Comment: Comeback in factory jobs is real and likely to grow

By Justin Fox / Bloomberg Opinion

For the first time since the late 1970s, U.S. employment in manufacturing has surpassed the peak set during the previous business cycle. This happened in May 2022, according to the revised 2022 payroll jobs data released last week by the U.S. Bureau of Labor Statistics. As of January 2023, the sector employed just short of 13 million Americans on a seasonally adjusted basis, the biggest number since November 2008.

After shrinking for three decades, manufacturing employment in the U.S. appears to have returned to growth. In the 2010s, this may have looked suspiciously like a dead-cat bounce after a decade of steep declines, and the latest BLS employment projections still estimate that manufacturing employment will fall by 139,400 from 2021 to 2031. Now that we’re almost 13 years into the new growth trend, I’m thinking that may be too pessimistic.

It’s not as if manufacturing is suddenly where all the work is. The sector, which accounted for more than a third of American jobs during World War II and stayed above 30 percent for most of the 1950s, is now at 8.4 percent of payroll employment and shrinking slowly. That pace represents a drastic change from the long decline of the previous half century, though.

One explanation for this shift is that globalization, while perhaps not going into reverse, is no longer proceeding at anything like its pace of the 1990s and 2000s. Manufacturers have been reassessing the risks and rewards of having supply chains spread across the planet and “reshoring” some production closer to consumers in the U.S. and elsewhere.

Another perhaps less encouraging explanation is that the huge manufacturing productivity gains of the 1990s and 2000s appear to have given way to a situation where producing more stuff actually requires hiring more workers.

Measuring productivity is hard, and interpreting the results even harder. In an 18,000-word research roundup published in 2021, BLS economist Shawn Sprague pointed to a slowdown in adoption of new technologies, a decline in competition, a rise in inequality, the hangover from the Great Recession and other possible causes for the productivity funk but cautioned that “only time — and additional data in our time series — will tell” if this represents “new normal” of lower productivity growth or just a pause.

The latter would be preferable, given that productivity gains drive increases in living standards over time. Either way, though, manufacturers have been hiring and will probably continue to do so. Even if the BLS projections are right and employment in the sector falls slightly over the coming decade, manufacturers will have to replace millions of retiring workers.

The payroll jobs numbers cited above don’t include information about workers’ ages, but statistics from the household survey that’s used to estimate the unemployment rate do provide a breakdown for those working in production occupations, which are mostly in manufacturing. They show that 24.6 percent of U.S. production workers are now 55 and older.

The rising share of manufacturing jobs held by 55-and-older workers is mostly the result of demographic change, with that age group comprising 23.1 percent of the U.S. civilian labor force in January, up from a low of 11.6 percent in 1992 and 1993. But production jobs can be physically demanding, so you would think older people would hold a smaller percentage of them than their overall labor force share, not a larger one. Manufacturing’s lean decades of layoffs and little new hiring have left it with an inordinately top-heavy workforce age distribution.

The sharp jump over the past couple of years in the percentage of production workers who are teenagers is a sign of what’s to come, although expanding that share will take some effort. Employers of all stripes have been backing away from bachelor’s degree requirements, and manufacturers, which generally didn’t have them to begin with, are having to scramble to attract young Americans who see factory work as unattractive. Hourly pay of nonsupervisory and production workers is almost 9 percent lower in manufacturing than in the U.S. private sector overall, although steadier hours mean weekly pay is almost 10 percent higher, and benefits tend to better, too. Also, the number of new U.S. high school graduates is projected to start falling after the 2024-25 academic year, meaning a smaller pool to hire from.

All in all, it’s looking like a new employment era for Americans without college degrees, which seems as if it could reshape the U.S. economy and society in lots of mostly positive ways. It also seems as if it will pose big challenges for the manufacturers and other employers that need to hire them.

Justin Fox is a Bloomberg Opinion columnist covering business. A former editorial director of Harvard Business Review, he has written for Time, Fortune and American Banker. He is author of “The Myth of the Rational Market.”