American factories are adding jobs, but they could use more robots. The U.S. economy added 200,000 positions last month, including 15,000 in manufacturing, the Bureau of Labor Statistics reported on Friday. President Donald Trump often talks about boosting the sector, but productivity has been near-stagnant. While average hourly earnings rose 2.9% last month, the fastest growth since 2009, wage growth in the manufacturing sector remained weak.
In his State of the Union speech, Mr. Trump boasted that manufacturers had added about 200,000 new jobs since his election. More than 12.5 million Americans are now employed in the sector, compared to fewer than 11.5 million in 2010. Even so, the industry remains a shadow of its former self. Factory jobs have declined from around 32% of the U.S. non-farm total in the early 1950s to less than 9% today. Part of that decline is due to factories relocating to lower-cost countries such as China and Mexico.
Some economists and business leaders also point fingers at automation. The likes of Microsoft founder Bill Gates and Tesla creator Elon Musk fret about robots taking jobs. There is some evidence: each additional robot per thousand workers cuts wages by 0.25-0.5%, according to research by Daron Acemoglu and Pascual Restrepo for the National Bureau of Economic Research. That might explain why pay in the sector has shrunk from nearly 4% more than the typical private-sector worker, just after the last recession, to barely better than parity today.
Lazy robots
Employers seem stuck with lazy robots, however. In theory, replacing homo sapiens with machines should lead to a surge in output per worker. But that ratio has nearly flatlined since about 2011. Productivity in manufacturing has been weak even in relative terms. In early 2008, the sector was nearly 5% more productive than the norm. Today, that lead has vanished. At least part of the explanation may be that the robot conquest never really happened. The capital intensity in manufacturing, a measure of the use of assets in producing revenue — as opposed to the use of people — increased sharply between 2005 and 2010, according to the Bureau of Labor Statistics. In the five years thereafter, it barely grew, suggesting less investment in robots and the like. One consequence may be tepid productivity growth.
It’s not clear why manufacturers are investing so little. But the worriers should be careful what they wish for. The only thing worse than too many robots may be too few.
( The author is a Reuters Breakingviews columnist. The opinions expressed are his own )
