Manufacturing Moved South, Then Moved Out

The region embraced industries that soon fell to foreign competition.

Gone for good.

Photographer: Mario Tama/Getty Images

The Southern U.S. was, for the first century of the nation’s existence, a bunch of farms. It was a bunch of farms before then, too, but so was the North. After independence, though, manufacturing began to take off north of the Mason-Dixon line, while the states south of it stuck with agriculture and slavery. The Civil War ended the slavery. And finally, in the 1880s, “New South” boosters such as Atlanta’s Henry W. Grady began pushing the region to shift its focus from crops to industry.

It was a long, strange process. In the early days, wrote University of Georgia historian James C. Cobb, Southern recruiters targeted “mobile, footloose industries that required little more than a roof and a cheap work force to put under it in order to begin operation.” Another nice quote from the same source: “The South took on the role of health spa for manufacturing industries in their declining years.”

By the 1930s, according to Cobb, Southerners were getting somewhat smarter about the kinds of industries they went after, and using increasingly inventive tax breaks and other perks to entice companies to relocate. The expensive modern pageant of industrial recruitment was largely a Southern invention.

By some measures it worked. By the mid-1980s, Cobb reported, 65 of the top 76 counties in terms of the percent of workers employed in manufacturing were in the South. That was partly just an artifact of the rural-skewing nature of Southern manufacturing -- paper mills, for example, tend to be located in counties where there isn’t a whole lot else going on. But the economies of some Southern states -- Alabama, Arkansas, Mississippi, North Carolina, South Carolina and Tennessee -- began to approach and in a few cases surpass the manufacturing intensity of Northern industrial stalwarts such as Indiana, Michigan, Ohio and Wisconsin.

The South remained, however, a lot poorer than the North. Part of it was the mix of industries, part the lack of unions. But the biggest reason may be that the South became a manufacturing hotbed just as U.S. manufacturing -- or at least employment in manufacturing -- was beginning to collapse.

What got me thinking about this was Paul Theroux’s screed about lost manufacturing jobs in the South in Sunday’s New York Times. Theroux is perhaps our nation’s most acclaimed travel writer, and he has just written his first book set in the U.S., “Deep South.” Reviews of the book have been mixed. South-Carolina-bred writer Jack Hitt really hated it, Ohio-bred historian Geoffrey C. Ward kind of liked it and West-Virginia-bred New York Times book critic Dwight Garner split the difference. Regionalism lives!

The reviews of his Times essay that I’ve seen have been unremittingly negative, and I didn’t think much of it either (I was born in New Jersey, raised in California and spent the early part of my adult life in Alabama, so you can make of that what you will). But I was intrigued by some of Theroux’s observations. He writes:

[I]f there was one experience of the Deep South that stayed with me it was the sight of shutdown factories and towns with their hearts torn out of them, and few jobs. There are outsourcing stories all over America, but the effects are stark in the Deep South.

That seemed like it was worth checking out. Has the Great Manufacturing Downturn really hit the South harder than anywhere else? Here’s what the downturn looked like on a national level:

Great decline

Manufacturing employment peaked in the U.S. in June 1979, at 19.5 million jobs, seasonally adjusted. But after a sharp decline in the recessions of 1979 and 1980-1981, it actually held pretty steady for a couple of decades. Then, in 2001, the true collapse began, followed by a modest recovery starting in 2010. There were multiple reasons for this collapse, but the big three have to be the rise of China as the world’s new manufacturing headquarters, the rise of robots and the worst recession in 75 years.

Was this collapse worse in the South than the rest of the country? That’s a little harder to figure out, and I spent way too much time digging through Bureau of Labor Statistics databases to find answers. Here’s one:

North south

It appears from the chart that Southern manufacturing employment has actually held up slightly better than the Northern variety, but I wouldn’t make too much of that. My choice of states was designed partly to start out with a similar number of manufacturing jobs in both groups; different choices would deliver different trajectories. Overall, it looks like manufacturing employment has suffered similarly dire fates in the South and the North. But you can find dramatic differences between individual states:

NC mi

Manufacturing employment has held up better in sad-sack Michigan than in booming North Carolina. Weird, huh? That’s because Michigan’s signature manufacturing industry is automobiles, while North Carolina’s is (or was) textiles and apparel. Clothing manufacture has moved almost entirely offshore, while the cars we drive are still mostly made here, albeit not necessarily by U.S.-based companies. On the other hand, North Carolina has had more success transitioning into service industries than Michigan, and its population and economy have grown steadily.

Another interesting thing that has happened as lower-wage manufacturers have shifted operations overseas is that average pay in Southern manufacturing states has closed some of the gap with the North.

catching up

What seems to have happened is that the lowest-value Southern manufacturing jobs have gone to China and elsewhere, leaving behind fewer but higher-value, higher-skill jobs.  Also, the union/nonunion pay gap has been shrinking in some industries, most notably automaking. The most highly compensated autoworkers in the U.S. are now those at Mercedes-Benz, who all work at a nonunion plant in Alabama.

Put these various pieces of evidence together, and the story I see is this: Manufacturing employment has taken it on the chin everywhere in the U.S., including the South. Worst-hit have been lower-value manufacturing operations of the sort often found in the small-town South that Theroux spent most of his time visiting -- although small towns and rural areas are also struggling all over the country, for a variety of reasons. Meanwhile, makers of higher-value products such as cars and airplanes have actually shifted some operations to the South, but they’re generally located near mid-size or bigger cities such as Spartanburg, South Carolina, or Birmingham, Alabama. And the most successful Southern metropolitan areas -- Atlanta, Charlotte, Nashville, the Research Triangle -- haven't built their economies around manufacturing. The parts of the South that industrialized did so just as industrialization was going out of style.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.