Is US manufacturing declining? The share of GDP and the world it holds

A share can fall for three very different reasons, and the slogans blur them. The US share of world manufacturing dropped from 28% to 16.5% partly because other countries, above all China, grew quickly, and partly because of the measuring stick: these shares are struck in current US dollars, and the dollar lost 23% of its value between 2002 and 2011. CRS credits part of the later rebound to the dollar strengthening again, and notes that part of China's rise on this measure came from the renminbi appreciating. A shrinking slice does not by itself mean a shrinking pie for the US, and some of the shrinkage never happened in a factory at all.

The share of GDP tells yet another story. Manufacturing is 12% of the US economy, a minority, but the economy grew, so a smaller share can still mean steady or rising output in absolute terms. Share and level are different measures, and 'declining share' is not the same as 'declining output.'

The recovery to over 18% by 2016 complicates the decline narrative without vindicating the revival one. Measured in each country's local currency and adjusted for inflation, CRS finds US manufacturing output growing more slowly than China, South Korea, Germany and Mexico, but more rapidly than many European countries and Canada. The honest reading is a fall then a partial rebound, in a world where manufacturing grew unevenly, not a clean line in either direction.

For the domestic picture, cite manufacturing at 12% of US GDP by value added, and note it is a share, not a level.

For the global picture, cite the US share of world manufacturing falling from 28% in 2002 to 16.5% in 2011 and recovering to over 18% by 2016. Say that the fall partly reflects faster growth elsewhere and partly the dollar, because CRS computes these shares in current US dollars and the dollar fell 23% over the same span.

Keep share and output separate. A falling share can coincide with rising output, so do not read 'smaller share of the world' as 'less manufacturing at home.'

Reading a falling world share as US contraction. Part of the drop reflects other countries growing faster, and part reflects the dollar: these shares are calculated in current US dollars, which lost 23% of their value from 2002 to 2011.

Confusing share of GDP with output. Manufacturing can be a smaller share of a bigger economy and still produce more in absolute terms.

Quoting the 2002 peak or the 2016 recovery in isolation. The series is a fall then a partial rebound; either endpoint alone misleads.

The figures trace to a Congressional Research Service report placing US manufacturing in international perspective. We opened the report and confirmed the 12% GDP share, the 28%, 16.5%, and over-18% world-share figures, and the 23% fall in the value of the dollar all appear in its text.

CRS is a nonpartisan body that writes for Congress, and it assembles national accounts and international data into a single readable document. That makes it a defensible source for figures that otherwise sit scattered across statistical agencies.

The report is careful about three things the slogans flatten: share versus level, growth abroad versus contraction at home, and the currency the shares are struck in. That last one is easy to miss and does much of the work, since CRS attributes part of both the fall and the rebound to the dollar moving rather than to factories. We carried all three distinctions, because they are exactly where the decline and revival slogans go wrong.