Reshoring: how jobs came flooding back to America

It is 20 years since the US presidential candidate Ross Perot railed against globalisation, warning of a ‘giant sucking sound’ as millions of jobs left America and went to foreign factories. The presidential hopeful warned that a new economic curse — offshoring — would shut steel mills and factories without government protection. But listen closely and a different sucking sound can now be heard: jobs coming back to America.

A country once panicked about ‘offshoring’ has a new buzzword: ‘re-shoring’. The US recovery is weak and unemployment remains high. But quietly, manufacturing has been making a strong recovery, adding 500,000 jobs since the end of the recession. America, influential analysts believe, is on the verge of a manufacturing renaissance.

The ability to extract gas from shale rocks, by hydraulic fracturing, has helped gas prices collapse to about 20 per cent of the equivalent price of oil, according to HSBC. And less than half its price in most European countries. It suddenly makes sense to build in America again. For the energy-intensive chemical and metal industries, it makes more sense than ever to go west.

Dow Chemical, for example, is building an ethylene production plant in Texas to take advantage of more affordable energy. US Steel is investing $100 million in a new plant in Ohio — it now makes sense to use gas, instead of coal, to purify iron ore. ‘I don’t see there’ll be much left of Europe’s chemicals industry,’ the boss of one of Europe’s major energy groups told me recently. But cheap gas tells only a small part of the story. A stronger Chinese yuan and a weak dollar have handed US exporters a major competitive boost. The quadrupling in oil prices over the past decade has also sent transportation costs soaring.