Has Manufacturing Hollowed Out? – Econlib

Last week I attended an excellent talk on Taiwan and semiconductors given by my Hoover colleague Glenn Tiffert. It was at the Naval Postgraduate School.

It was quite informative and the questions from the students in the audience reminded me of what I miss most now that I’m retired from NPS.

At a couple of points in his talk. Glenn matter of factly referred to the large decline in manufacturing in the United States in the last few decades. I didn’t correct him for two reasons: (1) I wanted to ask other questions and not monopolize and (2) I think the point he was making might have followed simply from the decline in manufacturing employment, which certainly has happened.

I wrote him and attached two graphs. I haven’t heard back and so I’m writing this up and giving links to the graphs.

First, on manufacturing output, see this graph from FRED. As you can see, manufacturing output in the second quarter of 2023 was only 6 percent below its all-time peak, which it reached in the fourth quarter of 2007.

Second, manufacturing employment has plummeted. See this graph from FRED. Employment peaked at 19.553 million in July 1979 and was only 12.985 million in July 2023. That’s a drop of 33.6 percent. Necessarily implication: labor productivity has increased.