Some good news for US manufacturing

US manufacturing

Advanced manufacturing is the key to lasting prosperity. The destruction of the US manufacturing base in recent decades – the US lost 55,000 factories and 5 to 6 million manufacturing jobs in the first decade of the 21st century – has dealt a severe blow to America’s economic competitiveness and its ability to generate wealth and provide decent, well-paying jobs to its population.

Reversing this dangerous state of affairs should be one of America’s top strategic priorities. In this regard, the latest US jobs report has some encouraging numbers:

Partly as a result of the last few months’ numbers, 2018 stands preliminarily as the best year for U.S. manufacturing job creation (284,000) since 1997 (304,000). The previous December-to-December manufacturing employment gain was 209,000.

Also, manufacturing jobs as a share of total non-farm jobs (the Labor Department’s definition of the total U.S. employment universe) rose to just under 8.55 percent – their highest level since July, 2016 (8.56 percent).

That’s the good news. The bad news:

Even so, manufacturing’s prior relative employment creation has been so weak that the sector still remains a laggard on this front for the recovery era as a whole.

Since bottoming out in February and March of 2010, manufacturing has regained 1.389 million (60.58 percent) of the 2.293 million jobs it had lost during the Great Recession and its aftermath. Overall private sector employment sank by 8.785 million during the downturn, but since then has regained 20.608 million jobs.

Manufacturing keeps trailing the overall private sector on the pay front, too. In December, pre-inflation manufacturing wages rose by 0.26 percent – considerably slower than the overall private sector’s 0.40 percent.

In summary, manufacturing employment is booming, but wage growth is still terrible. Part of the reason for this could be that some of the best and most lucrative manufacturing jobs are going unfilled. Given the general disdain for factory jobs in current-year America and the lack of emphasis on training people for highly skilled manufacturing roles, it’s unsurprising that the industry faces a sharp shortage of qualified workers:

This week’s new Job Openings and Labor Turnover Survey (JOLTS) revealed that job openings in the manufacturing sector jumped in October [2018] to a record-high 522,000, and it’s only going to get worse.

[…]

There are several causes behind this workforce crisis, notably that many workers lack critical training in the necessary skills to fill these jobs. The manufacturing industry also suffers from inaccurate perceptions among talented students who may avoid career opportunities in modern manufacturing.

In crisis there is opportunity, and the dearth of skilled manufacturing workers implies that a greater focus on closing the skills gap could lead to a boost in wages as the open jobs get filled. Jay Timmons, CEO of the National Association of Manufacturers, appears to think so. At the very least, this could be one piece of the puzzle to addressing the disaster of real wage stagnation in America. Rome wasn’t built in a day, and it will take many years to undo a generational catastrophe.

Also, the tariffs are working.

===

More on the strong manufacturing employment numbers: another way to put it is that “the U.S. had as many people working in the manufacturing sector in December as it did 69 years ago.” And, although the percentage of the population working in manufacturing is far lower than it was in 1949, it is growing: “As a percent of the total workforce, manufacturing rose for the first time since 1984.”

And here’s a comment from Timmons:

This year was one for the record books, with manufacturers’ average optimism for 2018 hitting an all-time high. Empowered by tax reform and regulatory certainty, manufacturers are keeping our promise to expand our operations, hire new workers and raise wages and benefits. But as this survey also shows, we face challenges, most seriously the workforce crisis. We have more than half a million jobs to fill right now—and by 2028, as many as 2.4 million could go unfilled if we don’t equip more Americans to take on these high-tech, high-paying careers.