Many critics of free commerce argue that globalization has led to the US turning into deindustrialized; That’s, commerce is eroding our manufacturing base. Economists refute this declare by pointing to the truth that US industrial manufacturing is close to the document highs set in 2018 or that the manufacturing element, whereas off the highs set in 2008, remains to be at a really excessive degree of manufacturing. Certainly, simply final quarter, the US manufacturing sector produced $7.3 trillion price of products. That is hardly the image of a producing sector that has been gutted by worldwide commerce.
“However wait!” the intelligent protectionist claims. “We have to think about the counterfactual. Consider how a lot greater manufacturing could be if it weren’t for globalization!”
This objection is affordable. Counterfactuals are all the time tough to contemplate. By definition, the counterfactual doesn’t exist, so we are able to by no means empirically present what the “correct” counterfactual is. Idea helps information us, however we are able to additionally take a look at different proof to counsel what the counterfactual is. If we had been experiencing a declining manufacturing base, it ought to present up in employment numbers. In spite of everything, factories shouldn’t be hiring; they’d be doing alternative hiring, certain, however that’s about it. Job openings needs to be pretty low in comparison with historic traits, layoffs/discharges pretty excessive.
Looking at employment numbers, we see information inconsistent with the “deindustrialization” argument. Job openings in manufacturing in August 2024 (newest information as of this writing) had been 505,000. There are half one million job openings within the US proper now for manufacturing jobs. That’s down from the post-pandemic rehiring soar, the place openings hit 997,000, however properly above the pre-pandemic common of 293,000. Producers within the US want staff and the demand is mostly excessive. In a deindustralizing economic system, one wouldn’t count on to see growing demand for manufacturing staff.
The development in job openings is attention-grabbing too. Aside from two declines from the 2001 and 2008 recessions, the development in job openings is mostly rising. The one non-recession exception is in 2018 when the Trump commerce struggle began. Odd that…if free commerce was deindustrializing and tariffs had been industrializing, one wouldn’t count on to see job openings fall as tariffs go into impact.
Likewise, layoffs are very low. Certainly, since 2001, agency layoffs have been typically regular at a really low degree. We don’t see any mass layoffs (recessions excepted). Certainly, in the course of the “China Shock,” the variety of folks laid off fell, not rose. If the decline in manufacturing throughout this time was because of China, we must always have anticipated to see layoffs improve. Certainly, a falling variety of layoffs means that the decline in manufacturing on the time was doubtless due closely to attrition (folks quitting/retiring and never being changed).
One last observe: wages for manufacturing (manufacturing and nonsupervisory) staff have typically been rising sooner than inflation, suggesting actual wages have been rising. Once more, if the demand for manufacturing staff was falling because of deindustrialization, we must always see wages fall, not rise.
Placing these employment figures collectively, we are able to begin to see a counterfactual emerge. US manufacturing manufacturing has hit a ceiling, sure. However it’s not because of commerce. It seems extra because of the truth that corporations can not rent! They need staff, they want staff, they’re keen to pay for workers, however they can’t get them (for no matter cause). The information don’t present a deindustrializing nation. It exhibits an economic system nonetheless industrialized however hitting some constraints. Reasonably than burdening US manufacturing with extra constraints through tariffs, “Purchase American,” and different restrictions, policymakers ought to discover why manufacturing jobs are laborious to fill.
Briefly, protectionism is not going to industrialize and deindustrializing base. It’ll deindustrialize and industrializing base. And all as a result of they’ve the incorrect counterfactual.
Jon Murphy is an assistant professor of economics at Nicholls State College.
