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Jul 7, 2014

Some Manufacturing Jobs Are Coming Back, But Will You Recognize Them?

Editor’s Note: This monthly blog from Scott Wise, JMP Principal Engineer, seeks to find interesting uses of statistical discovery to solve deep questions dealing with business, economics, sports, health, food, history and psychology.  For our Feb/Mar blog we will explore the issue of whether US manufacturing jobs that largely left the country will ever return back home to its former levels and what types of jobs we should really be focused on for the future?  We will also feature some newer JMP graphing visualizations along the way!

Local Texas singer/songwriter James McMurtry seemed to have summed up the situation in his song “We Can’t Make It Here Anymore.” The song features imagery about down and out towns whose long time manufacturing jobs moved overseas.  In particular, he pens the verse “Now I’m stocking shirts at the Wal-Mart store, just like the ones we made before, except this one comes from Singapore, I guess we can’t make it here anymore.” Chances are you don’t have to travel too far in your state to find numerous towns and cities who have suffered a similar fate.  So in a political primary year, it is not surprising that we have seen both Democratic and Republican Presidential hopefuls passionately promise to bring these jobs back!

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However, Ben Casselman wrote a recent blog for FiveThirtyEight that makes a very sound point about the possible fallacy of this rhetoric in a piece titled “Manufacturing Jobs Are Never Coming Back” (http://fivethirtyeight.com/features/manufacturing-jobs-are-never-coming-back/).  Ben argues that while a growing number of factories are starting to come back to the USA (often called “reshoring” as opposed to “offshoring”), the actual number of jobs added has been much smaller than what we originally lost (only 5% increase in jobs since 2009).  One reason cited for the lack of large job additions is the fact that returning factories are highly automated with better technology and need far fewer workers than in the past.   He goes on to argue that these former jobs in the US have been replaced mainly by service sector jobs, particularly in the retail space.  It may be popular for politicians to appeal to potential voters who may long for past lost manufacturing jobs that paid top dollar with little education requirements.  However, Ben argues that we should instead be hearing about how candidates will instead stimulate our service economy (particularly in retail) and not the empty promises to bring back jobs that will never come back!

           

In my own career I have personally lived in towns and worked in businesses that have been drastically effected by the outsourcing of jobs overseas (especially in the manufacturing of steel, consumer apparel and electronics).  Yet while we might never bring back the large manufacturing job numbers of the past, surely we are not relegated to a future of only service sector retail jobs.  How can we look at this analytically, and more important graphically, to find the best truth? 

Part 1: Why Aren’t More Manufacturing Jobs Getting Added Back?

First we found some raw data by going to the excellent source provided by the Bureau of Labor Statistics (http://www.bls.gov/data/).  Here we found seasonally adjusted quarterly Manufacturing Employment data from 1987 to the end of 2015.  We also asked for a measure of Manufacturing Real Output Per Person over that same time period.  In the graph below we can see a definite drop in manufacturing jobs that seems to only show some small recovery since the end of the great recession in 2010.  However, the Real Output Per Person has been going up steadily, with only a slight dip during the last recessionary period.  Now this is not proof of causation for a pretty complex topic, as there are many varied reasons on why companies are deciding to onshore back to the US and how many jobs these facilities will ultimately add.  But this relationship does lead us to believe that the increasing output per person is one factor that could be reducing the need for older high levels of manufacturing jobs.

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We next looked at adding Retail Employment to the mix to see if this level might be growing in relation to the manufacturing job declines.  From the graph below we can see that while retail jobs have surpassed the total number of manufacturing jobs sometime in the early 2000s, it has since relatively flattened out with only a dip and loss gain back after the last recessionary time period.  So while other Service areas might be taking off in job growth, it isn’t likely we will all have to end up working in only retail in the future!

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Part 2) So What Do These New Manufacturing Jobs Look Like Anyway?

So if some manufacturing jobs don’t come back because they have been replaced by better automation and technology, what kind of jobs are coming back?  One could argue that it comes down to a familiar acronym that we often hear mentioned in recent articles as being the exact thing our current workforce lacks in matching the better paying jobs of the future.  These are STEM skills, or short for Science, Technology, Engineering and Math.  The number of jobs that use STEM skills is quite diverse, running from manufacturing to the lucrative health and life science fields.   But are STEM jobs growing even in Manufacturing and could these jobs be well represented in the ones that are reshoring back to the US?  Again our BLS data source presented us with another great set of data created in 2014 where they projected the expected ten-year increase in all job occupations.  By focusing on the occupations in manufacturing that are STEM skill related, we can see a very clear picture.  The graph below shows a Parallel Plot that shows the convergence of occupations in terms of 2014 Median Income, Percentage Expected Growth (in 10 years), and Education Rank (minimum education requirements with 8 = Doctorate, 7 = Masters, 6 = Bachelors, 5 = Associates, etc. down to 1 = No Formal Education Requirements).   It can readily be seen that the STEM manufacturing occupations (the red lines) are all grouped up into the higher expected job growth and median pay areas of the chart than the non-STEM occupations in blue.  Also looking at the Education Rank, even with just a Bachelors or Associates degree (third and forth grouping down from the top), you can see that your opportunities for higher paying job growth are better on the STEM side!  So it’s not like we as a workforce have to invest multiple years in advanced degrees, we just need to learn skill in the right things…mainly STEM skill areas!

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We even interactively clicked on the red lines on the graph to find and label the top performing STEM occupations in terms of percent growth and median annual wage.  Notice in the table below that most of these required only an entry level Bachelor’s degree, but contained good growth and wage prospects.

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The picture is even more overwhelming when we add in all possible STEM jobs including those in explosive growth areas outside of manufacturing, like those in the health and life sciences.

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So my question to politicians would not be how are you going to bring manufacturing jobs back to the US!  Nor would it be how are you going to stimulate the retail sector! It would instead be how are you going to better prepare our work force with STEM skills to meet the more advanced manufacturing and service jobs of today and tomorrow!  So manufacturing is not dead, but we need to upgrade our skills to take advantage of the advanced technological facilities that are coming back and so we can finally say that “we made it here!”  I know we are up for the challenge and the future looks bright for us to have meaningful US manufacturing jobs!  Lastly in the immortal words of Huey Lewis & The News “I'm taking what they giving 'cause I'm working for a livin'.”

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(Note: If you liked the use of these types of visualizations please go to the following link to learn more about using JMP Graph Builder to quickly, interactively and easily build these types of graphs and more!  Please see “Materials for Creating Effective Visualizations Using Graph Builder” created by Xan Gregg and Dan Schikore at https://community.jmp.com/docs/DOC-9766)

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