the last 10 years have not not been good to US manufacturing workers

In my previous post I showed how US service employment totals have almost reattained their pre-recesionary levels, while goodsproducing sectors remain well below 2007 levels. Indeed, goods producing industries (mostly mining, construction and manufacturing) are about 83 percent of pre-recessionary job totals, whereas service industries are nearly 99 percent.

The decline of construction is a well-understood contributor. What is less appreciated, however, is the dramatic fall in manufacturing employment. Today, the US manufacturing sector employs about 1.1 million fewer workers than it did on the eve of the recession.

Yet while the recession had important impacts on manufacturing, it really just sped up the sector’s decline. Since January 2001 the US manufacturing industry has shed about 5.1 million jobs, a 30 percent reduction.

Although US manufacturing has declined as a share of total US employment for the past 40 years, the 2000s really marked the first period of substantial job losses (prior to that US job totals grew while manufacturing remained stagnant). Indeed, manufacturing employment totals in 2000 were about the same as in 1970.

US Manufacturing Employment 1960-today (source: BLS-CES)

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Although manufacturing is not as central to the Colorado economy as it is in many other states the story is similar.

Colorado Manufacturing Employment 1990-today (source: BLS-CES)

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So what happened in the 2000s?

China.

In 2001 China was granted World Trade Organization (WTO) status. This means that China was allowed to participate much more freely in international trade. The ramifications for both countries have been tremendous. For China, the economy has flourished and tens of millions of people have seen substantial increases in income and living standards.

In the US, increased Chinese imports have helped keep inflation in check and allowed people to buy more stuff. The following chart shows the rapid growth in the US trade deficit with China over the past 10 years.

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This dynamic has had important repercussions. Although prices are lower in the US, and millions of Chinese have moved out of poverty, there has been a cost to US workers. For many who have lost their manufacturing jobs, it has been difficult to find employment that paid the same wages and benefits. And while the government has established training programs to help displaced workers. In Today’s New York Times we learn:

Federal money for the primary training program for dislocated workers is 18 percent lower in today’s dollars than it was in 2006, even though there are six million more people looking for work now. Funds used to provide basic job search services, like guidance on résumés and coaching for interviews, have fallen by 13 percent.

Particularly impacted by this are younger workers without a college degree. Surely we can do more….

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