(What’s Left of) Our Economy: So You Think Trump Tariffs are Undermining U.S. Manufacturing? Part 2
This deserves loud pushback.
Wait! So productivity growth is suddenly bupkis? At least when it comes to U.S. manufacturing and assessing its health?
That would be awfully strange, given that, generally speaking, economists seem to agree on its outsized importance for national economic success. Indeed, according to the Congressional Research Service, “Economists believe productivity growth to be a primary driver of long-term economic and income growth and improvements in living standards. As productivity increases, society can produce more goods and services with the same level of resources, which, all else equal, increases incomes and access to goods and services, including access to additional leisure time.”
And Nobel Prize winner Paul Krugman has stated, “Productivity isn’t everything. But in the long run, it is almost everything.” (See this link for both of the above quotes.)
Yet none of the recent claims that U.S. based manufacturing is on the ropes due largely (at least) to the Trump 2.0 tariffs (see yesterday’s post for some examples) has mentioned the sector’s outstanding labor productivity performance during that period.
As reported by the U.S. Bureau of Labor Statistics, labor productivity during the first three quarters of 2025 (the latest available data) has advanced by a total of 1.54 percent. That represents nothing less than a turnaround from its performance during the same pre-tariff-y quarters of 2024, when it fell by 0.18 percent.
Even better: Except for the Covid recovery-distorted increase in 2021, that 2025 manufacturing labor productivity rise represented the sector’s best three quarter-long stretch since the second through the fourth quarters of 2010.
And that improvement came early during the recovery from the major slump in both the economy overall and in industry’s labor productivity during the Great Recession. By contrast, 2025’s small surge is an acceleration within the same period of economic expansion. So it doesn’t benefit from “easy comps.”*
And about all those claims that the Trump 2.0 tariffs, and their frequent fluctuations, have so paralyzed domestic manufacturers with uncertainty that they’ve frozen new investments solid? Well, the data say, “You can’t be serious.”
The best measure of such actual investments is core capital spending (“core capex” for short). It covers new orders by business for assets used to maintain or expand or maintain operations – including machinery and computers. This gauge is called “core” because it leaves out spending in the defense and civilian aircraft sectors, since they’re considered volatile for reasons having little to do with the underlying condition of industry or the broader economy.
Core capex is thought to speak volumes about the state of domestic manufacturing because it’s seen as a prime indicator of future confidence by companies in general and by manufacturers in particular. For if these firms keep buying more and more of these products, they’re clearly expecting good times ahead. The reverse is true as well.
Final numbers are available from the Census Bureau through last November, and they reveal that since last February, core capex is up 3.23 percent. Other …
This deserves loud pushback.
Wait! So productivity growth is suddenly bupkis? At least when it comes to U.S. manufacturing and assessing its health?
That would be awfully strange, given that, generally speaking, economists seem to agree on its outsized importance for national economic success. Indeed, according to the Congressional Research Service, “Economists believe productivity growth to be a primary driver of long-term economic and income growth and improvements in living standards. As productivity increases, society can produce more goods and services with the same level of resources, which, all else equal, increases incomes and access to goods and services, including access to additional leisure time.”
And Nobel Prize winner Paul Krugman has stated, “Productivity isn’t everything. But in the long run, it is almost everything.” (See this link for both of the above quotes.)
Yet none of the recent claims that U.S. based manufacturing is on the ropes due largely (at least) to the Trump 2.0 tariffs (see yesterday’s post for some examples) has mentioned the sector’s outstanding labor productivity performance during that period.
As reported by the U.S. Bureau of Labor Statistics, labor productivity during the first three quarters of 2025 (the latest available data) has advanced by a total of 1.54 percent. That represents nothing less than a turnaround from its performance during the same pre-tariff-y quarters of 2024, when it fell by 0.18 percent.
Even better: Except for the Covid recovery-distorted increase in 2021, that 2025 manufacturing labor productivity rise represented the sector’s best three quarter-long stretch since the second through the fourth quarters of 2010.
And that improvement came early during the recovery from the major slump in both the economy overall and in industry’s labor productivity during the Great Recession. By contrast, 2025’s small surge is an acceleration within the same period of economic expansion. So it doesn’t benefit from “easy comps.”*
And about all those claims that the Trump 2.0 tariffs, and their frequent fluctuations, have so paralyzed domestic manufacturers with uncertainty that they’ve frozen new investments solid? Well, the data say, “You can’t be serious.”
The best measure of such actual investments is core capital spending (“core capex” for short). It covers new orders by business for assets used to maintain or expand or maintain operations – including machinery and computers. This gauge is called “core” because it leaves out spending in the defense and civilian aircraft sectors, since they’re considered volatile for reasons having little to do with the underlying condition of industry or the broader economy.
Core capex is thought to speak volumes about the state of domestic manufacturing because it’s seen as a prime indicator of future confidence by companies in general and by manufacturers in particular. For if these firms keep buying more and more of these products, they’re clearly expecting good times ahead. The reverse is true as well.
Final numbers are available from the Census Bureau through last November, and they reveal that since last February, core capex is up 3.23 percent. Other …
(What’s Left of) Our Economy: So You Think Trump Tariffs are Undermining U.S. Manufacturing? Part 2
This deserves loud pushback.
Wait! So productivity growth is suddenly bupkis? At least when it comes to U.S. manufacturing and assessing its health?
That would be awfully strange, given that, generally speaking, economists seem to agree on its outsized importance for national economic success. Indeed, according to the Congressional Research Service, “Economists believe productivity growth to be a primary driver of long-term economic and income growth and improvements in living standards. As productivity increases, society can produce more goods and services with the same level of resources, which, all else equal, increases incomes and access to goods and services, including access to additional leisure time.”
And Nobel Prize winner Paul Krugman has stated, “Productivity isn’t everything. But in the long run, it is almost everything.” (See this link for both of the above quotes.)
Yet none of the recent claims that U.S. based manufacturing is on the ropes due largely (at least) to the Trump 2.0 tariffs (see yesterday’s post for some examples) has mentioned the sector’s outstanding labor productivity performance during that period.
As reported by the U.S. Bureau of Labor Statistics, labor productivity during the first three quarters of 2025 (the latest available data) has advanced by a total of 1.54 percent. That represents nothing less than a turnaround from its performance during the same pre-tariff-y quarters of 2024, when it fell by 0.18 percent.
Even better: Except for the Covid recovery-distorted increase in 2021, that 2025 manufacturing labor productivity rise represented the sector’s best three quarter-long stretch since the second through the fourth quarters of 2010.
And that improvement came early during the recovery from the major slump in both the economy overall and in industry’s labor productivity during the Great Recession. By contrast, 2025’s small surge is an acceleration within the same period of economic expansion. So it doesn’t benefit from “easy comps.”*
And about all those claims that the Trump 2.0 tariffs, and their frequent fluctuations, have so paralyzed domestic manufacturers with uncertainty that they’ve frozen new investments solid? Well, the data say, “You can’t be serious.”
The best measure of such actual investments is core capital spending (“core capex” for short). It covers new orders by business for assets used to maintain or expand or maintain operations – including machinery and computers. This gauge is called “core” because it leaves out spending in the defense and civilian aircraft sectors, since they’re considered volatile for reasons having little to do with the underlying condition of industry or the broader economy.
Core capex is thought to speak volumes about the state of domestic manufacturing because it’s seen as a prime indicator of future confidence by companies in general and by manufacturers in particular. For if these firms keep buying more and more of these products, they’re clearly expecting good times ahead. The reverse is true as well.
Final numbers are available from the Census Bureau through last November, and they reveal that since last February, core capex is up 3.23 percent. Other …
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