Thread by @basilh_2

Notes on the manufacturing productivity slowdown

1. A common narrative: "US manufacturing output has held steady even as employment has fallen -- productivity growth in the industry has remained high"

bloomberg.com/view/articles/…

Alas... manufacturing output has been ~flat since 2008 and employment is actually up a bit

fred.stlouisfed.org/series/IPMAN
fred.stlouisfed.org/series/MANEMP

From Lashkari and Pearce: both labor productivity and multifactor productivity in manufacturing have been flat-to-declining since ~2010

And this is not due to composition effects (initial vs. current weights)
libertystreeteconomics.newyorkfed.org/2024/07/the-my…

This is true both at the tippy top -- the four fastest-growing ("leader") industries and the rest

Another way to see that this is broad-based is cutting by subsector, via Joey Politano:

apricitas.io/p/americas-man…

2. You can see in that chart the Susan Houseman et al fact: since 1997, ~half of the growth in manufacturing output is just from computers and electronic manufacturing

econtalk.org/susan-houseman…

And that computer manufacturing output growth is:
(1) about improved *quality*, rather than quantity 'per se'
(2) in part reflects mismeasured inputs via offshoring to cheap labor

minneapolisfed.org/article/2012/i…

3. Actually, nondurable manufacturing productivity has been flat as far back as the data go -- to 1987

The pre-2008 manufacturing productivity growth was driven by *non-durable* productivity growth -- but within that, a lot of heterogeneity

Justin Fox: bloomberg.com/view/articles/…

4. It turns out that the US, along with Japan, has had uniquely weak manufacturing productivity growth (via Greg Ip)

wsj.com/economy/americ…

I wonder how much of that is compositional?

Countries with faster growth maybe just have lots of the *industries* with faster growth -- most obviously Taiwan and semi manufacturing, but does this explain why the UK has had faster manufacturing productivity growth?

5. Dispersion in productivity within manufacturing has gone up: from Joey and Acemoglu-Autor-Patterson

economics.mit.edu/sites/default/…

6. And the manufacturing productivity slowdown comes despite rising R&D in manufacturing!

ie: Ideas are getting harder to find, in manufacturing

libertystreeteconomics.newyorkfed.org/2025/01/the-rd…

6. Could the slowdown in manufacturing productivity be related to the fact that health costs aren't exploding any more?

https://x.com/Noahpinion/status/1928466438844784780

Health spending/GDP has been flat over the same period that manufacturing productivity has been flat!

Has Baumol's cost disease -- AKA differential productivity growth -- been defeated by *slowing* goods productivity growth, rather than by *rising* services growth?

Maybe not, here's service-sector productivity growth

apricitas.io/p/americas-pro…