Report sheds new light on supposed end of U.S. manufacturing

The demise of American manufacturing is not just premature, it's flat-out wrong: That's according to a report issued yesterday by Ball State University's Center for Business and Economic Research (CBER), based in Muncie, Ind., and Conexus Indiana, a public-private sector initiative.

U.S. manufacturing and logistics industries experienced dramatic growth over the past generation, the report said. U.S. manufacturing has grown 11 percent since the dot-com bust of 2000 to 2003 and the ensuing economic turbulence of the 2001 and 2007-09 recessions, according to the report.

The United States has lost approximately 7.5 million manufacturing jobs since employment in the sector peaked in 1979, according to the report. However, it has gained more than 9 million jobs in trade, transportation, and utilities, the broadest measure of the logistics industry, the report said.

"According to folklore, this has been a terrible generation for manufacturing and those who move goods," said CBER director Michael Hicks, George and Frances Ball distinguished professor of economics and business research. "That isn't really what the data says. Indeed, 2015 was a record manufacturing ... year in inflation-adjusted dollars. While 2016 fell just short with some weakness in the first and second quarter, 2017 looks to be a new record year.

"Most of the confusion about manufacturing and logistics is due to declining employment over the past generation," Hicks said. "The fact is, manufacturing firms have become very lean, and productivity growth means more goods produced with fewer workers."

Three factors have contributed to a decline in employment, according to the report:

• The workforce is better educated and trained, which has increased productivity;
• mechanization has displaced some workers;
• improved processes, such "Lean Six Sigma" and other management methods, have led to increased production.

"Trade and productivity growth shifts job opportunities to other places and other sectors even as employment grows," Hicks said. "We are at peak U.S. employment right now."

The Manufacturing and Logistics: A Generation of Volatility and Growth reports and a data spread sheet can be downloaded from the CBER website.