When Employment Changes Faster than our Memories

Without U.S manufacturing, the Allies may not have won the two World Wars, and the country may not have launched from its agrarian roots into the largest economic powerhouse in the world. We would not be where we are today were it not for American manufacturing, particularly in the twentieth century. But the world has changed, and despite our romantic notions, manufacturing is no longer the keystone of the American economy, nor is it the lifeblood of the job market as it once was. Only in recent years has the reality of labor market evolution hit home for workers, employers and some, not all, policymakers. Since the energy price gains of the 1970s, followed by the rise of globalization and technology, the use of labor in the United States has been permanently altered as illustrated in Figure 1, with manufacturing losing share and other private sectors gaining share.

This essay focuses on the following four points:

  • Manufacturing, the traditional source of middle incomes in the early post-WWII period, has steadily declined while professional services have grown.
  • On the public side, the share of employees laboring for the federal, state and local governments has been climbing rapidly (Figure 2).
  • New economic realities demonstrate that jobless recoveries are becoming the norm and not the exception.
  • Education has become the defining factor of one’s labor force experience.

The Evolution of What We Do: Long-run Decline in Manufacturing Employment

Since 1960, manufacturing employment as a share of total employment has steadily declined, and this decline has picked-up speed as the current economic cycle has proceeded (Figure 3). Manufacturers have shed more than two million jobs from the level that held near the peak of the last expansion (Figure 4). During the 2001 recession, and in the months that followed, the economy lost more than three million manufacturing jobs, and manufacturing employment failed to mount any meaningful recovery during the six-year economic expansion that followed. At best, the economy was able to stop shedding manufacturing jobs for a brief time. The total number of employees in manufacturing actually peaked way back in the summer of 1979. Since then the United States has shed on average about 21,000 manufacturing jobs each month. Manufacturing employment fell below 12 million jobs in May 2009 for the first time since early 1946. At that point, manufacturing jobs accounted for more than 30 percent of all nonfarm employment in the country. Today, manufacturing jobs employ just one in eleven workers, making manufacturing jobs in relative terms far less numerous.