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Brooks Wilson's Economics Blog: The Health of Manufacturing in the United States

Monday, April 2, 2012

The Health of Manufacturing in the United States

Many Americans believe that our manufacturing sector has all but disappeared.  The graph shows that the belief is wrong.  The horizontal axis measures time from 1992 to February 2012.  The left vertical axis measures manufacturing in dollars and the right, as an index in which the January, 1992 level of manufacturing equals 100.  Other than periods of recession, manufacturing has grown. 
Steve Chapman (“Manufacturing an Economic Myth”) does a good job explaining the myth that our manufacturing sector is in decline. 
The first is that it's not declining in the ways that matter. Compared to1990, the total value of U.S. manufacturing output, adjusted for inflation, was up by 75 percent in 2010 -- despite a drop caused by the Great Recession.
It has declined as a share of gross domestic product only because other industries have expanded even more rapidly. Economist Mark J. Perry of the University of Michigan-Flint points out that in 2009, the total value of America's manufacturing output was nearly 46 percent greater than China's. Over the past two decades, our share of the world's manufacturing has been pretty stable.
The decline in the number of manufacturing jobs is taken as evidence that the sector is sick or uncompetitive or the victim of unfair trade practices. In reality, the change indicates sound health. Our manufacturing workers have become so much more productive that they can churn out more goods with a far smaller workforce.
I recommend the entire article.

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