Should-Read: A very good point from Susan Houseman—and really important: “manufacturing” in America is very different from “computer manufacturing”. The second is doing very well, in spite of offshoring of all kinds and in spite of our “Dutch Disease” produced by capital inflows and service exports. The first, not so much: Susan Houseman: Understanding the [Post-2000] Decline in Manufacturing Employment: “How did so many people erroneously point to automation as the culprit? It was, Houseman said…

…”a widespread misinterpretation of basic manufacturing data.” True, manufacturing real (inflation-adjusted) output and productivity seemed to be growing strongly. However, a closer look revealed that the apparent strong growth was driven by a single industry within manufacturing: computer and electronics products. Despite making up less than 15 percent of manufacturing, the computer industry’s incredible growth pulled up the entire sector’s productivity numbers, papering over widespread weaknesses. “This one industry ends up dominating the manufacturing statistics and gives a misleading impression about what’s going on in the sector,” Houseman said….

Take out computers and the trends become clearer: real gross domestic product growth in manufacturing has been only 12 percent of the private sector average since 2000…. Trade issues, in fact, have left a big dent in manufacturing employment, Houseman said, citing recent research. Exchange rates, tariffs and other trade issues have made domestic manufacturing less competitive, while policy changes have made it easier and cheaper to import products, especially from China. People have been buying more manufactured products, Houseman said, but these products are increasingly made overseas…

February 3, 2018


Brad DeLong
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