Bill Wood
Published: April 23, 2014 1:39 pm ET
Updated: April 23, 2014 1:46 pm ET
Image By: Plastics News
According to data that is compiled and reported every month by the Bureau of Labor Statistics (BLS), the total number of jobs in the plastics processing industry increased by 1.7 percent in 2013. This followed annual increases of 1.6 percent in 2012 and 1.7 percent in 2011.
This sluggish, albeit steady, rate of job growth is comparable to the slow, but steady pace of expansion in the overall U.S. economy during the past three years.
The official statistics show that the total U.S. GDP has increased by an average of about 2 percent per year over the past five years, and this was enough economic growth to generate annual increases of about 1.7 percent in the total number of jobs in the plastic sector over the past three years.
Before I offer further analysis of this data, I should explain exactly what is included in these numbers for the sake of clarity. First, the data being reported by the BLS is for SIC 326 — rubber and plastics products. The fact that the rubber industry is included in SIC 326 data does not significantly affect the trend in the data or the forecast as it pertains to plastics processors, but it does increase the actual number of jobs in the monthly data. Second, this data does not include persons involved in manufacturing plastics resins, molds or machinery. Jobs in these sectors are captured and reported in other SIC codes.
My forecast for 2014 calls for another increase of 1.7 percent in the number of jobs for plastics processors. This is based on expectations of a continuation in the unspectacular, yet steady upward trend in the overall economic data. I still expect the pace of growth in the economy to accelerate moderately in the second half of this year with the quarterly growth rates registering gains in excess of 3 percent. This will likely be enough to push the annual gain in the GDP data to somewhere between 2.5 percent and 3 percent for the year. But because employment data lags the overall economic data, the growth in the number of jobs in the plastic sector will not start to accelerate until 2015.
The lackluster pace of growth in the processors’ jobs data this year will be substantially slower than the gain in the production levels for the industry. While the number of jobs has expanded by only 1.7 percent per year during the last two years, production levels have increased by 5 percent per year. We expect another increase of 5 percent in output for plastics processors in 2014. The difference of roughly 3 percent between the gain in the number of employees and the overall rise in production will be accomplished by raising productivity levels. In order to compete in the global economy, the U.S. plastics industry has had to become much more productive. Processors are much more willing to invest in new, more productive machinery than they have been in new employees.
This is really the most dramatic change in this industry in our generation. As the chart above indicates, employment levels for plastics processors peaked in 2000. The recession in 2001 started a sharp decline in payrolls that did not really hit bottom until 2009. After several decades of steady growth, the number of employees in the plastics industry declined by an average of 4 percent per year through the first decade of this century. The processing sector lost 350,000 jobs during this time, and it has only gained back about 50,000 jobs in the past four years.
Or to put it another way, the total volume of output of plastics products in the United States is about 5 percent lower than where it was at the end of 2000, but the number of employees is down 30 percent. The chart clearly illustrates that a substantial number of jobs were lost during the two big recessions that occurred during the 10-year span ending in 2010, but it also shows that this industry was losing jobs even when the economy was not in a recession.
By now, everybody is acutely aware that this situation is not restricted to just the plastics industry, and that it is a part of a much bigger structural problem for America. Long-term unemployment, under-employment, the skills gap, the stagnant labor participation rates and the demise of the middle class are all part of the dilemma. The chart of the employment data for the entire manufacturing sector exhibits a pattern that is nearly identical to that of the plastics industry. From the year 2000 to 2010, the U.S. manufacturing sector lost a total of more than 5 million jobs. In the four years since hitting bottom, this sector has recovered fewer than 1 million jobs. The U.S. economy seems to have little trouble generating wealth, but it no longer seems able to distribute it efficiently.
So what does this mean for the future? In the short term, I expect that the number of jobs in the plastic sector will continue to rise, and the trend upward will accelerate in the years 2015 and 2016. This is about the time that the U.S. economy is expected to get the unemployment rate down to a level that is considered “full employment.” In 2015 and 2016, the pace of overall economic growth will rise above 3.5 percent, and the volume of plastics products manufactured in the United States well finally get back to the pre-recession levels.
But the number of jobs in the plastics industry in particular and the manufacturing sector in general will not rise to anywhere near the levels seen at the end of last century. Manufacturing levels are no longer dependent on labor — they are now driven by technology. This means that the manufacturing sector will not be a significant source of job creation for our economy going forward. The types of jobs that are created will not be assembly, inspection and packing. They will be for programmers and engineers.
The loss of manufacturing jobs notwithstanding, all of this should be good for the U.S. economy in the long run if the markets and the policymakers handle it properly. There is no shortage of jobs that need to be done in America. Repairing our decaying infrastructure, caring for aging baby boomers, natural disaster relief and mitigation, and educating our youth are just a few areas that come to mind easily. What we must do is create a bigger market with rising demand for these jobs. Increasing our national wealth by substantially raising our production of manufactured goods is a crucial step towards increasing aggregate market demand in this country and thereby creating all types of new jobs. Not just jobs in manufacturing, but in all sectors of the economy.
Bill Wood is economics editor for Plastics News, and is the founder and president of Mountaintop Economics & Research Inc. | 
