Global Manufacturing Job Shrink

A lot of political candidates bemoan the loss of manufacturing jobs leading to a shrinking or stagnant middle class. Some blame trade agreements--NAFTA, TPP in particular. But is trade the blame? Are those jobs going somewhere else? From the Economic Policy Institute...

The United States lost 5 million manufacturing jobs between January 2000 and December 2014. There is a widespread misperception that rapid productivity growth is the primary cause of continuing manufacturing job losses over the past 15 years. Instead, as this report shows, job losses can be traced to growing trade deficits in manufacturing products prior to the Great Recession and then the massive output collapse during the Great Recession.

Specifically, between 2000 and 2007, growing trade deficits in manufactured goods led to the loss of 3.6 million manufacturing jobs in that period. Between 2007 and 2009, the massive collapse in overall U.S. output hit manufacturing particularly hard (real manufacturing output fell 10.3 percent between 2007 and 2009). This collapse was followed by the slowest recovery in domestic manufacturing output in more than 60 years. Reasonably strong GDP growth over the past five years has not been sufficient to counter these trends; only about 900,000 of the 2.3 million manufacturing jobs lost during the Great Recession have been recovered. In addition, resurgence of the U.S. trade deficit in manufactured goods since 2009 has hurt the recovery of manufacturing output and employment.

In short, the collapse in demand during the Great Recession and ensuing glacial recovery was responsible for most or all of the 1.4 million net manufacturing jobs lost between 2007 and 2014. Between 2007 and 2014, productivity growth slowed noticeably, and manufacturing output experienced no net, real growth.

If you read this,  it says that during the last Republican presidential administration and when Republicans controlled the Senate and House, a ton of manufacturing jobs were lost during the 'small' recession of 2001 and before the Great Recession of 2008. During the Democratic presidential administration and a mixed-control Congress, manufacturing jobs stabilized.

That's the US, where manufacturing only accounts 10% of all jobs now. Here's what's happening in the rest of the world...

And manufacturing employment is falling almost everywhere, including in China. The phenomenon is driven by technology, and there’s reason to think developing countries are going to follow a different path to wealth than the U.S. did—one that involves a lot more jobs in the services sector.

Pretty much every economy around the world has a low or declining share of manufacturing jobs. According to OECD data, the U.K. and Australia have seen their share of manufacturing drop by around two-thirds since 1971. Germany’s share halved, and manufacturing’s contribution to gross domestic product there fell from 30 percent in 1980 to 22 percent today. In South Korea, a late industrializer and exemplar of miracle growth, the manufacturing share of employment rose from 13 percent in 1970 to 28 percent in 1991; it’s fallen to 17 percent today.

The decline in manufacturing jobs isn’t confined to the (now) rich world. According to the Groningen Growth and Development Center, manufacturing jobs in Brazil climbed as a proportion of total employment from 12 percent in 1950 to 16 percent in 1986. Since then it’s slid to around 13 percent. In India, manufacturing accounted for 10 percent of employment in 1960, rising to 13 percent in 2002 before the level began to fall. China’s manufacturing employment share peaked at around 15 percent in the mid-1990s and has generally remained below that level since, estimates Harvard economist Dani Rodrik. As a proportion of output, manufacturing accounted for 40 percent of Chinese GDP in 1980 compared with 32 percent now.

Here's a quick message to all the political candidates: stop telling us that our jobs are going overseas! The number of manufacturing jobs is shrinking globally. Trade agreements, I suppose, can't hurt if they create markets for our goods and services. And if you the politicians really want to prod the economy, consider this nugget:

Worldwide, services account for 70 percent of value added and 45 percent of employment—the sector “outperforms” in terms of labor productivity.