Factory jobs are booming like it’s the 1970s
By Jim Tankersley, Alan Rappeport and Ana Swanson
Ever since American manufacturing entered a long stretch of automation and outsourcing in the late 1970s, every recession has led to the loss of factory jobs that never returned. But the recovery from the pandemic recession has been different: American manufacturers have now added enough jobs to regain all that they shed — and then some.
The resurgence has not been driven by companies bringing back factory jobs that had moved overseas, nor by the brawny industrial sectors and regions often evoked by President Joe Biden, former President Donald Trump and other champions of manufacturing.
Instead, the engines in this recovery include pharmaceutical plants, craft breweries and ice-cream makers. The newly created jobs are more likely to be located in the Mountain West and the Southeast than in the classic industrial strongholds of the Great Lakes.
American manufacturers cut roughly 1.36 million jobs from February 2020 to that April, as COVID-19 shut down much of the economy. As of last month, manufacturers had added back about 1.43 million jobs, a net gain of 67,000 workers above pre-pandemic levels.
Data suggests that the rebound is largely a product of the unique circumstances of the pandemic recession and recovery. COVID-19 crimped global supply chains, making domestic manufacturing more attractive to some companies. Federal stimulus spending helped to power a shift in Americans’ buying habits away from services such as travel and restaurants and toward goods such as cars and sofas, helping domestic factory production — and with it, job growth — to bounce back much faster than it did in the previous two recessions.
Treasury Secretary Janet Yellen said the recovery of manufacturing jobs was a result of the unique nature of the recession, which was induced by the pandemic, and the robust federal response, including legislation such as the $1.9 trillion American Rescue Plan of 2021.
“We had a huge shift away from services and into goods that spurred production and manufacturing and very rapid recovery in the U.S. economy,” Yellen told reporters during a trip to Detroit this month. The support for local economies and small businesses included in Biden’s rescue plan, she said, “has been tremendously helpful in restoring the health of the job market, and given the shifting in spending patterns, I think that’s been to the benefit of manufacturing.”
American manufacturers, like many industries, have struggled to find raw materials, component parts and skilled workers. And yet, they have continued to create jobs at a rate that has surprised even some longtime promoters of American factory employment.
“We have 67,000 more workers today than we had in February 2020,” said Chad Moutray, chief economist for the National Association of Manufacturers. “I didn’t think we would get there, to be honest with you.”
In recessions over the past half-century, factories have typically laid off a greater share of workers than other employers in the economy, and they have been slower to add jobs back in recoveries. Often, companies have used those economic inflection points to accelerate their pace of outsourcing jobs to foreign countries, where wages are significantly lower, and to invest in technology that replaces human workers.
This time was different. Factory layoffs roughly matched those in the services sector in the depth of the pandemic recession. Economists attribute that break in the trend to many U.S. manufacturers being deemed “essential” during pandemic lockdowns, and the ensuing surge in demand for their products by Americans.
Manufacturing jobs quickly rebounded in the spring of 2020, then began to climb at a much faster pace than has been typical for factory job creation in recent decades. Since June 2020, under both Trump and Biden, factories have added more than 30,000 jobs a month.
Sectors that hemorrhaged employment in recent recessions have fared much better in this recovery. Furniture makers, who eliminated one-third of their jobs in the 2008 financial crisis and its aftermath, have nearly returned to their pre-pandemic employment levels. So have textile mills, paper products companies and computer equipment makers.
Biden has pushed a variety of legislative initiatives to boost domestic manufacturing, including direct spending on infrastructure, tax credits and other subsidies for companies such as battery makers and semiconductor factories, and new federal procurement requirements that benefit manufacturers located in the United States. Biden administration officials say those policies could play a decisive role in further encouraging factory job growth in the coming months and years, in hopes of continuing the expansion and possibly pushing factory employment back to pre-2008 levels.
Other factors could help hasten more American manufacturing. Delayed deliveries, sky-high shipping prices and other supply chain issues during the pandemic have encouraged some CEOs to think about moving production closer to home. The average price to ship a 40-foot container internationally has fallen sharply in recent months, but it is still three times higher than it was before the pandemic, according to tracking by the freight booking platform Freightos.
Businesses are also beginning to question the wisdom of producing so many goods in China, amid rising tensions between Washington and Beijing over trade and technology. The Chinese government’s insistence on a zero-COVID policy, despite the severe disruptions it has caused for the economy, has especially shaken many executives’ confidence in their ability to operate in China. Biden has also maintained many tariffs on Chinese imports imposed by Trump.
The Biden administration is hopeful that new policies — including a manufacturing competitiveness law and a climate law the president signed this summer — will encourage more companies to leave China for the United States, particularly cutting-edge industries such as clean energy and advanced computing.
Brian Deese, director of the National Economic Council, said in an interview that the laws were already changing the calculus for investment and job creation in the United States. In recent weeks, White House officials have promoted factory announcements from automakers, battery companies and others, directly linked to the climate bill.
“One of the most striking things that we are seeing now,” Deese said, “is the number of companies — U.S. companies and global companies — that are committing to build and expand their manufacturing footprint in the United States, and doing so based on their view that not only did the pandemic highlight the need for more resilience in their supply chains, but that the United States is creating a policy environment that makes long-term investment here in the United States more attractive.”