Job-Killing Labor Costs and the Manufacturing Sector

Mises Institute ^ | January 20, 2011 | Christopher Westley

[sickoflibs]

If there is one issue that pops up again and again in my conversations about economics with interested noneconomists, it is manufacturing.

There's a genuine concern about the state of manufacturing in the United States, and I am not sure of the reason why. It could be that there is an inchoate sense that manufacturing is dying here, given that so many of our popular-consumption goods seem to be made overseas. Then there is the issue of the trade deficit, which is generally reported on in the mainstream media in a manner that is irresponsible, uninformed, or both.

Personally, I am quite proud of the US manufacturing sector, which still leads the world in manufacturing output. It will surprise some readers to learn that, after an initial decline in manufacturing during the outset of the 2008 recession, manufacturing output in the United States has increased for 17 consecutive months. According to a recent report by the Institute for Supply Management (described by Yahoo Finance),

[ISM's] index of manufacturing activity rose to 57 in December [2010] from 56.6 in the previous month. Any reading over 50 indicates growth. The latest is well above the recession's low of 32.5, hit in December 2008. But it's below the reading of 60.4 in April, the highest level since June 2004.

So the United States has been producing wealth at an increasing rate since the low point of the most recent recession. This has been the norm, not the exception, for decades. In an open letter to protectionist Senator Sharrod Brown of Ohio, economist Donald Boudreax noted, "Just before the current downturn — in 2008 — inflation-adjusted manufacturing output in the U.S. was 13 percent higher than it was in 2000, 52 percent higher than in 1990, 84 percent higher than in 1980, and 133 percent higher than in 1970."

Despite the postwar resurgence in global output and competition, US manufacturing output has remained steady at 21 percent of the world's output. Needless to say, reports of the death of US manufacturing are greatly exaggerated.

But what makes me proud of this sector isn't its aggregate output. Rather, it has to do with its output given the constraints placed on it by the federal government. These constraints have the effect of increasing the cost of capital and labor, which become especially serious when these costs grow relative to those of international competitors. How ironic are the actions of so-called progressives who champion positive interventions in the workforce meant to help the average worker but that actually harm these workers in the long run.

The important question is, why do increases in manufacturing output tend not to lead to increases in manufacturing hiring? When considering this question in class, I like to show students a video clip of the scene in the movie "Back to the Future" when the protagonist, Marty McFly, is transported to the 1950s. There, he drives his car into what was then a typical service station. Several well-dressed men run out to greet him, pump his gas, check his oil, and wash his windshield. To modern generations accustomed to self-service gas stations, such employment seems bizarre.

The message for my students, however, is that such jobs, once a ubiquitous portion of the labor market, were eventually priced out of existence by government interventions. Increases in the minimum-wage, increases in payroll taxes, and other attempts to coerce employers to act in ways others find virtuous often forced employers to cut back elsewhere.

If the cost of labor increases, someone has to pay for it. Laborers may pay in the form of decreased work opportunities, investors may pay in the form of decreased returns on capital, or consumers may pay in the form of higher prices required by increased costs. Society in general pays if simply because we have less wealth and higher costs than would otherwise have been the case.

In the case of the gas stations, we see an effort on the part of service-station owners to organize their operations in ways that make them less labor-intensive than they otherwise would have been. The result is that entry-level workers who might earn income, as well as other valuable workplace skills, must find other uses of their time.

We no longer see certain occupations anymore because of such workplace interventions. For most of us, elevator operators are an amusing curiosity seen mostly in black-and-white movies. Many fast-food restaurants now make customers pour their own drinks in an effort to reduce labor costs. The growth of the temp-worker industry reflects the desire by firms to hire workers without the increased regulatory burden of labor, which is then taken on by the temp agencies themselves.

What impresses me are the heroic efforts of unsung individuals and firms to maintain productivity in spite of such interventions. This is especially shown in the US manufacturing sector. To illustrate this phenomenon, consider the graph below.

This chart shows that while manufacturing employment fell significantly during the most recent recession — which is to be expected as firms correct from the years of malinvestment that characterized the unsustainable boom — the recent "official" recovery has been characterized by at best tepid growth in manufacturing employment.

What is more, recent gains in manufacturing output have occurred amid months of falling manufacturing employment.

