Where did all the manufacturing jobs go?

Since 2001, the number of employees listed under Manufacturing from the BLS has dropped 24%. On the contrary, Transportation and Warehousing is up 48% making the number 2:1 manufacturing to transport jobs versus 3:1 to start the millennia. Luckily total output has remained steady, doing all it can to hold above flat for the same period.

More interesting is the rebound in manufacturing establishments, bumping back even with 2001 levels. In short, we're doing about the same as before with fewer people.

Professor Menzie Chenn explains with further insight in the image source link below.

So, did all the jobs leave or did technology and automation eat them?

I wouldn’t peg any one. I’m also of mind there’s more to the story I’ll continue from my last piece -Trade Imbalances. The evolution of the logistics function in the value chain has made it to where it is as much of the production process as the assembly belts themselves.

The popular production process that also ballooned with the older value model of input —> transform —> output was Just-In-Time Manufacturing out of Japan in the 70s/80s. With enough pulse on demand, and rigid processes, one could marry up with the production process beautifully. The key was to keep everything as needed. Within more regionally centric sources of input, this was achieved very well. American industries have adopted to great benefit.

Simultaneously, the world of trade and procurement began to change rapidly. And under the peaceful hegemony of safe transits and fair play, these networks began to grow. They started to stretch further from previous areas of production and consumption. Whole sections of business functions moved internationally as well as domestically.

The track shoe went from being made in a waffle maker to help build economic output of another country by having the manufacturing there. There’s global benefit. It is also where new ideas of valuing logistics should arise. As the U.S. began to trade out rungs of manufacturing ability abroad, it became more reliant on timing and fulfillment. The apparel brand is no longer buying fabric to make the shoe as fast as orders are filled. Instead, teams come up with ideas of what demand WILL BE. Brands emerge to induce it.

Then other teams call and schedule the manufacturer to make an allotment based on forecast, quality, design, and on. Yet another lines up all the transportation from the supplier into the US, then whatever manner of digestion that follows to the end sale. The timing of production to value is far less connected.

To accommodate, the logistics industry is helping house then discount then destroy inventory all along the way. For this, space is needed, and more people than the traditional look of inbound/outbound logistics. Transport service changes tell the story below.

The first reality is all ocean containers have to be unloaded and reloaded once they arrive here. Then they have to be housed. To save on transfer costs, the warehousing industry bloomed around coastal port cities and urban centers for transloading. Dray carriers do most of this first transfer, and operate <250 miles to ensure daily turns. The LTL and small vans to your door on the other end more locally.

The average age of the 1 BILLION+ square feet of warehousing space in the Inland Empire of Southern California is 43 years old. This, of course aligns with the shift in processes that many years ago.

The Ports of LA and Long Beach now account for 30% of inbound U.S. maritime volume. Other huge chunks buzz about Laredo, TX and Detroit, MI for Mexican and Canadian good/energy exchanges. New England turned on billions of square feet of space as well. Because so little is made versus consumed in the area, it is considered a backhaul market. A.k.a where it’s cheap to get out.

Production centers were not housing all the overstock, inputs, and safety stocks either. Those functions were better timed and scheduled to make it into the domestic supply chain elsewhere. Some allotments sitting like a t-shirt ready to move when called upon, just in time.

The U.S. transportation industry was valued at $1.7T in 2022. Manufacturing is around $2.3T. Less noticed is the in-house logistics contribution of ~$300B. Trucking holds the highest % of cargo value because it uses one box dedicated versus 10,000 boxes on a ship or 100 on a rail line, but the supply fluidity and risk profiles are much different between them. This became evident in the pandemic.

The POs were cut. The product made. Many times they were shipping or already shipped. The production process was not halted. Delivery was.

 

When put together, it becomes less evident that manufacturing jobs just left the nation in a zero sum manor. The value chain changed so too the roles within the process. The US transportation industry supports US manufacturing whether originated here or abroad.

The unfortunate reality is the trade roles have not come in at a 1:1 level, and when they do, they are usually going to be further from the heartlands. This may be a positive for the new areas of the country built on trade, but the average pay is lower.

Again from the BLS below to showcase. In total there are a bit less jobs overall, they’re more concentrated, and a higher share of them are lower pay at an average level.

In areas that have only seen facilities and jobs leave may get a distribution center for advanced operations, but it’s not enough to replace what the incomes and people lost to communities across the country once more prosperous. This has to be appreciated in how much of the country feels on trade.

It’s just not the whole story either.