President-elect Trump was elected on the thesis that he would bring back manufacturing jobs to the U.S. and stop them from leaving. Before we can gauge this proposed initiative’s future success or failure, we need to understand the current landscape for manufacturing jobs in the country.
The first myth that needs to be busted is that the US doesn’t make anything anymore. Our manufacturing output is near the highest it’s ever been. While it is true that China displaced the US as the largest manufacturing nation in 2010, the US has outperformed most other wealthy countries in the growth of “value-added” which is a measure of the economic contribution of manufactures in the design, assembly, and marketing of the product.
From Fred:
https://fred.stlouisfed.org/series/OUTMS
While our manufacturing output has been stellar, we have seen a downshift in employment that started decades ago. This was due to displacement technologies that the movement of manufacturing to areas with cheaper labor to create better profit margins.
From Fred:
https://fred.stlouisfed.org/series/MANEMP
When China entered the World Trade Organization, the trade balance became more prominent, and manufacturing employment fell in the U.S. Advances in technology and cheaper labor allow for lower prices and better profit margins. This is a price we pay for living in a capitalist, shareholder nation.
From Calculated Risk:
http://www.calculatedriskblog.com/2016/12/trade-deficit-at-426-billion-in-october.html
The Census Bureau shows us that even though manufacturing is the 4th most significant employment sector in the U.S., it is now less than 9% of the total workforce.
http://www.census.gov/library/visualizations/2016/comm/manufacturing_day2016.html
Employment in manufacturing has been falling while the output is growing. A lot of the productivity gains have come in the manufacturing sector, and while this is great for production, it impacts total employment.
From Fred:
From Brooking:
https://www.brookings.edu/wp-content/uploads/2016/06/us-manufacturing-past-and-potential-future-baily-bosworth.pdf …
Will we go into a trade war with China? I don’t believe Trump will start a trade war because while nearly 48% of the US population are workers, 100% of them are consumers, and the US is a consumption-based economy. A trade war will negatively affect consumers, which will impact the economy, even if it results in some gains in manufacturing. So far, President-elect Trump has not talked about taxing companies that are headquartered in the U.S. but do manufacturing in other countries. He has spoken about making the U.S. more business-friendly and taxing current manufacturing plants directly conflicts with this.
So, let’s be realistic. Regardless of who the president is, we cannot expect to gain 5-9 million manufacturing jobs in the next 4-8 years. A more realistic scenario is that while output may continue to grow with future technological advances, jobs in this sector will likely continue to shrink, stay flat, or, at best, grow slowly against population growth.
The strong dollar limits manufacturing growth expectations. A much stronger dollar will also hurt oil and commodities, as so many of the world’s imports follow oil prices.
Another “must-follow” on twitter:
Johnny Bo Jakobsen @jbjakobsen
Higher oil prices = positive (!) for US manufacturing activity. Goods news ahead if oil prices continue rising #USD
An infrastructure bill could do more for employment in the short term than dithering around the edges of the manufacturing sector by passing out favors to some companies that promise to keep jobs in America while threatening punishment on others. Steve Bannon’s trillion-dollar infrastructure plan makes sense if we can find workers capable of doing this work. Last I heard, we were planning on deporting some of those people. There is a big difference in economic output between hiring existing working crews to work and hiring new people who don’t have jobs. The job openings for construction are growing every year, with hours worked being at all-time highs for a reason. This is a reason why I like Bannon’s go great thesis to make sure we target areas of high unemployment of men of all ages. It might be wishful thinking with unemployment claims low and job openings above 5.5 million, but one can hope.
I hope this article gives you some perspective on manufacturing in America. We have a new President, and we should pray for his success, as his success means America is doing great.
On another note, my readers and followers on social media know my love-hate relationship with the anti-American bears. These are people who call for the collapse of America every year with worthless economic rants. I hate smoking, but every 15 years I am going to pull out a cigar and take a photo of me smoking it, to make a point that America hasn’t collapsed yet, like the extreme left and right talk about every day. The stock markets are at all-time highs, and we still have 74 straight months of job gains. Recessions come and go, but 24/7 bears always stay 24/7 bears ( Hence the 24-hour fitness shirt for you)
Merry Christmas Bears !!!!
2016 2001
Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data daily on his own facebook page https://www.facebook.com/Logan.Mohtashami