A new story from the Associated Press argues that there’s been a big productivity surge in the U.S., post-financial crisis. Paul Wiseman writes: (my emphasis added)
The reason is U.S. workers have become so productive that it’s harder for anyone without a job to get one.
Companies are producing and profiting more than when the recession began, despite fewer workers. They’re hiring again, but not fast enough to replace most of the 7.5 million jobs lost since the recession began.
Measured in growth, the American economy has outperformed those of Britain, France, Germany, Italy and Japan — every Group of 7 developed nation except Canada,
According to the conventional wisdom, as summarized by Wiseman, the U.S. has sailed through the crisis in better shape than our industrialized rivals. The conventional wisdom also says to the degree that we have a jobs problem, it’s because we are so good at boosting output and productivity.
Of course, this directly contradicts my recent post, where I argued that the apparent productivity gain from 2007-2009 was to a large extent the result of mismeasurement.
But now let me make a different point. Wiseman argues that companies are producing more than when the recession began.
I don’t think he’s right for most of manufacturing.
I’m going to show a series of charts for various manufacturing industries. These charts show shipments, adjusted for prices changes–’real’ shipments. Real shipments are a good measure of what actually comes out of the factory.
These charts are scaled to January 2007 =100. They are also not seasonally adjusted. We’re going to look at them and ask ourselves the question–is the industry producing more than when the recession began? (I do my comparison from JanFeb 2007 to JanFeb2011, to reduce the impact of seasonal variation)
Let’s start with chemicals. Is the industry producing more than when the recession began? No, since real shipments are down almost 13% over the past four years.
Next up is the plastic and rubber products industry. Producing more than when the recession began? No. Real shipments are down 21% over the past four years, and it’s not even clear that we are seeing signs of recovery now.
Next: Nonmetallic mineral products, which includes glass, cement, tile etc. Producing more than when the recession began? No. Real shipments are down almost 30%. And from the chart, there’s little sign of recovery, which is not surprising given the importance of construction as a market.
Now we come to primary metals–steel, aluminum and etc. Producing more than when the recession started? Almost! Real shipments are down only 3.5% and there appears to be a sustained improvement underway.
Our next contestant is not quite so lucky. Machinery is one of the key strengths of the U.S. economy, including everything from construction equipment to turbines to mining machinery. Unfortunately, when we ask ourselves the question if the industry is producing more than when the recession started, the answer is: No. Real shipments are down 14% over the past four years. What’s more, the data suggest that the industry is still at early 2009 levels, which is not the right place to be.
Next is the computer and electronics industry. Is this industry producing more than before the recession? This is the one case where the answer is unequivocally yes. According to the methodology I am using, real shipments are up 8% over the past four years, with a steady recovery since the bottom of the recession. A couple of caveats here, both directions. There’s reason to believe that this number might be understated, because it doesn’t take into full account the increased power of communications equipment. On the other hand, this industry depends on foreign components, so it is very susceptible to the mismeasurement problem I described in my post last week. Let’s call it a yes for growth, and move on.
Our next industry is electrical equipment, which includes appliances. Is it producing more than when the recession began? Hell, no. Real shipments are down almost 17% over the past four years, and there’s no sign of a real recovery in the data.
Now we come to the ever-important transportation industry–motor vehicles, airplanes, and all that good stuff. Is the industry producing more than 4 years ago? No. According to my methodology, real shipments are down 24% over the past four years. Now, I don’t intend to go to the wall on this exact number. Everyone has their favorite way of doing this. The Fed’s industrial production number pegs motor vehicle IP as down 18.7% and aerospace and other transportation IP as up 2.7%. Still, no matter which way you slice it, real shipments are down for the industry as a whole.
Just two more to go, furniture and miscellaneous. Not surprising, furniture is still licking its wounds from the housing collapse, with real shipments 24% below the level of four years ago
Finally we come to the miscellaneous category, which is actually kind of interesting because it includes medical equipment, as well as toys, sporting goods, and office supplies. Wiseman’s main example, a maker of pharmaceutical equipment, is probably in this category. Is this industry producing more than it was before the recession? Oh, an ever so barebones 0.6% gain. Really, the graph looks pretty much flat.
A couple of final notes. First, these results are roughly compatible with the Fed’s industrial production indices (the Fed’s number for growth in the computer and electronics industry is larger, for the reason I noted above).
Second, I eagerly await the BEA’s real value-added stats for 2010 to see how it matches up (coming out April 26). And then we can contrast these two very different views of the health of manufacturing and the economy as a whole.