When people talk about the “decline of U.S. manufacturing” over the past 10 years or so, they are not talking about some ephemeral or nebulous evaporation of demand or an unquantifiable off-shoring of jobs. Generally, they are not even talking about a dramatic decline in the relative amount of value added by manufacturing to overall gross domestic product, because since 2005 that share has only fallen from 13 percent to 12.4 percent. This is significant, but not staggering.
By comparison, the contribution from the finance and insurance industry fell by a full percentage point, from 7.6 to 6.6 percent, over the same period, and the contribution from construction fell 1.4 percentage points from 5.0 to 3.6 percent. Overall manufacturing output has also been fairly resilient and has generally followed the ebb and flow of the economy at large, not the downward death spiral that doomsday propagandists describe. Our factories are producing as much value now as they were before the financial crisis and more value than in 2000, when real output peaked before a contraction that coincided with the bursting of the dot-com bubble.
When people describe the decline of U.S. manufacturing, most often they are referring directly to the dramatic decline in overall manufacturing employment over the past decade. In 2003, manufacturing employed about 14.5 people in the U.S. — come 2013, that number fell to 12.0 million. At its most-recent peak in the late 1990s (manufacturing employment has been in decline for a long time), the industry employed 17.5 million people. At its most-recent low in 2010, the post-crisis pit, the industry employed just 11.5 million people.
Part of the reason for such a dramatic decline in manufacturing employment has been productivity gains. As the graph shows, even as overall employment tanked, output not only remained strong, it grew. As employment stabilized and began to grow itself in the wake of the financial crisis, the manufacturing industry at large began experiencing a robust recovery.