Exports Prop Up Manufacturing Jobs

The best news about the dismal May employment report may be that it could have been a whole lot worse.

Manufacturing payrolls fell 26,000 last month — no surprise as they’ve now fallen almost two-straight years.

What’s unusual, economists said, is that given the weakness in domestic demand they’re not falling even more. In 2001, the last time the U.S. was in a recession, manufacturing lost an average of over 100,000 jobs per month. So far in 2008, it’s lost an average of 41,000.

The difference, economists say, is exports. “I think the story is, without exports the manufacturing performance would have been much, much worse,” said Nigel Gault, chief U.S. economist at Global Insight.

Still, for a sector that’s averaged 9% growth on an annual basis over the past four quarters, one might expect that exports would be able to do more than just limit manufacturing losses.
But there, exports may suffer from one of their strongest attributes: fast productivity. The sector tends to have higher productivity than the economy-wide average, so higher orders and output don’t translate into new jobs as quickly as they would in labor-intensive industries like health care and restaurants, which combined to add over 45,000 jobs last month.

“Our manufacturers are able to meet increased demand for exports even while shedding jobs,” said Jared Bernstein, an economist at the Economic Policy Institute.

Still, a durable employment and economic recovery is unlikely if manufacturing keeps losing 40,000 to 50,000 payrolls per month. Manufacturing employment held fairly steady from 2004 to 2006, a period of robust economic growth. A bottoming-out in housing would help, since half of last month’s manufacturing losses came in wood products and furniture.

Besides, “we can’t all work in hospitals and restaurants,” Bernstein said