US manufacturing is coming back—Thank shale

Rig hands thread together drilling pipe at a hydraulic fracturing site owned by EQT Corp., atop the Marcellus shale rock formation in Washington Township, Pennsylvania.
Ty Wright | Bloomberg | Getty Images

The U.S. shale boom is beginning to ripple outward to American cities.

The shale mining industry's rising demand for materials and equipment along with the abundance of cheap fuel are fueling a modest renaissance in American manufacturing, according to a report prepared by IHS Global insight for the U.S. Conference of Mayors.

The shale extraction industry is itself driving growth through its hunger for steel pipeline, extraction machinery and other materials needed at domestic shale deposits, including the Bakken in North Dakota and the Marcellus shale in Pennsylvania. The availability of cheap fuel has in turn allowed these energy intensive manufacturing industries to cut costs and compete better with foreign imports.

(Read more: Booming US energy sector feeds manufacturing)

Manufacturing job growth a myth: Pro
Manufacturing job growth a myth: Pro

The steel, iron, fabricated metals, and machinery manufacturing industries saw real sales 17 percent and employment jump by 9.7 percent in metropolitan areas across the country through 2011 and 2012. Some of that growth is happening in once-great centers of American industry and manufacturing: Chicago, Pittsburgh, and St. Louis. Growth is also expected in cities such as Miami and Honolulu.

(Watch: Oil price eased by shale development)

Cheaper energy is allowing many types of manufacturing to grow in the U.S. The report credits shale gas with lowering production costs for everything from feedstock to building materials. Cheaper energy will constitute a competitive advantage for U.S. companies, attracting foreign buys for U.S. products and improving the trade balance.

The dramatic rebound from the recession may not last forever for every industry. Steel and iron production are likely to level off over the next several years, for instance. Overall, however, the IHS expects employment in energy intensive manufacturing to expand by 1 percent annually through 2020, and almost three quarters of those jobs will be created in U.S. cities.