If I had a list of twenty top wishes, more timely U.S. government publication of the multifactor productivity statistics wouldn’t make the cut. All the same, I’d like to see the posting of this data sped up for several reasons, including:
>Multi-factor productivity (also called total factor productivity) is the broadest of the measures of economic efficiency tracked by Washington, purporting to show how much in the way of all kind of inputs are needed to produce a unit of economic output in a given time period; and
>although even stalwarts of the rarely humble economics profession agree that productivity is challenging to measure precisely, they also mainly tend to agree that the stronger a country’s productivity performance, the likelier that country’s population will be living standards rise on a sustainable, not bubbly, basis.
So even though the new detailed multi=factor productivity statistics released by the Labor Department late last week only bring us through 2018, they’re worth contemplating anyway – and even for those focused tightly on politics in this presidential election year. For these latest numbers somewhat further undercut widespread claims that President Trump’s tariff-heavy trade policies have been weakening American domestic manufacturing (which is strongly affected by trade), and indeed add to those overall economic metrics for which the Trump years have seen better performance than the Obama years. (As known by RealityChek regulars, the Obama administration holds an edge here.)
Let’s start with what the new Labor Department release says about how many of the industries it follows achieved multi-factor productivity growth during the last two Obama years and the first two Trump years (the best basis for comparison, since it examines time spans closest together in the same – expansionary – business cycle). Here are the numbers:
2015: 21 of 86
2016: 37 of 86
2017: 32 of 86
2018: 44 of 86
On average, these gains were considerably more widespread under the Trump administration. Also noteworthy: Although the number of multi-factor productivity growers dipped between the final year of the Obama administration and the first year of the Trump administration, that first Trump year featured no tariff increases. These moves didn’t begin until the early spring of 2018 – a year in which the numbers of productivity growers rose significantly.
Such figures by no means clinch the case that the tariffs helped domestic manufacturers – because a single year can’t make or break an argument; because trade policy was far from the only development influencing manufacturing; because none of the developments that do influence productivity work their magic in ways convenient for calendar-watchers; and because the 2018 tariffs only covered aluminum and steel.
Still, it’s hard to look at these productivity numbers and see any harm done to U.S.-based manufacturing by the tariffs – or by the very good reasons at the time for assuming that many more were on the way, with all their implications for business plans.
But what about actual multi-factor productivity throughout the entire manufacturing sector. Here’s what separate Labor Department data reveal:
last two Obama years combined: -2.15 percent
first two Trump years combined: +0.84 percent
Another Trump edge, and another reason for doubting the “tariff-mageddon” claims concerning manufacturing.
The multi-factor productivity reports also handily present the numbers of manufacturing sectors that enjoyed overall output growth year in and out. These data make the Trump years look superior, too, and cast further doubt on the tariff opponents’ credibility:
2015: 50 of 86
2016: 31 of 86
2017: 44 of 86
2018: 55 of 86
Unfortunately, even if the multi-factor productivity data for 2019 (a slower growth year for domestic industry) were available, robust conclusions about the Trump manufacturing record on this front per se, and especially about the effects of the tariffs would be difficult for the fair-minded to draw. After all, that’s the year when major tariffs on Chinese goods were imposed, and therefore when the inevitable inefficiencies they created began. In other words, U.S.-based manufacturers were just at the start of efforts to make supply chain and other adjustments to the levies, not at the end of this process. And the CCP Virus’ arrival and all the economic distortions it’s produced will complicate analysis going forward.
Moreover, although it should be “needless to say,” I’ll make the point again anyway: Major changes in U.S. trade policy toward China and overall were vital both for economic, national security, and – as has become clear this year – health security reasons.
As a result, here’s the firmest conclusion I can draw: The stronger U.S. manufacturing’s performance in improving multi-factor productivity remains, the easier these needed trade wars will be to win at acceptable prices.