Economic Reality Check: U.S. Factory Jobs Are Not Coming Back - They're Headed Back To The Same Level As In 1940 By 2024

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by: Mark J. Perry

The ultimate economic outcome: More output with fewer workers.

As I reported earlier this week on CD, US manufacturing employment is estimated to fall by 814,100 jobs over the ten-year period between 2014 and 2024, from 12.18 million jobs in 2014 to only 11.37 million factory jobs in seven years according to employment projections from the BLS. To put that decline into perspective, US factory payrolls over the next seven years are projected to fall by 2024 to the lowest level since 1940!

At the same time, real manufacturing output is projected to increase by almost 2% per year between 2014 and 2024, which will lift factory output by nearly 21% over that period at the same time that factory employment declines by almost 7%. In dollar terms, the BLS estimates that output in the manufacturing sector will increase by more than $1 trillion (adjusted for inflation in 2009 dollars) from $5.45 trillion in 2014 to $6.6 trillion in 2024. The chart above shows graphically these expected changes in manufacturing output and employment in the ten-year period from 2014 to 2024.

Therefore, continued US factory job losses are inevitable, but will primarily be the result of ongoing and significant increases in worker productivity, and not because of international trade, bad trade deals, or outsourcing. For Trump to implement protectionist trade policies, or bully American companies in an attempt to save jobs in an industry that is destined to lose hundreds of thousands of jobs over the next seven years due to advances in technology is a guaranteed and foolhardy exercise in public policy futility.

Within seven years, the number of US factory jobs will fall to an 84-year low and there's nothing that can be done to stop that inevitable outcome, unless maybe of course Trump can use his deal-making skills to negotiate some deal with the Schumpeterian forces of innovation and technology, and get it to agree to stop its inevitable march forward.

Or maybe he can outlaw advanced manufacturing, 3-D printing, computer technologies, hydraulic fracturing, horizontal drilling, robotics, and all power tools. Or why not just outlaw the use of electricity at the nation's factories to bring manufacturing jobs back? While he's at it, Trump could also significantly increase the number of farm jobs by outlawing tractors.

But you have to give Trump credit for his Herculean efforts to do the impossible and bring US factory jobs back. On the campaign trail, Trump frequently claimed he would "bring jobs back from China, Mexico Japan, and Vietnam. They are taking our jobs." In his address to Congress this week, Trump promised that "dying industries will come roaring back to life" under his leadership. That's elicited this response from Jordan Weissmann writing in Slate.com ("The Heartless Cruelty of Donald Trump's Continued Promises to Coal Miners"):

This is the distilled essence of Trump's whole economic message. The dead shall rise again. Sheets of American steel will roll like they did when the Bee Gees were on the radio. Coal will be pulled from the ground and burned for power. Americans will drive cars full of parts made north of the Rio Grande. Somehow, all of this will be accomplished through great new trade deals.

This promise has always been cruelly hollow. Some old-line heavy industries may see small bumps thanks to Trump's policies, but the jobs they once provided are not coming back (see chart above). Insofar as the president's supporters have really pinned their hopes for a revival on his flimsy pledges, they are about to be utterly let down.

Economic Reality Check: The dead will not rise again and American factory jobs ain't comin' back - we're headed back to the factory employment level of 1940 by 2024 if BLS forecasts are accurate. At the same, manufacturing output will continue to "roar" to new record high levels due to increases in factory worker productivity. And that's really the best of all possible outcomes - increasing factory output with fewer inputs (workers) - and achieves the ultimate economic goal, one that should be celebrated as the most desirable type of economic progress possible.

As hard as this concept is to accept for most people, we should never forget that jobs are not a true economic benefit, but are rather a cost or price of production and ultimately of consumption. As Milton Friedman explained, the appropriate national objective is to have the fewest possible jobs in any given industry. That is, we want the greatest amount of output with the least amount of work (and fewest jobs) - think farming. What we're getting from Trump is "jobism" - the flawed thinking that mistakenly treats the number of jobs as being the key measure of an industry's and economy's success (see related CD post here).

At the same time, there are lots of hope and opportunities ahead for the US job market. At the same time that 814,000 factory jobs are projected to disappear between 2014 and 2024, the BLS forecasts that more than nine million new jobs will be added in service-providing sectors. Trump should focus more on America's expanding and "roaring" service sector - which has large and growing trade surpluses with the rest of the world, a topic he overlooks when talking about trade - instead of obsessing about the sector destined to lose hundreds of thousands of jobs and return to the staffing levels of more than 75 years ago.

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