US Manufacturing Share Declines, But Unemployment Improves

On Feb 18 I discussed manufacturing and employment in the US. The large trade deficit with China showed no correlation with US unemployment, and in fact trended in the opposite direction.
To follow up, here is  graph that I compiled and that I doubt you will see anywhere else.
It shows that decades of normal decline in the manufacturing share of GDP has not resulted in more unemployment. Again, the opposite happened.
As manufacturing share declined, unemployment improved.


- to enlarge the graph, right click and choose 'view image'

The middle line on the graph captures the effect of the US trade deficit. China is most often singled out as the culprit for blame in the trade deficit, but China is in fact less than half of the deficit. So the graph shows the number of manufacturing jobs that would be needed in the US if the trade deficit were eliminated.
As the manufacturing share declines, that number of jobs grows. So you might expect total US unemployment to grow too, but instead, jobs tend to shift to other sectors and unemployment improves.

That is what I mean by the 'normal decline' in manufacturing share.

As an industrial society develops, its economy first transfers workers and output from agriculture to manufacturing. That is normal in the sense that technology develops, skills build up and firms specialize in narrower activities. So farmers that built plows would switch to focus on building plows..... and the share of agriculture in GDP declines while the share of manufacturing rises.
So it's also normal for manufacturing firms to spawn service firms. An employee who did accounting for a manufacturer would open an accounting firm..... and the share of manufacturing declines while the share of services rises.
That's an entirely normal process, so a falling share of manufacturing should not be alarming.

Again, the graph shows the trend (over decades) that a falling  share of manufacturing in US GDP was accompanied by rising employment in the overall economy.

This explanation is not meant to imply that the process is smooth or painless, as it is clearly not so. