Research highlights declining auto industry, manufacturing next?

In a recent post, the Brookings Institution’s Mark Muro raises concerns about the U.S. manufacturing sector’s health due to the leading indicators of slowed growth in both auto sector output and auto manufacturing employment. Muro contends that these slowdowns are driven by plateaued consumer demand and automakers investing billions in developing technologies necessary for electric and self-driving cars. Muro reports that the manufacturing sector is already seeing a slowdown in nearly 40 percent of the U.S. largest metros. Of the top 100 metros, Muro reports 39 have seen manufacturing growth turn negative from January of 2016 to March 2017.

In an article for the Financial Times, Jessica Cheek and Federica Cocco provide several charts that highlight similar red flags from the U.S. car industry including stagnating demand for passenger cars due to ride-sharing companies and changing consumer preferences. The areas most impacted by these trends include both metros and small towns in the Midwestern and Southern states. The city with the most jobs lost in auto manufacturing is Charlotte, NC, with a loss of 2,712 jobs (a 6.4 percent decrease).

In his post, Muro warns that the decline in the auto industry could be damaging for the overall U.S. manufacturing sector because about 40 percent of the nation’s manufacturing employment in 2015-16 was connected to the auto industry. Additionally, as the dollar strengthens and U.S. goods become more expensive, Muro says that the slow growth of other production sectors will not be able to “pick up the slack from a likely auto-sector slowdown.”