New York (CNN Business)America’s manufacturing sector is in a recession. But that is only part of the story.
The industry has expanded by virtually every metric over the past decade, under both the Obama and Trump administrations.So what gives? How can factories grow — and be in a recession at the same time?
No data are worth anything by themselves. That’s why last decade’s manufacturing rebound must be understood in its historical context: Manufacturing is in a 40-year slump. It’s in a decade-long expansion. And it’s in an annual recession.Economic data shows two trends going in opposite directions: One explains the expansion, which began as manufacturing recovered from the 2008 financial crisis. The other shows that manufacturing has been slowing down for more than four decades. Read MoreAmerica’s factories were hurt badly in the recession between 2007 and 2009, with the loss of more than 2 million manufacturing jobs. Over the past decade the sector has rebounded and added 1.4 million factory jobs since a 2010 low point, according to the Bureau of Labor Statistics. That’s why the recent data for the sector looks so buoyant.Even within this upward trend, there have been mini-cycles, including the 2015 commodities downturn, and last year’s sluggish global growth and the US-China trade war. The latter caused the sector to fall into a recession in the second half of 2019, according to data from the Institute of Supply Management.
Meanwhile, the number of manufacturing jobs in the United States has fallen steadily since a 1979 peak of 19.6 million, according to the Bureau of Labor Statistics. Politicians, economists and presidential candidates have long been warning about a structural downturn in traditional factory jobs. And they’re right to sound the alarm.”Over the past 30 years, we have seen manufacturing come down as a contributor to the economy as we have moved towards a service-based economy,” said Gregory Daco, chief US economist at Oxford Economics.Since 2000, the manufacturing sector has lost 4.4 million jobs, according to the BLS, which cites trade liberalization, productivity gains and technological advances — the use of automation and robots — as reasons for the loss.Automation is expected to be an unstoppable threat, as jobs lost to robots don’t come back.
Where do we go from here?
For 2020, the recently signed “phase one” deal with China will probably remove some of the uncertainty businesses faced last year. The sector overreacted on cutting hiring and production in the eye of the trade war last year, said Natixis Chief Economist of the Americas Joseph LaVorgna. This promises a rebound.
“I think the trade war-related uncertainty had a big role to play in 2019, so did (and do) recent events in the aviation industry,” said Simona Mocuta, senior economist at State Street Global Advisors, said in an email. “I would expect manufacturing activity to improve a bit in coming months, partly also reflecting better global data so this flattening may once again give way to improvement. There is broadening evidence that global manufacturing has bottomed.”
Source: edition.cnn.com
