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Under Trump, Manufacturing Job Growth Slows to a Trickle

The average hourly wage for manufacturing workers is, for the first time ever, slightly below the overall average.

The average hourly wage for manufacturing workers is, for the first time ever, slightly below the overall average.

Donald Trump put manufacturing jobs at the center of his economic platform in 2016. He endlessly harped on the loss of relatively good-paying manufacturing jobs.

He blamed this job loss on “terrible” trade agreements and other countries “manipulating” the value of their currency to get an advantage in trade. He put China at the top of the list of bad actors, promising to declare them a currency manipulator on day one of his administration, which would directly lead to economic sanctions.

While Trump has engaged in considerable bluster in his trade negotiations, they have not led to much of a payoff for U.S. manufacturing workers to date. At the most basic level, instead of shrinking, the trade deficit has gotten larger under Trump.

In 2016, the last year of the Obama administration, the trade deficit was $502 billion. Through the first four months of 2019, the trade deficit was running at almost a $620 billion annual rate, more than $100 billion higher than the deficit Trump inherited.

For all his screaming about currency manipulation, the value of the dollar relative to other currencies has barely changed since Trump took office. Needless to say, Trump did not declare China a currency manipulator on day one of his administration or on any subsequent day.

While he has in fact started a trade war with China, currency values — which would directly affect our trade balance — are no longer a major issue of contention. Instead, Trump seems more focused on ensuring that China respects the intellectual property claims of Boeing and other multinational companies when they outsource factories to China.

Although the story of negotiating whiz Trump winning terrific trade deals for U.S. workers has not quite panned out, he actually could point to an increase in manufacturing jobs under his watch. Manufacturing employment increased by 471,000 (3.9 percent) in the 28 months from January 2017 to May 2019.

This is not exactly spectacular. Under Obama, in the first 28 months after the sector stopped shrinking in the Great Recession, manufacturing added 525,000 jobs. Also, the job growth probably had more to do with a rise in world oil prices leading to increased demand for drilling equipment than anything Trump did, but things were at least going in the right direction.

This may no longer be true. Manufacturing job growth has slowed to a trickle in recent months. In the last four months, the economy has added a grand total of 13,000 manufacturing jobs, just over 3,000 a month.

The story is even worse if we look at hours. The index of aggregate hours worked in manufacturing is down 0.3 percent from its January level. It is back to where it was in August of last year. It is good that manufacturers would cut back hours rather than lay off workers in response to weak demand, but it doesn’t change the fact that we are seeing less demand in the manufacturing sector.

We get the same story from other data sources. The Federal Reserve Board reports that its measure of industrial production for manufacturing has been falling since December 2018 and is now back to its level of April 2018.

Even when the number of manufacturing jobs was rising under Trump, this was not translating into substantial wage growth, as wage growth in the sector has lagged overall wage. Since January 2017, the average hourly wage for all workers has risen by 7.1 percent. The average hourly wage for manufacturing workers has gone up just 4.7 percent, barely more than the rate of inflation. In fact, the average hourly wage for manufacturing workers is, for the first time ever, slightly below the overall average, with the cross having occurred in May of last year. Forward-looking indexes show manufacturing deteriorating sharply. The Institute for Supply Management’s manufacturing index fell 0.7 percent in May to 52.1. (A figure above 50 indicates expansion.) Further, the New York Fed’s Empire State Index had its sharpest one-month drop ever in June, falling 26.4 percentage points to a reading of -8.6 percent. In short, multiple indicators point to the same conclusion: The recent job growth in manufacturing may be coming to an end.

The story of weak wage growth in manufacturing is that, insofar as we do add manufacturing jobs, they are not the good-paying union jobs that we lost in the last decade. The number of union members in manufacturing did rise slightly over the last two years, but we are still below the 2015 level, and we are down more than 50 percent from the 2000 level. The lack of growth of unionized jobs in the sector means that even if we do continue to see a modest increase in manufacturing employment again, it probably would not substantially improve the wage picture in the sector.

We can speculate as to the motivations of current or former manufacturing workers who voted for Trump, but if they expected that his presidency was going to bring back good-paying jobs in the sector, they were badly mistaken. It’s not clear that they will see their MAGA hats as much compensation.

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