By Bill LaFayette, Ph.D., vice president, economic analysis
The May 27 online edition of Columbus Business First (see Ohio, Great Lakes states big production job losers) highlighted a Business Journals study reporting that manufacturing employment has declined significantly in 49 of the 50 states since 2001. This is certainly true. Employment peaked nationally in March 2000. National employment is 33 percent lower now than it was then, while Ohio is down 40 percent and the Columbus MSA is down 38 percent.
These statistics seem to imply that manufacturing is in decline and all these jobs have gone to other countries. The fact is that the primary reason for the decline over the past decade is not offshoring, but rather efficiency gains. Consider this: between 2001 and 2007, manufacturing employment declined 25 percent but the output of U.S. manufacturers increased 20 percent. As a result, a typical manufacturing worker could produce 41 percent more output in 2007 than he or she could produce six years earlier.
In other words, what took 100 workers to make in 2001 took only 71 workers in 2007. Many tasks that were performed by workers a decade ago are now performed by machines. While some production has certainly shifted overseas, if this were the driving force behind the employment losses, output would have stagnated or fallen rather than increasing at a faster-than-average rate.
Manufacturing employment has increased since the labor market turned in December 2009 – 2.2 percent nationally and 2.7 percent in Ohio. (Local employment, however, has been flat.) This is not surprising: the 41 percent efficiency gain is unusually large and production improvements have hit a wall. This is likely to be temporary.
In fact, the State of Ohio considers manufacturing to be one of the key industries to focus on for economic development. From the Ohio Means Business website, Ohio is "the 3rd largest manufacturing state in the U.S. ($84.1 billion) and 8th largest source for Gross Domestic Product among the 50 states and the District of Columbia ($471.3 billion in GDP) across a wide industry base." Read more about how Ohio's manufacturing knowledge will help your business adapt to changing manufacturing demands.
Over the long run, manufacturing will provide fewer jobs than it has historically – but more jobs among supplier industries. The manufacturing jobs that do exist are far more technology-dependent and higher skill than they were a decade ago.
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