Silicon Valley Leads in Manufacturing Job Loss Since 2001 Due to China
Nationwide Toll From China Shock: 3.4 Million Lost Manufacturing Jobs
KEY POINTS
- The trade deficit with China, also known as the “China Shock”, has cost the U.S. 3.4 million manufacturing jobs since 2001.
- Our breakdown of the impact on 927 U.S. cities and towns shows huge manufacturing job loss in
hundreds of communities. - The Los Angeles metro area ranked first in total job loss, losing 218,881 jobs due to China
imports.
A comprehensive new CPA analysis of 927 U.S. cities and towns shows that job loss in manufacturing due to China imports since 2001 has affected almost every community in the U.S., including towns and cities in all fifty states. The hardest hit metro area is the San Jose, California metropolitan area. This metro, colloquially known as Silicon Valley, lost 51% of its manufacturing jobs, or 94,000 jobs, due to imports from China. The hardest-hit metro in absolute terms is the Los Angeles metro area which lost 218,881 manufacturing jobs due to China imports since 2001. The New York City metro area lost the second most, with 130,771 jobs lost. The Chicago area lost the third most with 123,883 manufacturing jobs lost.
To estimate the local impact of trade deficits with China, we looked at the level of China imports in each of 19 sub-sectors of manufacturing, and how many job losses they caused, based on China’s share in each U.S. manufacturing sub-sector. We also factored in job losses in other sectors linked to those manufacturing sectors through the Employment Requirements input-output model from the Bureau of Labor Statistics (BLS). We then applied those job losses to the U.S. Census’s 927 core-based statistical areas (CBSA) which include all metropolitan areas with a population of at least 50,000 and all micropolitan areas with a population of at least 10,000. We looked at the job composition of each of those 927 CBSAs by manufacturing sub-sector in 2001 to generate estimates of manufacturing job loss for each locality. A full explanation of the methodology is in the appendix.
This is the first local, sector-specific analysis to assess the impact that the trade deficit with China has had on individual communities. The “China Shock” team led by MIT economist David Autor has done a number of studies looking at the impact of total China-related job loss on employment, unemployment, family structure, and other social ills. This study adds to that growing literature. There is growing interest in the local impacts of national economic policy, including the local cost of job loss and now, with the Biden administration’s industrial policies, the potential benefits to local areas of government-supported industrial investment.
In 2001, China was granted Permanent Normal Trade Relations (PNTR) which confirmed as permanent China’s Most-Favored Nation (MFN) status, making our low tariff levels on imports from China permanent in the eyes of industry. The certainty of MFN prompted a huge investment boom in China by U.S., Chinese, and global multinationals. Last year, the U.S. ran a $382.3 billion trade deficit with China, a result of imports of $536.3 billion compared to U.S. exports to China of only $154.0 billion. Since 2001, the U.S. goods trade deficit with China has grown by $299.2 billion and reached a cumulative total of $6.1 trillion of annual goods deficits with China.
In 2001, the U.S. had 17.1 million manufacturing jobs. By 2022, that total had fallen by 24% to reach 12.97 million manufacturing jobs. If employment in the manufacturing sector grew at the same pace as the rest of the economy since 2001, there would be 7.1 million more manufacturing jobs than exist today. Our analysis finds that the trade deficit with China accounts for nearly half (47.9%) of the manufacturing job loss. Our model estimates the number of jobs in each metro/micro area displaced by imports including jobs dependent on those manufacturing industries.
Table 1 shows the areas with largest job loss due to China as a percentage of manufacturing employment they would have had were it not for the China trade deficit. The trade deficit with China has had the most significant impact on San Jose, California. There would be roughly twice as many manufacturing jobs in the Silicon Valley metropolitan area as there are today. Silicon Valley was hard hit by the wholesale shift of computer and electronics manufacturing to China just as the Internet was beginning a huge boom that continues today. Companies like Apple, Hewlett-Packard, and Cisco Systems moved their manufacturing from Silicon Valley to China.
Jobs in the computer and electronic industry account for the largest share of job loss by far, 1.2 million jobs of the 3.4 million manufacturing jobs lost. But the computer and electronic industry was largely concentrated in major metropolitan areas. Other hard hit sectors in other parts of the country like Cedar Rapids, IA include manufacturing sub-sectors like electrical equipment, machinery, metal products, and furniture. These sectors were based broadly throughout the entire country and often in small cities where they were the dominant employer.
