The Surprisingly Swift Decline of U.S. Manufacturing Employment

Justin R. Pierce

Economist, Federal Reserve Board

Tuesday, February 12, 2013

12:30 to 2:00pm

John W. Kendrick Seminar Room
Room 321 at 2115 G Street NW
Washington, DC 20052

We examine the link between the sharp drop in U.S. manufacturing employment after 2001 and the elimination of trade policy uncertainty resulting from the U.S. granting of permanent normal trade relations to China in late 2000. We find that industries where the threat of tariff hikes declines the most experience greater employment loss due to suppressed job creation, exaggerated job destruction and a substitution away from low-skill workers. We show that these policy-related employment losses coincide with a relative acceleration of U.S. imports from China, the number of U.S. firms importing form China, the number of Chinese firms exporting to the U.S. and the number of U.S.-China importer-exporter pairs.

The paper can be found here.