Even before the Great Recession, US employment growth was unimpressive. Between 2000 and 2007, the economy gave back the considerable gains in employment rates it had achieved during the 1990s, with major contractions in manufacturing employment being a prime contributor to the slump. The US employment “sag” of the 2000s is widely recognized but poorly understood. This paper explores the contribution of the swift rise of import competition from China to sluggish US employment growth. The authors find that the increase in US imports from China, which accelerated after 2000, was a major force behind recent reductions in US manufacturing employment and that, through input-output linkages and other general equilibrium effects, it appears to have significantly suppressed overall US job growth. The authors apply industry-level and local labor market-level approaches to estimate the size of (a) employment losses in directly exposed manufacturing industries, (b) employment effects in indirectly exposed upstream and downstream industries inside and outside manufacturing, and (c) the net effects of conventional labor reallocation, which should raise employment in non-exposed sectors, and Keynesian multipliers, which should reduce employment in non-exposed sectors. Their central estimates suggest net job losses of 2.0 to 2.4 million stemming from the rise in import competition from China over the period 1999 to 2011. The estimated employment effects are larger in magnitude at the local labor market level, consistent with local general equilibrium effects that amplify the impact of import competition.
Automation, Inequality, and Productivity
Import Competition and the Great US Employment Sag of the 2000s
Journal of Labor Economics