Realist, not conformist analysis of the latest financial, business and political news

America’s Industrial Disaster – US Manufacturing Output At Record Levels

As we all know – because we’re repeatedly told so by Lighthizer, Navarro and The Donald – American manufacturing is in a parlous state. Cruelly persecuted by those dastardly foreigners even. The problem with this justification for a trade war, tariffs and the subsequent making us all poorer being that it simply isn’t true.

Here’s US manufacturing output. Yes, this is value and it’s inflation adjusted:

Manufacturing sector real output. Credit, BLS, public domain via FRED


Here’s manufacturing employment over the same period of time:

Manufacturing employment Credit BLS via FRED, public domain

So, if output has been going up over the decades  – and yes, manufacturing is always more highly leveraged to the business cycle than services – while employment hasn’t recovered then what else must be happening? Yup, that’s right, productivity in manufacturing must have been rising:

Manufacturing labour productivity. Credit BLS via FRED public domain

Over the decades manufacturing productivity has been increasing. This neatly explaining how we’ve got more stuff being made by fewer people. And yes, this means fewer jobs, but then that’s the point of what we’re doing anyway. We always want to kill jobs by productivity increases if we can. Because that’s the very process that makes us richer as a society.

We’d obviously like to see a rise in labour productivity. It’s the major determinant of what future living standards are going to be, so quite an important number. Rising productivity, in the absence of the capitalists nicking it all, is also what raises real wages, something we’d like the UK to experience more than it has just recently.

What the evidence we’ve got doesn’t show is that the foreigners have been stealing all the jobs. Which means that it would probably be a good idea not to base public policy on the idea that the dastards beyond the borders have been impoverishing us all, wouldn’t it?

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