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Your Happy Labor Day Graph

Anthony Randazzo
September 5, 2011, 9:39am

Well, perhaps this is a not so happy labor day graph. 

Want to know one reason why the jobs market isn't coming back? This is far from the only reason, but look at this trend manufacturing—an industry employing millions of people. Not only are there 2.2 million fewer manufacturing workers today then there were in 2007 prior to the recession, but we've been on a long-term trend downward in manufacturing. The kicker is that at the same time output has been growing.

Manufacturing Output

You'll note in the above graph that manufacturing fell right along with employment during the past three recessions, and very sharply in the most recent recession. But at the end of each recession output always continues to grow and employment continues to fall. Though the phenomenon is more pronounced in the most recent recession the trend is the same. 

The solution to this, by the way, is not to force American companies to "bring back" workers from overseas. This fall in manufacturing employment is not so much an outsourcing caused event as much as an automation and efficiency caused event. As it turns out, manufacturing jobs are disappearing all over the world. David Henderson notes:

"Manufacturing employment declined from the mid-1990s to 2002 in a number of countries whose economies are rapidly developing, including China, Brazil, and South Korea. In fact, China, Brazil, South Korea, and Japan had steeper percentage declines in manufacturing employment over that period than the United States.

It is also worth noting that pretty much every major OECD manufacturing nation has seen declines over the past decades, as noted in the below chart (via Scott Lincicome):

Global manufacturing

In conclusion, consider this "Macroeconomic Puzzle" from Arnold Kling:

Explain why, with unemployment over 9 percent, there has emerged the phenomenon of self-service frozen yogurt shops.

I'm heading out to Yogi Castle to ponder that.


Anthony Randazzo is Director of Economic Research


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