MT Magazine November/December 2023

FEATURE STORY

NOVEMBER/DECEMBER 2023

27

included a period from August 2015 to November 2016 where employment contracted for nine out of the 16 months for a net loss of about 7,000 manufacturing jobs. For comparison, the overall economy added 3.2 million jobs in that same 16-month span. While the overall economy was not officially in recession during this period, something was clearly happening in the manufacturing sector. What’s Past Is Prologue Because the downturn in manufacturing employment was so small compared to the conditions in the overall economy, it would be easy to imagine how someone without a close connection to the manufacturing sector could have overlooked the downturn. A New York Times article from 2018 dubbed the 2016 manufacturing recession “The Most Important Least Noticed Economic Event of the Decade.” But the reality of the situation was quite severe. In the third quarter of 2015, manufacturing accounted for 11.8% of the overall U.S. economy. It would fall to 11.1% over the course of the next four quarters. While the drop in GDP share is a function of both declines in manufacturing output and growth in other sectors, we can really isolate the impact of 2016 by looking at industrial production. Ahead of the 2001 recession, industrial production peaked in June 2000, nine months prior to the official beginning of the recession in March 2001. The dollar value of manufacturing technology orders peaked in September 2000, two months later than industrial production (see the charts of industrial production on page 18). Units ordered, on the other hand, only began a sustained decline two months into the recession, in May 2001.

For quite some time now, economists have been warning of a coming recession. Citing the strong labor market, many have also made comparisons to the relatively short and shallow recession which affected the U.S. economy in late 2001. As time goes on and more data becomes available, another possibility is that the future will bring a “rolling recession,” where different sectors experience minor contractions on a rolling basis, but the overall economy will avoid tipping into recession. This is strikingly similar to the experience of the manufacturing sector from late 2015 into 2016. Examining some of the trends from that period helps infer the likely direction of the manufacturing sector, the length of any coming downturn, and what could be expected from the subsequent recovery. What’s in a Name? The National Bureau of Economic Research (NBER) is the organization responsible for determining when the U.S. economy is in recession as well as assigning the beginning and ending dates. Recessions are defined as a broad contraction in economic activity, so NBER tends to weigh economy-wide metrics when determining if a recession has occurred. According to NBER’s website, the Business Cycle Dating Committee tends to give the most weight to measures of personal income and employment when determining the beginning and end of a recession. From the end of the financial crisis in 2009 to the onset of the recession brought about by the COVID lockdowns, employment in the United States grew by nearly 17% at an almost linear rate. While employment growth like that would generally point to strong economic growth, another story was developing in the manufacturing sector. Over the same time span, manufacturing employment only grew by 9.5% and