Joe Biden began his presidency much as his predecessor did, promising to restore hope to a blue-collar middle class battered by decades of relentless job losses from automation and foreign competition.
But the realities of trying to stoke U.S. manufacturing employment following an economic crisis are quickly endangering his plans.
After a period of recovery last year, U.S. factory payrolls stagnated in recent months, then went into reverse in January. The country is on course to repeat a pattern seen in every recession since manufacturing jobs peaked in June 1979: a structural step-down in employment even amid a sustained expansion in output.
As Biden starts to lay out plans for the long-term economic rebuilding program designed as a follow-on to his $1.9 trillion COVID-19 relief bill, the business calculus of American manufacturing looms as a headwind.
A Bloomberg analysis of plant-closure notifications sent by companies to state officials around the country shows the fallout from the pandemic is far from over. Employers, who have already cut a net 582,000 factory jobs compared with the pre-COVID-19 level, aim to emerge leaner and meaner from the crisis.
In Ferndale, Wash., Mayor Greg Hansen watched Alcoa, the biggest U.S. aluminum producer, close a smelter last year that operated for more than half a century. The decision put 700 workers, the equivalent of 5% of the town’s residents, out of work without any obvious pathway to another job.
In nearby Bellingham, Safran Cabin, which makes overhead baggage compartments and ceiling panels for Boeing airplanes and Mitsubishi regional jets, will shut its local plant by year-end, laying off 250 more.
That’s left Hansen confronting the same problem plaguing small American factory towns for decades. “We need to try to figure out what do we do now and make sure we have good blue-collar jobs” for those affected, Hansen said. “That’s a much bigger, more difficult puzzle to figure out.”
Companies such as Caterpillar Inc., one of the world’s largest machinery makers, are trying to plan for what remains an uncertain recovery. Wall Street analysts don’t expect its sales to return to pre-pandemic levels until at least 2025.
In a move intended to boost morale, the company has reinstated employees’ annual salary increases and kept health-care premiums unchanged for at least some employees for the first time in years, according to a person familiar with the moves. But its 2020 annual government filing will likely show that employment dropped for a second straight year.
Papermaker Georgia-Pacific announced in January that it would close its Easton, Pa., cup plant by year-end, with 190 workers losing their jobs in three waves beginning in March. The work — making cups for theme parks, hotels, offices and other commercial users — will shift to a plant in Lexington, Ky., where only 50 jobs will be added. The privately held company won’t specify whether that capacity boost will entirely make up for the Pennsylvania loss. But it’s hard to see it as a bet on a rapid rebound in demand for paper cups, which collapsed in the pandemic. “This was a strategic decision based on business needs,” spokesman Eric Abercrombie said.
How much U.S. industrial capacity will end up being cut is unclear. Industrial production in December was 3.6% lower than a year earlier, with capacity usage 5.3 percentage points below its 1972-2019 average, according to the Federal Reserve. More recent data from purchasing-manager surveys show orders for manufactured goods expanding at the start of 2021.
But there are bigger questions over the return of jobs — and the political reverberations that would accompany a failure to bring them back in important swing states such as Michigan and Pennsylvania. States such as those helped Donald Trump win the White House in 2016 and Biden win it back in 2020, and are likely to continue as partisan battlegrounds for many elections to come.
United Steelworkers President Tom Conway is already worried about a jobless recovery. “That’s what happened in 2009,” Conway said. “We’ll see productivity take a big pop with no significant increase in the workforce” and remaining employees “working 12-to-16-hour days for months on end,” he fears.
Biden and his team are well-aware of the danger. Even as the president woos business support for his relief plan — showcased in an Oval Office meeting Tuesday with chief executives — he’s planning a bigger role for the government in this recovery, with money for both research and demand creation, through infrastructure programs, procurement policies, reshoring initiatives, and long-term priorities including climate change.
Signing an executive order Jan. 25 to encourage more federal government purchases of American-made products, Biden dismissed "the defeatist view" that the U.S. couldn't create more manufacturing jobs. "I don't buy for one second that the vitality of American manufacturing is a thing of the past."
Biden is due to visit the industrial state of Wisconsin next week. That's in the run-up to a congressional address in which he is expected to lay out his "build back better" plan, including components to create more manufacturing jobs that advisers hope will spark some bipartisan action.
“In the area of manufacturing and infrastructure — and they are related — there could be and should be some bipartisan interest,” Biden economic adviser Jared Bernstein said. “There are lots of states that are red, blue and purple that would very much be interested in signing on to a jobs agenda with high-value-added manufacturing jobs.”
U.S. manufacturing still faces plenty of long-term challenges. In a forthcoming study of Indiana, experts at the left-leaning Brookings Institution and right-leaning American Enterprise Institute found that the most manufacturing-intensive U.S. state was plagued by declines in productivity and investment and a rotation from production jobs to warehousing ones.
Between 2001 and 2019, Indiana lost 72,000 manufacturing jobs, the report found. Which puts the last year in perspective: There were 36,000 fewer factory workers in Indiana in December than just one year before.
Mark Muro, one of the report’s authors at Brookings, says the ominous reality is that it will likely take Indiana years to get those jobs back — if it’s even possible.