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Manufacturing's Comeback: Numbers Fabricate a Complicated-Yet-Rosy Outlook

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According to many economists, unreliable government data is leading to overly rosy conclusions about the health of the manufacturing industry.

American manufacturing hit an important milestone in April, when the Commerce Department reported that the sector had recovered all the value lost in the recession.

That sort of good news may be difficult to see in places like Danville, Ill., which has been hard-hit by factory closings. One out of every 5 jobs in Danville is in manufacturing, and those jobs are rapidly disappearing. The city of 33,000 lost about 1,600 manufacturing jobs during the recession. Now, the town’s economic development agency touts the growth of its retail sector.

Danville’s experience indicates that the story of manufacturing’s comeback is more complicated than the broad-brush numbers. Scratch below the surface of the data from Commerce Department’s Bureau of Economic Analysis and it’s hard to declare the industry fully healed.

For instance, how can the manufacturing sector’s value-added measure post such impressive gains when the gap between U.S. exports and imports remains so wide? Even as plants produce more, why has manufacturing only added back a quarter of the 2.3 million jobs lost in the recession? And why is the pace of job growth slowing down — manufacturers added 178,000 jobs in 2011, but only 128,000 in 2012 and 71,000 in 2013 — even though manufacturing’s contributions to the economy are picking up?

For policymakers, getting a clear picture of American manufacturing is important as Washington looks to boost a steady but sluggish recovery and expand hiring. Bolstering manufacturing makes sense if the sector is on the upswing. But lawmakers might hesitate to throw money at an industry that has dim long-term prospects.

Misleading Scenarios

According to many economists, unreliable government data is leading to overly rosy conclusions about the health of the manufacturing industry. Imports are not properly measured, for instance. And the rapid changes in the computer industry tends to skew the numbers.

“You think your manufacturing is growing, but it may be shrinking, and you don’t know the right places to apply policy levers,” said Michael Mandel, an economist at the Progressive Policy Institute who has spent years studying these issues. “At this point, in manufacturing we’re flying blind.”

Manufacturing may be making a comeback, but that rebound could be far more modest and shorter-lived than initial numbers would suggest. As a warning, the Bureau of Labor Statistics predicts that manufacturing will lose more than half a million jobs between 2012 and 2022.

“The manufacturing sector is really weaker than it appears in the data,” said Susan Houseman, an economist at the W.E. Upjohn Institute for Employment Research, a Michigan-based think tank.

This hasn’t stopped Washington from pouncing on the idea of a “manufacturing renaissance” driven by increased productivity in American factories.

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