For whatever reason, lots of financial writers seem intent on insisting that the manufacturing sector in this country is humming along and we should take that as a sign that better days are just ahead. Unfortunately, the data indicates another reality altogether.
Mike Mandel has been pointing out for sometime that the supposed recovery in manufacturing is only one if measured from the nadir it achieved during the Great Recession. His most recent post on the subject includes this graph:
Karl Smith takes this a step further by pointing out the decade long decline in manufacturing employment.
I’m sure that you haven’t failed to notice that the rebound in manufacturing employment is minuscule when compared to the decline and that the decline in manufacturing actually began back in 1999 and has pretty much continued unabated from then. Smith has this observation:
The lesson is that it seems unlikely this trend was caused solely by the financial crisis or housing collapse. The job loss that began in 1999 has continued at a greater or lesser pace ever since. More likely this is the result of globalization.
It’s anathema in many economics circles to speak ill of international trade. Indeed, I am not even willing to go that far. What I am saying is that the story of this recession is a part of the larger story of globalization and its effects on the U.S. labor market.
Karl Smith actually has two posts on this subject. The one which contains the data I used above and this one which responds to some push back he received on the first post. Both are short and worth a read.
Both Mandel and Smith are arguing a piece of a point that I tried to make in the post below on “Unemployment and Stimulus.” It seems a bit lame as I reread it, but hopefully what these two gentlemen are saying helps define my point. Specifically, it seems that we don’t have a good handle on exactly what has gone wrong with this economy or to put it a different way, what radical changes have occurred for which we have no good explanation. If that is the case then it seems appropriate to concentrate on reinstituting some fundamental fiscal discipline at the federal level as opposed to trying to solve problems which are not amenable to short-term fixes.