Production and Employment

An interesting relationship can be identified by observing the trends in industrial production and the level of manufacturing jobs in the country. During the three expansionary periods of industrial production in Exhibit 9.3, 1996—2000, 2001—2007, and 2009—2015 the level of manufacturing employment moved sideways, with little-to-no upward trend. Conversely, whenever industrial production contracted during recessions of 2001 and 2007—2009, manufacturing employment appropriately fell. This suggests that the government’s expansionary fiscal and easy monetary responses had no influence on job creation in the manufacturing sector.

There may be many reasons for this trend, but none more explanatory than the increase in productivity. American manufacturing has managed to make more with less. That includes less of all inputs: land, capital, and labor. Automation on the assembly line and factory floor with enhancements like robotics in assemblies, stamping, and welding has helped streamline the manufacturing process.

The increase in globalization has led to a diminished need for U.S. domestic manufacturing employment. The United States simply cannot compete with abundant labor forces of highly populated, low-wage countries with little-to-no oversight or protection of workers.