Indiana's manufacturing sector is far from healthy

If only the claims that "Indiana's manufacturing sector is healthy" were true, we might have difficulty explaining Donald Trump's popularity in the state.

But it isn't true, at least not if you are an employee – which is code for a major voting bloc.

According to the U.S. Bureau of Economic Analysis, the value of outputs from Indiana's manufacturing sector has indeed grown from $61.4 billion in 2000 to $94.1 billion in 2014.

Sounds like a lot.  However, these are current dollars.  Once you adjust for inflation, the manufacturing output grew only 11% in real terms during 15 years, or at about the same rate as the state's overall anemic economy.  Real average annual growth rates of about three quarters of a percent hardly seem healthy.

The core problem in the state is the massive job loss in manufacturing industries since 2000, which is, "coincidentally when everyone's favorite trade punching bag China joined the World Trade Organization, or WTO."  We need to keep punching that bag, because it is the source of much of the West's economic malaise.

What an amazing coincidence that manufacturing jobs in Indiana peaked in December 1999 at 672,200.  In fact, between January 1990 and December 1999, the state added 66,400 manufacturing jobs over the decade.  This rate of manufacturing sector job growth (11.0%) outpaced total population growth in the state (9.7%), an impressive feat.

But since the start of 2000, Indiana has lost 156,300 manufacturing jobs (or more than 23% of all manufacturing jobs in the state) – perfectly in concert with China joining the WTO.  And over this time frame, the state's population has grown 9%, meaning that manufacturing employment's contribution to total employment has been evaporating quickly.

The Federal Reserve has kept average weekly earnings data for all manufacturing sector employees in Indiana since 2007.  Although earnings increased 8% in nominal terms, they actually decreased nearly 6% when adjusted for inflation.  In real terms, manufacturing sector wages are going backwards.

It is even worse for production employees, whose nominal hourly wages are unchanged since 2006, which translates into a 14% decline in real terms during the past decade.  In inflation-adjusted terms, hourly wages for all manufacturing employees are also headed down, declining by 4.4% since 2007 as a 14.3% cumulative inflation rate more than offsets the 9.2% nominal increase.

Hear that giant sucking sound?  That's Indiana's manufacturing jobs and wages getting vacuumed up by China and – of course – Mexico.