It's quality over low cost for U.S. clothing manufacturing

Summary

Marketplace Morning Report — August 19, 2025

Episode Title: It's quality over low cost for U.S. clothing manufacturing

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Overview

This episode explores the evolving landscape of U.S. clothing manufacturing, focusing on the shift from mass-market, low-cost apparel to specialized, high-quality products. It uses the example of New Bedford, Massachusetts’s largest tailored clothing factory to illustrate how adaptation and craftsmanship ensure continued operations. Broader economic news sets the context, including retailers’ earnings, the effect of tariffs, and contradictions in the U.S. housing market.

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Key Discussion Points & Insights

1. Retail Sector Earnings & Consumer Behavior

• Home Depot's Results:
  Home Depot reported Q2 earnings and revenue below analysts’ expectations, with total quarterly sales at about $45 billion. CEO noting customers “are focused on smaller home improvement projects,” while major renovations are postponed as people wait for interest rates to drop. (01:05)
• Effect of Tariffs:
  Inventory purchased ahead of tariffs helped delay price increases, but new inventories reflecting higher import costs are arriving—meaning price hikes may follow at retailers like Target and Walmart.
  • Larry Adam (Raymond James):
    “...they really haven't raised prices yet because they had previously imported a lot of goods prior to the tariffs. But they did say that these price increases are coming.” (02:06)
  • Retailers must now “start to increase their cost if they want to maintain their margins and their profitability going forward.” (02:45)
• Broader Retail Outlook:
  Lowe’s, Target, and Walmart earnings are also in focus, as consumer spending and reactions to corporate policies (like Target’s changes to diversity initiatives) influence performance. (01:05)

2. Tariffs and the U.S. Treasury

• Tariffs serve not only to influence trade and jobs, but also generate substantial revenue for the U.S. government, helping to offset increased government spending. (03:10)

3. Housing Market Contradictions

• Housing starts rose by 5.2% from June to July, but new building permits fell. (03:10)
• S&P Global upgraded the U.S. credit rating to AA+. (03:10)

4. U.S. Clothing Manufacturing: Survival via Specialization

• Historical Context:
  U.S. apparel manufacturing is at a fraction of its historic levels. The episode references the decline through the story of the now-defunct Hathaway Shirt Factory in Maine, now converted into condos. (05:13)
• Factory Automation and Process in New Bedford:
  At the Joseph Abboud suit factory, a ceiling-mounted conveyor moves garments through 225 manufacturing steps, an innovation credited with controlling labor costs and keeping the factory competitive.
  • Joe Behena, VP of Manufacturing:
    “Automating the transport between those steps is one way the factory has kept labor costs down, at least enough to stay in business.” (06:13)
• Labor and Market Forces:
  Jason Miller (Michigan State University) explains the massive loss of U.S. apparel jobs over 35 years, with most production moved to lower-wage countries.
  • Jason Miller:
    “For everyday clothes that the vast majority of Americans wear, we will never be competitive again.” (06:39)
• Quality as the Differentiator:
  Rather than compete on price, U.S. manufacturers now excel in high-end, specialized apparel.
  • Jason Miller:
    “Domestically made apparel has to be things that are essentially specialized or tailored...” (06:57)
  • Betsey Stevenson, University of Michigan:
    “It almost has to be focusing on quality rather than low cost.” (07:10)
• Skilled Labor & Craftsmanship:
  The U.S. retains an advantage in skilled labor, particularly relevant in complex tasks like sleeve-setting for suits.
  • Joe Behena (on sleeve-setting):
    “After this job, 100% of our coats get inspected. We’re going to make that coat look perfect before it moves on and it gets to our customer.” (07:47)

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Notable Quotes & Memorable Moments

• “Consumers are putting off home purchases. Those who already own homes are delaying big job kitchen and bathroom remodeling as they wait for interest rates to come down.”
  — Nancy Marshall Genzer, 01:05

• “If you listen to what they said on their earnings, basically they said that they really haven't raised prices yet because they had previously imported a lot of goods prior to the tariffs. But they did say that these price increases are coming.”
  — Larry Adam, 02:06

• “For everyday clothes that the vast majority of Americans wear, we will never be competitive again.”
  — Jason Miller, 06:39

• “Domestically made apparel has to be things that are essentially specialized or tailored.”
  — Jason Miller, 06:57

• “It almost has to be focusing on quality rather than low cost.”
  — Betsey Stevenson, 07:10

• “After this job, 100% of our coats get inspected. We’re going to make that coat look perfect before it moves on and it gets to our customer.”
  — Joe Behena (via Daniel Ackerman), 07:47

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Important Segment Timestamps

• Home Depot earnings and retail sector analysis: 00:43–02:45
• Tariffs, U.S. Treasury, and housing news: 02:45–04:15
• U.S. clothing manufacturing segment begins: 05:13
• Factory automation and manufacturing process: 05:40–06:23
• Economic history and US/China labor shift: 06:23–06:39
• Economic realities and specialization: 06:39–07:10
• Focus on skill and quality in manufacturing: 07:10–07:56

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Conclusion

This episode highlights the ongoing transformation of U.S. clothing manufacturing: a decisive move away from low-cost, mass-market competition toward niches that capitalize on skilled labor and quality. The Joseph Abboud factory exemplifies how automation and craftsmanship allow survival amidst global pressures. The episode’s broader economic observations underscore the complex interplay between tariffs, consumer behavior, and sectoral resilience.

Listeners come away with an in-depth understanding of the challenges and opportunities facing U.S. manufacturing—and why, in clothing, quality's the last stand.

