Friday, November 18, 2011

Is U.S. manufacturing growing or shrinking?

Here’s a little known fact: U.S. manufacturing has actually been growing as an economic output in the U.S. for at least 60 years. Here’s another: China is now the largest manufacturing nation. So there you are: U.S. manufacturing has been growing, but China is now #1.

If you don’t believe me, here are two charts, published in the New York Times (Sept. 11, 2011). The chart on the right shows overall output, growing steadily over decades with only brief setbacks. Whether the trend will continue upward, or represents the end of an era, depends on whether you’re an optimist or a pessimist.


We’re used to hearing that U.S. manufacturing is declining, but the chart on the left shows that it’s only declining as a share of overall economic output. Other sectors are simply growing more quickly. The U.S. is producing more output in information-intensive industries (such as finance) and less in labor-intensive industries (such as manufacturing). Even the manufacturing tends to be more information-intensive. The U.S. is strong in things like jet engines and pharmaceuticals, whereas for sneakers you think of Asia.

There are issues, to be sure. Most importantly, growth in output does not necessarily mean growth in jobs, and a country needs jobs for its people. Also, China’s manufacturing output is growing much faster than the U.S. Much of that was done by making the pie bigger, but some was done by taking share from other countries. The gains in share are not just in sneakers, but in things like laptop computers (Lenovo) and telecom switches (Huawei).

This is obviously a complex topic--just ask anyone at your next cocktail party or Occupy Wall Street event. And to be precise, manufacturing output did decline during the down years of recessions, when the whole economy slowed.

Just the same, it might cheer some of you as we enter the winter to know that U.S. manufacturing has been growing for nearly all of the last 60 years, and more.

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