Matt Yglesias posts: ... Certainly the trend is different from what we saw in the last recession, where jobs disappeared and never returned. But prior to 2001, the pattern had been for manufacturing to fluctuate cyclically - big layoffs during recessions followed by rapid rehiring. The current cycle has us recovering from the trough level of manufacturing employment, but still nowhere near where we were before the downturn began. This is all correct, but it's also worth noting that those pre-2001 cyclical recoveries in manufacturing employment were quite weak. It never returned to pre-recession peak levels after any of the prior three recessions (1980, 1981-82, and 1990-91), and the chart appears to show a lot of employment fluctuation within those recoveries. None of this is too surprising in hindsight, as it makes sense that manufacturing employment would be especially sensitive both to the effects of globalisation and to spurts of technological advancement. So you would expect jobs in the sector, during recoveries, to have an idiosyncratic and unpredictable relationship with output. The relative weight of each influence on manufacturing productivity is difficult to know just by looking at the macro picture. As for what happens in the next few years, there have been many, many stories anecdotally arguing that companies will "bring home" jobs back from China and other low-wage countries as productivity-adjusted wage differences narrow - and this will lead to a meaningful rise in employment in concert with those jobs that return as part of a cyclical bounce. But then maybe also there will be technological leaps that lead to fewer jobs created or even renewed job losses as productivity accelerates, possibly even outnumbering the increase in jobs that either will be re-shored or that are simply part of a normal cyclical rebound. It's just hard to know. That can be said for any sector, of course, but manufacturing seems an especially difficult case. Again I think the comparison and contrast with construction is helpful for understanding part of what's happened in the recent recession and recovery. In absolute numbers, these two sectors remain the biggest jobs laggards since the recession started (construction has 25 per cent fewer jobs than before the recession, and for manufacturing the number is 13 per cent, according to CreditSights): But here's a chart of construction sector employment throughout the Great Stagnation period: The trajectory consistently begins to decline just before each recession and is followed by a similarly-sloped increase in the recovery period, easily exceeding the prior peak and with little volatility. And this too makes sense, mostly - construction isn't a sector where jobs can be off-shored. As for productivity growth, this is harder to work out. Here's a chart from McKinsey showing the respective contributions to productivity and employment through roughly two decades (manufacturing and construction are at the top): And commentary from the report: The United States is well behind international best practice in the construction of infrastructure. While measuring productivity in the construction industry, most observers agree that it has at the very least stagnated and perhaps even declined over the last three-plus decades. The construction industry needs to deliver greater value with existing inputs, or even fewer inputs. This is a bit crude and I wonder about possible flaws in the way productivity is measured here. Regardless, there is little reason to believe that construction employment won't follow the same path as in previous recoveries if this one accelerates. At least until we start 3D-printing houses. But there was a mystery in the sector thoughout much of last year: if there hadn't been a meaningful and weirdly undetected increase in productivity growth, then why the disconnect between between the rise in housing starts and the very slow return of construction jobs? But then along came Jed Kolko writing at Calculated Risk explaining that such a lag is normal and has to do with a combination of measurement issues and labour hoarding during the downturn, resulting in smaller output per worker. That was followed by a report from Goldman economists finding that the effects of labour hoarding are diminishing, which means that more workers will soon have to be hired. Mystery largely solved. Related links: Another look at household formation, and why it matters - FT Alphaville US payrolls and past as predictor for manufacturing and construction - FT Alphavillle