Reindustrialization in USA - Euler Hermes

Economic Outlook n° 1187 | Special Report | The Reindustrialization of the United StatesEuler Hermes2000-2010:momentum lost followed by massive restructuringu Limited role in the U.S. economy?During the previous decade, the manufacturingweight in the U.S. economy remained fairly steady,at 12.4% (real value added) of GDP in 2000 and 2010,with limited fluctuations over the period (high of 12.9%in 2007 / low of 11.5% in 2009). The growth yearswitnessed noticeable contributions from the manufacturingsector to the improvement of the economy- a bit higher than would have been expected given itsweight in the U.S. economy - but they were always lessthan the contributions from the services sector. Conversely,the significant drops in manufacturing value-add,which occurred during the recessions, werea significant drag on the U.S. economy and, generallyspeaking, were major downward economic drivers.u Sharp restructuring in manufacturingemploymentBetween 2000 and 2010, the manufacturing sectorlost 5.7 million jobs (-33%). In Figure 6, we comparethe actual employment in manufacturing from 2000-2010 and two scenarios estimated:• the Productivity 2000 scenario shows the numberof jobs needed to produce the actual outputwith productivity held constant;• the Output 2000 scenario shows the number ofjobs it would have taken to create that outputwith the actual productivity gains. This scenariomore closely matches what actually happened,suggesting that any drop in output during arecession had a smaller effect on employment.The analysis shows that manufacturers did not layoff workers because the economy was so bad, butbecause productivity was so good that they neededfewer workers. The main driver for manufacturingjob losses during the last decade was certainly productivitygains. The output decrease resulting fromthe recession, shipping jobs overseas, and the lowercompetitiveness of U.S. manufacturing in the globaleconomy contributed much less to the decline injobs. The impact of productivity improvement onjob losses was more than three times as high as theimpact of economic contraction.u Different goods, different stories?We carried out the same analysis for durable goodsmanufacturing, which posted a -35% decrease inemployment during the last decade – or 3.8 millionjobs. The impact on employment that productivityimprovements had, compared to the impact that therecession had, was only about two and a half timesgreater, as opposed to three times greater for allmanufacturing. The difference suggests that durablegoods manufacturing was more sensitive to economicconditions than overall manufacturing. Durablegoods meant to last three years or more - such asappliances, cars and planes - represent discretionarypurchases which can be more easily delayed thanthose for non-durables such as food.The computer and electronic manufacturing sectorwitnessed a sharper drop in employment (-40% orloss of 735,000 jobs). The dramatic decline in jobswas a result of the adverse effects of strong productivityimprovements (+79% over the period), whichwere only partially offset by jobs created due toincreasing activity.Between 2000 and 2010, the machinery sectordemonstrated better resistance to erosion as itsemployment dropped by a relatively smaller -32%(-467,000 jobs). Lower productivity enhancement(+27% during the decade) led to a lower adverseimpact on job losses.In 2010, non-durable goods manufacturing jobsdropped -30% from 2000 (-1.9 million jobs). Theimpact of productivity improvements was four timesas large as the impact of activity fluctuations duringthe last decade.• • •11