It is significant that meager increases in manufacturing employment that occurred near the beginning of 2010 disappeared once states began implementing federal health-care "reform," which created added employer costs and uncertainty. Until issues associated with these costs get sorted out, manufacturing employment seems to have been paying for it.

"Reports of the death of US manufacturing are greatly exaggerated."But employment decline in manufacturing is no recent phenomenon, and many economists, including Boudreaux, argue that because US manufacturing output leads the world (albeit with reduced labor inputs) this is not an issue that should be of great concern. I beg to differ, if only on the basis of allocative efficiency. It is one thing if electronic manufacturing moves to Asia because Asians have comparative advantages in their production, but quite another if it moves to Asia because of artificial costs placed on domestic producers.

Similar logic applies to the growth of the service sector in the United States. It is one thing if this sector has grown because of some genuine comparative advantages of US workers in providing service output, but it is quite another if this sector's growth has occurred because workers are forced into it in numbers higher than they otherwise would have been due to artificial costs placed on manufacturing labor.

Does this explain much of the growth of the service sector in the United States? If so, we are witnessing a malinvestment of labor inputs, favoring service over manufacturing, that has been forced on resource markets — and an inevitable change in the character, if not the quality, of national output.

While we laud US manufacturing dominance, the state of manufacturing employment is an issue that should be of great concern to those of us who study the effects of economic interventionism. It is obvious that current levels of manufacturing output could be achieved with higher levels of labor input than we see today.

Unemployed workers in the United States should be up in arms over any legislation that increases the cost of labor. (Employed workers should be up in arms as well, to the extent that they face less job security and lower wages due to such legislation.) Despite the laudable efforts of manufacturing firms to maintain levels of output with increased cost, labor has paid the price with higher levels of unemployment.

Congress conceded as much, if only implicitly, when it allowed for a reduction of payroll taxes in the tax-overhaul bill it passed this past December. Such actions must be expanded and made permanent for the United States to retain its manufacturing competitiveness in the 21st century.

In the end, the depletion of manufacturing employment merely reflects the law of demand in that, by increasing the cost of manufacturing labor, employers have demanded less of it while whole manufacturing sectors have moved overseas. Meanwhile, unemployed manufacturing workers collect unemployment compensation while their former managers work overtime to replace their manufacturing output with higher levels of capital.

These outcomes would hardly surprise Ludwig von Mises, who wrote, "State interference in economic life, which calls itself 'economic policy,' has done nothing but destroy economic life. Prohibitions and regulations have by their general obstructive tendency fostered the growth of the spirit of wastefulness."[1]

I would only add that a serious discussion about some of the costs of intervention in the manufacturing sector, as well as the overall economy, is long overdue. Bring it on.

[1rudeboy]

Can you post that nifty chart of what the U.S. manufactures? Please be sure to include food & beverages.

[investigateworld]

Do you think we drill for it....

If we had too,yes.

Pizza and beer are consumables, necessities - yes.....

But to lump them in with steel and jet engines?

That's disingenuous.

[1rudeboy]

No, it only seems disingenuous, and is usually promoted by someone trying to make you scared enough to buy gold, or some sundry financial newsletter.

The categories can be broken-out into durable and non-durable goods. Please remember that those two terms have a specific meaning in the field of economics.

[Toddsterpatriot]

This one?

[1rudeboy]

No, the one from Census . . . or is that one only for manufactured export goods? (You could post it anyway for reference).

[Toddsterpatriot]

That was exports.

[Toddsterpatriot]

U.S. Exports to World Total by 5-digit End-Use Code
2005-2009

(In thousands of dollars)

