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05/18/2012

Manufacturing employment: A longer view

Manufacturing employment: A longer view

"Do you think the total manufacturing employment will ever catch back up to mid-1995?" That was a question that came into SouthPoint in response to our post earlier this month on the recent rebound in regional manufacturing. An excellent question—one we'll try to answer in this post.

First, a quick scan of the environment. According to data from the U.S. Bureau of Labor Statistics (BLS), total manufacturing employment in the six states of the Sixth Federal Reserve District (Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee) has declined by 863,900 over the 17 years since it peaked in March 1995—a decline of 36.6 percent. Percent change losses were greatest in Mississippi and Tennessee and comparably less severe in Louisiana. Alabama, Georgia, and Florida experienced declines in line with the regional average. For comparison, the nation as a whole saw a decline of 30.8 percent in manufacturing employment over the same period.

Looking deeper into more detailed data from the U.S. Bureau of Economic Analysis (BEA) at some sectors within manufacturing, jobs tied to nondurable production have declined just over 40 percent from 1995 to 2010 (the latest data available), more than the 27 percent decline in durables employment for the states of the Sixth District. Peering a little deeper in a sector that has been hardest hit in terms of job losses, employment related to textile production has declined by 328,000, a drop of 74 percent. For the nation as a whole, textile-related employment has declined just over 70 percent, which represents just over 1 million jobs in total.

Back to the question at hand: will manufacturing employment ever come back to 1995 levels? If there's one thing I've learned over the years it is never to say never, unless you are talking about my beloved Cleveland Browns making it to the Super Bowl. That said, it's difficult to see regional manufacturing employment growing by 863,900 under any reasonable timeframe.

This is not to say that manufacturing will not continue to be an important contributor to economic activity in the region. In fact, while manufacturing employment has declined, regional manufacturing output, as measured by looking at state GDP data from the BEA, has risen 42 percent from 1997 (the earliest date data available) through 2010.

The story here is clearly productivity. You need to visit only one of the region's auto production facilities to see this in action. Data from the BLS bear this out—nationally, output per person in manufacturing has risen over 80 percent from 1995 through 2011.

So, even if some of those manufacturing jobs we lost over the last two decades in sectors such as textiles are replaced by new manufacturing jobs in sectors that are expanding—like auto production—the number of people needed to produce goods today is much lower than in 1995. Employment levels may not return to 1995 levels, but because of productivity gains manufacturing output looks poised to continue to expand and have a positive impact on the region's economic health.

Photo of Michael ChrisztBy Mike Chriszt, a vice president in the Atlanta Fed's research department

May 18, 2012 in Employment, Manufacturing | Permalink

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