February 15, 2020

The corona epidemic in China is disrupting manufacturing for many products and will cause companies to rethink their supply chains. A wholesale transplantation of manufacturing jobs back to the US is unlikely, however, because the allure of cheaper labor is just too great when making products that have a large labor input; diversification among several low-cost countries is probably the answer instead.

For products with a relatively low labor input, however, the higher cost of US labor and materials can be worth the newly exposed foreign risks. This is especially true for the manufacture of exotic products like computer chips and electronics, where jobs in the past year already grew 2.7 percent.

US auto jobs, on the other hand, shrank 2.5 percent in the past year. Political factors pressure the car companies to keep assembly jobs in the US, but more components are made in other countries (including China).

Total jobs in January were up 1.5 percent from last year, no different than in recent months. As I’ve said before, this isn’t a bad pace of growth, but it’s so modest that shocks of many kinds (now including larger trade disruptions due to corona virus) can quickly slide the economy into recession.

Jobs were up 2.3 percent in healthcare, 2.3 percent at restaurants, 2.0 percent in business services, 1.5 percent in finance. On the other hand, jobs were up just 0.7 percent in government, 0.3 percent in manufacturing, and down 0.4 percent in retail.