Additional information

End-Use Code	Value 2005	Value 2006	Value 2007	Value 2008	Value 2009
(00000) Wheat	4,416,027	4,256,669	8,450,461	11,445,584	5,515,311
(00010) Rice	1,337,714	1,337,293	1,471,002	2,311,533	2,274,187
(00100) Soybeans	6,626,555	7,288,375	10,443,447	16,031,502	16,905,202
(00110) Oilseeds, food oils	1,190,935	1,329,691	2,034,425	3,190,447	2,525,373
(00200) Corn	5,824,420	8,226,378	11,209,235	14,611,992	9,680,733
(00210) Sorghum, barley, oats	628,355	707,276	1,226,515	1,487,777	728,478
(00220) Animal feeds, n.e.c.	3,387,722	3,813,842	4,567,605	5,931,953	6,350,471
(00300) Meat, poultry, etc.	7,206,280	7,830,539	9,803,526	13,473,914	12,056,081
(00310) Dairy products and eggs	1,299,418	1,491,901	2,452,990	3,245,250	1,880,555
(00320) Fruits, frozen juices	4,996,914	5,565,404	6,204,632	7,147,122	6,888,310
(00330) Vegetables	3,509,842	3,852,542	4,320,698	5,091,865	4,942,980
(00340) Nuts	3,043,642	3,226,764	3,449,396	3,898,846	4,183,367
(00350) Bakery products	2,696,155	2,997,266	3,458,496	3,972,302	4,057,777
(00360) Other foods	5,872,533	6,585,524	7,282,239	8,312,435	8,116,537
(00370) Wine and related products	912,592	1,098,847	1,217,621	1,299,056	1,273,536
(01000) Fish and shellfish	4,207,720	4,350,747	4,374,738	4,373,778	4,088,512
(01010) Alcoholic beverages, excluding wine	821,174	958,548	1,176,751	1,280,937	1,169,517
(01020) Nonagricultural foods, etc.	977,358	1,044,775	1,120,494	1,242,933	1,270,889
(10000) Cotton, raw	3,933,122	4,516,513	4,590,808	4,814,406	3,368,670
(10100) Tobacco, unmanufactured	983,722	1,134,076	1,201,464	1,231,004	1,133,193
(10120) Hides and skins	1,787,883	2,055,688	2,182,541	2,066,608	1,465,990
(10130) Agric. industry-unmanufactured	1,401,808	1,578,557	2,126,111	3,270,157	2,781,143
(10140) Agric. farming-unmanufactured	1,833,043	1,848,596	2,082,180	2,470,796	2,358,184
(10150) Agriculture-manufactured, other	1,651,371	1,733,912	1,917,364	2,219,799	2,087,976
(11010) Metallurgical grade coal	2,385,524	2,563,510	2,937,949	5,810,995	4,455,228
(11020) Coal and fuels, other	1,329,221	1,337,047	1,676,376	2,793,453	2,066,459
(11100) Crude oil	551,652	567,086	751,092	1,031,499	972,228
(11110) Fuel oil	6,932,607	12,060,896	15,573,765	34,894,056	23,670,220
(11120) Petroleum products, other	14,104,621	17,316,831	19,325,281	27,995,137	21,731,464
(11130) Natural gas liquids	1,075,494	1,623,363	2,107,542	3,260,336	2,803,344
(11200) Gas-natural	3,109,833	2,241,159	3,163,501	4,892,249	3,286,064
(11300) Nuclear fuel materials	1,619,190	1,827,382	2,430,288	2,177,672	2,283,340
(11400) Electric energy	1,046,509	1,036,051	991,907	1,263,886	561,929
(12000) Steelmaking materials	5,991,623	6,801,742	9,882,359	14,193,933	8,548,322
(12100) Iron and steel mill products	6,917,987	7,280,901	8,857,734	11,471,121	7,063,152
(12110) Iron and steel products, other	4,351,229	5,161,823	5,779,523	7,264,146	5,412,567
(12200) Aluminum and alumina	5,191,121	7,293,397	8,029,016	8,569,567	5,691,779
(12210) Copper	2,356,484	4,701,430	5,378,672	6,125,726	4,085,511
(12260) Nonmonetary gold	5,548,806	8,783,018	13,307,357	18,689,079	13,932,512
(12270) Precious metals, other	3,175,711	7,041,535	8,438,360	10,564,281	8,007,692
(12290) Nonferrous metals, other	4,523,315	6,601,440	8,060,264	7,765,131	5,825,561
(12300) Finished metal shapes	11,405,809	13,941,026	15,288,523	16,918,626	13,091,337
(12420) Pulpwood and woodpulp	5,272,294	5,907,916	7,112,556	7,940,832	6,848,862
(12430) Newsprint	9,862,581	10,567,425	11,543,605	12,462,794	10,759,362
(12500) Plastic materials	24,793,298	27,923,880	29,118,286	31,639,545	25,543,801
(12510) Chemicals-fertilizers	5,197,329	5,299,442	6,292,134	10,760,304	7,034,570
(12530) Chemicals-inorganic	5,880,332	6,660,376	7,014,514	8,356,994	6,018,503
