Manufacturing Jobs Are Having Their Best Year Since 1984
There has been a lot of political ballyhoo about bringing manufacturing jobs back to America, notably by President Trump. To do so, President Trump has used two tools including changing the tax code and instituting tariffs. It’s too early to assess the impact of the tariffs as they are now in the process of being negotiated, enacted, rescinded, promised and threatened. But we’re already receiving some early indications about the efficacy of the tax policies. The data can tell us a lot and the early indications, while inconclusive, are trending in the right direction.
Since the recession ended in 2009 manufacturing jobs have been steadily climbing again for the first time since a very brief rise in 1997. That increase has accelerated more recently and job growth in manufacturing on a year over year basis in June of 2018 was stronger than any month since 1984.
From 1997 until 2010 the U. S. lost over 6 million manufacturing jobs or about 35% of all of manufacturing employment. Since that time manufacturing has rebounded by about 10% and added a little over 1 million of these jobs back. Still it has been rare for manufacturing jobs to improve over the past 30 years. Recently, however, things appear to be accelerating. In July 2018 the year over year improvement in manufacturing jobs crested 2.6% for the first time since 1984.
Manufacturing jobs are not an economic panacea. Manufacturing’s share of total U.S. employment is now under 10% and only about 12% of real GDP, so while greatly reduced, it is still a key part of the economy.
Manufacturing seems likely to continue to steadily improve. Perhaps its largest roadblock to improve is a structural lack of available labor in the U.S. With unemployment at 3.9% there’s limited available labor remaining and their individual skills might not be a good fit for the jobs available. As has been discussed on previous commentaries there are some people that remain outside of the workforce that could re-enter. These groups include people with opioid and other drug addictions, others who are disabled, and people with prison records. The numbers of people incarcerated and on disability are now clearly declining for the first time in over a decade and opioid addiction is now receiving far more attention and seems likely to improve going forward. On a combined basis these groups may have pulled well over 1 million people from the labor force. This additional labor will help bring the working civilian labor force participation rate back towards what it was prior to the 2008 recession, although it will take a few years. Nonetheless it provides support for the idea that this economic cycle has room for growth.
Manufacturing job growth seems likely to continue. President Trump’s corporate tax policy has the potential to encourage manufacturing jobs to come back to the U.S., although economists remain highly divided as to how much of an impact this policy will ultimately have. Early indications suggest that it may be having some positive impact but it simply remains too early to make a strong judgement.
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