In the first decade of this century, the U.S. manufacturing sector shed jobs at an alarming and unprecedented rate. That coincided with a surge in imports, weak growth in exports, and a yawning trade deficit. The sharp job losses in manufacturing helped keep employment growth weak and labor force participation low.
During the 2016 presidential election, both Republican candidate Donald Trump and Senator Bernie Sanders blamed trade and globalization. That message helped propel Trump to the presidency. But most economists dismissed it, arguing that automation was to blame. Media reports often take this view as fact. In late 2016, for example, New York Times reporter Binyamin Appelbaum wrote, “From an economic perspective . . . there can be no revival of American manufacturing, because there has been no collapse. Because of automation, there are far fewer jobs in factories.”
Yet this view reflects a misreading of the data. As I discuss in a recent paper, although automation is occurring in manufacturing, as it is in other sectors of the economy, the evidence does not support the idea that automation was the main cause of the sudden decline in manufacturing employment after 2000. Although it’s difficult to precisely pin down what was to blame, a large body of research suggests that economists and pundits are wrong to so quickly dismiss trade and to blame machines.
THE COLLAPSE OF MANUFACTURING
Employment in U.S. manufacturing peaked at over 19 million in 1979, and although it fell by about seven percent in the 1980s it remained fairly stable throughout the 1990s. That changed after the turn of the century. Between the economic peaks of 2000 and 2007, manufacturing employment dropped by 20 percent, or 3.4 million people. It was hit hard again by the Great Recession of 2008–09 and rebounded only slightly during the recovery. In total, since 2000 manufacturing employment has fallen by over 28 percent, or by nearly five million jobs. There are some 22 percent fewer factories in the United States today than there were in 2000.
As employment in manufacturing has fallen, so has its share of the wider
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