(12540) Chemicals-organic	23,377,062	27,124,997	31,622,940	33,351,324	24,602,598
(12550) Chemicals-other	16,721,139	18,518,081	20,421,169	23,176,664	20,785,260
(12600) Cotton fiber cloth	3,232,897	3,131,450	2,857,846	2,777,619	2,115,630
(12620) Manmade cloth	5,686,350	5,772,104	5,872,791	6,046,710	4,743,467
(12630) Hair, waste materials	483,543	552,491	606,774	617,950	488,015
(12640) Finished textile supplies	2,377,417	2,539,263	2,467,721	2,440,976	2,072,266
(12650) Leather and furs	1,095,540	1,051,872	1,150,922	935,118	568,783
(12700) Synthetic rubber-primary	2,694,877	3,188,402	3,609,603	3,763,748	2,792,362
(12720) Nonmetallic minerals	488,854	605,025	581,999	825,002	481,209
(12750) Industrial rubber products	2,585,845	2,929,954	3,249,079	3,372,866	2,864,700
(12760) Mineral supplies-manufactured	3,751,497	4,513,271	4,932,509	4,994,114	4,027,656
(12765) Tapes, audio and visual	2,014,146	1,796,091	584,404	505,783	696,209
(12770) Other industrial supplies	14,793,038	16,415,191	19,854,838	20,443,435	17,932,452
(13100) Logs and lumber	4,332,968	4,604,286	4,730,702	4,417,280	3,523,549
(13110) Wood supplies, manufactured	1,074,196	1,221,734	1,279,670	1,399,805	1,014,437
(13200) Glass-plate, sheet, etc.	1,141,029	1,279,408	1,475,229	1,628,697	1,344,362
(13210) Shingles, molding, wallboard	2,637,272	3,022,113	3,413,712	3,875,079	3,341,640
(13220) Nontextile floor tiles	377,329	415,826	462,505	498,880	425,461
(20000) Generators, accessories	7,613,908	9,467,357	10,415,345	12,125,075	10,296,288
(20005) Electric apparatus	25,674,197	29,809,799	30,884,798	30,835,619	26,062,564
(21000) Drilling & oilfield equipment	8,153,668	10,779,975	12,611,364	15,064,587	11,467,010
(21010) Specialized mining	634,938	838,723	1,059,037	1,436,270	1,123,268
(21030) Excavating machinery	8,812,827	9,870,857	12,790,982	15,079,628	9,810,299
(21040) Nonfarm tractors and parts	1,382,445	1,859,599	2,102,594	3,410,665	2,048,417
(21100) Industrial engines	14,934,258	15,976,883	19,147,306	21,848,649	21,916,203
(21110) Food, tobacco machinery	2,064,865	2,193,266	2,610,392	3,055,859	2,722,159
(21120) Metalworking machine tools	7,663,288	9,497,605	6,715,081	7,442,813	5,298,367
(21130) Textile, sewing machines	1,247,851	1,273,208	1,384,618	1,323,294	965,597
(21140) Wood, glass, plastic	3,645,557	3,628,075	3,510,729	4,139,420	3,414,628
(21150) Pulp and paper machinery	2,718,324	2,852,539	2,701,033	2,955,993	2,311,204
(21160) Measuring, testing, control instruments	16,720,633	19,151,971	20,629,956	20,984,430	16,939,642
(21170) Materials handling equipment	8,162,312	9,919,919	11,985,740	14,728,350	9,722,423
(21180) Industrial machines, other	28,295,944	32,697,001	38,364,090	38,138,302	30,876,273
(21190) Photo, service industry machinery	7,492,107	8,192,305	9,191,558	9,846,793	7,888,360
(21200) Agricultural machinery, equipment	5,144,124	5,312,437	6,268,756	8,297,054	6,253,057
(21300) Computers	10,206,187	11,470,423	13,535,351	14,560,866	12,314,744
(21301) Computer accessories	35,330,167	36,109,996	29,403,993	29,336,861	25,402,179
(21320) Semiconductors	47,221,556	52,429,936	50,444,550	50,603,102	37,487,996
(21400) Telecommunications equipment	25,666,771	28,930,842	31,424,350	32,865,982	28,683,134
(21500) Business machines and equipment	2,335,954	2,702,010	5,392,134	4,246,641	2,973,575
(21600) Laboratory testing instruments	6,665,275	7,280,227	8,128,335	9,011,278	8,693,696
(21610) Medicinal equipment	20,364,358	22,702,165	23,825,242	27,023,260	26,879,276
(22090) Civilian aircraft, engines, equipment, and parts	55,888,616	64,502,981	73,019,297	73,998,632	74,755,438
(22100) Railway transportation equipment	2,345,207	2,939,640	3,013,878	3,430,978	2,500,782
(22200) Vessels, excluding scrap	64,957	51,701	108,920	88,165	22,016
(22210) Commercial vessels, other	230,358	222,441	293,268	372,734	395,242
