Federal Action Supercharges Construction of U.S. Manufacturing Facilities

Explosive Growth in Manufacturing Facility Construction

Three pieces of legislation signed into law by President Joe Biden since 2021 are contributing to a boom in the construction of manufacturing facilities in the United States and leading to an economic boom for the country. The new laws are:

• The Infrastructure Investment and Jobs Act (IIJA)
• The Inflation Reduction Act (IRA)
• The CHIPS Act

You can see the impact these actions have had in this chart from a report by the U.S. Department of Treasury:

The biggest, though not exclusive impact, has been on the computer, electronic, and electrical segment:

These charts present the spending in inflation-adjusted dollars, showing how robust the surge actually is and that it's not simply due to rising manufacturing costs due to inflation. The good news is that, as the Treasury Department's report makes clear, the growth in computer, electronic, and electrical manufacturing construction has not been at the expense of other segments, many of which showed growth, as well.

To give you a sense of the magnitude of this growth, Deutsche Bank Research found that 18 new chipmaking facilities started construction between 2021 and 2023. Additionally, the Semiconductor Industry Association reports that over 50 new semiconductor projects have been announced after the passage of the CHIPS Act. This will keep the U.S. competitive in the technology sector for years to come.

The report points out that these results are largely a US-specific phenomenon, with other industrialized countries not enjoy such healthy and sustained growth

Other Nonresidential Construction Spending Also on the Rise

Other nonresidential construction spending has improved since 2021, as well, increasing by about 15 percent. Public spending increased by 7 percent while private spending increased by nearly 20 percent and both continue to grow.

The IIJA, passed, in part, to recharge the U.S. economy following the COVID-19 pandemic, is largely responsible for much of this growth as this chart shows:

Michigan: The Poster Child for the Manufacturing Construction Boom

One state stands out among all the others when it comes to new manufacturing construction, particularly in the area of renewable energy. Climate Power recently issued a report saying that the Biden Administration's clean energy plan - which includes both the Infrastructure Investment and Jobs Act and the Inflation Reduction Act – is "turbocharging Michigan's economy, positioning it as a solar & EV battery manufacturing powerhouse."

Michigan leads the nation with at least 45 new clean energy projects - EV battery plants and solar energy manufacturing, for example - announced or moving forward since the passage of the Biden clean energy plan. This has created at least $21.5 billion in investment and led to more than 20,000 new clean energy jobs nationally. 21 of the new projects are taking place in low-income and rural communities which will lead to $11 billion in investments and nearly 13,000 new jobs in these areas.

As part of the effort to prepare workers for the transition to the new clean energy economy, Secretary of Energy and former Michigan Governor Jennifer Granholm has announced a $5 million investment by the Department of Energy for Biden's Battery Workforce Initiative that will support new training programs for EV battery manufacturing.

Lifting All Boats with a Rising Tide of Manufacturing Construction

The Treasury report explains the broad and dramatic impact these new laws will have on our nation's economy:

Such investments harness government resources to increase productive capacity-a central goal of Secretary Yellen's Modern Supply-Side Economics policy framework. Private manufacturing for semiconductors, with funding from the CHIPS Act, expand the U.S. economy's footprint in a sector vital for today and tomorrow's technologies. Increased public expenditure on our infrastructure from the IIJA enables a better functioning, more resilient economy. Tax incentives from the IRA address the historically overlooked market failure of climate change, ushering in a green energy transition that steers the country toward sustainable growth. Each of these projects addresses market failures to increase inputs to production which fuels long-run growth.

Government officials aren't the only ones heralding the economic turnaround created by the IIJA, IRA, and CHIPS Act. Union leaders are excited about the future, as well. United Auto Workers President Shawn Fain points to how this is about more than just creating job opportunities. The 'Gander reports that, in February, Fain said that workers want to grow in their jobs, feel like they’re making a difference, and play a role in helping to "solve the climate crisis."

A Deliberate Approach Yields an Exceptional Result

Following the pandemic-caused recession, the U.S. economy is back on track and is the envy of the world. This was no accident. The IIJA, IRA, and CHIPS Act, working together, have had the desired impact.

The Treasury report concludes by saying, "The boom in U.S. manufacturing construction is a real one: driven by the [Biden] Administration's policy focus and led by technology manufacturing while leaving room for broader construction to continue growing. While many factors are at work on this trend, this kind of progress is central to President Biden's economic agenda and Secretary Yellen's approach to Modern Supply-Side Economics".