Kruse Kronicle

The Impact of American Manufacturing Productivity

—

by

mwkruse
in , ,

The media is filled with stories today about Obama and Clinton, each trying to anti-NAFTA each other. Mark Perry has a fascinating post today about this at Carpe Diem (Home of the coolest economics graphs on the web.) First, there is this graph:

Ip

This normalized to 2002 output levels. Except for the dip due to the 2001 recession, we see a steady rise in manufacturing output from the early 1990s through 2005. If labor productivity were staying constant and jobs were moving out of the country, then we should be seeing a decline in output as jobs leave the country. That brings us to a second graph:

Mfg1

Perry notes that more than five million manufacturing jobs were created in the three years after NAFTA, reaching a plateau in the late '90s. Then there was a dramatic drop of almost 20,000 jobs (nearly 20% of the total) in a couple of years during the 2001 recession, yet manufacturing output accelerated to its highest growth rate in the past twenty years.

The implication appears to be a significant increase in worker productivity due largely to technological innovations. This corresponds well with what I've read elsewhere of businesses finally being able to take advantage of computer technology in a big way starting at the end of the '90s. Here is a chart that shows the longer trend in Manufacturing Jobs from the Federal Reserve of St. Louis.

Dmanemp_max_630_378

Anyway, NAFTA appears to have had little or no impact on the recent decline in manufacturing jobs.

Comments

2 responses to “The Impact of American Manufacturing Productivity”

  1. Bob Robinson Avatar
    Bob Robinson

    Here in Ohio, this is a hot topic (especially as we vote tomorrow in the Primary).
    The Economic Policy Institute (a center-left economic think-tank) writes, “Manufacturing cars, trucks, and auto parts is one of the most important industries in Ohio, and NAFTA has produced a large and growing trade deficit with Mexico in this crucial sector. While NAFTA has increased automotive trade between the United States and Mexico, the effects on Ohio and other industrial states have been overwhelmingly negative. U.S. exports to Mexico increased, but imports from Mexico increased much faster. In 1993—the year before NAFTA took effect—the United States had a positive trade balance in auto parts of $2.4 billion. By 2007, that balance was a trade deficit of more than $12 billion (See Chart: U.S./Mexico trade balance in motor vehicles and parts, 1993 and 2007). Overall, including both vehicles and parts, the U.S. trade deficit with Mexico has ballooned from $2 billion in 1993 to nearly $31 billion in 2007. Nationwide, the auto trade deficit with Mexico has cost us 363,000 jobs. That is why Ohio voters want the next president to rewrite NAFTA, and that is why Senators Obama and Clinton are so critical of the trade deal as it approaches its 15th anniversary.”
    EPI is very anti-NAFTA. Just thought I’d offer the “other side” for argument’s sake!

    Reply
  2. Michael W. Kruse Avatar
    Michael W. Kruse

    Thanks Bob. Of course, Perry’s numbers are referring to manufacturing in the aggregate. So I believe it is entirely possible for some industries and regions to vary widely in terms of cause and effect.
    Comparing 1993 directly to 2007 dosen’t tell us all we need to know. For instance, did auto manufacturing jobs grow in the US in, say, the first six years after NAFTA and then tank, or do we see a steady decline in these jobs from NAFTA’s passage onword. The first scenario would seem to suggest that NAFTA was not the presenting issue. Without a time series it is hard to tell. Other aggregate studies I’ve seen suggest that as much as 80% of manufacturing job losses in recent years is due to improvements in production. The rest to outsourcing and other issues.
    Thanks for the link. Good to hear from you.

    Reply

Leave a Reply

Discover more from Kruse Kronicle

Subscribe now to keep reading and get access to the full archive.

Continue reading