Nutty Manufacturing Productivity Statistics

This morning the BLS released its

This morning the BLS released its “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2008”. And guess what? According to the BLS, the U.S. manufacturing sector had the fastest productivity growth in the world in 2008—1.2%, tied with South Korea. Meanwhile, Japan, Canada, Germany, France and Japan all had manufacturing productivity declines.

Good news for the U.S.? Nope. Remember that the U.S. manufacturing productivity stats are not adjusted for offshoring. That is, when a U.S. manufacturer starts buying or making parts overseas, rather than making them at home, domestic factory employment drops. However, the BLS stats can still report the same output. The result? A reported rise in productivity.

[Added 11/1/2009: As David Martin correctly points out in his comment, the international manufacturing productivity comparisons from the BLS actually use the BEA value-added measure. My mistake, my apologies. However, in two cover stories and various other stories, I’ve spent a lot of time explaining why the BEA manufacturing measure *also* significantly understates the impact of offshoring, because import prices are mismeasured.]

I ask you—with manufacturing productivity dropping around the world, is it more likely that the U.S. is one of the few countries where manufacturing productivity is rising? Or is it more likely that our view of the U.S., with the biggest goods imports in the world, is being warped by a statistical mirage?

2008 increase in manufacturing output per hour U.S. 1.2% Korea 1.2% United Kingdom 0.3% Germany -0.1% Japan -0.2% Taiwan -0.5% France -0.8% Canada -2.6% Sweden -3.7%

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