American manufacturing since the Great Recession
The Great Recession heightened concerns over America’s ailing manufacturing base. During the 2016 election, candidates from both parties promised to address falling employment in a sector that shed 25% of its jobs from 2001 to 2018.
How has manufacturing been doing since the Great Recession?
By one broad measure, the situation isn't too bad. Politicians often lament that “America no longer makes anything.” That’s not entirely true. In fact, productivity numbers held reasonably steady during the recession and recovered quickly. Stability isn’t growth, but it’s not step backward either.
Decent productivity numbers are consistent with reports that output has increased in spite of the decline in employment.
How encouraging is that data?
It turns out that productivity increased in very few industries from 2016 to 2017. Oil and gas extraction stands out as the largest gainer, enjoying 32% growth. However, growth rates fall off precipitously from there. Primary metals, the 2nd largest gainer, saw only a 3.6% increase.
Most importantly, food, apparel, computers, beverages, transportation, furniture, textiles, and plastics all saw modest drops. Therefore, the seemingly positive numbers are driven almost entirely by one sector of the economy.
That’s not all. Productivity data doesn't tell us anything about how workers are doing.
At first glance, average hourly wages for production employees in the manufacturing sector continue to climb.
However, it’s the rate of that wage increase that really matters.
That’s where the main cause for concern lies. In the eight years before the Great Recession, annual wage growth averaged 2.73%. In the eight years since then, it’s averaged 1.78%.
Incomes simply aren't growing as fast as they used to.
That gap between pre- and post-recession growth might seem small. However, for comparison, note that 1.78% is below the Federal Reserve’s 10-year “breakeven” rate, which was 2% at the start of 2018.
There are a number of inferences to draw. Most importantly, a contracting job market is only part of the story. The jobs that do remain are subject to downward pressure on wages.