(22220) Marine engines, parts	976,964	1,127,719	1,267,760	1,450,095	1,188,961
(22300) Spacecraft, excluding military	37,955	26,879	30,336	26,555	48,362
(30000) Passenger cars, new and used	30,492,691	33,977,613	43,743,138	49,568,671	27,501,371
(30100) Trucks, buses and special purpose vehicles	13,477,345	15,104,176	17,033,187	15,753,472	12,472,506
(30200) Engines and engine parts (carburetors, pistons, ri	11,324,368	12,197,079	13,222,680	12,860,797	8,775,176
(30210) Bodies and chassis for passenger cars	58,449	58,906	187,253	193,100	65,257
(30220) Automotive tires and tubes	2,403,281	2,487,460	2,733,607	3,076,308	2,768,978
(30230) Other parts and accessories of vehicles	40,916,620	43,336,184	44,330,344	39,850,620	30,131,644
(40000) Apparel, household goods - textile	5,311,955	5,199,401	4,744,950	4,913,001	4,767,587
(40030) Apparel,household goods-nontextile	1,672,191	1,839,910	1,953,582	2,232,846	2,117,895
(40050) Sports apparel and gear	485,324	588,789	565,214	607,659	520,298
(40100) Pharmaceutical preparations	27,618,757	30,919,365	35,164,635	40,422,158	46,122,661
(40110) Books, printed matter	4,820,801	5,205,957	5,586,630	5,808,117	5,183,642
(40120) Toiletries and cosmetics	5,975,099	6,760,241	7,615,193	8,715,182	8,436,427
(40130) Tobacco, manufactured	1,340,630	1,362,074	1,157,107	858,340	533,247
(40140) Writing and art supplies	5,623,401	5,835,270	6,182,716	6,743,648	5,942,634
(41000) Furniture, household goods, etc.	2,885,663	3,209,952	3,591,487	4,045,732	3,221,439
(41010) Glassware, chinaware	405,241	433,268	493,571	521,438	395,705
(41020) Cookware, cutlery, tools	771,945	871,885	1,003,808	1,029,246	840,518
(41030) Household appliances	6,050,859	6,636,064	6,940,036	7,376,021	5,919,684
(41040) Rugs	906,070	1,008,340	1,023,943	1,090,418	849,025
(41050) Other household goods	12,428,236	14,078,144	15,458,272	17,020,468	16,629,750
(41110) Pleasure boats and motors	2,480,770	2,784,741	3,149,061	3,423,537	2,050,067
(41120) Toys/games/sporting goods	7,564,206	9,044,514	11,288,684	11,615,803	9,839,225
(41140) Musical instruments	1,058,999	1,066,449	2,110,834	2,182,878	2,108,088
(41200) TV's, VCR's, etc.	3,639,449	3,867,843	3,858,229	3,747,936	3,904,324
(41210) Stereo equipment, etc.	2,213,713	2,460,028	2,469,801	2,272,000	1,786,163
(41220) Records, tapes, and disks	3,640,005	3,543,387	4,962,046	5,135,017	4,035,140
(41300) Numismatic coins	67,805	155,242	244,792	321,107	282,087
(41310) Jewelry, etc	4,727,493	6,150,140	6,974,894	7,189,366	6,807,589
(41320) Artwork, antiques, stamps, etc.	4,778,136	5,952,850	7,497,948	8,448,043	6,861,140
(42000) Nursery stock, etc.	341,782	388,513	422,700	444,337	405,493
(42100) Gem diamonds	8,906,873	9,986,079	12,328,131	15,250,311	10,483,995
(50000) Military aircraft, complete	2,417,217	4,464,053	4,174,989	4,580,069	2,381,208
(50010) Aircraft launching gear, parachutes, etc.	305,808	344,801	329,905	393,594	452,002
(50020) Engines and turbines for military aircraft	1,566,406	1,643,263	1,780,258	1,772,342	1,912,519
(50030) Military trucks, armored vehicles, etc.	920,345	845,650	1,031,680	926,068	1,012,332
(50040) Military ships and boats	0	5,170	23,310	8,624	0
(50050) Tanks, artillery, missiles, rockets, guns and ammu	2,037,040	2,714,832	2,935,530	2,881,743	3,121,615
(50060) Military apparel and footwear	668,594	693,126	654,518	540,713	434,997
(50070) Parts for military-type goods	4,919,362	5,917,827	5,963,682	5,490,903	5,481,298
(60000) Minimum value shipments	18,800,866	21,595,289	24,277,382	27,830,906	22,610,420
(60010) Miscellaneous domestic exports and special transac	5,328,568	5,365,184	6,128,446	6,237,098	5,799,825
(60040) Undocumented exports to Canada	0	0	0	0	0
TOTAL	901,081,813	1,025,967,497	1,148,198,722	1,287,441,997	1,056,042,963

