US is at Peak of Industrial Production
Analysis by Ball State University economist Michael Hicks has found that the United States economy is back at a record level of industrial output.
Industrial production index peaked in December 2007, then dropped by roughly 15 percent by the summer of 2009, taking five years to recover to a second peak in 2015.
As the world economy dipped in 2015 and 2016, so too did U.S. industrial production, before peaking to another record level of industrial output. It’s worth noting that total US industrial production is more than twice what it was back in 1979, when employment peaked.
“Other measures tell the same story,” said Hicks, who is director of Center for Business and Economic Research (CBER) at Ball State University. “Inflation-adjusted manufacturing GDP peaked in the fourth quarter of 2017, both in dollar and quantity index measures.
New data on value-added of manufacturing—a measure of production that subtracts all the goods used in production—offers an even more interesting insight into America’s manufacturing strength. “By making this calculation across all US manufacturing,” said Hicks, “we omit all the spending by factories on imported parts. That number is at a record high right now, a full decade after the start of the Great Recession.”
Hicks also notes that manufacturing employment, which all too many folks think is a good sign of the industry’s health, is about 1.5 million less than it was at the start of the Great Recession and about a third lower than at its peak month in 1979.
“While manufacturing employment has gained a full million jobs since the end of the recession,” he said, “that rebound seems to be slowing. Still, the loss of manufacturing employment has been swamped by growth in other sectors. For every job we’ve lost in manufacturing since December 2007, we’ve gained six jobs in other sectors. The problem is the new jobs require different skills in different places. Moreover, turnover within manufacturing has had a very uneven effect on workers.”
Hicks also notes that since about 2000, manufacturing jobs held by non-college graduates have declined by almost 45 percent, while manufacturing jobs held by those with a college degree are up almost 17 percent.
“That means in net, all the new jobs and almost all the replacement jobs in manufacturing are going to college graduates,” he said. “That trend also accelerated during the Great Recession.”
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