Can American manufacturing really be cornerstone of economic revival?

"Of the 2.3 million jobs lost, not more than half will ever come back," says Dan Meckstroth, chief economist at Manufacturers Alliance for Productivity and Innovation (MAPI) in Arlington, Va. "We may get 1 million more back."

Nonetheless, the Obama administration is indeed making manufacturing an important part of its economic strategy for 2012, and possibly beyond. It is asking Congress to remove from the tax code the deduction for moving expenses when a company transfers jobs overseas. At the same time, it's proposing an expansion of the deduction for manufacturing and a doubling of the deduction for advanced manufacturing technologies – from 9 percent to 18 percent.

The administration is also proposing a new "manufacturing communities tax credit," which would provide $2 billion per year in incentives for three years to companies that build in a community that has suffered a major job-loss event, such as a plant closing.

Mr. Obama covered these points at a Jan. 25 rally at Conveyor Engineering and Manufacturing, a growing manufacturer of giant augers in Cedar Rapids, Iowa. "We've got to stop rewarding businesses that ship jobs overseas [and] reward companies like Conveyor that are doing business right here in the United States of America," Obama said.

Even if Congress does nothing, economists expect to see some manufacturing jobs return. For example, the auto industry is expanding production as consumers, driving old models, start to replace their clunkers.

On Jan. 6, Chrysler announced it will add 1,100 jobs at its Jefferson North plant in Detroit, where it makes the Dodge Durango and the Jeep Grand Cherokee. On Jan. 13, BMW announced it would add 300 jobs at its Greer, S.C., plant, and on Jan. 12, Daimler said it would add 1,100 jobs at its truck plant in Cleveland, N.C.

US manufacturers are also benefiting from a 23 percent decline in the value of the US dollar since 2002. The lower value makes US exports more competitive and imports more expensive. "This will be a tail wind for US manufacturers for quite some time," says Mark Zandi, chief economist at Moody's Analytics in West Chester, Pa.

Organized labor says it's pleased to finally see a pickup in manufacturing jobs. But as Robert Baugh, executive director of the AFL-CIO Industrial Union Council, observes, the US lost 6 million manufacturing jobs between 2000 and 2011.

"Most is internal, people going back to work," he says. "We have no illusions about how deeply the nation has been affected."

In fact, there is no question that manufacturing job losses are still taking place. Mr. Meckstroth points to food, beverages, apparel, paper, chemicals, and plastics as industries that are still shrinking. Some consumer-oriented businesses are also struggling, as are those in the housing market.

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