Manufacturing jobs have a talismanic power in politics in the United States and many other high-income countries. The underlying belief is that other governments have enacted policies that can steal American jobs, and that if the U.S. government responds strongly, the U.S. economy can bring those jobs back. But politicians in both parties in the United States (and indeed in high-income countries around the world) have been making similar claims for decades. Perhaps the real picture of manufacturing jobs is more complicated?
Kyle Handley takes a long-term view dating back to the 1950s. “What Happened to American Manufacturing? Evidence of Technology, Trade, and Structural Change” (Economic Innovation Group, July 2024).
As a starting point, let’s consider some basic patterns of U.S. jobs in manufacturing and services.The always useful FRED website, run by the Federal Reserve Bank of St. Louis. The first chart shows total manufacturing jobs in the United States since 1950. The second chart shows total service-sector jobs in the United States since 1950.
As a starting point, note that the total number of manufacturing jobs in the United States has never exceeded 20 million for the past 75 years. The total number of service jobs was already over 20 million in 1950, and is now 136 million. Even when manufacturing jobs increased in the 1960s and 1970s, the total increase over that 20-year period was about 15 million to 19 million. In that 20-year period, service jobs increased from 35 million to 85 million. In short, manufacturing jobs have not been the primary determinant of total employment growth in the United States for a long time.
The reason for this broad pattern is that manufacturing productivity growth has been relatively high, allowing fewer workers to produce more. Here are some numbers from Handley’s essay: Manufacturing jobs were about 40 percent of all U.S. jobs in 1950, but now they are about 10 percent. But the panel below shows that real value added per manufacturing worker has nearly doubled over that period.
Total manufacturing jobs in the U.S. peaked in the 1970s. During the 1984 presidential campaign, Walter Mondale claimed that Ronald Reagan had led a “Rust Ball” economy. But much of the recent focus on manufacturing jobs began in the early 2000s, when China joined the World Trade Organization and dramatically expanded its role in the global economy. The chart above clearly shows the decline in U.S. manufacturing jobs that began in the late 1990s and continued through the Great Recession.
In retrospect, there were several reasons for that rapid decline. The surge in Chinese exports was one, but another was the way new digital technologies and automation increased the productivity of some manufacturing workers and reduced demand for others.. Another problem was the rapid increase in home construction in the United States in the early 2000s. Some workers with the skills and background needed for manufacturing jobs may be able to transition easily into construction jobs.–It worked fine until the housing boom turned into a recession.
So the underlying story here is not the decline in the manufacturing share of jobs that has been occurring as part of a general shift toward service jobs for decades. But the shift from manufacturing jobs in the early 2000s was particularly rapid. “The China shock came very quickly,” Handley writes, “and the U.S. labor market was unable to adjust to the loss of manufacturing jobs at the same time.”
This shift to service jobs is happening everywhere, including in China, Handley writes.
The same pattern holds true in nearly every advanced, high-income economy. The share of manufacturing employment declined by 30–65% in Australia, Canada, Germany, France, Japan, South Korea, and the United States from 1980 to 2012. … Using OECD employment trade data, we can trace the trajectory of manufacturing employment since 1995 using internationally comparable data across countries. China remains a manufacturing giant, but manufacturing employment has been in steep decline, peaking at 151 million manufacturing jobs in 2013 and declining to 129 million in 2019. Over the same period, global manufacturing jobs fell from 355 million to 324 million.
Handley provides this chart showing the global manufacturing jobs share for several major countries. Comparing 2000 to 2019, before the pandemic, China has a lower global manufacturing jobs share, while Vietnam and Indonesia have much higher global manufacturing jobs shares.
To be clear, I believe it is important for the U.S. economy to maintain significant manufacturing capacity. Geographic proximity to manufacturing and research can lead to a clearer view of technological problems and solutions. However, while the total number of U.S. manufacturing jobs may remain stable or increase slightly as manufacturing technology and productivity continue to increase in the U.S. and around the world, manufacturing jobs are unlikely to increase substantially in the U.S. or in high-income countries.
