The Failure of Exports

Posted by: Michael Mandel on February 29

We’ve seen a collapse of manufacturing jobs since 2000. Is this because of productivity growth or because the jobs have been moved out of the country?

Here’s a piece of evidence that suggests that productivity growth is not the cause. In 1997 the BLS, as part of its employment projections, did a forecast of export and import growth over the next ten years (actually 1996-2006). They predicted 104% growth in real exports over that period (roughly doubling) and 86% growth in real imports.

blsprojections

In fact, as the chart shows, actual export growth (the red bar on the left) was half of what was projected, while import growth was slightly faster than what was projected.

If job loss had been primarily driven by productivity growth, the odds are that exports would not have fallen so far short of what was expected. In fact, all other things being equal, faster-than-expected productivity growth should have increased exports relative to predictions, rather than decreased it. That’s because productivity growth would have decreased costs, and made U.S. exports more competitive.

(Note: This is not just a fluke of the BLS numbers. DRI/McGraw-Hill had a similar ten-year forecast for export and import growth around this time).

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Reader Comments

brad setser

March 4, 2008 09:05 AM

Dr. Mandel --

I agree with you. A world where the US exports and imports 17% of its GDP (paying for imported oil with exported goods and services) would have more manufacturing jobs than a world with 17% of GDP imports and 12% of GDP exports. I would attribute at least some of the gap to exchange rate policies outside the us, which have held a range of currencies down. China's rMB peg probably has little impact on total employment in a flexible economy, but it should change the composition of output and composition of employment -- and directionally, it has shifted us output away from manufacturing.

Mike Mandel

March 4, 2008 02:09 PM

Brad,

As you can see, since 2006 I've shifted part of the way in your direction.

Thank you for your interest. This blog is no longer active.

 

About

Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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