Saturday, August 22, 2009

Manufacturing Output Per Worker Hits Record High

As I reported several days ago that manufacturing employment had fallen below 12 million jobs for the first time since 1941, and that manufacturing jobs as a percent of total employment fell below 9% (see chart above), the lowest percentage ever in BLS history (back to 1939).

The chart below shows manufacturing jobs and manufacturing output, using BLS data on manufacturing employment (
data here) and Federal Reserve data on the dollar value of manufacturing output (data here), monthly back to 1972. The general trend over the last 40 years is clear: the U.S. has been producing more and more manufacturing output with fewer and fewer workers.

In fact, at the same time that U.S. manufacturing employment fell to a record low (as a share of the workforce), the productivity of manufacturing workers reached an all-time record high in July of $223,915 (in constant 2000 dollars) worth of output per worker (see chart below). That's almost 3 times as much output per worker as in the early 1970s, and twice as much output per worker compared to the mid-1980s.

Bottom Line: More and more manufacturing output with fewer and fewer workers should be considered a positive trend for the U.S. economy, not a negative development. We should think of it the same way as the trend in farming over the last 150 years - we're much better off as a country, with a much higher standard of living, with 3% of Americans working on farms compared to 150 years ago when about 65% of Americans toiled on farms. If we can continue to produce more manufacturing output with fewer workers, we'll be better off as a country, not worse off.

19 Comments:

At 8/22/2009 10:12 AM, Anonymous Anonymous said...

Higher productivity is very good news and is hopefully intrinsic in every U.S. worker. Most U.S. manufacturers are organized for continuous improvement with many ideas coming from those employed on the production line. The great majority of manufacturing jobs do pay UAW wages but are decent.

A Big Problem: We have these great productive companies with world class products that are shut out of markets. Other countries know that it would be hard to organize similiar organizations very quickly. The strategy for those countries is make it hard for U.S. producers to enter that country's market. The way to enter that market is joint-ventures where U.s. producers transfer expertise developed in the U.S. and make that product in the host country.

 
At 8/22/2009 1:50 PM, Blogger juju said...

Mark, thanks so very much for publishing this information in context.
There is so much media "drama", regarding this subject.
The U.S. is second to none in manufacturing, period.
ALL countries, including China, have lost manufacturing jobs due to higher productivity.
Much of that information is direct manufacturing jobs.
Now, count the support positions
to manufacturing (sales, accounting, customer service, etc..) and our manufacturing portion of GDP jumps to about 40%+ or -.
Again, thanks for the
"whole" picture.

 
At 8/22/2009 2:10 PM, Anonymous Anonymous said...

Higher productivity is good. But loosing manufacturing jobs to other countries and then importing goods produced in foreign countries back to USA isn't so good.

The thing to keep in mind is that US consumers have increased their consumption of manufactured goods even more than the productivity of US workers has increased. And a lot of that extra consumption is creating manufacturing jobs in foreign countries rather than in USA.

Which is bad for USA. Because this leads to trade imbalances with other countries and huge national debts for USA.

It's one thing to loose jobs due to increased productivity. But it's quite another to offshore production to other countries and then import manufactured goods back to USA. That kind of loss of manufacturing jobs is bad for USA in the long run.

 
At 8/22/2009 2:14 PM, Blogger juju said...

ALL countries, including China, have lost manufacturing jobs due to higher productivity.

 
At 8/22/2009 3:38 PM, Blogger 1 said...

"But loosing manufacturing jobs to other countries and then importing goods produced in foreign countries back to USA isn't so good"...

How about losing the jobs to robots?

The Robots Are The Chefs In This Japanese Restaurant

 
At 8/22/2009 5:25 PM, Blogger juju said...

1, that is sooo strange.
Try to wrap your mind around this one.
The robots we just purchased.
MAKE THEMSELVES!
With the lights turned off to save $$. These robots assemble their clones.
Ssomething not right about that.

 
At 8/22/2009 5:32 PM, Blogger juju said...

1, I would agree with your statement about losing manufaturing jobs. However, it is important that people know what the facts are first, prior to finding any solutions.
That said, I am not a conspiracy buff, or nut. However, some of the policies, of the last 40 years, seem to be designed for some manufacturing to leave to re-distribute our wealth to other nations.
The above is a departure to opinion, rather than to established facts, of which I am more comfortable to research or discuss.

 
At 8/22/2009 5:52 PM, Blogger OA said...

Anonymous said...
"Higher productivity is good. But loosing manufacturing jobs to other countries and then importing goods produced in foreign countries back to USA isn't so good."

Are you old enough to have purchased a Zenith tv, GE alarm clock, RCA VCR, or sunbeam kitchen appliance? I am. Believe me, price wasn't the only factor in those businesses going away.

Where America can compete, that's great - Harley, Caterpillar, Boeing, etc. But where it can't, letting someone else make it and letting American consumers pay less is better.

 
At 8/22/2009 5:57 PM, Blogger sethstorm said...


Bottom Line: More and more manufacturing output with fewer and fewer workers should be considered a positive trend for the U.S. economy


To a very limited extent.

When product quality suffers and you take the floor from under the US manufacturers, no.





Higher productivity is very good news and is hopefully intrinsic in every U.S. worker. Most U.S. manufacturers are organized for continuous improvement with many ideas coming from those employed on the production line. The great majority of manufacturing jobs do pay UAW wages but are decent.

The problem is the increased desperation in countermeasures by certain parts of business. In short, more dirty pool with Third World countries as a beneficiary, less dealmaking with the First World.

