Solutions Economic and Market Watch

Hello, and welcome to the Economic & Market Watch podcast for the week of November 17, 2025. This is John Suter of CFC.

Today, we are talking about two totally different industries that are headed in opposite directions in the United States. American manufacturers employed some 19.5 million workers at the industry's peak in 1979. That was about the same time as my high school graduation.

At least a third of my classmates stayed in my hometown and took a factory job. Unfortunately, that was the start of the decline. As the recession of the early 1980s rolled in, having little tenure to bid for union jobs, my classmates were in and out of work quite regularly. In fact, I kind of felt sorry for them. It was not the best of times for young job entrants into the manufacturing labor force.

Since then, the number of manufacturing jobs has shrunk to fewer than 13 million.

America's manufacturing dominance was neither built nor lost overnight. It took decades of concerted investment and supportive policymaking to build up, and decades of misjudged financial moves and unsupported policymaking to unwind.

Moreover, census data shows fewer manufacturers are starting up at all.

While tariffs are benefiting some of our industries here in the United States, other sectors have been hit with higher costs and uncertainty. For example, jobs gained by protecting sectors like steel and aluminum caused other manufacturing companies to pay more for their steel and aluminum inputs. That translates into higher costs and lower profit margins, and possibly cutbacks on their workers.

And then there's China, a very seasoned and competitive country. It leads the world in manufacturing productivity because of lower labor costs, economies of scale, and robotics. These are the reasons why eighty percent of the iPhones that Americans use today are made in China, and why 90% of the Christmas decorations we're all buying right now are too.

Given this backdrop, it is very challenging to figure out if we are getting ahead or falling further behind. A quick fix is not in the cards for this sector, though that doesn't mean we can't start working on a slow fix, building it up again.

That big slump in brick and mortar manufacturing is in sharp contrast with something else we're making in The United States. I'm talking about the astonishing rise in investments meant to support artificial intelligence, or AI.

A recent study completed by Harvard economist Jason Furman calculated that real GDP growth in the 2025 would have been just 0.1%, not the 1.4% achieved if one subtracts out the AI contribution. Our economic growth is currently being driven by data centers and processing technology.

Furthermore, tariffs have not deterred imports of this core hardware powering the AI economy. Much of that hardware has been exempted from new duties. Shipments of servers, high end chips, and power systems have jumped 64% year to date, a surge that reflects the intensity of the data center boom. And boy, what a boom it is... so much so that I pray AI doesn't turn out to be a bust.

Another important facet to keep in mind is that AI has not yet proved itself. It's the latest and greatest, but that also means there's no track record to measure it by. There are a few economists that believe AI has actually lowered productivity at this point rather than raised it. It's not generating a lot of revenue, but it is taking a lot of time and money. Even worse, some companies are forcing employees to use AI or be fired. Consulting giant Accenture recently delivered some tough news. They will be exiting employees who aren't getting the hang of using AI at work. Yikes. As if it's not already tough enough out there.

Both of these industries have been championed as central to our country's future, manufacturing and AI. The fates of manufacturing and AI have huge implications for American workers and wealth accumulation. Their futures, however, appear to be diverging. AI is flourishing, but manufacturing is entering an ever deeper slump.

In this world economy, software and services are accelerating, while at the same time manufacturing remains flat or on a downward skid. Even with tariffs protecting US manufacturers from foreign competition, job gains in this sector are down 38,000 since the start of the year, according to the Bureau of Labor Statistics.

What does that mean long term for labor? It may take a thousand or more workers to construct a data center, but often only 100 to 300 employees will work in the building when it's operational. Meanwhile, a traditional auto factory could employ several thousand employees over the same square footage.

And those manufacturing jobs would probably pay better than an equivalent job in other sectors of almost every group of workers. Industry experts say that "a blue collar worker that secures a manufacturing job today is similar to winning a lottery ticket." But this isn't the job market I graduated high school into. There just aren't that many lottery tickets out there anymore.

However, if you're looking to win a lottery ticket, then you'll need to move to California, Texas, Ohio, or Michigan. That's where manufacturing jobs are the most abundant.

That's it for today. As always, we thank you for listening, and be sure to download the Economic & Market Watch dashboard and intelligence brief. We'll talk to you soon.