Economic data from the government comes out at such a frantic pace during the beginning (and the end) of months that it’s easy to overlook some real gems. So I’m relieved that less than a week has passed since the Commerce Department published its latest figures on manufacturing output. The news, as has typically been the case lately, is bad for manufacturing renaissance cheerleaders. In fact, they reveal a new all-time “worst.”
This latest report, which came out last Thursday, shows us how manufacturing production has been faring both on its own terms and in relation to the rest of the economy according to a measure called real value-added. As suggested by the name, it adjusts for inflation. And many economists believe it’s especially accurate because it tries to avoid the double-counting that occurs with other gauges that tend to count parts and components more than once – when they’re originally produced, and when they become inserted into larger assemblies and even final products. Moreover, for the first time, Commerce has (separately) released figures that show manufacturing’s performance at an impressive level of detail.
As these figures reveal, real manufacturing-value added as a whole grew more slowly than overall inflation-adjusted economic output in the second quarter of this year – by a whopping 3.90 percent to 0.70 percent. Consequently, manufacturing’s after-inflation growth has trailed that of the rest of the economy for five out of the last six quarters. The sector has fared no better on an annual basis. Although in 2013, it matched the meager 1.50 percent real output rise registered by the entire economy, in 2014, manufacturing lagged by 2.40 percent to 1.60 percent.
This dreary performance means that, so far through 2015, manufacturing real value-added as a share of the economy has sunk to 11.74 percent in the first quarter and 11.65 percent in the second. If these numbers hold, this measure of manufacturing’s economic role will have hit its lowest level since these data started being kept – in 1997. Almost as important, judging from real-value added, manufacturing is an even smaller part of the entire economy than during the bubble decade – which few would call a golden age for domestic industry.
The new more detailed sector-specific figures show, at the broadest level, that since the economic recovery began in mid-2009, durable goods value added after inflation is up 36.03 percent – considerably faster than the 27.44 percent growth of manufacturing overall. Non-durable goods real value-added takes up the rear – growing during the recovery by only 18.58 percent. That tracks with the Federal Reserve’s industrial production index, which measures production and does engage in that double counting.
But what veer big-time from the index are the more detailed figures. For example, the manufacturing rebound that has taken place during the recovery has been spearheaded by a strong showing in the automotive sector. Yet that industry’s real value-added growth since 2012 (the farthest back these statistics go, has been only a total of 8.78 percent. That’s far below that of manufacturing’s leader – the primary metals sector. It’s after-inflation value-added is up 27.52 percent during this time. And next comes petroleum and coal products, where such output has risen by 21.91 percent. (These real value-added figures are additive within manufacturing, and within the major durable goods and non-durables categories.)
Manufacturing’s worst value-added performer? The big machinery sector, where real value-added has fallen by 8.96 percent. Next comes the small wood products industry, where it’s shrunken by a much slower 3.36 percent rate.
Throughout this presidential campaign, voters will no doubt be treated to a seemingly endless series of film clips and photos of candidates visiting factories, often wearing hard hats and safety goggles, shaking workers hands and proclaiming how determined they are to strengthen American industry. I wonder how many of them will have combed through this new manufacturing data, which makes clear that success will require much more than campaign promises.