 
At 8/22/2009 6:16 PM, Blogger sethstorm said...


Where America can...

...stop overusing words meant for sport and not economics.

That phrase just seems to be a cop-out.


Are you old enough to have purchased a Zenith tv, GE alarm clock, RCA VCR, or sunbeam kitchen appliance?

I'm old enough to have seen most of the life of a Curtis-Mathes as well as those other brands being under First World ownership (vs . Construction quality on all of those brands were well beyond what the PRC (or similarly despotic FTA nations) could/can/will be able to do *per dollar*.

The Zeniths, and such were built to be repaired and lasted longer. The knockoffs of today, not at all. Over a 20-30 year period, the US brands win hands down - they were meant to be used longer than 2-5 years.


How about losing the jobs to robots?

The only thing they can't do is replicate the qualities in food that reduce monotony. A human can stop mid-sentence to add or remove something from the recipe, the robot doesn't know any better.


And a lot of that extra consumption is creating manufacturing jobs in foreign countries rather than in USA.

Which is bad for USA. Because this leads to trade imbalances with other countries and huge national debts for USA.


The imbalance isn't anywhere close to even, thanks to various foreign interests that bribe Congress to look the other way. That is, such massive imbalance adds national security problems.

 
At 8/23/2009 12:30 AM, Blogger juju said...

Hey Seth,
Remove energy from that trade imbalance numbers and see what the balance of trade is for goods only.
I think you might find that the U.S. is a net exporter. Or close to a net exporter.
That import of Energy is a HUGE number.
Our Gov't seems to want to import oil.

 
At 8/23/2009 4:17 AM, Blogger 1 said...

"The robots we just purchased.
MAKE THEMSELVES!
With the lights turned off to save $$. These robots assemble their clones
"...

Hmmm, that's interesting...

Is it a varient of rapid prototyping software/hardware at work in those systems juju?

Your next comment: "However, it is important that people know what the facts are first, prior to finding any solutions"...

I would first look to the damage that the EPA has wroght on the employment game in this country...

Next I would look at what Congress and the CAFE standards have done to impact employment...

If we as a nation aren't growing economically then we're shrinking...

 
At 8/23/2009 6:17 AM, Blogger juju said...

Good morning 1,
RE: rapid prototyping software/hardware.

I am over my head on the why's and hows these things do what they do.

RE: I would first look to the damage that the EPA and congress has wrought on the employment game in this country.

There is no doubt, that the Government "ties one of my company's arm behind our back" and says, go compete!
The interesting thing is, for the most part, we can compete. In spite of the disadvantage our Gov't puts us in. That disadvantage inspires creativity.

 
At 8/23/2009 2:20 PM, Blogger OA said...

sethstorm, my parent's Zenith lasted maybe 20 or 30 years. My Zenith was dead in just a few. I bought two GE alarm clocks in a row that were done in a few. So I use the cheap 25 year old one I had in high school. It's so old it is stamped made in Hong Kong.

You can keep telling us about all these inferior products coming out of other countries, but there were plenty made right here.

 
At 8/23/2009 3:45 PM, Anonymous westright said...

US Manufacturing has been transforming and adjusting extremely effectively for a generation thanks to training, innovative techniques, stronger analytical tools and the ability to remain relatively unencumbered by unions. My question is how has the falling number of mfg jobs affected the middle class and the ability to become middle class. Why has secondary and above education continued to not grow or innovate and fails to produce graduates that actually fit the available opportunities at an ever increasing cost?

 
At 8/23/2009 11:28 PM, Blogger 1 said...

"The problem is the increased desperation in countermeasures by certain parts of business. In short, more dirty pool with Third World countries as a beneficiary, less dealmaking with the First World"...

Well considering just how many so called 'first world' governments are wasting time and resources (as in extorted dollars from productive citizens) on silly fairy tales such as global warming, killing mother earth, or worse pandering to supposedly needy parasites, is it any wonder that businesses are dealing with certain 3rd world countries that have a much more pragmatic, less delusional view of the real world?

 
At 8/23/2009 11:34 PM, Blogger 1 said...

"The interesting thing is, for the most part, we can compete. In spite of the disadvantage our Gov't puts us in. That disadvantage inspires creativity"...

Yeah juju no doubt about it...

I may be seeing a problem that isn't there but here goes...

At what point does government interference start impacting on 'inspired creativity'?

Where is the point of diminisihing returns on being creative as a practical matter due to government ineptness and clumsiness in the free market?

 
At 9/04/2009 1:30 PM, Anonymous Anonymous said...

And if wages reflected the greater worker efficiency, minimum wage would be roughly $17 per hour.

 
At 10/03/2009 12:30 AM, Blogger Corson said...

The facts are that employment in manufacturing has dropped from a high of about 19 million in 1978-9 to less than 12 million in 2009, as the US abandoned and gave up on much potential manufacturing for export during that time. The value of US manufacturing output has only less than doubled during that interval (in constant dollars) and that occurred only because of the very high productivity of remaining US manufacturing workers. The high productivity of the remaining workers should not hide the fact we abandoned much potential manufacturing output by the US for export and in fact shipped those jobs overseas. The high productivity of the remaining workers was largely due to capital improvement so the gains largely went to capital and not the remaining employees (those still employed). This amounts to a double whammy for aggregate demand in the US from which we are still adjusting and it helped badly skew the distribution of income in our country.

The popular perception that we are suffering as a consequence of what happened is clearly true.

 

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