Research Highlights

Is American Manufacturing in Decline?

By Susan Houseman

Susan HousemanU.S. manufacturing has been in the spotlight in this presidential campaign. The candidates, most notably Donald Trump and Bernie Sanders, have argued that globalization has severely weakened domestic manufacturing, citing large trade deficits and job losses to back their claim. This argument resonates in many American communities.

Countering the prevailing view, some analysts and pundits cite strong manufacturing output and productivity statistics to assert that American manufacturing has never been better; automation, not globalization, accounts for the nearly 30 percent reduction in manufacturing jobs since 2000. Typical of this viewpoint, Binyamin Appelbaum, in a recent New York Times article, writes, “From an economic perspective . . . there can be no revival of American manufacturing, because there has been no collapse. Because of automation, there are far fewer jobs in factories. But the value of stuff made in America reached a record high in the first quarter of 2016, even after adjusting for inflation."

Do so many Americans have the story completely wrong, as Appelbaum and others imply? No. Rather, these analysts have misread the numbers, as I explain in “Measuring Manufacturing: How the Computer and Semiconductor Industries Affect the Numbers and Perceptions” (coauthored with Timothy Bartik and Timothy Sturgeon) and a policy brief based on that research, published in 2014.

This piece updates the analysis in those articles and makes several points:

  • A small industry—computer, semiconductors and related products, which account for only 13 percent of value-added in manufacturing—drives the apparent robust output and productivity growth in the sector.
  • Performance in most manufacturing industries has been very weak. Excluding output from the computer and semiconductor industry, the amount produced in American factories is barely higher than in the late 1990s and is about 5 percent lower than before the Great Recession.
  • The extraordinary output and productivity growth in computers and semiconductors reflects the way statistical agencies account for improvements in the products produced in this industry; rapid productivity growth in this industry, and by extension the above-average productivity growth in the manufacturing sector, has little to do with automation.
  • Manufacturing’s anemic output growth is largely the result of globalization and that fact, coupled with automation, is responsible for large reductions of manufacturing employment since the 1990s.

Read Is American Manufacturing in Decline? by Susan Houseman.
Read Don’t blame the robots! An interview on manufacturing, automation, and globalization with Susan Houseman.