2017 US aerospace and defense industry export and labor market study

2017 US aerospace and defense sector export and labor market study Exports and employment experience declining growth, with an outlook for further challenges 2017 US aerospace and defense sector export and labor market study 11Executive summary 2US aerospace and defense export growth has declined 4US aerospace and defense exports support over 1.4 million jobs 12Scope and methodology 16Sources 17Authors 18 Contents2017 US aerospace and defense sector export and labor market study As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting. 2017 US aerospace and defense sector export and labor market study 2 Executive summary There are two parts of this report. The first part is a study of the trends in exports, and the second is a study on employment trends in the US commercial aerospace and defense (A&D) sector.US A&D exports grew in 2016 by $2.5 billion, but the pace of growth declined significantly from 4.0 to 1.7 percent, 2015 to 2016.1 This likely results from the recent challenges that the US Export-Import (Ex-Im) Bank faces, the strength-ening of the US dollar, and global competition. Exports of A&D products reached $146.4 billion in 2016, compared to $143.9 billion in 2015.2 By contrast, exports grew $10.1 and $5.5 billion in 2014 and 2015.3 However, with global tensions on the rise, we could expect to see this trend change in the near future, with export growth possibly gaining momentum.A&D sector exports remained a major contributor to overall US exports, adding approximately $85 billion to the positive trade balance in 2016.4 The sector has been a major component to America’s overall exports, creating significant employment, at approximately twice the national wage rate,5 which helps support the nation’s overall growth. While not included in the US A&D export data, the US Foreign Military Sales program has increased $5.8 billion or 21 percent from 2013 to 2016, but experienced a $13 billion decline or 28 percent in 2016.6The US A&D sector is one of the top employers to the US economy, with 4.1 million workers directly and indirectly employed in 2016.7 Despite an increase in sector revenues over the last five years, total employment has decreased by 344,610 over the same period, with the decline slowly tapering off in the recent years.8 Much of this decline was in the defense subsector and was likely due to the effects of the Budget Control Act of 2011, the ongoing efforts to replace labor with process automation and robotics, and internal efficiency initiatives. Total employment in the sector experienced a decrease of 0.4 and 0.3 percent in 2015 and 2016 after a 2.2 percent drop in the employment level in 2014.9 Of total A&D employment, exports supported nearly 1.42 million jobs in 2016 (34 percent of the total A&D jobs), slightly up from 1.40 million in 2015 and 1.37 in 2014.10 However, growth in export related jobs remained somewhat sluggish in 2016 at 1.1 percent, in line with the slow growth in A&D exports.11Export growth has slowed for the US aerospace and defense sector likely due to a decline in export financing, a stronger US dollar, and increased global competition. 2017 US aerospace and defense sector export and labor market study 3At a glanceAt a glanceUS A&D export growth slowed tofollowing 7.9% and 4.0% growth in 2014 a n d 20151.7% in 20161.42 million jobsUS A&D exports directly supportedin 2016, and contributed 10.1% to overall US exports in 2016, up from 7.1% in 2010$9 billion or 12%US A&D net commercial exports rose sharply in 2016 byUS Foreign Military Sales in 2016declined $13 billion or 28%$1.1% in 2016Direct employment for A&D exports grew marginally byfollowing a 1.7% growth in A&D exports in 2015decreased 0.4% and 0.3%Total employment in the US A&D sector in 2015 and 2016Direct and indirect jobs lost between 2011 and 2016 in the defense subsector totaled165,044 lost jobs Figure 1. US aerospace and defense sector gross and net exports: 2011–2016 (USD millions)Source: Deloitte analysis based on data from United States Census Bureau2011$98,825$53,323$64,563$69,356$73,552$76,557$85,478$117,308$128,296$138,406$143,917$146,39720122013201420152016CAGR 8.2%CAGR 9.9%Figure 1. US aerospace and defense sector gross and net exports: 2011–2016 (USD millions)Gross exportsNet exportsSource: Deloitte analysis based on data from United States Census Bureau2017 US aerospace and defense sector export and labor market study 44US A&D sector imports have declined by about $4 billion or over 6 percent from 2014 to 2016, likely due to increased manufacturing activity in the US over the past few years.