U.S. manufacturing revival revisited Revised data show recovery was less robust than thought.

April 24, 1992|By Sylvia Nasar | Sylvia Nasar,New York Times News Service

The revival of United States manufacturing, one of the brightest spots in the 1980s economic landscape, may have been less spectacular than government data have been showing.

New estimates from the Commerce and Labor Departments show that on three fronts manufacturing performance from 1977 to 1989 was more modest than previously thought.

The output of American factories grew only two-thirds as fast; manufacturing's share of the economy is smaller and the glorious gains in factory productivity previously reported now look less glorious.

The Labor Department now says, for example, that real output per hour in manufacturing grew 1.9 percent a year over the period, not the 2.7 percent in the old statistics.

"The revisions are large, and they change our view of the recovery in manufacturing," said Robert Z. Lawrence, an economist at the Kennedy School of Government.

Michael J. Boskin, chairman of the President's Council of Economic Advisers, commented, "It's a more muted version of what we thought before. There was clearly a revival of productivity growth in the 1980s, and manufacturing is not disappearing."

But the new numbers, he acknowledged, show the revival "wasn't as robust as with the old measures."

The trouble with the old numbers is that the government, in order to compare output in different years, uses prices in one year, the base year, to value gross domestic product over time. This greatly exaggerates the contribution of fast-growing industries, like computers, in which prices have been falling.

The new estimates are preliminary and some additional revisions, reflecting more detailed information on different manufacturing industries, are likely before the final figures are published this fall. Economists at the Commerce and Labor Departments warned that for technical reasons the new estimates might be understating manufacturing output in the late 1970s and early 1980s.

But Edwin R. Dean, associate commissioner of the Bureau of Labor Statistics, said, "It does look as if -- after all the improvements in the data come in -- we will still have a slightly less rosy picture than we had before the revision."

The more subdued statistical portrait of the manufacturing rebound is likely to intensify the debate over the Reagan-Bush economic track record and provide new ammunition for those who argue that Washington should play a bigger role in industry.

"This will strengthen the momentum for industrial policy," predicted Lawrence R. Mishel, research director of the Economic Policy Institute, a Washington research organization.

And Robert B. Reich, a political economist at the Kennedy School who is an adviser to Gov. Bill Clinton of Arkansas, the front-runner for the Democratic presidential nomination, said: "Public investment is important. Efforts to improve manufacturing technologies may be critical. The question remains whether we can trust government with the job."

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