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Decline in U.S. Manufacturing: to Cluster or Diversify One's Economy?

January 12, 2011

A recent Brookings Institution report looks at the nearly 30-year impact of manufacturing's global realignment on US metropolitan areas, finding those with the highest dependence on manufacturing were impacted in several negative ways in addition to the losses in manufacturing. In particular, the resilience of the most manufacturing-centered economies — their ability to transition employment into other sectors — was particularly poor, many experiencing below national average growth in jobs and wages. Brookings reports only 3 of the 114 metro areas in the study exceeded the national averages for both jobs and wages: Charlotte, Manchester and Portland, ME.

Diversity, rather than clustering, appears to have been more closely related to growth during the period, Brookings finds, albeit a modest relationship. The inflation-adjusted average wage grew by 16.9 percent between 1980 and 2005 in the 38 metropolitan areas that were most industrially diverse in 1980, but by only 9.5 percent in the 38 areas that were least industrially diverse. In addition, the metropolitan areas that lost the fewest manufacturing jobs gained the most non-manufacturing and advanced service jobs.

Somewhat surprisingly, the report states "a metropolitan area's industrial diversification or concentration had little to do with its job growth." This leaves open questions for economic developers as to the appropriateness or potential impact of either cluster or diversification strategies for encouraging economic development.

More information is available at: http://www.brookings.edu/reports/2010/1216_manufacturing_wial_friedhoff.aspx.

manufacturing, clusters, metros, economic impact report