Do You Want to Restore Manufacturing Employment? Smash the Robots!

There has been much public discussion about the demise of US manufacturing jobs and policies to restore manufacturing employment. Indeed, as shown in Chart 1, in absolute as well as relative terms, US manufacturing employment has declined in the post-WWII era. In absolute terms, US manufacturing employment started falling precipitously in the 2000s and has been especially hard hit since the Great Recession. (Shaded areas in this and subsequent charts represent periods of economic recession.) US manufacturing employment relative to total US nonfarm employment has been trending lower throughout almost the entire post-WWII era. While relative manufacturing employment has been trending lower for almost 70 years, manufacturing’s relative contribution to total real GDP (see Chart 2), after ebbing during the 1980s and early 1990s, staged a resurgence in late 1990s until the Great Recession. Although foreign trade is being advanced by some as the reason for the secular decline in US manufacturing, I will argue that technology is the principal factor accounting for this phenomenon.

This post was published at FinancialSense on 03/06/2017.