U.S. manufacturers across the country have suffered dramatic job losses over the past seven years of economic growth, with these losses falling particularly hard on states that are heavily dependent on manufacturing and are now suffering the most as the U.S. economy struggles to cope with the housing crisis and slowing economic growth.
Overall employment growth and declines in the number of unemployed were smaller in manufacturing states than in non-manufacturing states—even before the current economic slowdown occurred.[1] This leaves manufacturing states in a more precarious economic situation today, and in more desperate need of an economic recovery plan than non-manufacturing states.
While the U.S. economy and jobs eventually posted recoveries after the last recession in 2001, the same was not true for manufacturing. From March 2001 through the end of 2007, the manufacturing sector lost a total of 3.2 million jobs. During that 81-month period, employment in the sector decreased in 67 of those months, and added jobs in only 14 of those months. Then, from the end of 2007 through June 2008, private-sector employment declined by 0.5 percent, but manufacturing jobs dropped more than three times as fast, by 1.7 percent, during the same time period.
The disproportionate troubles in manufacturing have been especially felt in manufacturing states. Between March 2001 and June 2008, private sector jobs grew three times faster in non-manufacturing states than in manufacturing states. Also, not a single manufacturing state matched non-manufacturing states’ average yearly rate of private job growth.
Even Oregon, which had the highest rate of private job growth among manufacturing states from March 2001 to June 2008, had a growth rate that was only three-quarters that of the non-manufacturing state average. In some states, such as Michigan and Ohio, the sector’s decline even meant a net loss of private sector jobs. Meanwhile, 15 out of 18 non-manufacturing states gained jobs at a greater rate than the manufacturing state average. The only three states that did not were New York, New Jersey, and Louisiana.
Manufacturing states also suffer from higher unemployment rates. Between March 2001 and June 2008, the average unemployment rate in manufacturing states was 5.3 percent, compared to 4.7 percent in non-manufacturing states. Only 5 manufacturing states—Alabama, Iowa, Minnesota, New Hampshire, and Vermont—had an average unemployment rate lower than the average unemployment rate for non-manufacturing states, while only two non-manufacturing states (Alaska and New York) and the non-manufacturing District of Columbia had average unemployment rates higher than the average for manufacturing states.
Manufacturing states also have higher unemployment rates than non-manufacturing states. From March 2001 to June 2008 the average unemployment rate in manufacturing states increased almost three times as much as it did in non-manufacturing states. On average, manufacturing states saw unemployment grow by 1.2 percent, while non-manufacturing states saw unemployment rise by 0.4 percent.
All these job figures underscore the need for policymakers to address the decline of our nation’s critical manufacturing sector. Factory work still pays higher wages and provides more benefits than other sectors of the economy. The manufacturing sector’s recovery is therefore crucial to the long-term well being of the economies of manufacturing states, and for the families who depend on manufacturing jobs.
The economic health of manufacturing states depends on the ability of federal, state, and local policymakers to work together to implement effective policies that will maintain and grow American manufacturing’s competitiveness in world markets so that manufacturers can continue to generate good jobs and stabilize regional economies. A promising direction could be increased public and private investment in energy efficiency and alternative fuels.
The benefits of bolstering manufacturing extend far beyond manufacturing states, however. In particular, the majority of our trade is in manufactured goods. Therefore, if the U.S. economy wants to shrink its near-record trade deficit by increasing exports, it needs to rely heavily on the manufacturing sector. That will require policymakers to pay some attention to the physical and human capital that is available in this sector. In particular, this will require more investment in math and science education as well as in lifelong training for jobs in new, emerging manufacturing industries, particularly those related to green technologies.
Manufacturing’s decline is not a new phenomenon. Robust policy response has been desperately needed for years. Now is the time for policy makers to get serious about fixing America’s manufacturing woes and in the process enhance opportunities for Americans to find good jobs while improving the nation’s overall economic health.
The Center for American Progress has formulated several policy proposals that would improve the situation of the manufacturing sector, including increased investment in renewable energy to help to create more good jobs in the future, enhanced public and private initiatives to promote innovation and skills for the jobs of the future.[2]
More information about this and other manufacturing-related policy proposals can be found in our Progressive Growth Series. These policy papers offer a fiscally responsible plan to grow our economy through the transformation to a low-carbon economy and leadership in innovation, technology, and science, and to recreate a ladder of economic mobility so that Americans may make a better life for themselves and their families so that our nation once again may be a land with a thriving and expanding middle class prospering in the global economy.
Endnotes
[1] Manufacturing states are states that had a manufacturing share of private sector employment that was one fourth of a standard deviation above the average share across all fifty states in 2000. Non-manufacturing states are similarly defined as states where manufacturing employment’s share out of private sector employment was more than one fourth of a standard deviation below the average manufacturing share across all states in 2000. Manufacturing states are thus Alabama, Arkansas, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Mississippi, New Hampshire, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, and Wisconsin. Non-manufacturing states are Alaska, Arizona, Colorado, Delaware, the District of Columbia, Florida, Hawaii, Louisiana, Maryland, Montana, Nevada, New Jersey, New Mexico, New York, North Dakota, Virginia, West Virginia, and Wyoming. The remaining states are neither manufacturing nor non-manufacturing states.
[2] John Podesta, Sarah Rosen Wartell, and David Madland, “Progressive Growth: Transforming America’s Economy through Clean Energy, Innovation, and Opportunity” (Washington: Center for American Progress, 2007). p.12 http://americanprogress.org/issues/2007/11/pdf/progressive_growth.pdf