Thursday, March 10, 2011

Rust Belt Reset: Manufacturing

Hot off the presses of The Economist:

For the first time in many years, American manufacturing is doing better than the rest of the economy. Manufacturing output tumbled 15% over the course of the recession, from December 2007 to the end of June 2009. Since then it has recovered two-thirds of that drop; production is now just 5% below its peak level (see chart 1).

Factory employment has been slower to recover than output, since productivity has risen. Nonetheless, that too is growing. In February factory payrolls rose by 33,000 from January. In the past year manufacturing employment has gone up by 189,000, or 1.6%, the biggest gain since the late 1990s. Total employment rose just 1% in that period. Unemployment has fallen more sharply than the national average in Illinois, Ohio and Michigan, which are relatively dependent on manufacturing.

America still makes things, even for export. But number of people required to make those things continues to drop. A reinvestment in manufacturing will not fuel a job recovery.

That lesson seems to be tough for Rust Belt states to learn. Those waiting for the return of manufacturing aren't paying attention. The output never went away. On the other hand, the jobs most certainly did.

1 comment:

Steve said...

Jim, I'm very glad to read this post. I have tried to convince people of this reality to no avail for the most part. Most people believe that "if we just brought back the manufacturing jobs (from China) and started making things again everything would be fine". A lot of those manufacturing jobs didn't go to China. They were automated away. We still make things, lots of things many of which get exported. There are lots of factories in the US doing this. This difference between 1955 and now is that in 1955 those factories employed armies of workers that they don't need to employ anymore. In some cases these factories have increased their output by a factor of 10 while having 10% of the workers. While it's not always that extreme, that's the reality of manufacturing jobs.

Unfortunately, this is hard lesson for rust belt states and other states to learn. With Pittsburgh being a center for robotics, ironically, Pittsburgh will benefit from this. The rest of the rust belt needs to think differently for its recovery.