I saw a graphic today (Graph 1 below) being shared by a number of my Facebook friends. It seems pretty dramatic, and the timing appears more than coincidental, implying that the acceptance of China into the WTO caused a dramatic decline in U.S. manufacturing jobs. However, I am not sure it represents the best understanding of the relationships involved. Last year I wrote several essays about how the economy has been changing since WWII, namely, the switch from a manufacturing to a finance/information economy--in one post, I included a graph displaying the change in GDP from the various sectors of the economy (How has the Economy Changed since 1947?).
Interestingly, manufacturing production has been steadily increasing (Graph 3, scaled on the right). The standard explanation for this apparently paradoxical situation is that the job loss is caused by automation and other increasing efficiencies in production. While this may be a boon to the factories who are able to lay off employees in droves and thereby scale back hiring costs, as we have seen, it has a devastating effect on the broader economy, contributing to mass unemployment. Is there a China-WTO connection to the loss in manufacturing jobs? Perhaps, but if so, the impact seems dwarfed by the larger changes in the U.S. economy.