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Structural Change in Manufacturing Mark Schweitzer Federal Reserve Bank of Cleveland April 27, 2004 Outline The current situation and the business cycle Look inside manufacturing productivity growth Where are the workers going? The Current Employment Situation MANUFACTURING:

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slide1

Structural Change in Manufacturing

Mark Schweitzer

Federal Reserve Bank of Cleveland

April 27, 2004

outline
Outline
  • The current situation and the business cycle
  • Look inside manufacturing productivity growth
  • Where are the workers going?
slide4

MANUFACTURING:

SHARE OF EMPLOYMENT

Percent of total employment

Note: Shading indicates periods of economic contraction.

slide5

MANUFACTURING:

LEVEL OF EMPLOYMENT

Millions of workers

Note: Shading indicates periods of economic contraction.

slide6

BUSINESS CYCLE PATTERN: MANUFACTURING EMPLOYMENT

Percent change from previous peak

Total Change from March 2001: -2,621,000

Average range

Average

2001-

Months from previous peak

slide7

MANUFACTURING GROWTH FROM PREVIOUS PEAK (March’01 to Feb’04)

Share of employment (percentage)

Overall manufacturing growth: -15.5%

Growth rate from the previous peak

slide8

MANUFACTURING GROWTH

(Aug’03 to Feb’04)

Share of employment (percentage)

Overall manufacturing growth Aug’03 to Feb’04: -0.7%

Growth rate

fourth district beigebook
Fourth District Beigebook
  • Manufacturing has experienced a profound scaling back over the last 5 years
    • Employment reduced sharply
    • Capital spending held very low
    • Turned around only over the past few months
  • Manufacturers outlook
    • Cautious about the future
    • Employment gains likely to be limited
    • Productivity growth continuing
slide11

Manufacturing

Nonfarm business sector

MANUFACTURING PRODUCTIVITY

Annual percent change

Note: Shading indicates periods of economic contraction.

bls industry productivity program
BLS INDUSTRYPRODUCTIVITY PROGRAM
  • The Bureau of Labor Statistics produces annual measures of productivity by detailed industry
    • Manufacturing Industries
      • Data provide nearly complete coverage
      • 4-digit NAICS industries (e.g., basic chemicals or industrial machinery)
    • Services Industries
      • Data provide coverage of about half of the service sector
      • 4-digit NAICS industries (e.g., full service restaurants or automotive repair and maintenance)
      • The industries for which data are available are the ones with the most reliable productivity measures
slide13

PRODUCTIVITY GROWTH 1990-1995

Percent of employment

Mean is 3.7%

Manufacturing

Iron and steel mills

Computer and peripheral eqpt.

Semiconductor eqpt.

Ship and boat building

Growth rate (annual average)

slide14

PRODUCTIVITY GROWTH 1990-1995

Percent of employment

Manufacturing

Mean is 2.4%

Services

Mean is 3.7%

Grocery stores

Commercial equipment

Specialty food stores

Growth rate (annual average)

slide15

PRODUCTIVITY GROWTH 1996-2001

Percent of employment

Manufacturing

Mean is 3.7%

Computer and peripheral eqpt.

Semiconductor eqpt.

Apparel knitting mills

Growth rate (annual average)

slide16

PRODUCTIVITY GROWTH 1996-2001

Percent of employment

Manufacturing

Mean is 2.7%

Services

Mean is 3.7%

Advertising agencies

Wholesale chemicals

Electronics and appliance stores

Growth rate (annual average)

slide20

Average

Average range

BUSINESS CYCLE PATTERN: NONFARM EMPLOYMENT

Percent change from previous peak

2001-

Months from previous peak

slide21

BUSINESS CYCLE PATTERN: UNEMPLOYMENT RATE

Change from previous peak

Average

Average range

2001 -

Months from previous peak

slide22

UNEMPLOYMENT RATE

Percent

Manufacturing

Total

conclusions
Conclusions
  • The decline in employment in the latest recession has been unusually large and has abated little
  • Manufacturing productivity has risen substantially
  • However the correlation with employment growth is weak
  • Manufacturing workers continued to flow out of employment through 2003
  • Job losers have largely joined the unemployed
slide26

Structural Change in Manufacturing

Mark Schweitzer

Federal Reserve Bank of Cleveland

April 27, 2004