Trade Deficits Holding Back U.S. Manufacturing Jobs, Output

 

Trade Deficits Holding Back U.S. Manufacturing Jobs, Output

By Burt Carey

Presidential candidates on both sides of the political spectrum have said much about jobs in America, and oftentimes those discussions are based on the link between trade deficits and domestic manufacturing.

Whether it’s Sen. Bernie Sanders, former Secretary of State Hillary Clinton, billionaire businessman Donald U.S. Manufacturing Jobs, jobs in America, trade deficits, EPI, Economic Policy Institute, reality, domestic manufacturingTrump, Sen. Ted Cruz or Ohio Governor John Kasich, the rallying cry of every campaign is to create jobs in the United States. The realities of jobs lost to foreign countries and to companies that move operations out of the U.S. present a daunting task to reverse a downward spiral in manufacturing jobs since the year 2000.

According to the left-leaning Economic Policy Institute and a more conservative National Association of Manufacturers, there are slightly more than 12 million Americans working in manufacturing. That’s roughly one in every 10 American jobs. Just 30 years ago, manufacturing made up about 24 percent of American jobs.

After holding relatively steady for 30 years, manufacturing employment began declining rapidly in 2000, falling to a low of 11.5 million in February 2010. This job loss can be traced to growing trade deficits throughout the decade, and the collapse of manufacturing output following the Great Recession—not rapid gains in productivity brought on by technological advancements—according to Manufacturing Job Loss, an issue brief from EPI Director of Trade and Manufacturing Research Robert E. Scott.

“Manufacturing job losses are not the inevitable result of technological progress,” Scott said. “They were caused by trade policy, and they can be reversed by trade policy. We are not losing manufacturing jobs to robots, we’re losing them to China. Our job losses are the result of failed currency and macroeconomic policies. They can be reversed by aggressive enforcement of fair trade laws, taking action to end currency manipulation, and through major commitments to rebuilding America’s crumbling infrastructure.”

As manufacturing employment began its decline around 2000, manufacturing productivity growth slowed as well. The reason for this slowdown was the U.S. manufacturing trade deficit, which began to rise sharply, according to EPI.

Between 1970 and 2000, manufacturing employment was relatively stable, ranging from 16.8 to 19.6 million, and generally remaining between 17 and 18 million. Overall manufacturing output growth fell drastically between 2000 and 2007, compared to the previous decade, as imports reduced demand for U.S. goods. Between 2007 and 2014, productivity growth declined even further, and manufacturing output stagnated as a result of the Great Recession. The manufacturing recovery has also been slowed by growth of the manufacturing trade deficit since 2009. Manufacturing employment hit a low of 11.5 million in 2010, before recovering slightly to 12.3 million in 2014.

Overall, manufacturing lost 5 million jobs between January 2000 and December 2014, and it hasn’t improved since then.

Between 2000 and 2007, growing trade deficits in manufactured goods led to the loss of 3.6 million manufacturing jobs in that period. Between 2007 and 2009, the massive collapse in overall U.S. output hit manufacturing particularly hard. Real manufacturing output fell 10.3 percent between 2007 and 2009. This collapse was followed by the slowest recovery in domestic manufacturing output in more than 60 years. Reasonably strong GDP growth over the past five years has not been sufficient to counter these trends; only about 900,000 of the 2.3 million manufacturing jobs lost during the Great Recession have been recovered. In addition, resurgence of the U.S. trade deficit in manufactured goods since 2009 has hurt the recovery of manufacturing output and employment.

It’s a complicated issue for presidential candidates to explain, let alone develop policy to reverse nearly two decades of job losses.

Source:  Baret News

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