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U.S. Apparel Manufacturing Showing Signs of Life

A confluence of issues is pointing to an uptick in domestic production.

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American Apparel is one of the largest U.S. manufacturers.

REUTERS/Lucy Nicholson /Landov

Nicole Miller still makes much of its collection in New York.

Nicole Miller still makes much of its collection in New York.

Thomas Iannaccone

WASHINGTON — In a development dripping with irony, U.S. apparel manufacturing is showing signs of a revival at the same time that its greatest champion of the last half-century — textile titan Roger Milliken — didn’t live to see it.

A new survey report from the Institute for Supply Management cited apparel manufacturing as the fastest-growing manufacturing sector in December, while the U.S. Labor Department said Friday that apparel manufacturers added 1,300 jobs last month. Mills making apparel fabric added 1,000 jobs in December to employ 124,800, the Labor Department said.

The burgeoning employment numbers come after decades of catastrophic contraction that saw towns in the south decimated by the closure of apparel and textile plants. Yet the latest growth simply continues a trend that has trickled along for the last two years, as apparel manufacturers have added more than 1,000 jobs in one month several times in that period. The sector added 1,200 jobs in October and 2,900 in January 2010. Apparel manufacturers added 2,000 positions to payrolls in December 2009 and 2,600 jobs in July of that year.

These are figures the sector hadn’t seen since August 1997.

There almost certainly will never be a return to the heyday of U.S. apparel manufacturing, which peaked in 1973 when the industry employed 1.5 million people and was one of the largest employers in the manufacturing sector. In the 38 years since, the sector has progressively shrunk to the point where it today employs only 165,000 workers, making it one of the smallest segments, falling below the employment levels of a slew of industries, including food manufacturing, transportation equipment, fabricated metal products and computer and electronic products.

So what’s driving the resurgence? Workers can thank retailers’ demands for shorter lead times, rising costs in Asia and a pickup in consumer spending on apparel.

Experts said there was a pickup in quick-delivery manufacturing business in the U.S. leading up to the holidays, contributing to the uptick seen in the ISM report. In addition, insiders said rising labor and raw materials costs around the world are making some firms rethink decades of shifting their sourcing abroad — and perhaps bring some of that production back to America.

That was the banner carried by Milliken, who died Dec. 30 at age 95, throughout his career. His belief was that the loss of domestic manufacturing would hurt the economy and job market, and he helped found — and fund — organizations such as Crafted With Pride in the U.S.A. and the American Textile Trade Action Coalition to fight against trade policy that encouraged importing.

Apparel was the fastest-growing manufacturing sector in December and a leading growth industry in production during 2010, according to Norbert Ore, chairman of the ISM’s Manufacturing Business Survey Committee. The report is based on a survey of 350 U.S. companies with a response rate of about 60 percent.

“During 2010, the apparel industry was one of those in major recovery,” said Ore. “It was 12 of 18 industries that grew consistently during the year.”

The emergence of apparel as the top growth category in the ISM Manufacturing Index is likely tied to a rebound in apparel consumption over the last several months of 2010, rather than being a clear sign of a strategic shift toward domestic production. Nonetheless, it shows an expansion of manufacturing, economists said.

“We’re starting to sell stuff again in the U.S. and there’s a limit to how much can be outsourced,” said Peter Morici, professor at the Robert H. Smith School of Business at the University of Maryland. “Retailing is up. It makes sense that production is up. However, it’s not yet an indication of a major shift in production [from overseas].”

The Federal Reserve’s Industrial Production & Capacity Utilization report, which tracks domestic manufacturing, registered a decline in both apparel textile and apparel production in November compared with October, the most recent month for which data is available, but year-over-year production levels were up. Clothing production levels fell a seasonally adjusted 0.3 percent in November compared with October, but rose 7.5 percent compared with a year earlier, the Fed said. Textiles saw production fall 2.5 percent in November, but increased 1.1 percent year-over-year.

An uptick in domestic production of apparel is likely an indication that categories such as high-end men’s suits and designer women’s apparel, some of which is still manufactured in the U.S., are riding the tide of consumer demand, Morici said. Industry estimates are that imports now account for 95 percent of all goods sold at retail, compared with about two-thirds of all merchandise about 20 years ago.

Nigel Gault, chief U.S. economist with IHS Global Insight, said consumer spending reports have shown particularly strong increases in spending on clothes and shoes in recent months.

