Rising labor and other costs overseas, the desire to reduce supply chain uncertainty and increased transportation costs are driving interest in re-shoring by U.S. producers of goods, according to a June survey by the National Association of Manufacturers (NAM). That bodes well for commercial insurers working in this increasingly competitive market.

Manufacturing and construction were the two industries hardest hit by the recession, accounting for roughly half of the nation's job losses during 2008 to 2009—including 2.3 million workers in the manufacturing sector alone, according to Chad Moutray, NAM's chief economist.

Since then, the manufacturing industry at large has “learned to do more with less” and has slowly started to bounce back, he says, even showing gains in employment: A little over 10% of all jobs created in the economy over the past two years came from the manufacturing sector.

Click “next” to read the top eight reasons why the U.S. manufacturing industry is reinvesting in domestic production.

Photos provided by AP Images.

Rising labor costs (68%).

According to media reports, labor costs in China have risen by some 22% in 2013 alone, and in some parts of the country, as much as 60% since 2009, with a further doubling of wages expected over the next five years. This has eroded China's competitiveness, as it loses manufacturing business to its neighbors and economic competitors worldwide.

Desire to reduce supply chain uncertainty (52%).

A 2012 World Economic Forum report noted that natural disasters are the biggest supply chain risk worldwide, followed by political conflict/unrest, sudden spikes in demand, import/export restrictions, and terrorism. Top network vulnerabilities are reliance on oil, availability of information, extensive subcontracting and supplier visibility—all risks and vulnerabilities for which the U.S. has displayed proven risk management and loss-recovery capabilities.

Increased transportation costs (44%).

According to Logistics Management, volatile fuel costs are expected to continue into next year. Plus, East-West shipping costs look like they might rise, thanks in part to fuel costs, but also because many carriers lost money in 2010 and 2011 and cut their capacity to save money. That could lead to a shipping crunch in the near future.

Increased labor productivity in the U.S. (36%).

The amount of output per hour worked in the U.S. has steadily grown in recent years, with a 0.5% increase in 2011 and a 1.5% increase in 2012. Productivity has grown by roughly 2012 amounts so far in 2013, with the possibility that it might be even higher, according to the U.S. Department of Labor. A big reason for the gains has come from workforces that were downsized in 2008 and 2009, and not yet restored to their pre-recession levels.

Exchange rate volatility (32%).

An October 2013 paper from the World Bank presented a multi-year study of Chinese firms that verified that volatility in real exchange rate has a direct trade-deterring effect. Firms simply do not export as much to countries with unsteady currency fluctuations. Conversely, countries with well-developed financial markets have a natural hedge against exchange rate risk. This puts the advantage back to the U.S., where the dollar's stability competes well against less stable currencies, such as the Brazilian real and the Indian rupee.

Issues with intellectual property (28%).

A report by the World Intellectual Property Organization's 2013 World Intellectual Property Report notes that brands have become more valuable than ever; worth tens of billions among top-flight firms such as Apple, Google, Coca-Cola and other regulars of the Fortune 500. The United States files nearly twice as many annual trademark applications as Brazil, Australia, Mexico, India, France, Russia and Germany, in large part thanks to strong protections of intellectual property both at home and abroad, which encourages businesses to set up shop stateside. Case in point: President Obama recently signed the Trans-Pacific Partnership with 12 countries, including Japan, Australia, Malaysia, Vietnam, Singapore, Canada and Mexico strengthening current U.S.-styles IP protection standards, to the competitive disadvantage of non-TPP nations, such as South Korea, Thailand and China.

Increased energy competitiveness due to reduced U.S. energy costs (24%).

The rise of new domestic sources of shale oil in the U.S. has raised the distinct possibility of energy independence for the country within a few decades, maybe less. Meanwhile, the development of alternative energy sources such as solar power (which the U.S. Department of Energy projects will drop in cost by 75% by 2020) points to a cheaper energy environment for the United States. Given how much energy costs factor into other competitive pressures, this means good things for U.S.-based manufacturing.

Need for higher-skilled labor in the U.S. (16%).

According to Forbes, in each of the last 10 years, U.S. employer demands have exceeded the supply of H1-B visas for highly skilled workers. In 2013, the supply of those visas ran out in just a week. And while this is sparking a passionate debate over immigration reform, the business reality remains a telling one: the need for highly skilled workers in the U.S. is red-hot.

Special Reports /

8 Reasons Why the Manufacturing Industry is Reinvesting in U.S. Production

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