How important is the manufacturing meltdown?
Dante Chinni
Posted: 01.05.2009 / 10:42 AM PST
When the Institute for Supply Management announced last Friday that its index measuring US manufacturing activity had reached a 28-year low, it was just the latest blow to manufacturing.
The sector has seen five straight months of contractions, and no segments of it showed growth in December, according to the Institute for Supply Management.
It’s tempting to think of such struggles in the manufacturing sector as isolated – say, “Detroit’s problem” or “the Rust Belt’s concern.” But a look at Patchwork Nation finds that this isn’t really the case.
Although the manufacturing problems don’t hit all 11 Patchwork Nation community types evenly, there are plenty of challenges to go around. And if the downturn in manufacturing produces more job losses and forces more people to switch to lower-paying service jobs, the recession could definitely deepen all over.
Where the jobs are (or were)
About 15 percent of America’s nonfarm workforce was employed in the manufacturing sector as of 2006, according to the latest county-by-county data available from the US Census. By comparison, 16 percent – slightly more – was in the government sector.
In 1950, more than 30 percent of the nonfarm workforce was in manufacturing.
Back to the 2006 data, a Patchwork Nation analysis shows that some community types have more than 15 percent of their workforce employed in manufacturing. Leading the way, with more than 21 percent, are America’s aging “Emptying Nest” counties.
More than a third of those “Emptying Nest” counties are based in the “Rust Belt”: Pennsylvania, Ohio, Indiana, and Illinois all have a fair number of “Emptying Nest” communities.
But “Emptying Nests” aren’t locked in the industrial Midwest. The counties also reach into North Carolina, Missouri, Tennessee, and northern Arkansas.
We know from talking to business people in Clermont, Fla. – the community that represents “Emptying Nests” for Patchwork Nation – that unemployment is rising fast there, close to 9 percent. According to census figures, manufacturing has the third highest payroll in Lake County (which includes Clermont), behind healthcare and retail.
Another community type feeling a sharp pinch is “Minority Central” – communities with large African-American populations. More than 18 percent of jobs in these places are in manufacturing. Most of them are located in the South – the Carolinas, Georgia, Mississippi, Alabama, and Louisiana.
Our correspondents in Baton Rouge, La., which represents “Minority Central” for Patchwork Nation, are starting to report a rise in unemployment – or at least a sense that times are growing tougher.
Plenty of problems to go around
Even communities that have an average percentage of factory jobs are having trouble in the manufacturing downturn. This includes some of Patchwork Nation’s most populous and wealthiest community types.
About 15 percent of the workforce in our wealthy, well-educated “Monied ’Burbs” earns a paycheck from the manufacturing sector.
Plants and factories have ended up in these communities because historically, these places have had more land available than can be found within city limits. In fact, for many families, the factory jobs in these suburban places were the way out of the cities and into single-family homes.
For some of the same reasons, a good number of people in our growing, diversifying “Boom Town” counties have manufacturing jobs. The figure is also about 15 percent there.
In all 11 of Patchwork Nation’s community types, more than 10 percent of the workforce is employed in manufacturing. That’s a lot of jobs.
The larger fallout
So if you don’t punch a clack in a factory, you’re OK, right? Well, yes and no. Consider a 2006 summary of wages from the US Bureau of Labor Statistics.
The survey found that workers with jobs in “production” earned, on average, $3.80 more an hour than those with jobs in “service” – an area that has been growing as a segment of US employment.
This is not a perfect science or a perfect match, of course: The categories of production and service encompass a range of jobs, from the high paying to the low paying. But if, on average, service workers make, say, $3 less an hour than people in factories, you are talking about a difference of $6,000 per job over 50 weeks (assuming a 40-hour week).
Thus each manufacturing job that shifts to “service” could cost the community thousands of dollars that no longer get pumped into local businesses. And this isn’t counting the better benefits that manufacturing jobs usually offer.
Does that mean that manufacturing jobs are the only jobs that matter? No. But it means their significance extends beyond any one region or economic sector. Their impact on the long-term health of the economy is very large indeed.
January 7th, 2009 at 9:24 am PST
Very few people outside the midwest realize how basic manufacturing is to the economy. Only physically productive enterprises (agriculture, construction, mining, manufacturing) can serve as the foundation of an economy. Everything else, excepting perhaps some facets of health care, consists of trading, controlling, and apportioning these produced goods. Such services include law, financial services, government, and education. The effect of the producer goods industries on the rest of the economy is much like that of high-powered money on fractional reserve banking; without the base, the superstructure will not stand.
My contention is that most of our current economic downturn can be traced to the erosion of American manufacturing jobs through poorly thought out globalisation. Starting with Nixon’s opening to China, accelerated by the Clinton administration’s cozying up to Chinese donors, and led by Walmart’s and the auto companies’ rush to cheap Asian labor, the atrophy of America’s working class has been completely unremarked by the monied elites that run our media and government. The fiction of prosperity fueled by artificially inflated home values and “low everyday prices” has brought us all down, destroying not just jobs but securities values, real estate values, and the ability of the majority of Americans to have a reasonably secure life.