Economist/Analyst (unnamed)
Appearances
Today, Explained
Tariffs hit like a Mack truck
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Today, Explained
Tariffs hit like a Mack truck
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Today, Explained
Tariffs hit like a Mack truck
The share of Americans working in manufacturing has fallen steadily for decades and decades. It's fallen steadily in every rich country. And I think even if we have plants building a lot of things, the facts on the ground suggest to me that jobs are going away and will continue going away. So I don't have great news for the folks at that plant.
Today, Explained
Tariffs hit like a Mack truck
So the main cause here, when you look into the data, is productivity is going up. Manufacturing is incredibly intense in equipment. You rely a lot on machinery. That machinery can get better. In a lot of plants now, it's robotics. It's literal robot arms coming and helping assembling products on the floor.
Today, Explained
Tariffs hit like a Mack truck
That process of improving that technology and organizing it better leads to big productivity improvements. That in turn means that you can make more goods with less labor. That makes the goods that you're producing cheaper and One thing that could happen is that it gets cheaper and then everyone buys a ton more of it because it's cheap. That's not really what happens.
Today, Explained
Tariffs hit like a Mack truck
What happens is that as people get richer, they spend less on most manufactured goods. And so the end result of this process is the share of manufacturing in the economy falls and the number of people working in it falls as well. If you go back to, say, 1950, there were a lot of manufactured goods that the average American didn't have. A lot of people didn't have cars yet.
Today, Explained
Tariffs hit like a Mack truck
Most people didn't have TVs, washing machines, dryers, dishwashers.
Today, Explained
Tariffs hit like a Mack truck
The U.S. has gotten rich enough, and a lot of countries have gotten rich enough, that demand for manufactured products is kind of peaking. We're nearing that saturation point.
Today, Explained
Tariffs hit like a Mack truck
And so this combination of really fast productivity growth and people substituting what they spend away from manufactured goods because they've reached some point of saturation combines to a pretty bleak picture for the state of manufacturing jobs.
Today, Explained
Tariffs hit like a Mack truck
So the standard model Economist uses is three sectors. So there's agriculture, there's manufacturing, and then finally there's services. And services, I find when I talk about services jobs, people think of like being a greeter at Walmart, and that is a services job. But there are a lot of different services jobs, and it's so heterogeneous that it almost feels misleading.
Today, Explained
Tariffs hit like a Mack truck
Doctors are service workers. Lawyers are service workers. The most common kind of service worker is a home health aide. That's the most common job in America right now. Anything that is not like directly making a durable finished product counts as services. And that is what most rich countries are seeing spending shift into.
Today, Explained
Tariffs hit like a Mack truck
That once people feel somewhat satisfied in the amount of stuff they have, they start to hire a housekeeper or go to a fancier gym and hire a personal trainer or That in turn means that employment shifts into those sectors because it's where people want to spend their money.
Today, Explained
Tariffs hit like a Mack truck
So I think this is one of the things that's been really hard about the past few decades. One thing that's changed is that manufacturing as a job has changed. It used to be that manufacturing paid above median wages. It was a place where people, predominantly men, who had only a high school degree or even dropped out of high school could get a good wage.
Today, Explained
Tariffs hit like a Mack truck
Manufacturing now pays slightly worse than the average job in America. So the premium that used to be there has diminished a lot. More broadly, what's happened is what a lot of researchers call job polarization, that there used to be a middle represented by sort of good manufacturing jobs that would earn you a middle class income. And the middle has been kind of hollowed out.
Today, Explained
Tariffs hit like a Mack truck
And what's left are at the bottom jobs. sort of fairly routine jobs that don't require a lot of education, like retail clerk, some home health aid jobs, though that can be very skill intensive, stocking, Amazon factories, things like that, which tend to not be highly paid.
Today, Explained
Tariffs hit like a Mack truck
And then at the other end, jobs like doctors and nurses, software developers, things that require a lot of education and training and command a higher wage. And so it looks like a U curve that it's sort of feast or famine. And I think that's part of what's made this transition so vicious is if you're a 55 year old working in the Mack truck plant, you get laid off.
Today, Explained
Tariffs hit like a Mack truck
The jobs that are available to you aren't probably going to be the higher end skilled jobs because they require an education that you didn't get and you don't have time to get before you retire. The ones that are available are the lower wage services jobs. And so that transition is genuinely incredibly hard. And a lot of people have lost out on that.
Today, Explained
Tariffs hit like a Mack truck
The US is a really big place, and some places can be prospering at a time when other places are not as much.
Today, Explained
Tariffs hit like a Mack truck
The trajectory for a place like Boston or San Francisco or Dallas, sort of big cities that attract big industries and where wages for everyone, not just people in those industries, but service workers around them, people working retail jobs nearby the Google offices or the biotech firm in Boston. They've really gained.
Today, Explained
Tariffs hit like a Mack truck
So I think part of it is if you look only at where the costs are concentrated, you're going to see costs. But it's not the whole picture. That being said, it really sucks. Like, I'm not going to try to sugarcoat what's happened from the point of view of a Mack truck plant worker. Their life has gotten worse because of this transition. They have borne the brunt of this big change.
Today, Explained
Tariffs hit like a Mack truck
And I think going forward, this is going to be important because this is not going to be the last shock that the U.S. faces. The labor market could change a lot due to AI. It could change a lot due to other policies from Trump or someone else. It could change a lot if our relationship with China changes. And we need to be able to cope with big shifts like that.
Today, Explained
Tariffs hit like a Mack truck
I think what you saw at the MackTrek plant is an example of us failing and letting down people during a big transition. And we can't do that again.
Today, Explained
Tariffs hit like a Mack truck
We haven't had a negative number since first quarter of 22.
Today, Explained
Tariffs hit like a Mack truck
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Today, Explained
Tariffs hit like a Mack truck
And which role player is about to become a household name? with so many fascinating first-round matchups. Will the West be the bloodbath we anticipate? Will the East be as predictable as we think? Can the Celtics defend their title? Can Steph Curry, LeBron James, Kawhi Leonard push the young teams at the top?