Perc Pineda, PhD
Chief Economist, Plastics Industry Association
The increase in nonfarm employment by 162,000 in August and the unemployment rate of 4.1%—unchanged from July—suggest that the U.S. labor market remains stable. Over the last 12 months, total nonfarm employment has increased by 603,000.
Manufacturing unemployment rate remains low
According to the August jobs report from the Bureau of Labor Statistics (BLS), employment in food services and drinking places increased by 59,000 in August—well above the average monthly gain of 12,000 over the prior 12 months—while employment in manufacturing continued trending up, adding 16,000 jobs, also well above the average monthly gain of 1,920 over the same period. The unemployment rate in manufacturing edged up from 2.9% in July to 3.3% in August.
Under normal economic conditions in the U.S., the unemployment rate in manufacturing has typically been lower than the overall unemployment rate. Since January 2000, however, the U.S. economy has experienced three recessions—the 2001 recession associated with the bursting of the dot-com bubble, the recession associated with the housing bubble and financial crisis from December 2007 to June 2009, and the COVID-19 recession from February 2020 to April 2020. The periods when manufacturing unemployment exceeded the overall rate were largely concentrated around those three recessions. Over January 2000 through August 2026, the unemployment rate in manufacturing was below the overall unemployment rate for 238 months, or nearly three-quarters of the time.
Services and manufacturing employment
The services sector continued to drive U.S. job growth. In August, it added 86,000 jobs—more than five times the 16,000 jobs added in manufacturing. The U.S. has evolved into a predominantly services-oriented economy, with a large share of consumption devoted to services. In the second quarter of this year, inflation-adjusted personal consumption expenditures (PCE) totaled $16.8 trillion. Of that amount, $11.1 trillion, or 66.0%, was spent on services, while the remaining 34.0% was spent on goods.
The shift toward services unfolded over several decades. The services orientation is even more apparent when consumption is measured relative to gross domestic product (GDP). In 1980, goods PCE accounted for 28.0% of GDP, while services PCE accounted for 33.3%. By 2000, the shares had shifted substantially: goods PCE had declined to 23.9% of GDP, while services PCE had increased to 42.1%. Last year, services PCE accounted for 47.0% of GDP, while goods PCE declined further to 21.2%. As a result of this ongoing trend, labor demand has steadily shifted from manufacturing toward the services sector.
Still, domestic manufacturing activity remains substantial. New orders for U.S. manufacturers increased 9.9% year over year to $663.6 billion, seasonally adjusted, in July. Over the same period, U.S. imports of goods rose 14.0% to $332.9 billion. Imports therefore amounted to 50.2% of domestic manufacturers’ new orders in July—roughly 50 cents of imports for every dollar of new orders. The comparison provides some perspective on the scale of foreign goods relative to demand being placed on domestic manufacturers.
Producing more with fewer workers
The reality is that the U.S. manufacturing sector’s share of GDP has declined over time. An even more consequential reality is that the sector is increasingly expected to produce more with a smaller workforce and higher costs of imported input, including those subject to tariffs. Manufacturers’ new orders have continued to rise even as manufacturing employment has declined from its peak of 19.5 million in July 1979 to 12.6 million in July 2025—a 35.1% decrease. The sector has responded with automation, robotics, industrial IoT, and other types of manufacturing technologies to augment efficiency and output. Still, the tall order of producing more with less labor remains a significant challenge.
The production function of the U.S. manufacturing sector is not monolithic and the elasticity of substitution between labor and capital is not necessarily equal to one. In other terms, manufacturing is not one single type of activity; different industries have different abilities to replace workers with machines, technology, or other forms of capital.
Interest rates matter for manufacturing
The recent labor market report from the BLS confirms the Federal Reserve’s view that the labor market is not the main concern when it comes to near-term monetary policy adjustments. Interest rates, however, matter for U.S. manufacturing. Capital expenditures (CapEx) are generally inversely related to borrowing costs. Plastics manufacturing CapEx was estimated at $11.96 billion in 2024. While such investment cannot be attributed solely to labor-supply constraints, its magnitude provides a window into how the industry is adapting to a tighter labor environment, among other pressures. Estimates of the industry’s CapEx in 2025 will appear in the forthcoming PLASTICS’ annual Size & Impact Report, to be released on September 16, 2026.*
Employment in plastics and rubber product manufacturing decreased by 100 in August, while the unemployment rate remained volatile, rising from 0.9% in June to 5.5% in July before edging down to 4.5% in August. Meanwhile, production of plastics and rubber products increased 2.2% in July from a year earlier.
* 2026 Size & Impact Report will be released at the National Plastics Conference on September 16, 2026. Visit, www.plasticsindustry.org for more information.ada in 2025. Maintaining a predictable trade framework among the three countries remains important to the competitiveness of their manufacturing industries.
