Manufacturing Jobs and Obama: Running in Place Defined as Progress
I came across this recently from Obama's stump speech:
Now we’ve added more than 5 million new jobs, more manufacturing jobs than any time since the 1990s. The unemployment rate has fallen from 10 percent to 7.8 percent. Foreclosures are at their lowest in five years. Home values are on the rise. Stock market has doubled. Manufacturing is coming back. Assembly lines are putting folks back to work. That’s what we’ve been fighting for. Those are the promises I’ve kept.”
It is a fine example of campaign rhetoric, which is to say that it conveys a completely false impression while not technically lying. The truth is with regard to jobs, especially manufacturing jobs, things are not getting better. They are simply not getting worse, or not getting worse as fast.
I really wish to concentrate on the manufacturing remarks, but first with regard to 5 million new jobs, Obama is talking about 5.006 million more employed (seasonally adjusted) since employment bottomed in December 2009 at 137.968 million. The employed are not jobs, which come from a different survey. Only 4.256 million jobs seasonally adjusted have been created since the jobs bottom of 129.244 million in February 2010. Obama's claim leaves out two crucial factors: population growth and that the number of employed hit its high in January 2008 at 146.397 million, or 3.423 million more than the September 2012 number of 142.974 million.
The increase in employment needed to keep up with population growth depends on which employment-population ratio we choose. But even if we use the one for September 2012 which is at the lower end, there would need to be 6.549 million more employed (from January 2008) to keep up with population growth. Both of these numbers (some 10 million in all) are not touched by Obama's claim of 5 million more employed. This is in part why I put the real unemployment rate up around 12.5% and why it has changed little since the beginning of 2010. Obama makes it sound like he has made progress but really he/the economy is only running in place.
In terms of manufacturing jobs, the first thing you need to know is that we have been hemorrhaging them for 30 years.
In the mid-seventies, manufacturing jobs accounted for about 22% of all non-farm jobs. By the time, Obama took office this had declined to 9.4%. In Obama's first year (2009), the economy lost 1.086 million manufacturing jobs and the percentage fell to 8.9%. In 28 of the 33 months since, the economy has made modest gains totaling 542,000 (or on average something over 16,000 manufacturing jobs a month). Even at this slow rate, Obama can claim creating manufacturing jobs at the fastest clip since the 1990s, but this is only because Bush's job creation record was so bad. In his 8 years, Bush managed to lose 27% of the manufacturing jobs there were when he took office. In 96 months, he only had 14 months with any increase in manufacturing jobs at all.
Importantly, in September 2012, there were still 610,000 fewer manufacturing jobs than there were at the beginning of Obama's Presidency. Nor has Obama succeeded in increasing the percentage of manufacturing jobs in the economy. These have been fluctuating in the narrow range of 8.9%-9.0% for the last 40 months, and this has been possible with Obama's modest gains because the baseline is now so low. In September, there were only 11.942 million jobs left in manufacturing. Obama's claims of creating manufacturing jobs are further dampened by the loss of 38,000 of them in the last two months.
Then there is the question of the quality of these manufacturing jobs. Although manufacturing jobs are held up as the model of "good jobs", in general, manufacturing has suffered a similar flattening in wages as other sectors. In the last 30 years, wages have fluctuated in a 10% range and are currently only about 5% better than they were 30 years ago.
In this graph, SIC stands for the old Standard Industrial Classification for jobs. This was replaced by NAICS or the North American Industrial Classification System in 2005. NAICS was applied retroactively to 2001. The green NAICS line above corresponds to the Bush Administration and the red NAICS line to Obama's Presidency. Everything is benchmarked to 2005 constant dollars.
The cliff dive at the end of the Bush Administration corresponds to the recession in 2008. I don't have an explanation for the rapid recover, but since Obama has been in office manufacturing wages have been in decline, although the scale of those declines (2.2%) is still relatively small.
The picture is only slightly better if we look at total compensation (wages and benefits) in manufacturing.
Here too the trend (red line) is negative, but the overall decline is only about a third of that in wages.
The lesson in all this is that, despite Obama's claims, we are stuck at high levels of real unemployment and low rates of manufacturing jobs, and the quality of those manufacturing jobs is slowly eroding.
Data for graphs from: