In last week’s State of the Union speech, President Obama gushed about manufacturing. He envisioned “an economy built on American manufacturing” and told us of the “huge opportunity at this moment to bring manufacturing back.”

But before unemployed machine operators and homeowners in factory towns get their hopes up, hear this: Obama’s speechwriters didn’t check with Obama’s experts. This morning, the Bureau of Labor Statistics released the official employment projections for the next ten years. What do the numbers say? Manufacturing will look more like the caboose than the engine of the economy. These projections deliver hard truths about manufacturing that the government, job-seekers and house hunters need to keep in mind:

  • Manufacturing shrinks even as the economy grows. Manufacturing jobs are projected to slip by 0.6% between 2010 and 2020, even though overall jobs will grow by 14.3%. That means that manufacturing will drop from 8.1% of all jobs in 2010 to 7.0% in 2020. The decade will be especially grim for apparel and leather manufacturing, both of which will shrink by more than half. Because manufacturing productivity is high, it accounts for a much bigger share of output in dollars than of jobs. Even so, manufacturing’s share of overall output will also drop, from 19.2% in 2010 to 17.6% in 2020. No matter how you slice it, the economy is not built on manufacturing today and won’t be in 2020.
  • Lots of jobs in manufacturing industries are really service jobs. Only 56% of jobs in manufacturing companies involve making or fixing actual stuff, what the government calls production, installation, maintenance, and repair occupations. (If you’re doing the math, that means only 4.5% of jobs in the U.S. involve making or fixing stuff in manufacturing industries.) What’s the rest? Service jobs: management, finance, sales, office support and so on. And don’t look to high-tech manufacturing for production jobs, either: just 32% of jobs in the computer and electronics manufacturing industry involve production, installation, maintenance or repair
  • The fastest growing sectors are service industries and a construction rebound. Professional services, education and health care will be the fastest growing sectors through 2020, along with construction. The fastest growing occupations will include higher-wage jobs like biomedical engineers, diagnostic medical sonographers and market research analysts, and lower-wage jobs like personal care and home health aides and construction helpers.

What does all this mean for housing? Over the long run, housing demand, sales, and home values go up in cities where there’s job growth. And local job growth depends a lot on which industries happen to be there: when high-tech booms, Silicon Valley and Austin grow; when the car industry melts down, Detroit suffers. The continued decline of manufacturing in America means rough times for housing markets in manufacturing cities.

Where are the manufacturing jobs? Manufacturing is relatively big in Midwest metros like Grand Rapids, MI, Gary, IN, and Milwaukee, WI, and also in southern spots like Greensboro, NC, Greenville, SC, and Louisville, KY. At the other extreme, there are almost no manufacturing jobs in south Florida or in the big east coast centers of New York, Washington and Boston. But the overall picture for long-term job growth and housing demand is not just about where manufacturing is – it depends on how fast all local industries are growing. I’ll do a deeper dive on longer-term growth soon. Stay tuned.