Manufacturing's share of the US workforce has plummeted from roughly 25 percent in 1976 to about 10 percent in June 2025, making it the only major sector to experience a sustained decline in employment share, according to a new Economic Commentary published by the Federal Reserve Bank of Cleveland. The report finds that output growth in the sector has largely stalled over the past decade after several decades of steady expansion, while productivity has contracted even as the broader private economy continued to improve.
The report documents that manufacturing total factor productivity began contracting in the mid-2000s, diverging sharply from the overall private nonfarm business sector, which kept rising. For roughly two decades prior, manufacturing productivity had grown at a pace similar to or exceeding that of the broader private economy. The composition of manufacturing workers has shifted dramatically: in 1976, almost 80 percent lacked a college degree, but by June 2025, that share had roughly halved to 39.4 percent, with workers holding at least some college education accounting for the remaining 60.6 percent. Workers without a college degree outnumbered those with at least a bachelor's degree by more than 60 percentage points in 1976, but these two groups were nearly equal in size by June 2025, just 4 percentage points apart. The wage premium manufacturing workers once enjoyed turned negative in the early 1990s, meaning they now earn less on average than comparable workers in the broader economy. When broken down by education level, workers with a high school diploma or less have faced negative wage premia beginning in the late 1980s, while college-educated manufacturing workers have consistently received positive wage premia, excepting the pandemic period.
More than one-fifth of all manufacturers report they can't operate at full production capacity because of an insufficient supply of labor, according to the 2025:Q3 Quarterly Survey of Plant Capacity Utilization cited in the report, while the National Association of Manufacturers survey in 2025:Q4 shows that more than half of manufacturers identify attracting and retaining qualified employees as a relevant challenge for their business. The report finds that the key driver of manufacturing's employment decline has been the lack of younger workers entering the industry rather than workers leaving it. Between 1960 and 2009, each successive cohort of workers entered manufacturing at progressively lower rates, while worker flows into and out of the sector don't differ markedly from patterns observed elsewhere in the economy, suggesting that worker mobility involving manufacturing largely reflects economy-wide labor market dynamics rather than sector-specific turnover.
The report traces much of this transformation to the rising role of automation in production. Robot density rose from fewer than 0.5 robots per thousand workers in the 1990s to nearly 30 per thousand by 2023, according to data from the International Federation of Robotics cited in the commentary. Research referenced in the report shows that robot adoption is associated with higher value-added output and labor productivity at the industry level, but lower labor demand in the local labor markets most exposed to robots. Each additional robot per thousand workers is associated with a decline of 0.45 percentage points in the employment-to-population ratio in more exposed commuting zones relative to less exposed ones, of which 0.16 percentage points are accounted for by the manufacturing sector, according to research by Acemoglu and Restrepo cited in the report. That same research documents a 0.77 percent reduction in local hourly and weekly wages. Evidence from Germany shows that industrial robots reduce employment in manufacturing industries even though some of these losses are offset by employment gains in other sectors, suggesting manufacturing bears the most direct labor-market effects of automation.
The report concludes that while manufacturing continues to contribute substantially to US output, its shares of GDP and employment have declined amid steady shifts toward services, and once a leading factor in productivity growth, manufacturing productivity growth has lagged behind the broader private economy since the mid-2000s. The developments reviewed highlight the structural transformation of US manufacturing over the past several decades, with automation and technological adoption appearing to have contributed to these shifts. The wage premium once associated with manufacturing has been maintained for more educated workers but has eroded and is now negative for less-educated workers, leaving the sector struggling to attract the next generation of employees even as it demands higher skills.