The Effects of Export Growth on U.S. States' Manufacturing Employment

In accord with the recent export boom, manufacturing payrolls returned to healthy levels last seen before the 2001 recession. Manufactured goods make up approximately 75% of total merchandise export value, and have been some of the fastest growing segments during 2003–07 period. Leading the pack are shipments such as automobiles, transport mediums, tractors, aircraft, spacecraft, associated parts, and the smaller iron and steel sector. Computer and electronic equipment, the second largest export segment, has seen healthy expansion as well, but not as consistent on a yearly basis as the export leaders. It is evident that the United States' comparative advantage in products sold abroad lie in heavy equipment, machinery, and electronics, because those involve advanced manufacturing facilities and infrastructure, extensive capital investment, and a skilled workforce. Not surprisingly, the lower-skilled and labor-intensive manufacturing industries, such as textiles or furniture, do not represent a large portion of U.S. exports, and are growing at a much slower pace.

Looking at states in terms of both export growth and manufacturing employment growth over 2003–07 shows a clear trend. With the United States as the point of reference, 32 states exhibited above-average export growth; of these, 22 also saw above-average manufacturing employment growth. Lagging the U.S. level were 19 states; of those, 13 also underperformed in terms of net new manufacturing payrolls. This simple analysis leads to an apparent conclusion: states that have expanded exports at an above-average pace have also experienced above-average manufacturing employment growth.

States with above-average export growth and where shipments of sophisticated goods such as automobiles, airplanes, and other machinery grew significantly during the period include Alabama, Iowa, Indiana, Kansas, Kentucky, Missouri, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Washington, and Wisconsin. Computers and electronic equipment was the main driver of growth in a smaller number of states, such as Florida, Idaho, South Dakota, and Mississippi.

This analysis is not without exception, of course, and a prime example is Alaska, which ranked second in manufacturing employment growth but 40^th in export growth. The discrepancy is due to the state's makeup; nonmanufactured goods account for 80% of the state's export value, and manufacturing is only a small segment of the local economy. Other states that contradict the trend are Hawaii, Maryland, New York, and Wyoming, where manufacturing employment and manufacturing gross state product make up a relatively small share of the state economy.

The relationship between export growth and manufacturing employment will become even more significant as the U.S. manufacturing sector continues its recovery in the coming years. In 2010, the United States is forecasted to create year-over-year new net manufacturing jobs for the first time in over a decade. States that expand their capital-intensive export industries most effectively are positioned to increase manufacturing employment at a faster pace and develop greater resiliency to domestic business cycles.