According to exit polling, voters who identified the economy as the top issue chose Donald Trump. Today’s jobs report shows that overall, Trump will begin his presidency with a running start as the jobs market recovery has shifted into a higher gear. But will Trump be able to deliver on his promise of bringing back good-paying blue collar manufacturing jobs for these voters—and not just the 1,000 jobs preserved at Carrier in Indianapolis?
Trump to Take Office with a Running Start
While not growing at a gangbuster rate, the economy added 178,000 jobs in November. The unemployment rate fell to 4.6 percent, its lowest level since August 2007. The big drop in the jobless rate has a major caveat—more people dropped out of labor force in November than found jobs. In fact, the Labor Force Participation rate trended slightly downward by one-tenth of a percentage point after being flat in October. Still, the steady job growth, alongside higher minimum wage laws and an unemployment rate that has been at 5 percent or less for fourteen months in a row, has kept paychecks growing enough to refill the wallets of working Americans devastated by years of flat earnings. While wages dropped three cents in November, annual wage growth held steady at 2.5 percent in November—still far short of 3–4 percent growth that would indicate an economy at full capacity.
The big drop in the jobless rate has a major caveat—more people dropped out of labor force in November than found jobs.
There is significant slack to pick up in the job market and not just among those who have dropped out. The average work week held steady in November and the number of underemployed Americans working part-time hours when they want full-time jobs is now at 5.7 million in November. That’s down by 3.6 million from its high of 9.3 million in September of 2010, but still well above its pre-recession level of 3.9 million. Finding jobs is still not easy—24.8 percent of the unemployed have been out of a job for six months, which is well higher than the 20 percent benchmark reached in every other post-war recovery. Trump will come into office in an enviable position—the job market is solid but still has plenty of room to grow.
Manufacturing Jobs Are Critical, but Recovery Is Sluggish
But this recovery has not reached all sectors evenly—especially manufacturing. Yesterday, President-elect Trump and Vice President-elect Pence announced a deal to keep 1,000 Carrier factory jobs in Indianapolis. This move came after the video of workers hearing the horrific announcement of the closing went viral during the primary season, when Trump (along with Senator Sanders and Senator Clinton) condemned the move and pledged to reverse the decision.
There is significant disagreement on the tactics that were used to maintain Carrier in the United States from the right and left. But, there should be no doubt that saving 1,000 manufacturing jobs is a crucial and a long overdue sign that the decline of our industrial strength has become a true national concern.
Manufacturing is critical to the Rust Belt states that swung the election. While manufacturing jobs only make up 8.5 percent of jobs (total nonfarm) in the United States, down from 14.4 percent just twenty years ago, they are still concentrated in the industrial heartland. According to BLS’s State and Area Current Employment Statistics, Wisconsin (where on average 13 percent of jobs are in manufacturing), Michigan, Ohio, and Pennsylvania ranked second, third, ninth, and seventeenth in terms of the concentration of manufacturing jobs, respectively (when averaging numbers for January to October 2016). All four states have a higher concentration of manufacturing employment than the national average in 2016.
While the wage differential has dropped in recent years as union density has decreased among factories and they have increasingly used temporary workers, industrial jobs still pay better than faster growing low-wage service sector jobs. Among sectors that employ the largest share of individuals without a four-year college degree, manufacturing wages (in October 2016) are an average of $20.62 per hour compared to $15.01 per hour in the retail and $13 per hour in the leisure and hospitality (BLS CES data).
Manufacturing is also critical to the broader economy beyond the jobs numbers. Manufacturing output has now recovered to the level it was in the first quarter of 2008 and remains one of the most productive sectors of the economy. Moreover, manufacturing is a critical source of commercial innovation—and this is especially true among the increasing share of advanced manufacturing jobs where technology is producing highly value-added products. Furthermore, the drop in manufacturing jobs is the key cause of the nation’s large trade deficit (a major drag on economic growth).
Can Manufacturing Be Saved?
The fate of manufacturing in the recovery remains uncertain. According to our analysis of BLS data, manufacturing employment is still down by 2.9 percent since 2000, trailing the national economy (Figure 2). Still, manufacturing has recovered by 807,000 jobs since its post-recessionary trough in February 2010. Of particular concern is that manufacturing employment has fallen by 54,000 jobs in the past year.
That’s why it’s a mistake to say that the Carrier deal is not significant, compared to efforts by the Obama Administration to save manufacturing jobs like the auto industry or compared to the size of the workforce. Most manufacturing firms are less than 1,000 people and the effort of saving them by necessity is a several hundred job per incident challenge. State economic development officials and their federal allies have little choice but to engage with manufacturing issues on an employer-by-employer basis.
As local union leader Chuck Jones said on NPR Wednesday night, “The man stayed true to his word, and he delivered. Now, whether you’re—or I’m not—I never was a Trump supporter, but the man deserves the credit for possibly saving 1,200 people’s livelihoods.”
Here is an example where the details don’t matter as much as the message to America. Jobs were saved and the President-elect personally intervened. It is the kind of message that President Obama sent when he intervened to save General Motors and Chrysler from bankruptcy—an action opposed by Republicans in Congress and a key factor in the president’s ability to carry the states of Michigan and Ohio in 2012. These actions buck decades of bipartisan neoliberal consensus around manufacturing that hide just behind obligatory politician factory tours—that manufacturing is part of our nation’s past and those who have worked in factories need to move or retrain for a new future.
The president won’t be in a position to negotiate a $7 million dollar incentive to all companies who threaten to move to Mexico. For sure, billions of dollars in tax incentives have already been showered on companies by localities seeking to keep their facilities with little long-term effect. To bolster manufacturing, Washington will have to take a new approach to trade deals that gives American companies a fighting chance to compete and take a tough stance on other nations that devalue their currency to undermine U.S. competitors. The federal government can play a key role in fostering innovation in manufacturing, through support of the manufacturing extension partnerships and related efforts championed by President Obama.
To bolster manufacturing, Washington will have to take a new approach to trade deals that gives American companies a fighting chance to compete and take a tough stance on other nations that devalue their currency to undermine U.S. competitors.
On a local level, successful initiatives like the Steel Valley Authority have used federal workforce development dollars to operate layoff aversion strategies that bring technical assistance and in some cases infusions of capital to manufacturers at risk of closing. More broadly, states and localities need to help with the creation of an industrial commons—the training systems, the infrastructure, zoning laws, economic development strategies—that position manufacturers to be successful. All this must be done with a keen understanding that the successful manufacturers will have to greater edge in technology and innovation in order to compete. Sometimes, the capital needed to buy a single machine can be enough to bring back production of a good, such as the retro-chic Kangol hat, from China to America.
Actions like Carrier are not tilting at windmills. Increasing wages in China and Mexico have narrowed the price difference between U.S. and international production enough to make significant reshoring possible. With the right visible leadership and policy actions—and not just the art of the deal—manufacturing could indeed be a bright part of the economic recovery.