Economic Notes On Manufacturing

The US has been shedding manufacturing jobs since about 2000. ( Not 1970 as many people believe . ) 


But, a capital spending report for the same period shows that capital spending has not dropped:


Furthermore, manufacturing revenue has been climbing over the period, but income after tax has stayed fairly flat. 

So, if the manufacturing companies are spending less on people, the same amount on machines but not getting more income, where is the additional expense? They could be spending more on raw materials, but the other possibility is that they are spending more on services, in the form of outsourced labor. For instance, instead of hiring janitors directly, they hire a janitorial services firm. In this case, the same number of people are being hired, but the job is shifted from “manufacturing” to “services.” I’m not sure about the details of this effect, but it does mean that the decline in manufacturing jobs may not be as great as it appears. 

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