The Reason 600,000 U.S. Manufacturing Jobs Vanished

This isn't your father's America.

Gone are the days you could graduate high school, get a job at a local factory, and have a job for life. The data suggests manufacturing jobs are in a permanent decline.

Even so, we're now manufacturing more and more stuff in the United States. It's not that manufacturing left the U.S. Instead, the manufacturing jobs did.

How 600,000 jobs vanished
It may be a tough environment for those seeking work in the manufacturing industry. But those who already have a manufacturing job have it better than ever. In fact, the average manufacturing worker is working more hours per week than at any time since World War II:

It's hard to see it in the chart -- the current manufacturing employee works 42.1 hours per week. That's higher than the "Made in the USA" heyday of the 1950s and 1960s.

Factories fear adding new workers
It's curious that at a time manufacturing workers are working more, fewer factories are hiring. Since the bottom in manufacturing employment in 2010, factories have only added 500,000 workers -- too few to keep work weeks at 40 hours.

There's an important takeaway from these two charts. First, factories are reluctant to hire new workers, choosing to pay their existing workers an average of 2.1 hours of overtime. Secondly, if the manufacturing industry hired enough workers to push down the average factory week to a normal level of 40 hours, the industry would create some 600,000 new American jobs.

There are plenty of reasons factories aren't hiring. For one, manufacturers recognize the cyclicality of the industry -- perhaps they're not ready to hire if another recession may be around the corner. Secondly, manufacturing workers bring big fixed costs like pensions and medical benefits. To put it simply, paying overtime wages is less costly than adding new workers.

So, while we're making more products in the United States, there's something we're not making: new manufacturing jobs. That trend is, unfortunately, probably here to stay.

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