Fact of the Week: Manufacturing Contributed 14 Percent of U.S. Economic Growth From 1987 to 2016, but it has Been Contracting Since 2007, Such That is now Reducing Growth by 1 Percent

Caleb Foote July 15, 2019
July 15, 2019

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Source: Corby Garner et al., “New BEA-BLS Estimates of the Industry-level Sources of U.S. Economic Growth between 1987 and 2016,” 2019, International Productivity Monitor, Centre for the Study of Living Standards.

Commentary: Manufacturing’s smaller role in the U.S. economy is hotly debated, with many blaming automation for its demise. But analysis of a recently expanded BEA and BLS dataset demonstrates both how stark manufacturing’s decline has been and that fears of automation are largely misplaced. It finds that from 1987 to 2016, the manufacturing sector added 0.34 percent to U.S. GDP annually, which amounted to 14 percent of the economy’s 2.38 percent annual growth rate over that period. However, manufacturing’s contribution to growth has declined dramatically in recent years—from 0.45 percent in the period from 1987 to 1995 to -0.01 percent in the period from 2007 to 2016. The bulk of this decline has been due to falling productivity growth, which has gone from manufacturing’s strongest source of growth to its weakest, as it has dropped from 0.21 percent to -0.07 percent across the same two periods.