The Manufacturing Sector Is Alive And Well

by: Tom Lindmark

An interesting article on manufacturing from the Cato Institute posits that there is no manufacturing renaissance simply because the meme of a manufacturing decline is a myth. Consider their chart.

Click to enlarge

Here’s their summary of the manufacturing sector;

Contrary to countless tales of its demise, U.S. manufacturing has always been strong relative to its own past and relative to other countries’ manufacturing sectors. With the exception of a handful of post-WWII recession years, U.S. manufacturing has achieved new records, year after year, with respect to output, value-added, revenues, return on investment, exports, imports, profits (usually), and numerous other metrics appropriate for evaluating the performance of the sector. The notion of U.S. manufacturing decline is simply one of the most pervasive economic myths of our time, sold to you by those who might benefit from manufacturing-friendly industrial policies with the abiding assistance of a media that sometimes struggles to distill fact from K Street speak.

Manufacturing’s share of GDP has certainly declined, but as they point out, that’s a function of the growth of the service sector. And while it is true that employment in the sector is significantly below its peak, that isn’t a result of a shrinking industry, rather it reflects substantial productivity gains.

No doubt the smattering of “onshoring” we’re seeing as well as the emergence of the US as a major energy producer with the follow-on industries which will feed off of fossil fuels hold the promise of an expansion of the manufacturing sector and more blue collar jobs. They just don’t represent a resurgence, the sector has been doing fine for a long time. All of which is worth remembering the next time you hear calls from either labor or capital for import protection, government investment and other forms of transfer payments. Chances are it’s about rent seeking, not reviving a sector that needs no help.