Washington DC, November 3, 2009 --  

The dying manufacturing sector will keep America's unemployment rate high for years to come.

When figures showing that America's economy has begun to grow again, continued job losses have become the biggest concern to America's economic recovery. With the national unemployment rate at 9.8 percent and climbing¹, the new question has become when America's economies will begin hiring again, and the country will return to full employment.

Estimates of America's return to full employment consitently point to date that is a long way off. Former Federal Reserve Governor Laurence Meyer predicts it will take six years, ² A group of Rutgers economists predicts eight³, and economist Paul Krugman predicts 10.⁴

But these macroeconomic analyses miss a core point about the job losses in this recession: One of the biggest chunks of these job losses has come from the manufacturing sector, and these jobs just aren't coming back. Not in six years, not in ten years, not ever.

A long-term view of this section of the job market shows that employment has been declining for years. Employment in manufacturing peaked 30 years ago with 19.4 million jobs in 1979. ⁵ Jobs have been lost almost every year since then, with the biggest chunks during times of recession. As of last month, only 11.7 million Americans were employed in manufacturing -- and 1.7 million of these jobs (or 1.1 percent of the labor force) were lost in the past year alone⁶. Even more manufacturing jobs will be lost as time goes on.

These jobs are gone forever -- an inevitable result of advances in manufacturing technology that require fewer workers, as well as growing overseas competition. The collective bargaining power of unions had delayed these inevitable job losses for many years, until a sharp dip in the economy pushed employers over the edge.

Economists like to think of people in aggregates, as if workers were interchangeable parts. But the reality is quite different. Middle-aged factory workers are unlikely to find new employment in cutting edge growth industries like software. The new jobs that will be created in the next decade simply will not be appropriate for these people. And while manual laborers are probably skilled enough to take a job as workers in the growing health care industry, people who are used to high union wages and generous benefits will be hard-pressed to accept a much lower paying job cleaning bed pans in a nursing home.

The truth is that a good chunk of these workers will never return to steady, full-time employment. When considering a return to a historic period of "full employment," such as the 4.9 percent unemployment rate of December 2007 ⁷, these workers must be factored in. In the past year, the ranks of the unemployable has effectively been increased by 1 percent of the labor force. This dead wood will be with us for decades.

With the perennial decline of the manufacturing sector, working class advocates have bemoaned the dearth of well-paying blue collar jobs in America. As knowledge and intellect become more important to good paying jobs, opportunities for duller Americans are limited. The high expectations of former union factory workers can simply not be met in the near future. Until they age out of the workforce, and are replaced by a new generation of manual workers with more realistic ideas about their job prospects, America will never be able to reach full employment.

While this is extremely painful to the individuals from the declining industries, it is much less of a concern to America as a whole. The problem of the chronically unemployed from a dying profession is a temporary one. It's happened many times in America's history -- to small-time farmers, outhouse diggers, longshoremen, ice harvesters, telegraph operators and typesetters.

While the presence of such dead wood always hurts the American economy in the short-term, it is far more important for the country to focus on growth industries than to attempt to prop up the workers of yesterday.

New and higher paying jobs will eventually replace the old. Until then, expect plenty of noise from America's working class. And better make sure your kids get that college degree.

Related Web Columns:

Sustaining the Unsustainable, June 2, 2009

Worse than Worthless
The Coming Dependent Majority, October 25, 2008

Notes:

1. Bureau of Labor Statistics, Seasonally Adjusted Unemployment Rate, October 2009

2. Bloomberg News, Meyer Sees No Return to ‘Full' Employment Until 2015, July 17, 2009

3. Advance and Rutgers Report, America's New Post-Recession Employment Arithmetic, September 2009

4. Bloomberg News, Krugman Says U.S. Must Spend More; Full Employment a Decade Off , November 2, 2009

5. Bureau of Labor Statistics, Employees on Nonfarm Payrolls by Major Industry Sector, 1959 to Date, October 2009

6. Ibid.

7. Bureau of Labor Statistics, Seasonally Adjusted Unemployment Rate, October 2009