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The economics for successful U.S. manufacturing appear to be swinging in the right direction, but a skilled labor shortage and economic uncertainty are clouding the view. Strategies for success vary among American manufacturers, but one U.S. company chose to invest here and is succeeding. Here’s how they did it.

More than a quarter century after hitting its peak, U.S. manufacturing appears to be back. More and more companies, from Apple to General Electric, Ford and Caterpillar, are deciding to make their products here. But what is behind this manufacturing renaissance? Why are companies bringing back jobs and what makes those companies think they can succeed?

The story of U.S. manufacturing’s decline began in 1977 when about 19.5 million people were employed in the manufacturing sector. Shortly thereafter, the number of manufacturing jobs began to bounce around with slight ups and not so slight downs until 2001, when the United States entered into a recession and manufacturing jobs dramatically declined to a little less than 12 million jobs by 2010.

Several factors, including a strengthening of the U.S. dollar during the 1980s, the entry of China and India into the global workforce in the 1990s, and the wide spread adoption of the Internet later on are thought to have contributed to this 40 percent decline.

Beginning in 2010 and continuing through today, a new trend began to emerge. Instead of manufacturing jobs dropping, the numbers began to rise for the first time since 1997. Last year, after four quarters of steady increases, the Boston Consulting Group published a report outlining why it believed manufacturing would return to the U.S.

Reasons in the BCG report include a shrinking wage gap between the U.S. and China. The report points out how China’s wages are increasing because of a desire to improve the living standards of Chinese workers and a tightening of the skilled labor force in China.

At the same time, U.S. labor costs have flattened and are even declining as workers have lost bargaining power in a weaker, more global economy. This increase in Chinese wages from 60 cents an hour a decade ago to $6 today is now only four times less than a U.S. worker whose fully weighted cost (wages + benefits) is somewhere between $24 and $26 dollars per hour.

Is that a narrow enough gap to bring jobs back to the U.S? Probably not. However, wages are only part of the equation. To get the full picture, one also needs to look at worker productivity. As manufacturing employment was declining, the amount of product coming out of U.S. factories was increasing. Between 1977 and 2010, manufacturing output more than doubled. U.S. workers became more productive.

The rise in productivity is not attributed to U.S. workers working harder, but to investments in training, equipment, and technology. Automated products, smart phones, video conferencing equipment have helped U.S. workers become three times more productive than their Asian counterparts; a trend that continues to this day.

Bottom line: Companies manufacturing in the United States need fewer workers to produce the same amount of work.

Another factor impacting the economics of manufacturing here versus China has to do with the Chinese yuan, which has reached its highest level in nearly two decades, meaning Chinese products cost more.