Here’s some pretty grim news about the U.S. manufacturing sector—manufacturing employment in the United States fell below 12 million this year for the first time since 1946, and is now at the lowest level (11,648,000 manufacturing jobs in November) since March of 1941 (see chart, data here). Since the recession started in December 2007, manufacturing employment has fallen for 24 consecutive months, as the U.S. economy shed an average of 89,000 manufacturing jobs each month for the last two years. From the peak manufacturing employment of 19.5 million jobs in 1979, the American manufacturing workforce has shrunk by more than 40 percent, as almost 8 million manufacturing jobs have been eliminated over the last 30 years, with almost 6 million of those losses taking place just since 2000. And there’s nothing to suggest that the trend won’t continue, so we can expect even more manufacturing job losses in the future.
But here’s where the news about the manufacturing sector gets a little better. According to the Federal Reserve, the dollar value of U.S. manufacturing output in November was $2.72 trillion (in 2000 dollars), which translates to $234,220 of manufacturing output for each of that sector’s 11.6 million workers, setting an all-time record high for U.S. manufacturing output per worker (see chart below). Workers today produce twice as much manufacturing output as their counterparts did in the early 1990s, and three times as much as in the early 1980s, thanks to innovation and advances in technology that have made today’s workers the most productive in history. So at the same time that manufacturing employment has been declining to record low levels, manufacturing output keeps increasing over time, and the amount of output that each manufacturing worker produces keeps rising almost every month to new record high levels. 
And here’s some more good news. For the year 2008, the Federal Reserve estimates that the value of U.S. manufacturing output was about $3.7 trillion (in 2008 dollars), and the nearby chart shows how the U.S. manufacturing sector compares to the entire Gross Domestic Product of the world’s five largest non-U.S. economies in 2008 (data here): Japan ($4.9 trillion), China ($4.3 trillion), Germany ($3.7 trillion), France ($2.9 trillion), and the United Kingdom ($2.7 trillion). Amazingly, if the U.S. manufacturing sector were a separate country, it would be tied with Germany as the world’s third-largest economy.
Bottom Line: As much as we hear about the “demise of U.S. manufacturing,” how we are a country that “doesn’t produce anything anymore,” and how we have “outsourced our production to China,” the U.S. manufacturing sector is alive and well. Despite declines in employment, the productivity of manufacturing workers has never been higher, and the United States is still the world’s largest manufacturer.