PAPER Updated Employment Multipliers for the U.S. Economy

manufacturing sector in the United States is facing a historic crisis. From 1967 to 1998, total employment in manufacturing never fell below 16.5 million. In February 2004, manufacturing employment is 14.6 million. This is the lowest level of manufacturing employment in the United States since 1958. There is a long tradition of economic thought that emphasizes the role of manufacturing as crucial to economic growth. This is both because economies of scale are more likely to be realized in capital-intensive manufacturing sectors and because the nature of manufacturing makes it more likely that capital investment and technological change will lead to faster productivity growth.1 The experience of the past two decades lends support to this view- rates of productivity growth in manufacturing are significantly higher than in the rest of the economy. Further, manufacturing has historically been a primary source for middle-class jobs characterized by decent wages and benefits, especially for workers without a college degree (still over 70 % of the workforce). Besides these differential productivity and wage effects, another argumen