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After focusing his presidential campaign partly around laments over the loss of US manufacturing jobs, Donald Trump has presided over a pickup in factory job growth. The gains actually began under President Obama. But by one measure the pace under President Trump is the fastest since the 1970s. Why?
Under both presidents, wider forces have helped, such as a growing economy. But both administrations, in their own ways, have embraced the idea of manufacturing as a key driver for the economy’s future rather than a declining relic. “It’s essential to driving innovation in our economy” and a reliable source of good jobs, says Scott Paul, president of the Alliance for American Manufacturing.
Many in the industry say Trump’s tax cuts have aided job growth. On trade policies, the answer isn’t so clear. Tariffs might pry open Chinese markets but also impose costs. What’s missing is a comprehensive strategy, says economist Rob Atkinson. Republicans push tax cuts and deregulation while Democrats favor job training and public-private partnerships. “What you really want is an all-of-the above president,” he says.
The US economy has created more jobs under President Trump than in the first two years of any president since Bill Clinton. But when it comes to manufacturing jobs, Mr. Trump really shines.
His administration has witnessed more growth of factory jobs than in the first two years of any president since Jimmy Carter 40 years ago.
The trend is significant in part because Trump’s promises of Rust Belt revitalization were a clear part of his electoral success in 2016.
It is too early to tell whether this is a blip or a turnaround. From 2000 to 2010, the United States lost a third of its factory jobs, some 5.8 million workers. The rebound after the Great Recession, which started under President Obama and has accelerated under Trump, has added back nearly 1.4 million of those positions, which is a start but hardly a full recovery. And some of Trump’s policies, notably on trade, may be holding the sector back.
Nevertheless, what is clear is that there’s new thinking at the White House. Starting with President Obama and much more emphatically under Trump, manufacturing is now seen as a key driver for the economy’s future rather than a declining job generator of an industrial past.
“There’s a newly rediscovered belief in American manufacturing in US politics,” says Scott Paul, president of the Alliance for American Manufacturing, a partnership of US manufacturers and the United Steelworkers union. “It’s essential to driving innovation in our economy. It’s one of the most reliable places for workers who don't have a four-year college degree to get a good job.”
Whether the momentum continues will depend, in large part, on economic forces that are beyond any president’s direct control. But experts on manufacturing say it may also hinge on whether the administration can expand its strategy from a focus on tax cuts and trade deals to include things like worker-training and research-promotion programs.
The administration faces formidable odds. Growth in the world economy has been cooling, including for factory goods. Globalization is a still powerful force that can pull US jobs overseas. And the trend of automation, while helping many US factories to compete in global markets, can mean that even success doesn’t ensure legions of assembly-line jobs attached.
Still, when it comes to jobs and pay, the trends look promising. After a rocky 2009, the Obama administration saw 908,000 factory jobs created in its next seven years. In just two years, Trump has already seen half again that number of manufacturing positions created – a 3.7 percent jump that’s the best performance of any first two years of a president since a 10 percent rise under President Carter from 1977 to 1979.
Hourly earnings in manufacturing jumped slightly more under Obama’s first two years than Trump’s, but the latter’s 3.3 percent increase is respectable. Averaging $27.21, these jobs represent a solid step into the middle class and are nearly on par with the $27.56 average for all nonfarm workers in the private sector. (Interestingly, until mid-2018, factory workers’ earnings were slightly higher than all private-sector workers.)
“It’s been a banner year for manufacturers,” says Chad Moutray, chief economist at the National Association of Manufacturers, a Washington, D.C., trade group. “We're coming into 2019 with a lot of uncertainties, but our members continue to be positive.”
How much of Trump’s success stems from inheriting an economy already in full swing is a matter of debate among economists. But they widely agree that his policies have helped to spur growth, especially his tax cuts for businesses and attempts to roll back regulations. The unknown is his trade policy.
“Taxes gets a thumbs up,” says Chris Geehern, executive vice president of Associated Industries of Massachusetts, a statewide employer advocacy and service group. Reducing “regulation gets a thumbs up. Tariffs? Not so much.”
The perils of tariffs
Tariffs can help protect industries from foreign competition. Through December, steel and aluminum manufacturing employment has risen by 500 workers apiece since the administration imposed steel and aluminum tariffs at the end of May, according to the US Bureau of Labor Statistics (BLS) data. But the appliance sector has shrunk by 1,300 jobs despite tariffs that were imposed on refrigerators and washing machines a year ago.
The flip side is that tariffs also impose a tax on all US companies and consumers by raising import prices. In December, the Tax Foundation calculated that Trump’s tariffs on thousands of goods from aluminum and steel to washing machines and refrigerators and Chinese goods of all kinds had so far imposed a $42 billion tax on consumers, effectively reducing a middle-class family’s after-tax income by an average $146.
Manufacturers also realize that tariffs and the threat of tariffs can be powerful bargaining chips in trade negotiations, so they’re willing to go along with temporary tariffs while the administration works out a trade deal with China, says Mr. Moutray of the National Association of Manufacturers. A successfully concluded deal “would be a huge effect,” he adds. “We’ve been wanting a better trade agreement with China for at least two decades.”
Success will depend not only on the terms of an agreement but on its enforcement measures, trade experts say. If the deal spells out the deadlines for China’s trade reforms for everything from intellectual property theft to domestic industry subsidies and the consequences for missing those deadlines, the deal could go a long way to boosting US manufacturers’ confidence and investment plans.
But a trade deal with China won’t be sufficient to keep US manufacturing jobs growing, says Harry Moser, president of the Reshoring Initiative, a nonprofit that tracks jobs coming back to the US. “The only way to fix US manufacturing is to import less.”
He and others point to a strong US dollar, which makes imports less expensive, and the lack of training initiatives for non-college-bound students as two areas that need to be addressed.
The Trump administration is working on expanding apprenticeships with a less bureaucratic federal program, but that has raised concerns about the quality of the training. And it has tried to defund an Obama program to bolster public-private precompetitive research centers for manufacturing.
A related challenge: There’s the longer-term worry of declining manufacturing productivity, points out Rob Atkinson, head of the Information Technology and Innovation Foundation, a science and technology policy think tank in Washington, D.C. One reason factory employment is up is because factory productivity is down, he says.
Productivity numbers are difficult to pin down, especially in manufacturing where increasing computer speeds may have inflated the actual progress. Nevertheless, BLS data shows a clear slowdown in overall productivity since the late 1990s. The manufacturing numbers are even more dire. From 1995 to 2000, when manufacturing led the rest of the economy with an average 4.5 percent annual rise in total factor productivity, the sector’s productivity has actually turned negative (a 0.5 percent annual decline) from 2007 to 2016 (the latest data available).
What’s missing is a comprehensive manufacturing strategy, Mr. Atkinson says. Republicans push tax cuts and deregulation while Democrats favor training and public-private partnerships. “What you really want is an all-of-the above president,” he says.