Yesterday’s manufacturing wage data from the Labor Department contains bad news not just for domestic industry’s workforce. The weak results also indicated that, if U.S.-based manufacturers think they can regain competitiveness via what analysts call the “low road” of labor cost cutting, they’re wrong so far. Why so? Because the same Labor Department has also revealed that U.S. Manufacturing’s productivity is faltering as well.
To recap yesterday’s numbers, U.S. manufacturing wages fell by 0.48 percent from August to September after inflation, and are now down 0.38 percent year on year and 2.61 percent during the current economic recovery to date. By contrast, overall real private sector wages are actually up slightly since the recession ended.
But despite the falling inflation-adjusted wages, the rate of manufacturing labor productivity growth has slowed significantly even since the expansion of the 2000s – which no one regarded as a golden age of American industry. During that expansion’s 20 quarters, which of course included the housing and credit bubbles, manufacturing’s labor productivity grew by a cumulative 25.31 percent (1.27 percent per quarter on average). During the current recovery, which has lasted 16 quarters, manufacturing labor productivity has advanced by a total of 14.39 percent (0.90 percent per quarter on average). (All these figures are calculated from the statistics on the Labor Department’s interactive productivity databases.)
Also of interest: In the 11 quarters that have passed since the Boston Consulting Group published its first prediction of an onshoring-driven U.S. Manufacturing renaissance, in August, 2012, labor productivity in the sector has grown by 4.89 percent. In the 11 quarters before, manufacturing labor productivity increased by 9.69 percent – nearly twice as fast.
The multi-factor productivity data for manufacturing only go through 2012, and are kept annually, not quarterly. But these figures, which take into account all the inputs for manufacturing operations, tell the same story.
From 2001 through 2007 (roughly the time of the previous economic recovery) multi-factor productivity in domestic manufacturing improved by 15.67 percent in toto, or 2.61 percent annually on average. From the start of the present recovery (in 2009) through 2012, it grew by 5.02 percent – 1.67 percent on average each year.
An industry that’s cutting wages and still getting less output per head, along with less output per all inputs, isn’t an industry experiencing an historic comeback. It’s one whose competitiveness by crucial measures looks less impressive all the time.