Once again, Heritage’s EJ Antoni speaks (on Fox) about a manufacturing recession, focusing on employment. I’ll just point out that, according to the most relevant indicator, the manufacturing sector hasn’t been in a downturn for two years.
True, employment and hours are down. So is the Fed’s manufacturing production index. On the latter, note that this is a gross value index. And as for employment and hours, well, employment and hours have been dropping for a long time, because…productivity!
Figure 1: Manufacturing employment (production and nonsupervisory) (blue), hours (green), production (tan), and value added in Ch.2017$ (red), all in logs, 2022M10=0. Source: BLS and Federal Reserve via FRED, and BEA, and author’s calculations.
So…if you focus on GDP as a measure of aggregate economic activity (as EJ Antoni does), you should be looking at value added as the relevant metric for manufacturing (since GDP is conceptually the sum of value added).
Speaking of productivity, it’s interesting to consider what happened in the wake of the imposition of tariffs on Chinese imports.
Figure 2: Output per hour in manufacturing (black). Source: BLS via FRED.
It’ll be interesting to see what happens to manufacturing productivity once Trump Trade War 2.0 starts.
