Manufacturing: Employment Falls to Record Lows, But Productivity Soars

by: Mark J. Perry

Here’s some pretty grim news about U.S. manufacturing -- employment in that sector fell below 12 million this year for the first time since 1946, and is now at the lowest level (11,648,000 manufacturing jobs in November) since March of 1941 (see chart, BLS data here). Since the onset of the recession in December 2007, manufacturing employment fell for 24 consecutive months, as the U.S. economy shed an average of 89,000 manufacturing jobs each month for the last two years.

From the peak manufacturing employment of 19.55 million jobs in 1979, the American manufacturing workforce has shrunk by more than 40%, as almost 8 million manufacturing jobs have been eliminated over the last thirty years, with almost 6 million of those losses taking place just since 2000. And there’s nothing to suggest that the trend won’t continue, so we can expect a continued contraction of U.S. manufacturing employment.

See related story here about
Michigan's population falling below 10 million.

But what about manufacturing output? That news is a little better. The chart below shows the decline in manufacturing employment plotted against the Gross Value of Final Products and Nonindustrial Supplies (in billions of constant 2000 dollars), as calculated by the Federal Reserve (
data here). In the thirty year period between 1977 and 2007, U.S. manufacturing output doubled from $1.5 trillion to $3 trillion, before dropping to a ten-year low in June 2008 of $2.6 trillion, from the contractionary effects of the recession. Manufacturing output has been rebounding lately and it increased in four out of the last five months, after falling in ten out of the previous 11 months, signalling that the economy moved from recession to expansion in the middle of the year.

Pretty grim so far, but here's where the news about the manufacturing sector gets better. According to the Federal Reserve, the dollar value of U.S. manufacturing output in November was $2.72 trillion (in 2000 dollars), which translates to $234,220 of manufacturing output for each of that sector’s 11.648 million workers, setting an all-time record high for U.S. manufacturing output per worker (see chart below).

Workers today produce twice as much manufacturing output as their counterparts did in the early 1990s, and three times as much as in the early 1980s, thanks to innovation and advances in technology that have made today’s workers the most productive in history.

Bottom Line: At the same time that manufacturing employment has been declining to record low levels, manufacturing output keeps increasing over time (except during recessions of course), and the amount of output that each manufacturing worker produces keeps rising almost every month to new record high levels. Manufacturing productivity has never been higher, and that's good news.