[1rudeboy]

Thanks, T. Please see #27 above. It is only for manufactured exports, but provides a decent snapshot.

[Toddsterpatriot]

Actually all exports, not just manufactured.

[meadsjn]

You made a claim the other day that Palin didnt need to do real interviews (to be elected president)

I made no such claim that "Palin didn't need to do real interviews".

She surely doesn't owe you such an interview, but she has written two books, 297 articles, and has made over a hundred speeches, for which I provided links, and you still did not bother to read or watch.

[investigateworld]

First off, I'm not a gold bug, we are beyond that stage. Bullets and beans are the only things now on my shopping list.

I predicted,YEARS ago that our insane free trade policies would cause us to elect a socialist/communist President of the USA.

"Oh no", replied the Free Traders, "Home ownership has never been higher thanks to free trade ",they cried.

[Hillarys Gate Cult]

A friend of mine works in a American factory. Their Chinese factory makes the same product which goes out to the market with a 70% failure rate. If their US factory would ever rise to a 3% failure rate then they would be standing in front of corporate explaining why they should still have their jobs. The Chinese government makes that 70% waste possible.

[Toddsterpatriot]

Still spreading that lie? LOL!

[1rudeboy]

Home ownership? Was that in NAFTA, or is it simply a WTO thing?

[1rudeboy]

I remember lots of talk when things were going well. I remember lots of laughs anticipating how people would react when things started not to go well. But I never anticipated that the reaction would be to blame people for saying things are going well when they were going well, because things went not well in the future.

[sickoflibs]

RE :” I made no such claim that “Palin didn't need to do real interviews”. She surely doesn't owe you such an interview,...”

Jeeze, you take BOTH sides of the argument in the same paragraph.

If she decides to run for president she will have to give up her current role and take on another one including giving real interviews. There is nothing wrong with what she is doing now, just your unrealistic expectations. She is doing a service now attacking Democrats.

THIS IS THE REPLY THAT STARTED IT FOR REFERENCE:

Palin Fans like her, fans believe in her, they love watching her nailing Democrats and Obama, But fans have a grip on reality.

Palin-bot’s are driven by emotion. When asked questions about her being anointed president without a campaign they go on the attack. Everything is ‘circle the wagons’ to them. They want Sarah to stay mysterious, to hide her real positions from the left, and right, because they fear that they will keep her from being president. Their deepest fear is she may not run, so they endlessly look for others to blame for saying she shouldn't run, so they can vent on them. They think she can win a general election on Facebook and Hannity while everyone else has to be vetted by those NOT trying to get them elected. They are completely delusional. They are not headed for a happy ending.

