Terry H. Schwadron
Feb. 26, 2020
Since the State of the Union address, in which Donald Trump bragged about a major return of manufacturing jobs in the United States, I’ve been wondering why we don’t see more evidence of it — and more specifically why the election campaigns are not mounting more of a challenge to these boasts.
From the statistics, manufacturing seems to be barely ahead of levels of three years ago, when Trump took office.
But Trump has been successful at making people believe that he is running a great economy, boosting consumer confidence, Wall Street profits and the financial markets — particularly as economies around the world have suffered. It was a snarky observation of Commerce Secretary Wilbur Ross recently that the coronavirus near pandemic could prove helpful to U.S. jobs development as compared with reliance on Chinese businesses, for example.
Indeed, despite his assertion that there have been more than 12,000 new manufacturing businesses that have returned to American shores from overseas, I continue to see notices about companies facing financial troubles and forcing layoffs. As it happens, that number is closer to 11,000, and the vast majority employ under five workers.
That might help to explain why we’re not seeing big new plants of the type Trump envisions across the Rust Belt or in upstate New York State or in West Virginia.
Clearly, Trump wants to bang the drum for a economy made more robust by his combination of corporate tax cuts, an aggressive tariffs program against foreign traders, and challenges to existing trade agreements that he believes are actually bringing back jobs to American shores.
Just as clearly, there is another view of these same developments that suggest we are adding to income inequality, that we are blasting U.S. deficits into orbits never to be paid for, and that, at best, after all these efforts, the economy is churning along on its own almost exactly at the same growth rates as under the Barack Obama years — a notion that Trump detests
What the government’s own statistics report that the manufacturing section, which admittedly is poorly described, lost shed a net 5,000 jobs in December and 12,000 jobs in January. In December, the Institute of Supply Management’s manufacturing index displayed the fastest rate of contraction since June 2009, though suggests an uptick in the future.
The National Association of Manufacturers, which represents the interests of manufacturing companies, is a big thumper for Trump re-election, deciding recently to give an award to Ivanka Trump for “extraordinary support of manufacturing in America.” Her own companies make things in China, of course.
A recent column by Joe Ragazzo, publisher of talkingpointsmemo.com, admittedly a website that leans politically leftward, examined some of the claims of manufacturing success. As noted, manufacturing is one in which Trump has taken direct action in the form of tariffs and tax cuts.
The column concludes, however, that despite Trump’s “righteous, self-congratulatory bluster, they have likely amounted to a net decrease in employment.”
In considering steel tariffs, for example, the column notes that the U.S. protectionist moves were meant to increase domestic production of steel in the United States. Over the last couple of years, we may have added roughly 1,000 jobs in steel production, but estimates show we may have lost 75,000 manufacturing jobs where steel is an input. So more people are making steel, but way fewer people are using the steel. It’s a net loss, concluded talkingpointsmemo.
“What is a manufacturing success? I think most of us would say increased employment and increased wages. Further still, we’d probably say improved working conditions. However, in this context it’s challenging to see any extraordinary results,” went the reasoning in the article.
Auto manufacturers are opening new plants — but for new product lines, like electric cars, while continuing to send manufacture of small cars, and the associated jobs, to Mexico — now a positive development being hailed by this same Trump government, which pats itself on the back for a renewed North American trade agreement that continues to allow such moves.
The numbers: The Bureau of Labor Statistics says manufacturing employment peaked in June, 1979, with about 19.5 million workers. Manufacturing employment had already fallen by the time the U.S. entered the 2007 recession (13.7 million) and bottomed out around February, 2010, at 11.4 million. By the time Obama left office in December, 2016, manufacturing had rebounded to 12.35 million. At the end of January, this figure was 12.85 million — following two straight months of declines. All told, manufacturing employment has grown 3.5% since Obama left office.
The sector churning out jobs are health and hospitals, financial services and construction.
From a wage point of view, workers’ share of total private sector work has fallen from 17% to 8.,5% between 1990 and 2017.
That same Institute for Supply Management measures total production growth. Over 129 straight months, January was the first for a positive report on the manufacturing sector — mostly in pharmaceutical and electronic products.
As the column noted, during his state of the union talk, Trump talked about a “blue-collar” boom and how we are “restoring our nation’s manufacturing might.” But he’s added fewer jobs than Obama added and manufacturing spent the final two quarters of 2019 in a recession., Ragzzzo notes. At the same time, the Trump government has attacked union organizing and opposed measures to recognize the benefits for franchise workers.
On top of all of this is a time of rapid automation in manufacturing. Were steel plants to reopen at the rate that Team Trump wants, they would be boutique operations heavily dependent on robots and automated processes. In other words, they would be plants that would expand productivity and profits, potentially advancing American protectionism, but not providing the kind of jobs that are needed to make manufacturing a bedrock for the U.S. economy.
Interestingly to me, this whole argument gets pretty short shrift in the Democratic primary elections. Of the group, Andrew Yang had been the most consistent voice about the dangers ahead with automation of millions of jobs. Whether from the most left or centrist candidates, it is too easily taken for granted that Trump has succeeded in making a return of manufacturing a reliable plank for belief in the American economy.
Indeed, there are more political jabs about income inequality and prescriptions for wealth taxes than there are about what we manufacture in this country and how. We are talking about jobs when the job prospects are not appearing in the numbers they should.
It seems to me any useful discussion about economics ought to return to some basic questions here about what we have before us.