The Manufacturing Renaissance Is Not as Awesome as We Thought

Courtesy of BusinessWeek. By Matthew Philips

If there’s one story that’s been beaten to death by the media in search of feel-good news from what’s been a pretty tepid economic recovery, it’s that of the supposed manufacturing renaissance in the U.S. Both Time and theAtlantic have promoted its success with recent cover stories. I’m guilty, too.

It’s not that American manufacturing isn’t doing well. Companies are moving operations back to the U.S. The South is becoming one of thecheapest places to build things in the world. Factories are humming along at their fastest pace in years. Since the spring of 2010, the U.S. has added 600,000 new manufacturing jobs. That’s great and all, until you consider the 1.9 million manufacturing jobs lost during the recession. Here’s what total manufacturing employment looks like since 1990:

Now, this isn’t a story that has to be told exclusively through the prism of jobs. As long as U.S. manufacturers continue to get more competitive with their foreign rivals, production will continue coming back and adding to the country’s gross domestic product. But from a jobs standpoint, it’s obvious that all that new growth and output is being driven by investments in capital, not labor. So: robots. Unfortunately, robots don’t get factored into the jobs number. If they did, a lot of machines would have earned a lot of jobs in the past few years. It’s not so much that factories are doing more with fewer resources—they’re doing more with fewer people.

The latest jobs report contains some numbers that drive that point home even further. In September, manufacturers added 4,000 jobs, bringing the total number of people with new jobs in manufacturing over the past 12 months to 161,000. A little more than 12 million people were working in manufacturing as of the end of September. That sounds like a lot, but as a share of total labor employment, it’s only 8.7 percent—a record low. Fifteen years ago it was 13 percent.

This is something Alan Tonelson, formerly a research fellow at the U.S. Business and Industry Council, has been harping on for years. He now runs his own public policy blog, RealityChek. In a blog post from Friday, Tonelson argues that the lousy job growth cements manufacturing’s “status as a major job-creation laggard during the current recovery.” Another way to put it is that hiring in other sectors has outpaced hiring in factories. That shouldn’t be terribly surprising, and while it doesn’t mean manufacturers aren’t doing well at the moment, it does throw some cold water on the idea that they’re roaring back.

This story isn’t particular to manufacturing. Economic growth no longer guarantees job growth. Companies are leaner and more profitable than they’ve ever been. That’s great news for shareholders and owners of capital. It’s not so good for workers. The U.S. will probably never recapture the glory days of mid-20th century manufacturing, at least not from a labor perspective. That’s not intrinsically bad, but it does raise a lot of questions about how to absorb into the broader economy the 9.3 million who are still out of work.

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