The economics of the U.S. auto industry, a brief history

From Adam Ozimek:

The economic value of the cars being made has climbed substantially through the years. As a result, real value added and industrial production — two different ways of measuring actual output — are now at all-time highs.

And this:

What about jobs? The auto industry today employs 1 million workers. Between 1950 and the signing of NAFTA in 1993, it averaged 1.1 million workers, just slightly higher.

And this:

The deindustrialization of Detroit is typically understood as a phenomenon of the 1970s and 1980s, and it is therefore blamed on the growth of trade during this period. But the fact is that auto investment and employment had started moving out of Detroit decades earlier.

I pieced together data from a variety of sources, which shows that auto manufacturing employment in the City of Detroit had already peaked in 1950, at just over 220,000 workers.

By 1970 the biggest declines had already occurred, with employment falling by more than half, to fewer than 100,000 jobs.

An important nuance is that many of these lost jobs migrated to other parts of Michigan, at least for a while. So while auto employment was collapsing in Detroit, the rest of Michigan managed to hold auto employment stable for another five decades until the 2000s, when it started falling everywhere in the state.

And:

Michigan now has about 280,000 fewer auto jobs than it did in the 1950s, a decline of roughly 60 percent.  For the United States as a whole, auto employment is only down 4.7 percent — further showing that the struggles of Detroit and Michigan are less about the decline of the American auto industry and more about its relocation elsewhere.

Another way of understanding the trend: If Michigan had simply maintained the same share of American auto jobs as it had in the 1950s, meaning it did not lose any production to other states, then it would only have lost 21,000 auto jobs since then, not the 280,000 it actually did lose.

An excellent piece, recommended.

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