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Air Conditioner Repair Is Where the Jobs Are

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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In another month of strong U.S. employment growth, one key sector shrank in November -- again. For the seventh month out of the past 10, employment in manufacturing was down from the previous month. The Bureau of Labor Statistics reported that, adjusting for seasonal factors, there were about 4,000 fewer manufacturing jobs in November than in October -- and 78,000 fewer than there were in January, when the sector hit its peak (at just over 12.3 million jobs) for the current expansion.

The declines this year can be attributed in part to potentially temporary factors such as a strong dollar (which makes U.S. manufactured goods more expensive abroad) and low oil and gas prices (which cuts demand for drilling equipment), so it's possible that the losses of the past year will be retraced and a new business-cycle peak reached. But that peak will still be way below the all-time record of 19.6 million manufacturing jobs set in June 1979. And manufacturing's share of total nonfarm payroll employment, which hit an all-time low of 8.4 percent in November, is likely to keep on declining.

Smaller Than Ever
Manufacturing's share of nonfarm payroll employment
 
Source: Bureau of Labor Statistics

Recent political discourse has featured two main responses to this phenomenon:

  1. This is what progress looks like. Get used to it. The economy is evolving, and manufacturing's share of gross domestic product has actually stayed about the same. The U.S. still makes lots of stuff, but it takes far fewer people to do it thanks to automation, and what we really ought to be doing is upgrading pay and benefits for other jobs so more people can share in the American Dream once proffered by employers such as U.S. Steel and General Motors.
  2. OMG, the factory jobs are going to China and Mexico! We have to stop them!

I think it's fair to say at this point that the second argument has more resonance among voters in Rust Belt states with large manufacturing sectors. Also, while the first argument is largely correct, it does gloss over the reality that most U.S. manufacturing industries have been struggling in the face of foreign competition -- as I've written before (and will surely write again) overall manufacturing output has held up only because of big gains in the computer and electronics sector, and those huge gains are in part a statistical artifact. U.S. factory jobs really have been going to China and Mexico.

My own take on manufacturing is that we should be doing more to encourage it in the U.S., but shouldn't expect it to be a huge job creator. The better job prospects will still be in work that can't be done by robots or people thousands of miles away.

Consider the industry that's been all over the news this week because of President-elect Donald Trump's intervention at the Carrier furnace plant in Indianapolis: ventilation, heating, air-conditioning and commercial refrigeration equipment manufacturing. It actually has not been decimated by foreign competition: Total receipts for U.S. manufacturers of the stuff were up about 4 percent in 2014 from the pre-recession peak in 2008. But the sector, generally known by the acronym HVAC (for heating, ventilation and air conditioning) has shed lots of jobs -- about 25,000 since 2008, and 1,000 just in October, according to the latest jobs report (data for narrower industry sectors is reported with a one-month delay).

After writing a column last month on blue-collar fields that aren't hemorrhaging jobs (auto repair, electrical work, plumbing), I was curious how things looked for HVAC repairers versus HVAC manufacturers. Here's the answer:

Better to Fix 'Em Than to Make 'Em
Employment in HVAC repair and manufacturing
 
Source: Bureau of Labor Statistics
Mechanics data from annual Occupational Employment Statistics; manufacturing from monthly Current Employment Statistics

The data on mechanics and installers is only collected once a year in May; the blue line on the chart above is dotted to reflect the many months with no data, and the 2016 numbers won't be out for a few months. The BLS expects employment in the field to keep rising at healthy clip, though, with a projected 331,600 people working as HVAC repairers and installers in 2024.

Fixing HVAC equipment also pays better than making it:

Better to Fix 'Em Than to Make 'Em, Part 2
Average hourly earnings
 
Source: Bureau of Labor statistics
*Production and non-supervisory workers

Getting a job as an HVAC mechanic or installer doesn't require a four-year college degree, but it does usually require postsecondary training and often a certificate -- not to mention a fair amount of skill. This is a common characteristic of what Georgetown University economist Anthony P. Carnevale, in an essay for the Atlantic's CityLab on Thursday, called the new "good jobs." It's the case even in manufacturing, he wrote, as "factories have substituted workers with a high-school education or less for new postsecondary-trained technicians working with powerful information technology."

So that's one thing I think we can be sure of. The Trump administration may be able to browbeat a few more companies into revising their plans to move jobs out of the country. More promisingly, a shift in multinational corporations' approach to globalization may bring a modest "reshoring" wave of new factories in the U.S. But those millions of old-line factory jobs really aren't coming back.

  1. The BLS also cautions against making too much of time-series comparisons derived from its annual Occupational Employment Statistics. As best I can tell, most of the reasons for this caution don't apply to the data in these charts. But nonetheless: view them with caution!

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

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Stacey Shick at sshick@bloomberg.net