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  • 2 min

Employment and Activity in the US Manufacturing Sector

  • 8 June 2014
  • Philippe Waechter
  • Employment
  • Manufacturing Activity
  • Manufacturing Employment
  • Manufacturing Sector
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Yesterday, in the Wall Street Journal (see here), Kathleen Madigan noticed that there was “no renaissance for manufacturing jobs”. And her chart is convincing. It shows the manufacturing production index and manufacturing employment since the business cycle trough in June 2009. The production index on the period is up by 25% and jobs by only 3.2%. Clearly the job recovery is weak, almost non-existent.
USA-Manuf-Act-jobs-J2009But is it different from the past? Is it different from the 1981/1982 recession period which was perceived as the deepest recession since WWII? (before the current period)
The comparison with the same chart starting in June 1982 does not show a real difference. Production is higher in the 1981/1982 period but job also is higher. (I have used the same scale for both charts). Internal demand was higher after the Reagan very strong stimulus.
USA-Manuf-Act-jobs-N82The recovery on production was stronger (33.4%) as it was also on jobs in 1981/1982 but for a mere 5% for this latter. To have a proper comparison it is necessary to take the ratio of production to jobs. It’s a measure of productivity.

The chart below shows that profiles are quite similar. In other words, the relation between production and jobs is the same now than in 1981/1982 after the end of the recession. The gap in the production level between the two periods is related to a too mild demand now and a strong one in the 80’s after Reagan’s stimulus. But demand is a different issue
USA-manuf-jobs-troughBut we know that this kind of analysis is not sufficient to have a clear idea of the business cycle profile (see this post from Paul Krugman here). It’s better to start from the peak cycle better than from the trough.
By changing the period of reference, then, there is a huge difference between 1981/1982 and now.
The production index is below its December 2007 level and so is the case for jobs. The picture was really different in 1981/1982. Production was higher than at the peak cycle but jobs were still lower.(see the charts below, again with the same scale)
We notice that in the two periods, the job level, 6 year and a half after the peak is still well below the peak. In other words, the “no renaissance of manufacturing jobs” is not a specificity of the current period. The main difference between the two can be seen on the manufacturing activity level.
The ratio of activity to employment was clearly higher in the first period than it is now. There was a strong persistence in the 2008/2009 shock.
USA-manuf-jobs-Ratio-PeakThe post-recession figures are quite similar even if in the current period’s demand is weaker than in the 80’s.
But taking figures back to the peak cycle give a very different story showing the persistence and the deepness of the 2008/2009 shock. The story then is clearly different and worrisome for the current cycle. We can wonder also if these figures are consistent with relocation of the manufacturing industry in the USA.
Just looking at post-recession data is not relevant to understand the sluggishness of the current period in the manufacturing sector.

Supplementary charts
USA-Manuf-Act-jobs-D07USA-Manuf-Act-jobs-J81

Related Topics
  • Employment
  • Manufacturing Activity
  • Manufacturing Employment
  • Manufacturing Sector
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