All metropolitan areas have had some degree of job loss due to the China Shock. But some have been impacted more than others. 74 of the 927 areas would have 10,000 more manufacturing jobs if the trade deficit with China had not grown. Figure 1 shows the geographic breakdown of jobs lost due to the China trade deficit across the country.
The map below, Figure 1, shows job loss due to the China trade deficit in all communities across the
United States. Darker shades of red indicate a greater percentage of job loss due to China. While all
communities suffered some job loss due to increasingly unbalanced trade with China, the areas that
suffered the most are located along the West Coast and Southwest as well as the Upper Midwest and
Northeastern regions of the U.S.
Figure 1: Map of Job Loss Due to China Shock in Core Based Statistical Areas (CBSAs)
Table 1: Top 50 Statistical Areas Manufacturing Employment Loss Due to China Shock
Statistical Area | Manufacturing Job Loss Due to China Trade | Percent Fewer Manufacturing Jobs Due to China Trade | Current Manufacturing Employment (2022) | |
Los Angeles-Long Beach-Anaheim, CA | -218,881 | -32% | 455,478 | |
New York-Newark-Jersey City, NY-NJ-PA | -130,771 | -29% | 320,974 | |
Chicago-Naperville-Elgin, IL-IN-WI | -123,883 | -24% | 386,102 | |
Dallas-Fort Worth-Arlington, TX | -109,200 | -29% | 264,021 | |
Minneapolis-St. Paul-Bloomington, MN-WI | -107,454 | -35% | 196,212 | |
Boston-Cambridge-Newton, MA-NH | -105,792 | -40% | 161,560 | |
San Jose-Sunnyvale-Santa Clara, CA | -94,088 | -51% | 89,907 | |
Portland-Vancouver-Hillsboro, OR-WA | -69,423 | -37% | 115,742 | |
Houston-The Woodlands-Sugar Land, TX | -64,775 | -24% | 206,386 | |
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD | -60,301 | -26% | 174,161 | |
San Francisco-Oakland-Hayward, CA | -56,859 | -29% | 137,758 | |
Detroit-Warren-Dearborn, MI | -55,728 | -19% | 235,073 | |
San Diego-Carlsbad, CA | -54,270 | -34% | 103,352 | |
Phoenix-Mesa-Scottsdale, AZ | -50,986 | -30% | 116,728 | |
Seattle-Tacoma-Bellevue, WA | -47,648 | -22% | 166,030 | |
Milwaukee-Waukesha-West Allis, WI | -44,518 | -29% | 110,672 | |
Atlanta-Sandy Springs-Roswell, GA | -41,379 | -21% | 158,055 | |
Cleveland-Elyria, OH | -39,653 | -25% | 115,921 | |
Grand Rapids-Wyoming, MI | -37,341 | -24% | 117,769 | |
Pittsburgh, PA | -36,917 | -31% | 83,996 | |
Providence-Warwick, RI-MA | -35,693 | -35% | 66,606 | |
Salt Lake City, UT | -32,856 | -36% | 58,131 | |
Tampa-St. Petersburg-Clearwater, FL | -32,170 | -35% | 60,659 | |
St. Louis, MO-IL | -32,008 | -22% | 111,374 | |
Riverside-San Bernardino-Ontario, CA | -31,999 | -24% | 101,409 | |
Baltimore-Columbia-Towson, MD | -28,978 | -35% | 54,158 | |
Austin-Round Rock, TX | -28,970 | -39% | 44,449 | |
Kansas City, MO-KS | -28,614 | -26% | 82,444 | |
Cincinnati, OH-KY-IN | -27,698 | -20% | 111,766 | |
Miami-Fort Lauderdale-West Palm Beach, FL | -27,202 | -27% | 75,031 | |
Rochester, NY | -24,774 | -31% | 54,322 | |
Louisville/Jefferson County, KY-IN | -22,922 | -22% | 81,021 | |
Washington-Arlington-Alexandria, DC-VA-MD-WV | -22,510 | -31% | 49,907 | |
Nashville-Davidson–Murfreesboro–Franklin, TN | -21,851 | -22% | 76,941 | |
Worcester, MA-CT | -21,625 | -35% | 40,286 | |
Orlando-Kissimmee-Sanford, FL | -20,971 | -34% | 41,534 | |
Hartford-West Hartford-East Hartford, CT | -20,788 | -24% | 67,289 | |
San Antonio-New Braunfels, TX | -19,512 | -29% | 48,825 | |
Bridgeport-Stamford-Norwalk, CT | -19,385 | -35% | 35,401 | |
Indianapolis-Carmel-Anderson, IN | -18,538 | -19% | 76,907 | |
Buffalo-Cheektowaga-Niagara Falls, NY | -18,117 | -26% | 52,786 | |
Dayton, OH | -18,003 | -29% | 45,078 | |
Denver-Aurora-Lakewood, CO | -17,585 | -24% | 56,496 | |
Tulsa, OK | -17,060 | -25% | 52,508 | |
Columbus, OH | -16,875 | -20% | 67,932 | |
Manchester-Nashua, NH | -16,668 | -43% | 21,905 | |
Madison, WI | -16,648 | -31% | 37,832 | |
Boise City, ID | -16,512 | -39% | 26,211 | |
Charlotte-Concord-Gastonia, NC-SC | -15,722 | -14% | 100,321 | |
Reading, PA | -15,463 | -34% | 30,439 |
Manufacturing employment is important because manufacturing jobs pay significantly above the median wage, especially for workers without four-year college degrees. Such jobs also typically provide steady employment and generous benefit packages. These jobs have predominantly been replaced with employment in services. The shift from manufacturing employment to service sector employment is increasingly a driver of inequality.
