Geographic trends in manufacturing job creation: Something old, something new Behind the Numbers, September 2017

Subdued recovery in manufacturing jobs

From the official beginning of the recession in December 2007 to the manufacturing employment low point at the beginning of 2010, the United States lost, on a net basis, 2.3 million manufacturing jobs.¹ It has taken over seven-and-a-half years for manufacturing employment to regain 1 million of those jobs. Over that same period, employment outside of manufacturing increased by 16.8 million jobs. With such disparate rates of increase, it is clear that manufacturing’s share of total employment continued to drop during the recovery period. However, the decline of manufacturing’s relative share was not uniform across the states—some states beat the national trend and more than recovered their state’s manufacturing employment share post 2010 (including some states that had not been manufacturing powerhouses prior to the downturn). But in no state has the proportion of manufacturing jobs reached its prerecession level. Indeed, even in states that had stronger manufacturing employment recoveries, the general trend remains downward. This diversification of job creation away from manufacturing is a trend not unique to the United States. Other advanced countries, along with the larger developing countries, are experiencing the same trend.

Decoding the downward national trend

Between 1985 and 2000, US manufacturing employment held relatively steady at just under 17.5 million jobs, after which it began to drop precipitously. By 2006, manufacturing employment had slipped below 14 million and by 2010, it was down to just 11.5 million. Although it has recovered somewhat, currently standing at 12.5 million, the loss of these jobs is even more striking when considered in the context of a growing economy that currently supports 146.6 million jobs in total, well above its prerecession peak. Figure 1 shows this decline in manufacturing employment share since 2000 when manufacturing jobs comprised 13 percent of total employment. During the latest recession, manufacturing jobs disappeared faster than nonmanufacturing jobs, forcing the relative share down to just 9 percent and over the past year, it has been stable at 8.5 percent.

Manufacturing jobs in the United States: A state-level view

On a percentage basis, the 1 million rebound in manufacturing jobs is an 8.4 percent gain over the level of manufacturing employment in January 2010. So where have those jobs been created? Well, not only in the usual places where manufacturing has always been a major employer.

Figure 2 illustrates the unevenness of the manufacturing recovery. While some states continued to lose jobs post 2010 or experienced only a slight recovery, others saw a much stronger bounce. Michigan, in particular, experienced a very strong recovery, with manufacturing employment growing by 33.3 percent or 151,000 jobs between January 2010 and July 2017.² Although this gain has boosted the proportion of manufacturing jobs in Michigan from 11.8 percent in 2006 to 13.8 percent currently, Michigan, just as every other state, has a lower proportion of manufacturing jobs than it did prior to the recession, when 15.0 percent of the state’s employment was accounted for by the manufacturing sector. Seven other states also showed percentage gains in manufacturing employment of more than twice the national average—Idaho (25.7 percent), Kentucky (21.9 percent), South Carolina (20.8 percent), Indiana (20.3 percent), Florida (19.3 percent), Oregon (18.9 percent), and Nevada (18.3 percent).

While many of the states that experienced exceedingly strong manufacturing employment gains post 2010 were states that still had a substantial manufacturing employment base in 2010, such as Indiana (where manufacturing was 15.8 percent of total employment), Kentucky (11.9 percent), Michigan (11.8 percent), South Carolina (11.5 percent), and Oregon (10.2 percent), others, such as Idaho (8.9 percent), Florida (4.3 percent), and Nevada (3.4 percent), had manufacturing employment bases near or below the national level of 8.8 percent. As shown in figure 3, the relationship between the relative size of the manufacturing employment base in 2010 and the post-2010 growth rates is fairly weak, although positive.³ In addition to Idaho, Florida, and Nevada mentioned above, North Dakota, Arizona, Colorado, Montana, and Georgia had strong growth given a relatively low starting base, although states such as Vermont, Connecticut, Pennsylvania, Arkansas, Kansas, and Mississippi either continued to contract post 2010 or had slower-than-average growth in manufacturing employment even with a larger-than-average 2010 manufacturing employment base.

Figure 4 depicts the role manufacturing employment currently plays in state employment, in the aftermath of all of the disruption of the recession and a slow slog of a recovery. While there has been some movement of the rankings prior to the recession as compared to the present, the most striking fact is that in 2006, prior to the start of the recession, manufacturing accounted for more than 10 percent of total employment in 27 states; today, only 16 percent of states can make the same claim.

Taking a global perspective

The United States is not unique in transitioning from an economy where job creation is highly dependent on the manufacturing sector. Many other countries are heading in the same direction. As shown in figure 5,⁴ in some cases the shift has been more recent and in others the trend began around the same time as the transition began in the United States in the mid-1980s. For most countries, the rate of decline appears to have slowed or leveled off. There are two anomalies among the countries shown: The proportion of industry employment in Mexico has remained fairly level since 2000 and in China, the decline only began in 2013 after a period of strong growth over the prior 10 years.

Shifts in manufacturing’s employment intensity is only part of the manufacturing story. The contribution that manufacturing makes to an economy can also be evaluated by many other measures, such as the absolute amount of manufactured goods that an economy produces and the value added by the manufacturing sector as a percentage of gross domestic product. In addition to the direct jobs and output generated by manufacturing—and, maybe more importantly, to the health and innovative capacity of an economy—is the role that it plays in driving research and development investment, creation of intellectual property, and generation of productivity growth. Furthermore, every manufacturing facility supports an ecosystem of additional upstream and downstream jobs in other sectors such as services, construction, mining, and agriculture, as well as other manufacturing jobs. Therefore, even though manufacturing’s employment intensity will likely continue to decline, it will continue to be a critical component of economic growth, not only in the United States, but in most economies around the globe.