Manufacturing employment and productivity growth
This National Bureau of Economic research paper is behind a paywall, but the premise is up for discussion:
This Paper challenges two widely held views: first that trade performance has been the primary reason for the declining share of manufacturing employment in the United States and other industrial economies, and second that recent productivity growth in manufacturing has actually been quite rapid but is not accurately measured. The paper shows that for many decades, relatively faster productivity growth interacting with unresponsive demand has been the dominant force behind the declining share of employment in manufacturing in the United States and other industrial economies. It also shows that since 2010, however, the relationship has been reversed and slower productivity growth in manufacturing has been associated with more robust performance in manufacturing employment. These contrasting experiences suggest a tradeoff between the ability of the manufacturing sector to contribute to productivity growth and its ability to provide employment opportunities.
While some blame measurement errors for the recently recorded slowdown in manufacturing productivity growth, spending patterns in the United States and elsewhere suggest that the productivity slowdown is real and that thus far fears about robots and other technological advances in manufacturing displacing large numbers of jobs appear misplaced.
Gee, whata surprise! All those Drucker disciples and throughput and brownfield analysts may have been right?
Which has higher productivity, automobile production or automobile repair?
I believe that the answer is auto production.
To make automobiles useful in the US we have to have production and repair. The productivity of the combination is lower that the first and higher than the last.
So what would happen to the US productivity of that combination if we decided to produce all automobiles in Mexico?
If those assumptions are true then the US has exported a lot of its capability to increase productivity.
What am I missing?
You can make up all kinds of hypotheticals in your own mind to satisfy what you want to believe. Or you can just look at the actual facts, which nobody disputes.
Here’s a chart (FRED) showing mfg’ing employment over time from long before NAFTA which didn’t come into force until 1994. China didn’t become a member of the WTO until the very end of 2001.
Mfg’ing employment grew after WWII to peak in June 1979, after which it fell by 14% to Jan 1994 when NAFTA came into force.
From 1994 until very late 2000 (for the first 6 years during which NAFTA was in force) Mfg’ing employment INCREASED in the US…it didn’t drop at all or because of NAFTA. You have no basis for blaming NAFTA for any reductions to US mfg’ing. employment based on any facts. That’s purely a Trump / right wing propaganda.
In fact NAFTA stopped the US downward trend in Mfg’ing employment since mid 1994 in its tracks if anything. Economic analysis has shown that NAFTA increased US mfg’ing employment especialls in the higher paid wage segments, while decreasing the proportion of low wage jobs in mfg’ing… NET benefit to US mfg’ing.. more mfg’ing employment at greater wage levels.
After China entered the WTO mfg’ing employment in the US did drop however until 2003… but all analysis by economists of this drop was due to the post Dot-com boom bubble bursting at the same time as China entered the WTO..
But from 2003 to the onset of the Great Recession Mfg’ing employment dropped only very slightly. Had China been the cause of the drop to 2003, then because China was in fact becoming even more of an exporting nation and more US imports came from China, then mfg’ing employment would have continued dropping at the same or greater rate than it did from 2001 to 2003. It didn’t though and barely dropped at all.
Then the US and global Great Recession began & took it’s toll on US mfg’ing, beginning already by early 2007 but it has been recovering very slowly since the end of the Great Recession.
Here’s the link to the FRED chart:
The known and understood causes of US mg’ing employment reductions are all due to mfg’ing productivity gains.
Here’s the chart showing Mfg’ing output per hour which has been steadily increasing since the earliest point on this chart (1987).
It only dropped with the Great Recession and then has risen again but grown at a very slow rate since then.
Here’s the FRED chart for mfg’ing productivity.
You will also note that the period during 2002 & 2003 when mf’ging employment dropped after China entered the WTO, is the same period where mfg’ing productivity increased at the greatest rate it every has before or since.
So you are all on the record. The US has not exported a lot of its capability to increase productivity after the dramatic run up in imports.
Productivity increases after the 2008 recession just stalled for some unknown reason.
The spike in the change in productivity which occurred in Q3 2009 is unimportant.
See change in productivity: https://fred.stlouisfed.org/graph/?g=hkgB
You believe that the spike in productivity increase which occurred about 3 months after imported goods had reached a 5 year low is unimportant. And you believe that the muted productivity changes after imports began to increase is also unimportant.
I believe that at the very least the issue is in doubt. That the US may well have exported a lot of its capability to increase productivity after the dramatic run up in imports.
But for some reason the ultimate crushing effect on productivity was delayed until after American consumers had maxed out their total household debt.
We have a difference of opinion.
I suggest you go back and see what I said a year ago.
I re read it.
The growth in productivity which you note in that post continued until late 2007, as American consumers ran up trillions of dollars total household debt.
Total household debt reached a peak in Q3 of 2008 and afterwards productivity growth saw a spike in Q3 of 2009 and one year later in Q3 of 2010 it passed thru zero. Since then productivity growth has been wandering around zero.
When have we ever seen this pattern of change in productivity? Especially over a period of almost seven years?
See change in productivity: https://fred.stlouisfed.org/graph/?g=hkgB
The US economy has changed for the worse.
The damage from imports seems to be hidden by borrowing until borrowing was severely reduced. Then there was the 2008 recession and the damage became apparent.
1.Thus Real GDP dramatically dropped during the 2008 recession. https://fred.stlouisfed.org/graph/?g=fXm2
2. And apparently so did the potential for rising productivity after imports rose after the 2008 recession.
Total household debt reached a low in Q2 of 2013 but has been rising since then and now it is higher than in 2008.
When interest rates are returned to something like normal there will be another recession and another set of corrections indicating past damage.
And economists will continue to deny that anything has gone wrong. Because their models must be correct. It is not reassuring when economists take such a long time to discover that productivity is not being measured accurately! LOL
American’s no longer consume the product of each others labor to the same degree that they did before NAFTA. Instead they borrow excessively, commit suicide, consume opioids, and die from drug overdoses.
The Republican tax cut will be as effective as they have been in the past and President Trump seems to be a passenger on this economic ship. So it is only a matter of time before the next day of reckoning.
We too have a difference of opinion.
I certainly do not mean to blame all of our problems on NAFTA.
It has been the combination of all the free trade treaties and the totality of decisions made on trade. Especially where they concern out trade with China.