If U.S. Manufacturing Is in Decline, How Are We Leading the World in Productivity

If U.S. manufacturing is experiencing a 30 year decline, how are we becoming more productive faster than every other developed country in the world?

The U.S. had the sharpest increase in manufacturing productivity -- output per hour of work -- in 2009 of the 19 industrialized economies for which the U.S. Bureau of Labor Statistics keeps data: 7.7%.

Japan had the steepest decline, 11.4%. For the first time since the BLS began keeping tabs, both output and hours worked in manufacturing declined in all 19 economies, a reflection of the unusually deep global recession. Manufacturing productivity declined in 12 of the 19 economies.

Without knowing much about the manufacturing sector of every developed country in the world, I suspect you could point to at least two reasons for this phenomenon.

First, manufacturing's decline in the US has been in labor, not production. In the 1950s, manufacturing accounted for one of every four jobs, whereas today it account for more like one in ten. At the same time, a technology revolution has allowed us to produce more and more stuff (we lead the world in manufacturing output) with a smaller and smaller share of the economy. Second, American business has, in the last few decades, relied on jobless productivity bursts to power ourselves out of recessions. That means employers try to cut labor to the bone and squeeze output from their slimmer payroll. Dramatic increases in productivity were rampant throughout the US economy in 2009 -- a good thing if you care about higher earnings, but a bad thing if you acknowledge that higher earnings were won on the back of a jobless recovery.

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