Every President Tries It. It Never Works. (to increase manufacturing jobs)

By Jason Furman. Excerpts:

"In a full accounting, during the first full month of his second term, the United States lost 2,000 manufacturing jobs. Losses continued almost every month, totaling 100,000 manufacturing jobs since January 2025."

"In his 2024 State of the Union address, President Joe Biden declared, “We’ve got 800,000 new manufacturing jobs in America and counting.” The next morning the Bureau of Labor Statistics announced that the economy had lost 4,000 manufacturing jobs the previous month. More losses followed, in almost every subsequent month of Mr. Biden’s presidency, totaling 202,000 in his last year. The 800,000 new jobs he exulted in were not the beginning of a sustained recovery of manufacturing but rather the return of some of the 1.4 million positions lost during the Covid pandemic."

"Reversing the loss of manufacturing jobs is extremely hard — and not necessarily desirable."

"Manufacturing job share has been dwindling in nearly all middle- and high-income countries. By one analysis, China lost more than 30 million of those jobs from 2011 to 2020, more than twice as many as the number of jobs that exist in the entire U.S. manufacturing sector. Yet total employment continued to grow"

"Manufacturing output, meanwhile, has risen, because workers now produce far more per hour using better and more sophisticated equipment. Today a given number of autoworkers can make, according to my calculations, three times as many cars in a year as they could 50 years ago.

The problem is that consumers do not want three times as many cars. Even as people get richer, they increase their spending on manufactured goods only modestly, preferring instead to spend more on services like travel, health care and dining out. There are only so many cars a family can own, but that’s not the case for expensive vacations or fancy meals. As a result we have fewer people working in auto factories and more people working in luxury resorts and the like.

These forces — rising productivity but steady demand — explain why the United States was losing manufacturing job share as far back as the 1950s and 1960s, long before trade became a major factor. The downward trend changed little after the U.S. entered NAFTA in 1994 or granted permanent normal trade relations to China in 2000. Economists continue to debate the magnitude of the “China shock,” but though it hit some regions harder than others, much of the research suggests that overall, it was responsible for a small fraction of the total manufacturing jobs lost since then."

 

"When governments try to reverse the trend, they mostly succeed only in shifting jobs from one industry to another rather than expanding manufacturing overall. Tariffs on steel, for example, may protect jobs in steel production, but they cost jobs in downstream industries such as automobiles by raising costs and undermining global competitiveness.

Subsidies for targeted industries — Mr. Biden’s preferred approach, particularly for microchips and green energy — have similar trade-offs. They help the favored industries but they also drive up construction and equipment costs across the board, making it harder for companies in other arenas to compete. So instead of creating more jobs overall, the subsidized industries just crowd out unsubsidized ones.

Efforts to revive manufacturing are rooted in nostalgia. Once upon a time, manufacturing jobs provided a reliable pathway to the middle class, offering a wage premium to workers without a college degree. In 1970, roughly 80 percent of manufacturing workers had no more than a high school education. Today that figure is closer to 40 percent.

Manufacturing jobs also used to pay more than nonmanufacturing jobs with similar skill requirements. Not anymore: Today people in nonmanagerial manufacturing jobs average $30 an hour as compared with $32 for truck drivers, $33 for wholesale trade workers and $38 for construction workers. Trying to push more people into manufacturing jobs is therefore more likely to harm the middle class than help it."

Related post:

The manufacturing delusion? (2023) This has an article by Christina Romer that makes points similar to Furman's