What the March jobs report tells us about manufacturing employment and the vast army ‘not in the labor force’

Coverage of this morning’s jobs report for March highlighted the underwhelming number of net jobs added last month and the still record low unemployment rate, but two other trends in the monthly report deserve attention as the second year of the Trump-era economy unfolds.

One under-appreciated trend is the number of Americans employed in manufacturing, the other is the number of Americans “not in the labor force.”

Creating jobs in manufacturing has been one of the stated goals of the Trump administration. The jobs report released this morning shows that the number of manufacturing jobs in the United States continues to climb, although that has been the general trend since 2010. Meanwhile, manufacturing jobs as a share of total employment have stabilized in the past year after declining steadily for decades.

According to this morning’s establishment survey from the Bureau of Labor Statistics, U.S. employers added another 22,000 jobs in manufacturing in March. That makes a total of 281,000 net manufacturing jobs added to U.S. payrolls since President Trump took office in January 2017. This is something the president can rightly tout as a step toward fulfilling one of his major campaign promises.

However, any congratulations should be tempered by the fact that manufacturing employment has been growing since March 2010, when the U.S. economy began to emerging from the deep recession of 2008–09. Since that low point, U.S. manufacturing employment has grown by a net 1.1 million, from 11.5 million to 12.6 million. The monthly rate of net manufacturing job creation has ticked up under President Trump, from 8,100 net new jobs a month in Obama’s second term to 18,700 per month.

As the nearby chart shows, while the number of manufacturing jobs has been rising in the past five years, as a share of total employment it has fallen to 8.5 percent. And even thought that share has ticked up in recent months, it remains at historic lows. This is not because of “unfair trade” or America’s deindustrialization, but because of rising productivity in the manufacturing sector. As I’ve noted elsewhere, the United States manufactures more value added than in the past with fewer workers because its workers are so much more productive. This is a sign of economic progress.

The fact that we’ve actually been adding manufacturing jobs recently may be primarily driven by the continued recovery from the steep recession as well as growing export opportunities and reduced energy costs that have reinforced America’s attractiveness as the home for manufacturing.

By raising the cost of domestic steel, President Trump’s tariffs Section 232 tariffs may put thousands of jobs in jeopardy in industries that use steel as a major component in their final products. The manufacturing employment numbers in the months to come may begin to show that effect.

As for the number of adult Americans who remain outside the workforce, President Trump himself has made this an issue by his dismissal of the conventional unemployment rate as “totally fiction.” The conventional measure of unemployment, known as U3, measures the number of people who are out of work but who are actively looking employment as a share of the total workforce. The current rate according to this morning’s household survey report is at a 17-year low of 4.1 percent.

The real unemployment rate, according to President Trump, must include the much larger number of Americans who are not actively looking for work but who potentially could be if labor-market conditions were more attractive.

The number of adult, non-institutionalized Americans who are “not in the labor force” totaled 95.3 million, according to this morning’s household survey report. When combined with the 6.6 million who are officially unemployed — that is, not working but actively seeking employment — that creates a grand army of Americans not working of more than 101.9 million.

This is the number President Trump cites whenever he is pressed about the tight national labor market. At a December cabinet meeting, the president said, “We’re … getting into the pool of the 100 million people that are not working. That pool is now coming back.” At a February meeting with members of Congress to discuss the pending steel tariffs, when Sen. Ron Johnson of Wisconsin said labor markets are already tight in his state, the president responded that there are still 100 million people in the country available to fill any additional jobs created by his trade policies.

Today’s employment report shows that the large majority of those people who are not working are quite happy to stay out of the labor force. When President Trump came into office, the number of adult Americans not in the labor force was 95 million. Fifteen months later, in March 2018, the number not in the labor force is — 95 million. The only downturn has been in those officially counted as unemployed, which has fallen from 7.5 million to 6.6 million.

The large majority of people who are not employed or not looking for work will likely stay that way for the foreseeable future. They are aging Baby Boomers, 10,000 of whom are turning 65 every day now, or other adult Americans who are in school, at home taking care of kids or other relatives, or ill or disabled.

The employment numbers simply do not support the contention that there are millions of Americans waiting on the sidelines to enter the U.S. labor force.