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Sunday, February 06, 2011

"US Manufacturing: Normally Lagging, now Leading"

Kash notes that "the manufacturing sector of the US economy has been performing surprisingly well" and wonders why (he also has graphs supporting his observations):

US Manufacturing: Normally Lagging, now Leading, by Kash, StreetLight: Something interesting is happening with this recovery. Actually, it’s something that was also an interesting feature of the Great Recession of 2007-09: the manufacturing sector of the US economy has been performing surprisingly well. In fact, it wouldn’t be too much of a stretch to say that manufacturing has been one of the important drivers behind the economic recovery (such as we’ve had) over the past two years. Normally manufacturing output and job growth lag overall economic recoveries in the US. This time manufacturing is leading it. ...
The employment picture ... tells the story even more clearly. In the previous two recessions, manufacturing lost more jobs, and recovered jobs more slowly (if at all), than the private sector as a whole. But during the Great Recession manufacturing job losses were actually proportionally less than job losses in the rest of the economy, and over the past year the manufacturing has actually been adding jobs. ...
The table below shows one more look at this phenomenon.

Let me add that in my work I interact with lots of manufacturing companies, and my personal observations match the data; manufacturing in the US is booming right now, despite the weakness in the economy overall.

Why does this recovery (and for that matter, the recession that preceded it) look so much different in the manufacturing sector of the US economy? It’s an interesting question, and one that I plan to examine in a few different ways this week.

Even with this change relative to previous recessions, employment has been struggling overall so I'm not sure how much this should buoy our expectations for the labor market. (If I'm reading the table correctly the total from manufacturing has only been 155,000 which is better than the average 55,000 jobs that were lost in the last two recessions, but still not all that much when there are many millions out of work. On the other hand, it's a bit over 12% of the total, though that may say more about the small size of the total than anything else). Maybe subsequent promised posts from Kash will help to clarify how much of an employment effect we can expect from the rebound in manufacturing.

    Posted by on Sunday, February 6, 2011 at 10:26 PM in Economics, Productivity, Unemployment | Permalink  Comments (47)


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