Deep Decline in U.S. Industrial Output - 5/17/16
There has recently been a deep decline in America’s industrial output. U.S. industrial production, the Federal Reserve’s measure of manufacturing, mining and utility output, fell by nearly two percent during the first quarter from a year earlier. Frequently, a dip in industrial production signals imminent recession.
As reported by the Wall Street Journal, industrial production has never plunged so deeply in a year that didn’t include a recession according to records dating back to nineteen-nineteen. Still, most economists believe that this time is different. What appears to be occurring is that the while the industrial sector is contracting, the broader economy is inching ahead.
Manufacturing is not the employment engine that it once was. Fewer than ten percent of U.S. workers and only about four percent of workers in Maryland are employed by factors. Just after World War II, roughly a third of U.S. workers worked in manufacturing, so a decline in industrial production would naturally translate into recession.
Moreover, the recent decline in industrial production was largely driven by a falloff in mining due to lower oil and natural gas prices. Mining employs even fewer workers than manufacturing and falling energy prices support consumption.