The Decline in US Manufacturing Before and During the Current Crisis

The implosion of two major automobile producers during the current recession has focused new political attention on the plight of us manufacturing, but there is little that us politicians can do to reverse the long-term decline in manufacturing jobs. This decline is a natural result of economic growth, technological change, and comparative advantage. Indeed, the shift of industrial jobs from advanced economies to less developed countries has been taking place for decades, and there is little evidence that it will slow soon. Despite this decline, us manufacturing's share of real output has remained essentially constant for fifty years because productivity growth has been much more rapid in manufacturing than in the service sectors of the economy. The current work aims at showing that this somewhat reassuring view of the stability of us manufacturing is a reflection of the phenomenal innovation in just one industry - computers and electronic equipment - over the past 15 years. The rest of manufacturing has been declining in relative importance since the 1970s.