FRED Graph production v employmentManufacturing output and manufacturing employment are important factors in our economy. They are also sources of endless speculation and angst.

Last week I ran across this graph from “FRED”, the St. Louis Fed. The graph combines year-over-year change in manufacturing production and employment curves.

Notice that usually employment tracks production although not varying as much as production. I also noticed that whereas most months from October 1998 to November 2010 showed growing production, employment lost every one of those months.

The blog writer from the Fed wrote, “The role of manufacturing in the U.S. economy is often discussed. As shown in the FRED graph above, as a year-over-year percent change, the level of manufacturing has generally grown. (One striking exception is during the recent recession.) The number of employees working in manufacturing is a different story, however. It has sometimes grown, but it has nearly always grown less than the growth in manufacturing. This suggests that growth in manufacturing does not equal growth in manufacturing jobs. What’s the explanation? A prime candidate is productivity growth. Another is that the sectoral mix has shifted toward industries with higher value added, such as computers and electronics.”

I think they are on the right track. Could we also add process industries (refining and chemicals fall into the manufacturing NAICS, but upstream does not)? I couldn’t find the numbers quickly, but I think those industries require fewer employees than, say, automobile and machinery manufacturing. There were huge shifts in the technology and market fundamentals in those subsectors.

What’s coming

I’ve been listening to reports from last week’s edition of the International CES (formerly Consumer Electronics Show). I draw your attention, for example to this video/podcast roundup from This Week in Tech (TWiT), a popular technology industry round table.

During the first 45 minutes or so there was a discussion of autonomous vehicles. Whereas the usual fare at the show includes TVs, mobile phones, electronic gadgets, this year’s news—even outstripping Internet of Things—was dominated by car manufacturers. This was to the extent that the Detroit Auto Show was pushed back one week so that the manufacturers could focus effort on CES.

Car designers have increasingly incorporated electronics into vehicles. First was control systems, then HVAC, then entertainment systems. Now we are seeing a rapid uptake of taking control to the next level—controlling not only the engine and transmission, but driving itself. Autonomous vehicles were front and center. And these are not only concept cars.

Let’s consider the economic impact of autonomous vehicles. There is every potential that widespread adoption of these vehicles could reduce vehicle demand. I live in a rural area where cars are pretty much a necessity for getting anywhere.

Even so, what if there were a model where I could click an app on my iPhone and summon a car to pick me up and take me down to Dayton (40 miles of rural interstate) for a meeting. On my way to the meeting, I could be preparing for the meeting. Or, perhaps just reading. Either way, I don’t have to concentrate on driving.

In my grandfather’s day, that would have been called the Trolley. There was a passenger light rail system that went from Sidney to Dayton (and through Piqua, Troy, Tipp City and Vandalia). We haven’t had that since before WWII.

Especially in cities. It could really cut down on need for cars in suburbs where cabs are infrequent and expensive. But if you don’t need a car full time, you could have an on-demand car.

If electric cars get added to this mix, many more jobs would be eliminated by eliminating engines, complex transmissions, and the like.

Yes, I can see where manufacturing production could continue to increase, but the need for employees would drop.

However, in that same time frame, we will be faced with a declining labor force. This could be something fortuitous for our grandkids.

Other CES news

Check out this article about Toyota’s hydrogen automobile.

I also wrote about this cool little gadget that gives early warning of driver fatigue.


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