By Mike Walden
Manufacturing has a special place in our economy and is something people can easily relate to. The output of manufacturing companies, spanning a variety of items from vehicles to clothing to chairs, are things people can directly see, touch, feel and use.
Manufacturing also has an important place in our economy. In the 19th century it surpassed farming as the dominant sector of the U.S. economy, and it became the employer of millions of workers. We clearly saw this shift in North Carolina, as the “big three” of tobacco, textiles and furniture manufacturing led the state economy for a century. Indeed, in North Carolina there was a strong link between manufacturing and farming, as the key raw materials for cigarettes, clothing and furniture came from the state.
The relative importance of manufacturing, especially traditional manufacturing, began to subside in the late 20th century. The main reason was foreign competition, especially from Asian countries, where manufactured products could be made more cheaply due to lower labor costs. Indeed, manufacturing is at the center of the current debate about bringing jobs to the U.S. A major element of the debate over tariffs is linked to recovering manufacturing jobs.
With North Carolina’s history and continuing reliance on manufacturing, the status and future of manufacturing is an important issue for the state. As a result, for the last several years I’ve devoted a column to the manufacturing outlook in North Carolina. Here is the 2025 version.
As always, there is a mix of good news and what I’ll call challenging news. Among the good news is that the value of manufacturing production in North Carolina has fully recovered from the pandemic and now exceeds pre-pandemic levels. Specifically, manufacturing production in North Carolina is 1% higher than in 2019, the year prior to the pandemic. However, this is much less than the 7% increase in manufacturing production in the nation over the same time period. In comparison, total economic activity in the North Carolina economy, including all sectors, jumped 16% between 2019 and 2024, much faster than the 12% increase in the total national economy.
Regarding jobs, from 2019 to 2024 manufacturing employment in North Carolina dropped 3%. In the nation they rose 1%. However, all jobs in North Carolina increased 9% between 2019 and 2024, almost twice as fast as the 5% gain in the nation for all jobs. Interestingly, the average hourly wage rate for state manufacturing jobs surged 28% from 2019 to 2024, faster than the price inflation of 22% during the same time period, and faster than the 23% increase in the average national manufacturing hourly wage rate.
I’ve presented many numbers here, so here’s a verbal summary of the current big picture of manufacturing in North Carolina. North Carolina manufacturing production has modestly increased the last five years, but this is in comparison to a much stronger increase in national manufacturing, and a much, much stronger increase in the overall North Carolina economy. Employment in manufacturing dropped slightly in the last five years, while national employment in manufacturing increased slightly, and overall employment in North Carolina increased twice as fast as total national employment. But increases in wage rates paid to manufacturing workers in North Carolina since the pre-pandemic year of 2019 more than kept up with inflation and were larger than the wage gains for manufacturing jobs in the nation.
This analysis leaves several key questions. First, if North Carolina manufacturing jobs have been dropping, why have pay rates in manufacturing jobs significantly risen? One answer is there are several thousand job vacancies in the state’s manufacturing sector. Numerous studies show that young people, especially, are not interested in jobs in manufacturing because they equate the jobs to being physically difficult and requiring long hours. Even if this perception is not completely accurate, with North Carolina being one of the fastest growing states in the nation, there are plenty of jobs available for young people in other sectors. However, manufacturing firms have tried to compete by significantly raising pay rates.
Second, why has North Carolina manufacturing production improved at a much slower pace than national manufacturing, and why has North Carolina lost manufacturing jobs while the nation gained those jobs? The answer appears to be in the unique composition of North Carolina’s manufacturing. Earlier in the column, I reminded you of the transition North Carolina has experienced in manufacturing by shifting out of tobacco, textiles, furniture and related industries to sectors like technology and pharmaceuticals. In looking at the data from 2019 to 2024, this transition is still continuing. Production in tobacco, textiles, furniture and paper all declined, while pharmaceuticals, technology, metal manufacturing, mining and transportation increased. Also, the job losses in tobacco, textile, furniture and paper manufacturing accounted for 90% of the state’s drop in manufacturing jobs between 2019 and 2024.
Third, and probably most important, what will the future hold for North Carolina manufacturing? My opinion is manufacturing will continue to be important to the state economy, but manufacturing will also continue to change. Tech and pharmaceuticals will likely expand, as will relatively new manufacturing sectors in aeronautics, vehicle production, computer chips and batteries.
There’s even some optimism that technology like artificial intelligence (AI) could help revive traditional manufacturing sectors such as textiles. Some think AI could streamline garment production to make domestic firms competitive with foreign firms on costs.
Hence, I’m optimistic about manufacturing’s future. Should you be, too? You decide.
Mike Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.
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