To illustrate the potential of these investments, Figure 1 shows ACC's estimates of the incremental production from the 50 projects (in orange) overlaid on top of our baseline forecast (blue). Including production from new investments, growth likely will average 4.6% per year through 2017, more than double the 2.2% average annual growth of the consensus forecast.
Further development of the nation's shale gas and ethane can drive an even greater expansion in domestic manufacturing capacity that goes well beyond the chemical industry — provided policymakers develop balanced regulatory policies and permitting practices. (ACC supports a comprehensive energy policy that maximizes all domestic energy sources, including renewables, alternatives, coal and nuclear as well as oil and natural gas; places priority on greater energy efficiency in industrial facilities as well as homes and buildings; and relies on sound economic approaches to encourage the adoption of diverse energy sources, including energy recovery from plastics and other materials and renewable sources. The United States must ensure its regulatory policies allow capitalizing on shale gas as a vital energy source and manufacturing feedstock, while protecting our water supplies and environment.)
Following a decade of job losses, the chemical industry added jobs for the second year in a row in 2012. Total employment rose to 798,500, up 1.3% from 2011. This in large part reflects increasing production of comparatively more-labor-intensive plastic resins, synthetic rubbers and manmade fibers. In 2013, productivity gains, which typically average around 2.5% per year, will outpace output growth. Thus, employment will slip by 0.2% this year before expanding by 0.8% in 2014.
However, the graying manufacturing workforce and decades of young people turning away from careers in manufacturing and the trades raise concerns about the quality and quantity of workers that will be available. Government and industry likely will work together to ensure the American workforce is prepared for the jobs required in an emerging manufacturing renaissance.
Moreover, the retirements of baby boomers — the average age of a chemical industry employee is over 50 — present challenges for retaining institutional knowledge. Today, many companies are ratcheting up efforts to avoid knowledge and skill losses (see: "Keep Know-how in Place"). They increasingly are using information technology and other media to capture and store institutional knowledge, and transferring that knowledge via project debriefings, mentoring, communities of practice, etc. In addition, they're taking deliberate steps in career development and succession planning, and employing phased retirements, etc.
Fortunately, the supply of new chemical engineers is on the upswing. After declining in the mid-2000s, chemical engineering enrollments now are increasing, somewhat alleviating what could be a critical challenge. Greater cooperation between industry and academia is playing a role.
The global recovery stalled in 2012 with Europe slipping back into recession and manufacturing in China slowing sharply. In the U.S., uncertainty about the election, the fiscal cliff, and the overall pace of recovery curbed growth. More than three years since the official end of the recession, the majority of manufacturing industries remain below their pre-recession peak. However, while growth slowed in developed countries, emerging market economies continued to expand. This year, growth will accelerate across most regions of the world. Low-cost shale gas will enable U.S. chemical makers to emerge as global low-cost suppliers of many petrochemical and plastic products. As balance sheets continue to improve and the nation's shale resources are developed further, chemical producers and other manufacturers are bringing investment back to the U.S. This manufacturing renaissance offers huge potential, not only to the millions of American workers it will employ, but also to the U.S. economy as a whole.
THOMAS KEVIN SWIFT is chief economist and managing director of the American Chemistry Council, Washington, D.C. MARTHA GILCHRIST MOORE is senior director, policy analysis and economics, for the American Chemistry Council. E-mail them at Kevin_Swift@americanchemistry.com and Martha_Moore@americanchemistry.com.