Manufacturing Productivity Grew Strongly in 2010

By February 3, 2011Economy

The U.S. manufacturing industry put in a sizzling performance in 2010, according to the Bureau of Labor Statistics productivity and output data released this morning.

Manufacturing output in real terms rose 6.6 percent in 2010, the fastest increase since 1997.  This indicates a good pace of recovery, but output is still 9 percent below the 2007 peak – indicating how serious the recent manufacturing recession has been.

Manufacturers continued their successful efforts to innovate and become more efficient, and manufacturing productivity in 2010 rose a solid 6 percent, the best productivity gain since 2003 – and considerably faster than the average 3.6 percent gain since 1987.

 Manufacturing productivity has grown so rapidly that in 2010 the average factory worker produced 41 percent more than in 2000.  When output does not grow as rapidly as productivity, fewer jobs are needed, and that has been happening since 2000.

However, in 2010, the 6.6 percent output growth marginally exceeded the 6.0 percent productivity growth; and as a consequence, manufacturing employment grew in 2010, with preliminary Labor Department figures showing 138,000 more factory jobs in December 2010 than in the year-earlier period. 

Fourth quarter manufacturing productivity grew at an annual rate of 5.8 percent, considerably above the long-term average and up significantly from the previous two quarters.  Output growth slowed somewhat in the quarter, to an annual rate of 3.7 percent.  Leading indicators, however, including the recent Institute for Supply Management data, hint that rate of growth may accelerate in the first quarter of 2011.

These figures are encouraging, but it is not baked in the cake that they will be repeated this year or next.  Manufacturing, though recovering, is still below where it was three years ago; and the Administration and the Congress need to focus more intensely than ever on pro-manufacturing policies.

Frank Vargo is the NAM vice president for international economic affairs

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