Help Factory Workers, Smash Machines

Higher productivity is a big reason for falling employment in the sector.

By SHARE

The Congressional Budget Office released a study last week on employment in the manufacturing sector of the economy this decade. It's down, but blame the machines as much as Asia. I put the good bits in bold:

Although the decline in manufacturing employment in recent years is not a departure from long-standing trends—the sector’s share of total employment has been falling steadily for more than half a century—the recession of 2001 hit manufacturing particularly hard. ... The steep decline in manufacturing employment since 2000 is associated with two interrelated developments: rapid gains in productivity (output per hour) in U.S. manufacturing and increased competition from foreign producers. Productivity in manufacturing has risen by about one-third since 2000, and growth in that productivity has consistently exceeded that of the overall nonfarm business sector. 

Competition from overseas helped spur U.S. firms to boost productivity, but that competition has also dampened demand for goods produced in the United States, despite domestic manufacturers’ efforts to reduce costs through productivity enhancements. Those same developments have also had some beneficial effects for many U.S. residents, including the ability to buy manufactured goods at relatively low prices.



This decline in manufacturing employment represents a reallocation of jobs among industries rather than a decline in total employment in the United States. Until recently, other sectors of the economy have more than compensated in terms of overall employment, as evidenced by the relatively low 4.7 percent unemployment rate that existed during early 2007 and the roughly 7.5 million net new jobs created in the U.S. between early 2004 and the end of 2007.