“It makes sense that if there is an overall pickup in consumer demand for clothing and shoes, the domestic industry would see the pickup just as foreign suppliers do,” Gault said.

Ore said manufacturers are “basically using capacity that existed before the downturn in 2008-2009…and “are using existing capacity more efficiently.”

Apparel executives said they have seen a slight increase in domestic production, mainly in subcontracting, to supply heightened demand by retailers that were carrying trim inventories into the holidays, but saw a surge in fourth-quarter sales and needed fast-fashion items to restock shelves.

As for what might have triggered a recent uptick in domestic activity, Nate Herman, vice president of international trade at the American Apparel & Footwear Association, said, “During this holiday period, companies were keeping such slim inventories because they were burned [in 2009] during the recession. But people were buying, so retailers in the U.S. had to turn to manufacturers for quick turnarounds to fill the shortage of orders. I don’t think it is a significant addition of new jobs, but it was a better utilization of existing capacity.”

Mark Jaeger, senior vice president, general counsel and secretary of Jockey International Inc., said, “I wouldn’t be surprised if there was an increase in fast fashion to support the general increase in retail sales. But I don’t see any strategic drive to return apparel production to the U.S. at this point.”

Bud Konheim, chief executive officer of Nicole Miller, said, “You’re never going to see a statistical rebound in U.S. manufacturing, but that doesn’t mean there isn’t an anecdotal shift. The atmosphere has changed. Stores are buying less units, because the prices are going up and the Chinese don’t want that business.”

Konheim said his company has maintained its mix of manufacturing about 50 percent of its merchandise in the U.S. — actually across the street from the firm’s Midtown Manhattan offices — and the rest imported.

While there’s been an ongoing effort to rezone Midtown Manhattan buildings to encourage more manufacturing, the decline in production jobs over the years has been astounding. According to the New York State Department of Labor, apparel manufacturing jobs dropped to around 19,000 as of 2009 compared with more than 330,000 in 1950.

“The reasons we make things here haven’t changed — you have the control, you can ship it faster, you don’t have excess inventory,” Konheim said. “We find it profitable, and it’s a reason why other companies would look to bring things back. But there are reasons it won’t come back for real, though. There’s no latent infrastructure. Other guys like me in the industry don’t have patternmakers or production managers. I’m sure if you go to any high school in the city, there’s no one that wants to go into the sewing trades. The industry has become buyers, not manufacturers.”

Los Angeles remains the largest center of apparel manufacturing in the country and is home to the company considered the largest U.S. clothing maker, American Apparel (another irony, given the firm was fined in 2009 for employing 1,500 undocumented aliens), while other firms maintaining U.S. production include VF Corp., HMX LLC, Hanes Corp., True Religion Apparel and Carhartt.

Apparel and textile employment in Los Angeles and Orange County has fallen by 22,000 in the last 12 years to 121,308 in 2009, according to the California Fashion Association. But the fashion industry’s sale-value of shipments has risen over the same period to $41.9 billion in 2009 from $22.8 billion in 1997, indicating the quality of goods being made has risen.

Retailers’ demands for quick deliveries have benefited Sjobeck, a Malibu, Calif.-based women’s contemporary label that makes all its clothes in Los Angeles. Jesse Ray Vasquez, Sjobeck’s co-owner and director of sales and marketing, said retail buyers are reacting to popular trends in the weak economy and thus are shopping for items that can be delivered either immediately or within a month.

He noted that another benefit of domestic production is affording its designers more time to design. Sjobeck’s team can submit designs to its local factory two to four weeks before receiving the finished goods. In contrast, with overseas production, Sjobeck would have to give designs to a foreign factory four to five months in advance.

New Crew Production Corp., a Los Angeles-based firm that makes clothes for labels such as Siwy and Raven Denim, said business has doubled from the previous year and is on target to double again this year. It’s also picked up new clients such as Straight Down, a golf apparel company that used to do production in China.

“[Straight Down] is a perfect example of many companies who have tired of the long delays and poor manufacturing habits of Chinese manufacturers,” said Shehera Mocellin, sales director at New Crew. “The capacity to manufacture from start to finish within less than four weeks is a huge advantage to meet our customers’ demands in a timely manner and within the trends’ ever-evolving bubbles. Many businesses today are seeing that the benefits of [being] American made is vastly greater than the elusive savings that is promised by overseas production.”

 

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