Transcript

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[David Brancaccio]

You can still make clothes in the United States at a profit. I'm David Brancaccio in Los Angeles. First, big retailers are coming out with their spring into summer results. One bellwether for the economy is Home Depot, which posted disappointing profits today. And some of that is the flagging state of the real estate market. Marketplace's Nancy Marshall Genzer reports.

[Nancy Marshall Genzer]

Home Depot reported second quarter earnings and revenue below analysts expectations. It says total sales for the quarter were about $45 billion. Home Depot CEO says its customers are focused on smaller home improvement projects. Consumers are putting off home purchases. Those who already own homes are delaying big job kitchen and bathroom remodeling as they wait for interest rates to come down. Home Depot is focusing more on professional contractors. Lowe's is set to report its second quarter earnings tomorrow. So is Target. Its first quarter sales were dragged down by weak consumer spending and a boycott by consumers upset that Target was ending some of its diversity initiatives. Walmart is set to report earnings Thursday. Last spring it said it would pass the cost of tariffs on to consumers.

[Daniel Ackerman]

Nancy?

[Nancy Marshall Genzer]

I'm Nancy Marshall Genser for Marketplace.

[David Brancaccio]

Staying on Home Depot results, let's turn to Larry Adam, chief investment officer at Raymond James.

[Larry Adam]

I mean, if you listen to what they said on their earnings, basically they said that they really haven't raised prices yet because they had previously imported a lot of goods prior to the tariffs. But they did say that these price increases are coming. And that's why I think the earnings reports that will continue this week, whether coming from Target or Walmart, we're going to have a clear focus on what they're doing from a pricing strategy and really what is the strength of the consumer. As we've been going through this summer.

[David Brancaccio]

We'Re living in a moment where the tariff buffers, stuff that had been piling up in warehouses purchased ahead of tariffs has been drawn down and the merch with the tariffs are moving to the consumer.

[Larry Adam]

You have to remember that these inventory levels on average were around 40 days or so when it came to retailers. And when you look at when they got put into place, they were able to work through a lot of that inventory without increasing their cost. But now that they got this new inventory, I think they're going to have to start to increase their cost if they want to maintain their margins and their profitability going forward.

[David Brancaccio]

Larry Adam, chief investment officer at Raymond James, a firm that has been a marketplace underwriter, there's contradictory data today from the housing market. Housing starts rose sharply 5.2% June to July, but new building permits were down. And here's not a number per se, but a rating AA plus. That is an increase in the creditworthiness rating of the United States as assessed by S and P Global. As we've been reporting, tariffs aren't just tools to manage trade and jobs. There are also taxes on imported goods that generate a fortune for the US treasury, helping to part balance out the big increases in spending in that package recently passed by Republicans.

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[David Brancaccio]

The manufacturing of clothes has been on the decline in the US for decades. One of the biggest employers in my hometown in Maine was the Hathaway Shirt Factory. Once a big famous factory, now it's lots of residential condos. But here and there we still make clothes. Stateside, the largest tailored clothing factory is in New Bedford, Massachusetts. It makes men's suits for Joseph Abood, about 600 of them a day. From reporter Daniel Ackerman. Went to see how they're doing it.

[Daniel Ackerman]

Running along the ceiling of the factory are what look like upside down railroad tracks. It's a sort of conveyor belt shuttle system to get suits in progress from station to station. Fabric moves from cutting to stitching to buttonholing all on its own.

[Factory Worker]

In the old days, there was somebody with a book out on the floor that was moving those goods to one job or another.

[Daniel Ackerman]

VP of manufacturing Joe Behena installed this fabric railway in 2019. Bahina says all told, there's about 200.

[Factory Worker]

225 steps to make a soup.

[Daniel Ackerman]

And automating the transport between those steps is one way the factory has kept labor costs down, at least enough to stay in business. Many other U.S. garment makers have folded.

[Jason Miller]

We used to have over 10 times more people employed making apparel in the U.S. just 35 years ago.

[Daniel Ackerman]

Jason Miller is an economist at Michigan State. He says those jobs have gone to places like China where labor is cheaper. Miller says tariffs can't make up that difference.

[Jason Miller]

Quite frankly, for everyday clothes that the vast majority of Americans wear, we will never be competitive again.

[Daniel Ackerman]

Tough luck socks and underwear. But Miller says men's suits, particularly high end ones, are different. Maybe a once in a lifetime purchase where the customer really wants something special.

[Jason Miller]

Domestically made apparel has to be things that are essentially specialized or tailored, in.

[Daniel Ackerman]

Other words, not competing on price, says University of Michigan economist Betsey Stevenson.

[Nancy Marshall Genzer]

It almost has to be focusing on quality rather than low cost.

[Daniel Ackerman]

And that quality is because the US does still have one advantage in our labor force.

[Nancy Marshall Genzer]

It's that we have very high skilled.

[Daniel Ackerman]

Labor at the suit factory, Behena says a lot of skill goes into one job. Sleeve setting, probably the hardest job in the factory. A worker at a sewing machine plucks a sleeve off the conveyor and carefully stitches it onto a navy coat so.

[Factory Worker]

That the sleeve then will lay in a beautiful manner.

[Daniel Ackerman]

Behna says sleeve setting is so important.

[Factory Worker]

After this job, 100% of our coats get inspected. We're going to make that coat look perfect before it moves on and it gets to our customer.

[Daniel Ackerman]

Because if you can't win on price, you kind of have to be a perfectionist. In New Bedford, Massachusetts, I'm Daniel Ackerman for Marketplace.

[David Brancaccio]

Our producers are Tamar Fagan, Ariana Rosas and Erica Soderstrom. Our senior producer is Alex Schroeder. Our supervising senior producer is Meredith Garretson Morby In Los Angeles, I'm David Brancaccio. It's the Marketplace Morning Report from APM American Public Media.

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