1 Chart that Explains Manufacturing Today
Is American manufacturing ever coming back? Yes, because it never went away—only the jobs did.
In a new research note, the St. Louis Fed shows how manufacturing now employs only 11% of workers today, down from 21% in 1987. This is after a particular steep loss of 2 million jobs during the Great Recession as well as the recent recovery of some 400,000 positions.
Yet look at manufacturing output—it’s kept steady even amidst the job losses and recessions. We see manufacturers continue to produce about 14% of all private sector output throughout the 1980s to today.
The only explanation for this divergence in jobs and output are the combined forces of technology and training, which have dramatically increased worker productivity. Now the same number of hours by the same number of workers generates many times more output than before. Here’s how the St. Louis Fed describes the situation—and its surprising upsides:
With millions of people changing jobs, it is easy to find and report on specific examples of companies that moved U.S. operations overseas while ignoring the foreign companies that set up operations here. It is also easy to find people who lost high-paying manufacturing jobs and were forced to accept lower-paying jobs in the service sector. The loss of manufacturing jobs is an ongoing phenomenon associated with a long trend of technological advance that is a necessary part of a growing economy. (Because it does cause hardships for some of those affected, the government extends a wide safety net to assist people who become unemployed or are unemployable because of skill mismatch.)
As the Fed concludes, we should embrace this change as a positive sign of creative destruction and renewal in the economy, one that we’ve already been through in transitioning out of our old agrarian economy. Indeed, we now eat better and enjoy a higher standard of living than we did in the days when agriculture dominated the economy and our workforce. That doesn’t mean we should approach manufacturing unemployment lightly, but rather see it as an opportunity to reinforce the human capital of our workforce for whatever the 21st century has in store.