[NVDave]

I don’t see anywhere in the Fed’s notes that this data is adjusted for either the PPI or CPI-U inflation during that period.

http://www.federalreserve.gov/Releases/G17/ip_notes.htm

Simply throwing up a “gross value of products” during the timeframe of 1975 to now (encompassing two periods of significant producer price increases) doesn’t impress me much. Never has. This is one of the favorite stats of those who keep trying to explain away the declining capacity utilization, the decline in establishments, employment and the systemic trade imbalance.

As for the productivity argument: Manufacturing productivity is soaring right now. Has been since the downturn began getting real bad in late 2008.

I suppose it is then your argument that what will really benefit the US economy and the manufacturing sectors especially is another recession just like 2007 to 2009, right? Hell, if the recession pushed manufacturing output measured by GVP per employee to $300K, another recession might put it over $400K, right?

[HiTech RedNeck]

Weeding out all the bad items would be a challenge with most of the raw output being bad. I wonder what the respective reliability of the ultimate shipments are.

[GoodDay]

“Small detail: Making frozen pizza for home cooking is considered’manufacturing’ now.”

So? Don’t be such a snob. These are also considered manufacturing jobs:

2007 NAICS DEFINITION

31 Manufacturing
311 Food Manufacturing
3111 Animal Food Manufacturing
31111 Animal Food Manufacturing
311111 Dog and Cat Food Manufacturing
311119 Other Animal Food Manufacturing
3112 Grain and Oilseed Milling
31121 Flour Milling and Malt Manufacturing
311211 Flour Milling
311212 Rice Milling
311213 Malt Manufacturing
31122 Starch and Vegetable Fats and Oils Manufacturing
311221 Wet Corn Milling
311222 Soybean Processing
311223 Other Oilseed Processing
311225 Fats and Oils Refining and Blending
31123 Breakfast Cereal Manufacturing
311230 Breakfast Cereal Manufacturing
3113 Sugar and Confectionery Product Manufacturing
31131 Sugar Manufacturing
311311 Sugarcane Mills
311312 Cane Sugar Refining
311313 Beet Sugar Manufacturing
31132 Chocolate and Confectionery Manufacturing from Cacao Beans
311320 Chocolate and Confectionery Manufacturing from Cacao Beans
31133 Confectionery Manufacturing from Purchased Chocolate
311330 Confectionery Manufacturing from Purchased Chocolate
31134 Nonchocolate Confectionery Manufacturing
311340 Nonchocolate Confectionery Manufacturing
3114 Fruit and Vegetable Preserving and Specialty Food Manufacturing
31141 Frozen Food Manufacturing
311411 Frozen Fruit, Juice, and Vegetable Manufacturing
311412 Frozen Specialty Food Manufacturing
31142 Fruit and Vegetable Canning, Pickling, and Drying
311421 Fruit and Vegetable Canning
311422 Specialty Canning
311423 Dried and Dehydrated Food Manufacturing
3115 Dairy Product Manufacturing
31151 Dairy Product (except Frozen) Manufacturing
311511 Fluid Milk Manufacturing
311512 Creamery Butter Manufacturing
311513 Cheese Manufacturing
311514 Dry, Condensed, and Evaporated Dairy Product Manufacturing
31152 Ice Cream and Frozen Dessert Manufacturing
311520 Ice Cream and Frozen Dessert Manufacturing
etc., etc.

For a complete list, see:
http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart_code=31&search=2007

[GoodDay]

“Simply throwing up a “gross value of products” during the timeframe of 1975 to now (encompassing two periods of significant producer price increases) doesn’t impress me much. Never has.”

That’s probably because you’re a knucklehead when it comes to economics, which is why you engage in unnecessary scare-mongering about China. That’s OK. I understand.

The Fed numbers don’t use prices. As the Fed itself explains in its own notes, the productivity numbers are based on figures from trade organizations that count physical units of a good, as well as things like number of man-hours. Prices — inflated or not — don’t enter into it.

See:

http://www.federalreserve.gov/releases/g17/ip_notes.htm

“Source data. On a monthly basis, the individual indexes of industrial production are constructed from two main types of source data: (1) output measured in physical units and (2) data on inputs to the production process, from which output is inferred. Data on physical products, such as tons of steel or barrels of oil, are typically obtained from private trade associations and from government agencies . . .”