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Where is U.S. Manufacturing Headed?

The sharp loss of manufacturing jobs has triggered legitimate concern that America’s best days are behind us. And in the years 2001 through 2008, about 40,000 U.S. manufacturing plants closed, resulting in the loss of good-paying jobs. From 2001 to 2007, 2.3 million jobs were lost just from the U.S.’s huge trade deficit with China. Two million more jobs were lost in 2008-2009 alone.

At its peak in 1979, manufacturing accounted for slightly less than 20 million jobs – but now that number is closer to 11 million.

Recently, leading indicators show economic momentum, but job growth still remains slow. Manufacturing has only seen small improvements along the way.

Industrial_philadelphiaThe picture is even bleaker if you stop to consider the population, since the labor force is larger today. This has led to a widespread belief that the core of the U.S. economy is being hollowed out.

International trade has had a major impact on this “hollowing out” of American manufacturing. The history of the U.S. trade policy shows how a shift after World War II contributed to the decline.  For at least 60 years, geopolitical and interests of the U.S. financial sector have preceded the needs of American manufacturers.

A couple of months ago, the President unveiled an initiative designed to foster high-tech manufacturing for the long term. The Energy Department will fund ‘innovation institutes’ to foster the kind of high-tech manufacturing that is vital to today’s global economy.

While this is true – and a good start in the right direction — this is not the same as creating jobs for a workforce of at least 120 million people. High-tech factories might employ hundreds of people using sophisticated software systems for design and production. But the problem is these workers are very different from the 1950s line workers doing routine tasks. They are more like Silicon Valley engineers or lab technicians. These are high-skill jobs—and not nearly as plentiful as the factory jobs of the past.

As more people develop the new skills required for this wave of high-tech manufacturing, it is possible that the economic system will usher in the next wave of prosperity and job growth. In the meantime, however, a generation ill-prepared for that change is likely to continue to struggle.  The road ahead is long… and perhaps a bit bumpy.