related to reshoring in 2010—the year the Reshoring Initiative was launched—was 6,000. The group says that a total of 1.6 million jobs have been brought back to the U.S since 2010.

“We publish this data semiannually to show companies that their peers are successfully reshoring and that they should reevaluate their sourcing and siting decisions,” says Harry Moser, founder and president of the Reshoring Initiative. “With five million manufacturing jobs still offshore, as measured by (the U.S.) $1.1 trillion-per-year goods trade deficit, there is potential for much more growth.”

While the federal and state governments have launched a number of initiatives and legislation to incentivize companies to bring work back to the U.S., it’s clear that many of the recent reshoring decisions have been made in response to an unprecedented spate of catastrophic global economic disruptions.

First, there was the COVID-19 pandemic, which brought the global supply chain to a screeching halt and impacted virtually every sector of the economy. Next was the (still ongoing) semiconductor shortage, which cratered U.S. automotive production, sending shockwaves throughout the supply chain. Only months later, the Ever Given, a massive ship owned by Taiwan-based transport company Evergreen Marine, ran aground and became lodged in the Suez Canal, stopping all traffic through the critical global shipping lane, holding up almost 450 other ships and costing the global economy up to $10 billion, according to insurance giant Allianz. Then there’s Russia’s disastrous invasion of Ukraine and China musing about either invading Taiwan or “decoupling” from the Western economy—or both. With all these events happening over a two-year span, it’s easy to see why so many companies are seeking to shield themselves from supply chain disruptions.

Key Takeaways from Reshoring Initiative’s Data:

• The continuing upward trend is due almost exclusively to companies filling supply chain gaps of essential products, including electric batteries, semiconductors, personal protective equipment (PPE), pharmaceuticals, rare earth elements and renewable energy.
• Shifting geopolitical forces are keeping supply chain risks in focus, resulting in increases in public awareness, government interventions and actions by individual companies.
• The electrical equipment industry has taken the lead with a significant increase in jobs announced due to large electric vehicle battery investments.
• So far, the top three states by number of jobs announced are Kentucky, North Carolina and Georgia, with Texas a close runner-up.

Opportunities Arise

Destabilizing geopolitical and climate forces have highlighted supply chain vulnerabilities and the need to address them, with many companies choosing to address these risks by bringing suppliers much closer to home. If the current trajectory continues, it will reduce the trade and budget deficits, add jobs, and make the U.S. safer, more self-reliant and resilient to global shocks.

“From 2010 to 2019, the decisions to bring jobs back onshore were driven by normal mundane things like duties and freight, carrying costs, travel costs and intellectual property risk,” says Moser. “Over the last two years, that has surged based on the experience of disruption and the fear of disruption.”

He also warns that we should not underestimate the risk of China voluntarily decoupling or of engaging in a conflict over Taiwan, which would likely shut off shipping from China as well as Taiwan and potentially the whole of Asia. Many firms are asking what will happen if all their supplies and suppliers from that region stop and don’t start up again for months or maybe even years. Will they be able to replace those inputs using U.S. companies?

“Since all the factories here are flat-out busy, the easy answer is no—there is no one with available capacity to help. So many companies would go out of business if that happened,” Moser says.

The fear of more supply chain disruptions occurring isn’t the only reason to bring back at least some of the work being performed overseas.

Data from the Reshoring Initiative shows that between 20 to 30 percent of what is now imported from China could be brought back to the U.S. with the difference in price more than offset by the savings on duty, freight, carrying costs and other expenses. These products would gain additional price offsets if they were subject to the 25 percent Section 301 tariff enacted by the Office of the United States Trade Representative (USTR) in 2018.

“I tell companies if you think you will be devastated if the China thing happens, at least bring back the 20 to 30 percent you can bring back to be more profitable. You will get your sources established well before the thousands of other companies who didn’t take care of this early start fighting over those same suppliers,” Moser says.

The manufacturing supply chain is about a lot more than parts and raw materials. Capital equipment won’t be immune from trade disruptions either, and Moser suggests that now is a good time to place orders and take delivery of machinery—while you can. Companies paying U.S. taxes are currently able to expense 100 percent of the cost of capital equipment against their taxes.

“I think we would be okay on capital equipment, but six months ago the delivery lead times for capital equipment was about eight months. If you wait until disruption looks imminent, you will likely see delivery lead times pushed out to two or even three years,” which is why Moser says that now seems like an exceptionally good time for companies to invest and gain the security of making it here.

Skilled Trades Crunch

It’s no secret that North American manufacturers are facing a significant challenge in finding enough skilled workers. The U.S. Chamber of Commerce’s America Works Data Center says that there were 10.7 million unfilled jobs in July 2022, while there were 5.7 million unemployed people. It also estimates that a full 60 percent of jobs in durable goods manufacturing had gone unfilled in that same month.

This begs the question: if domestic firms and foreign direct investment will combine to create an additional 350,000 jobs in 2022, who is actually going to do the work?

Some of this will certainly be taken up through available capacity. The U.S. Federal Reserve says that industrial capacity utilization was at 80.3 percent in July 2022. As for the rest, the reshoring trend may work to recruit more young workers into the skilled trades.

“Not long ago, it used to be that everyone wanted to go to college and become a professional. In the U.S., that’s starting to change, and I think it bodes well for the reshoring workforce,” Moser says. “One reason young people didn’t want to come into manufacturing was the idea that all the jobs were going offshore. But when they see this starting to turn around, and that manufacturing is coming back to the United States, it will look like manufacturing careers are a good choice once again.”

The Reshoring Initiative’s 1H 2022 Data Report contains data on U.S. reshoring and FDI by companies that have shifted production or sourcing from offshore locations to the United States. The report includes projections and analysis for 2022 in categories ranging from the number of manufacturing jobs gained to a breakdown of data by industry, country and state.