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Is Manufacturing in America Up or Down?

Bruce Morey
By Bruce Morey Senior Technical Editor, SME Media

I have been confused lately by contradictory messages coming from people and news sources I pay attention to. On the one hand I hear and read—from knowledgeable sources—that manufacturing in the U. S. is becoming “hollowed out.” Factories are closing or moving to cheaper countries. Workers are being laid off. Manufacturing in the U. S. isn’t what it used to be.

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Index of Industrial Production (red) plotted on same graph as Manufacturing Employment (blue). Gray shaded bars are years when the economy was in recession, with the yellow shaded area caused by COVID-19.

On the other hand, in my reporting and other duties for SME, there seems to be a deep well of unfilled manufacturing positions. As of October 2020, the nationwide demand in manufacturing was over 2.1 million jobs, with an average unemployment rate of 5.7 percent, according to Labor Insight (Burning Glass Technologies) as of October 13, 2020.

I hosted a panel discussion in October with employers trying to entice, even begging, workers to apply to work in their shops. This, in the middle of a pandemic-caused recession. Still, people remember the acre-sized parking lots filled with workers’ cars outside huge manufacturing plants. Now they are empty. So is manufacturing up or down? In decline or ramping up?

Your answer may depend on how long your memory is.

Let me explain. I found a measure of industrial production over decades from the Federal Reserve. It’s called the Index of Industrial Production. This picture of manufacturing is rosy. Even with some dips caused by recessions, industrial production rose on average from 1980 to 2019. What about labor? I did some more digging with data from the Bureau of Labor Statistics, for employment. This picture is decidedly mixed, and not good over the long term—but getting better recently. The graphs are superimposed over the same years in the figure below.

There are lots of conclusions one can make using this graphic. I invite you to make your own.

What are mine, you ask? From 2000 to 2010 the trend was higher productivity. More output with fewer people, which means productivity grew tremendously. Then the Great Recession hit. After that, labor tracks production, in general. So, from 2010 to today, more output, more people, which implies productivity is flat. Something happened from 2000 to 2010 to cause all that loss of jobs. China? Automation? Different product mix? More digging is needed. But if the present trends remain, a career in manufacturing is a safe bet.

(Note: I conveniently neglected the downward spike caused by the pandemic. Only time will tell if trends before the pandemic will continue. I suspect they will.)

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