Deutsche Bank Presents The REAL Story Behind The Decline Of American Manufacturing

Factory Detroit

Photo: Wikimedia Commons

Manufacturing, as a percentage of employment, may be on a decline, but that doesn’t mean the sector is performing poorly or necessarily contributing less to the U.S. economy, according to a new report from Deutsche Bank.Their report, titled “The decline of US manufacturing: Fact or fiction,” focuses on how there has been a steady decline in the percentage of U.S. workers in manufacturing positions as a per cent of the total workforce, but not much change in the amount of people working in manufacturing overall.

One big reason for this is that the industry is now more efficient then it was in the past, in that it can “do more with less.” So while, in some ways, manufacturing is in decline, in many it is not.

Manufacturing has been in steady decline in terms of a per cent of employment since World War II.

While non-manufacturing workers have accelerated 70% since 1979, those in manufacturing have declined 40%.

Even though employment in the sector is in decline, the manufacturing sector's production has kept pace with overall GDP.

The price of manufacturing goods is not increasing in line with GDP.

At the same time, manufacturing productivity has increased twice as fast as other sectors.

Yet, those individuals working in the manufacturing sector are seeing their salaries increase in line with the broader economy.

While labour costs are up, productivity is too, and thus unit labour costs are lower. The impact is lower output prices.

When you take into account manufacturing prices going lower, manufacturing workers are being paid more. But when compared to all prices, manufacturing worker pay is growing more slowly.

The ability of US exports to purchase imports abroad (Command GDP) has kept pace with real GDP. This means living standards are keeping pace.

Compared to manufacturing, information and health care add little to the economy, while finance adds a lot.

Health care costs are rising, but it's not necessarily adding more to the economy.

The information sector is showing the largest gains in efficiency.

But its jobs are declining as a result.

What shocks could damage the US economy's momentum?

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