U.S. Manufacturing Is Strong Despite Trade Critics

A common theme among critics of free trade is that the free flow of goods across borders (and oceans) has gutted America’s manufacturing sector. Not so fast says an economist from the Chicago Federal Reserve Board. In a hearing in Washington, D.C., the Dayton Daily News reports that Chicago FED senior economist William Strauss had to correct some bad economic history used by the anti-trade warriors.

While the manufacturing sector has suffered like all industries from tight credit and the recession, the intermediate and short-term prospects are very good. According to the Dayton Daily News (August 9, 2010):

Strauss ticked off one statistic after another that shows the U.S. remains a manufacturing powerhouse. The nation’s factories, he testified, are just more efficient.

He said that between 1950 and 2007, manufacturing output in the U.S. increased by 600 percent. Yet the nation today has only 14 million manufacturing jobs, roughly the same number as 1950.

How can this be?

Strauss pointed to automation and increased worker productivity, telling the subcommittee that 184 workers in 2009 produced as much as 1,000 workers did in 1950.

He explained that worker productivity is the main reason why manufacturing’s share of gross domestic product has declined by pointing out that “the greater efficiency of the manufacturing sector afforded either a slower increase or an outright decline in the prices of this sector’s goods.”

“This allowed manufactured goods to be less costly to consumers and led to the manufacturing sector’s declining share of GDP,” Strauss testified.