After three decades of job losses, the improved performance of recent years justifies cautious optimism for employment gains in the U.S. manufacturing sector. Concomitant with a moderately strong rebound in factory sector output growth from the deep 2007-2009 contraction, net manufacturing job creation is now a positive element in a struggling labor market. After offering historical context on the path of manufacturing employment, I parse the recent turn. I conclude with MAPI's forecast of manufacturing job gains for 2012 and 2013 along with suggestions for turning glimmers of light into a brighter picture.
The Post–World War II Path
As shown in Figure 1, the volatile post–World War II growth in manufacturing payrolls peaked in June 1979 at 19.6 million, 21.8 percent of total nonfarm employment. After 1979, the story was essentially one of persistent decline, bottoming in January 2010 at nearly 11.5 million jobs, 8.9 percent of total U.S. nonfarm employment. This is a 41.3 percent contraction, an 8.1 million job loss that took factory sector employment to its lowest level since March 1941.
Figure 1 – U.S. Manufacturing Employment, All Employees
Source(s): U.S. Bureau of Labor Statistics
The Post-2000 Plunge
Of the 8.1 million manufacturing jobs that the U.S. lost between June 1979 and January 2010, about 5.9 million (73 percent) vanished after July 2000. Two recessions, widespread supply chain reforms, and the emergence of large low-wage economies in global trade all contributed to the accelerated decline. Held back by the dramatic drop in manufacturing jobs, total employment made little progress during the past 12 years, realizing a paltry gain of only 1.7 percent between January 2000 and April 2012.
While all manufacturing sectors lost jobs between 2000 and 2010, Table 1 shows that durable goods industries accounted for 66 percent of the employment decline (about 3.9 million jobs). Computers and electronic products and transportation equipment suffered the largest absolute declines; both shed 737,000 jobs (transportation equipment employment was heavily impacted by the nearly 30 percent contraction in motor vehicle and parts output during 2008). Both machinery and fabricated metals suffered significant employment losses, at 494,000 and 506,000 jobs, respectively.
In the nondurable goods sector, plastics and rubber products experienced the greatest decline, with 337,000 jobs, followed closely by apparel manufacturing at 321,000 and printing and related support services at 315,000.
Table 1 – Change in U.S. Manufacturing Payroll Employment (All Employees, Thousands)
Source(s): U.S. Bureau of Labor Statistics and MAPI
A Hopeful Turn
Factory job losses now seem to be yielding to gains. In the 27 months after January 2010 and including April 2012, manufacturing experienced net payroll employment increases in all but two months, the most impressive run since the period between mid-1996 and mid-1998. Table 1 shows that over this period, manufacturing added 489,000 jobs (13.2 percent of the nonfarm payroll employment gain). Benchmarked against the factory sector's 9 percent share of total employment, this is certainly an encouraging performance.
The breadth of job gains over this time has been somewhat less exciting. The employment recovery thus far has been almost entirely in durable goods manufacturing, which experienced an increase of 481,000 jobs, compared to just 8,000 for nondurables.
While all major industry sectors participated in the July 2000 to January 2010 decline, not all are contributing to the rebound. Seven sectors experienced employment declines between January 2010 and April 2012. These include apparel manufacturing and textile product mills as well as nonmetallic mineral products and printing and related support activities. Both the wood and furniture sectors have been suffering continuing job losses, no doubt held back by the weakness in the housing market.
Of the five industry sectors that experienced the largest job losses between July 2000 and January 2010, four have been among the five biggest employment gainers in the subsequent months. These are plastics and rubber products, machinery, fabricated metals, and transportation equipment. Arguably, this suggests something of a snapback, possibly being "caught short" amidst a stronger than expected manufacturing recovery. Longer-term employment prospects remain something of a question mark for these industry sectors.
There is, however, a wide range of both durable and nondurable goods industry sectors that were not among the biggest employment losers in the 2000-2010 period and are now gaining jobs. These include chemicals; food; beverages and tobacco; and electrical equipment, appliances, and component manufacturing. The gains have been modest but may spell the end of a long period of persistent overall job loss in manufacturing.
MAPI is relatively optimistic regarding U.S. factory sector employment growth, at least over the short-term. After a gain of 65,000 manufacturing jobs during 2010 and 226,000 during 2011, we project continued strengthening and expect further increases of 312,000 factory sector jobs during 2012 and 361,000 during 2013.
The more interesting questions relate to the longer term. Is the current period similar to the aftermath of the Great Depression and World War II, during which manufacturing employment enjoyed persistent (albeit volatile) growth? Much depends on policies and investments. The shifting balance toward durable goods employment, shown in Figure 2, and the fact that durable goods have accounted for almost all of the manufacturing job gains since January 2010, may foreshadow a positive return from public and private attention to select durable goods industries.
More generally, a U.S. manufacturing sector that faces globally competitive business costs and benefits from innovation investments and effective workforce training stands the best chance of translating the modestly encouraging job gains of recent years into a brighter long-term employment picture.
Figure 2 – Durable Goods Employment, Share of Total Manufacturing Employment
Source(s): U.S. Bureau of Labor Statistics and MAPI