Friday, May 6, 2016

Details on How Bad the US Manufacturing Sector is Performing Right Now

Austrian-lites are not going to like this.

Greg Mankiw reports:
The presumptive Republican nominee, Donald J. Trump, says, “We don’t make things anymore.” Judging from the surprising success of Mr. Trump’s campaign, this theme apparently resonates with many voters. But it is just not true.

When do you think manufacturing output reached its peak in the United States? The answer: right now. Manufacturing output achieved a record high in the most recent quarter of data. The nation’s manufacturers are now producing 47 percent more than they did 20 years ago.

What has declined is manufacturing employment, which is 29 percent lower than it was 20 years ago. Producing more output with fewer workers is called higher productivity, which in turn is driven by technological innovation. This change is hard on displaced workers, but it is good for the economy over all. Rising living standards are possible only if productivity increases.


  1. And he also says later in the article that there is no crony capitalism and taxes should stay high.

  2. You aren't controlling for changes in technology. To put in another way, there is monetary inflation but computer prices keep coming down. Same with manufacturing - output may be up, but it is much less than there would have been had the managed trade deals been negotiated properly, just as Trump says.

  3. However, as productivity increases compensation would ideally increase. Manufacturing sector wages haven't been keeping up with productivity gains over that same term in constant dollars. Over a shorter term, about a decade, compensation is down slightly.

    Also the population has increased and should require more stuff. This should at least mitigate employment losses, but it apparently hasn't.

    Additionally I could not find how this index is calculated. There are a number of things I can think of which should be considered and I don't know if they are. What I could find on the fed websites suggests it has issues with the way manufacturing is done in the USA today and what gets manufactured here. For instance ethanol manufacturing for the last 20 years owes its growth to government mandates.

  4. Is the stuff we are building for "War Machine" included in this wonderful stat ?

    If so maybe nothing to gloat about.