Bureau of Labor Statistics

Bureau of Labor Statistics

Prof. Robert Lawrence from Harvard makes an interesting point in response to my Wednesday column about our misplaced hopes in manufacturing as a source of new jobs: even if every single thing we bought was “made in America” — if we stopped multinationals from outsourcing production to China and closed our doors to imports — even then, manufacturing employment would lag.

The reason is simple: we are spending less and less on goods and more and more on services. In 1969, American consumers were allocating half of all their spending on consumption to goods. By 2010, that share had fallen to one-third. Spending on equipment is also falling. “Even if we had no trade deficit, given this inelastic demand, employment in goods would continue to fall,” Mr. Lawrence said.