Has the Bottom Finally Fallen Out for Manufacturing Job Growth?

Oct. 7, 2015
Do recent manufacturing job losses spell trouble for U.S. competitiveness?

The recent job report from the Bureau of Labor Statistics, which reported that the economy added 142,000 jobs in September, represented 60 straight months of positive job growth by the U.S. economy.

Despite this milestone, recent job reports have been lackluster. Indeed, job growth over the last two months has been paltry, as job growth fell well short of the 2014 average of 262,000 jobs a month and unemployment remained at 5.1%. Furthermore, null wage growth and job losses in specific industries raised some red flags.

The scariest aspect of recent job reports, however, is that despite continued overall employment growth for the United States as a whole, manufacturing has lost 27,000 jobs in the past two months. Not only have manufacturing jobs declined, but wages have been stagnant and hours worked decreased by 0.2 hours, indicating a slowdown in demand.

But isn’t a “Manufacturing Renaissance” a driving force of this sustained, 60-month recovery? So the popular narrative would have you believe, yet this “Renaissance” is largely a myth. Job additions have been driven by resuscitated consumer demand, not by increased competitiveness and productivity as compared to our competitors. And despite continuing claims that all is well, manufacturing job growth has suddenly come to a screeching halt, and the sector looks to be in a perilous position. Before July, the manufacturing sector was growing at a slow but positive 0.4% annual clip in 2015. Now, the United States has fewer manufacturing jobs than it did in January, a frightening departure from the consistent 1.5% annual employment growth that added 750,000 manufacturing jobs from 2010 to 2014 (roughly 35% of jobs lost in 2008 and 2009).

The failure to reauthorize the Export-Import Bank in July epitomizes the United States’ dangerously laissez-faire attitude towards manufacturing that borders on outright neglect.

—Adams Nager

Losses in manufacturing are not spread evenly among industries. In August and September, motor vehicles and parts added 9,000 jobs, expressing continued growth of consumer demand. However, other important industries lost significant numbers of jobs. Fabricated metal products and machinery production lost 11,000 and 9,000 jobs respectively. Computer and electronic production and primary metals also saw reduced employment.

It is tempting to dismiss losses with a wave of a hand and an assumption of increased productivity. However, manufacturing job losses represent a real loss in production strength. In truth, labor productivity growth in the United States is well behind that of our competitors, too often leading to U.S. producers being elbowed out of competitive markets.

True, the job loss data of the last two months are still considered preliminary and will be adjusted by the Labor Department. However, these gloomy numbers are all too predictable. Despite steady employment growth in the U.S. manufacturing sector since the nadir of the Great Recession in 2009, the current employment levels remain 1.4 million jobs below where they were in the beginning of 2008. The failure to reauthorize the Export-Import Bank in July epitomizes the United States’ dangerously laissez-faire attitude towards manufacturing that borders on outright neglect. Moreover, the lack of export financing assistance has already dulled U.S. manufacturing’s competitive edge, and almost certainly has factored into the workforce reduction seen in the past few months.

If anything jeopardizes the current streak of 60 straight months of employment growth, it could be the return to manufacturing decline after a period of steady but shallow growth. Soon, we all might have to face the music and admit that U.S. manufacturing, and U.S. competitiveness in general, could be in big trouble.

Adams Nager is an economic policy analyst at the Information Technology and Innovation Foundation, a think tank focusing on the intersection of technological innovation and public policy.

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