The decline of manufacturing employment and deindustrialization has not occurred evenly throughout the country. Overall employment has increased, but some metropolitan areas have lost jobs, signaling the hollowing out of their employment base and collapse of communities. These shifts are not costless. Workers that lose a high paying manufacturing job typically find other employment at lower wage levels.
Decoupling Has Begun, But More Action Needed
Recent analysis of trade data with China shows a decoupling pattern that began after imposition of Section 301 tariffs in 2018 and continues to the present day. The U.S. deficit with China is down 33% in the first seven months of 2023 due to tariffs and weaker U.S. consumer spending this year. Our most recent Domestic Market Share Index (DMSI) showed China has been surpassed by the European Union as the largest source of manufactured imports into the U.S.
Yet, the U.S. still runs its largest bilateral trade deficit with China. The one-sidedness of our economic relations with China has allowed China to prosper while it has cost Americans jobs, particularly in manufacturing. According to our most recent DMSI report, China still holds a significant share of the U.S. domestic market for apparel (51%), electrical equipment and appliances (22%), and computer and electronic goods (21%). More action is needed to make the U.S. less dependent on Chinese manufactured goods.
Along with growing industrial strength, China has become a large and growing national security threat. It has built the world’s largest navy. It threatens many of its smaller neighbors, including Taiwan and those nations around the South China Sea. It is becoming increasingly powerful in high technology, including high-tech weapon systems.
Our analysis shows that China’s export-led growth strategy, enabled by the U.S. Congress granting it Most-Favored Nation (MFN) status in 2001, has cost 3.4 million American jobs and has been a key driver of the deindustrialization throughout the country. While removing MFN will not be sufficient to build back American’s manufacturing base, it is a necessary step along with industrial policy to reshore manufacturing and create new manufacturing jobs.
Methodology
To estimate the number of jobs lost due to the trade deficit with China, we map the trade data from the U.S. Census Bureau by industry sector according to the North American Industry Classification System (NAICS) to the Bureau of Labor Statistics (BLS) Employment Requirements tables that estimate the number of jobs created from $1 million of revenue. In order to use the BLS input-output model, the trade data is mapped from NAICS sectors to the 205 BLS industries. The model estimates the direct employment effect by industry as well as the indirect employment effects from linkages between industries.
We estimate the jobs displaced from a given value of imports by sector as a substitute for domestic output. The change in the trade deficit with China since 2001 by sector is the input into the model.
Once national estimates are derived, the total number of jobs lost by industry sector is mapped back to NAICS sectors and multiplied by the share that each core-based statistical area (CBSA) comprises of the national share. The most recent employment figures by industry sector for core-based statistical areas are from the U.S. Census Statistics of U.S. Businesses (SUSB) data.
In short, our methodology estimates the number of jobs lost from substituting imports from China for domestic output by industry. This is then mapped to the employment composition by industry for all 927 CBSAs.
Since the beginning of 2001, the U.S. has lost 4.13 million manufacturing jobs. These jobs have predominantly been replaced with employment in services rather than goods-producing jobs. Meanwhile, as the U.S. economy has grown, there are 23.5 million more people employed over the same period. If employment in the manufacturing sector grew at the same pace as the rest of the economy since 2001, there would be 7.1 million more manufacturing jobs than exist today. Our analysis finds that the trade deficit with China accounts for nearly half (47.9%) of the manufacturing job loss.
