Why is the U.S. producing fewer goods and more services?

Countries like China and India provide cheap labors, great technical skills, and very low cost production.

The US is transitioning from a manufacturing based economy to a service economy. The reasoning is likely due to the demand for cheap goods and the low-cost of high volume shipping. As a result, many American companies have have moved manufacturing jobs overseas to countries that have lower labor costs. China is indeed the main player in manufacturing these days, but other Southeast Asian countries manufacture goods as well. Hence, it all boils down to profit margin.

Corporations have found that it is cheaper to produce goods overseas and have them shipped in. Whereas services must be performed by someone who is in this country in most cases. The exception being the huge customer service rep industry in India.