Can an Economic Recovery Occur Without a Robust Manufacturing Sector?

[Dr.Love]

Below is a post that I made back in August detailing some of the damage done to the manufacturing sector in this recession. The Federal Reserve cite agrees with the numbers that Alan Tonelson cites. However, I think it is important to keep one thing in mind: when manufacturing was hit in this recession, it was knocked down from an all time high in output. Further, manufacturing has been in more-or-less steady recovery for the past six months.

I bring these points up because there is a pervasive myth that US manufacturing has been disappearing since the '70s. This is not true. Further, all of the reasons given for fearing the demise of manufacturing have been true for much longer than the current recession. Given all this, why should I assume that manufacturing now has any real problems (besides those directly related to the recession)?

@Dr.Love

Industrial Production and Capacity Utilization in the US, compiled by the Federal Reserve. Look, especially, at Chart 1, which shows the manufacturing output out the United States over the past 40 years. If you look at the chart*, even after accounting for the damage done by the current recession, we’re still manufacturing roughly twice as much as was manufactured in 1970. The population in 1970 was about 200 million, which means the US is now manufacturing roughly 33% more per US citizen than it did it 1970.

The graphs are constructed from source data measuring physical output of each industry, then combined in a weighted average. The weights are “derived from their proportion in the total value-added output of all industries” (from the explanatory notes). Notice that neither the physical output, nor the weights are affected by inflation, and thus the graph itself automatically corrects for inflation.

What is true is that manufacturing employment is dropping. Part of this is probabily because other countries are increasing their manufacturing employment, but it is also because the manufacturing workers that remain are becoming increasingly more productive. Basically, we don’t need as many manufacturing workers because the ones we have are so damn good at what they do.

*The Federal Reserve should update the report to include data from July in about five days, so what I say will be a bit out of date soon…