Manufacturing jobs have a talismanic force in the politics of the US and many other high-income countries. The underlying belief often seems to be that governments of other countries have enacted policies that allowed them to steal US jobs, and that if the US government just got tough, the US economy could get those jobs back. But US politicians of both parties (and indeed, politicians in high-income countries around the world) have been making similar claims for decades now. Perhaps the actual situation with manufacturing jobs is more complex?Kyle Handley offers some long-term perspective going back to the 1950s in “What happened to U.S. manufacturing? The evidence on technology, trade, and structural change” (Economic Innovation Group, July 2024).As a starting point, consider some basic patterns of US jobs in manufacturing and services, from the always useful FRED website run by the Federal Reserve Bank of St. Louis. The first figure shows total US manufacturing jobs since 1950. The second figure shows total US services jobs since 1950.
As a starting point, notice that the total number of US manufacturing jobs has not exceeded 20 million at any point in the last 75 years. The total number of services jobs was already higher than 20 million back in 1950, and now stands at 136 million. Even when total manufacturing jobs were rising in the 1960s and 1970s, the total increase over two decades was a rise from about 15 million to 19 million jobs; in those two decades, services jobs were rising from 35 million to 85 million. In short, manufacturing jobs have not been a major determinant of total US employment growth for a long time.The reason behind this broad pattern is that productivity growth in manufacturing has been relatively high, so that lower numbers of workers could produce ever-more. Here’s figure from Handley’s essay. Manufacturing jobs were almost 40% of total US jobs back in 1950, but are now about 10%. However, the bottom panel shows that the real value-added per manufacturing worker has roughly doubled over that time.
Total US manufacturing jobs peaked in the 1970s; by the 1984 presidential election, Walter Mondale was arguing that Ronald Reagan had presided over a “Rust Bowl” economy. But most of the recent focus on manufacturing jobs looks at the period starting in the early 2000s when China joined the World Trade Organization and dramatically expanded its role in the global economy. The figure above clearly shows the drop in US manufacturing jobs that starts in the late 1990s and continues through the Great Recession.Looking back, that sharp decline had several reasons: the surge in Chinese exports was one, but another was the way in which new digital technologies and automation were increasing the productivity of some manufacturing workers and reducing the demand for others. Another issue was the sharp rise in US housing construction in the early 2000s: some of the workers with the skills and background for manufacturing jobs could easily transfer to construction jobs–which worked OK until the housing boom turned into a bust.Thus, the underlying story here is not a reduction in the share of manufacturing jobs, which has been happening for decades, as part of an overall shift to services jobs. However, the transition out of manufacturing jobs in the early 2000s was especially rapid. As Handley writes: “The China Shock occurred very fast and U.S. labor markets were simply not able to contemporaneously adjust to the jobs lost in manufacturing …”This shift to services jobs is happening everywhere, including China. Handley writes:
The same pattern prevails in nearly all advanced, high-income economies. The manufacturing share of employment declines at a rate of 30 to 65 percent in Australia, Canada, Germany, France, Japan, South Korea, and the United States from 1980 to 2012. … Using the OECD’s Trade in Employment data we can trace out the path of manufacturing employment since 1995 using internationally comparable data across countries. China remains a manufacturing juggernaut, but its manufacturing employment has been trending sharply downward, peaking at 151 million manufacturing jobs in 2013 and falling to 129 million by 2019. Worldwide manufacturing jobs fall over the same period from 355 to 324 million.
Handley offers this table showing the share of global manufacturing jobs for some key countries. If you compare 2000 to the pre-pandemic year of 2019, you can see that China has a lower share of global manufacturing jobs, while the countries with a substantially greater share of global manufacturing jobs include Vietnam and Indonesia.
Just to be clear, I do believe it’s important that the US economy retains a significant manufacturing capability. Having manufacturing and research in geographic proximity can lead to a more clear-headed perspective on technological problems and solutions. But as manufacturing technologies and productivity continue to rise, in the US and around the world, the number of total US manufacturing jobs might stabilize or even rise somewhat, but truly large gains in manufacturing jobs are not likely in the United States or any high-income country.More By This Author:If Demand For US Treasury Bonds Dried Up, What Warning Signs Would Flash?Are American Jobs Really All That Bad? Trade Wars Are Easy To Win, And Income Tax Is Easy To Eliminate
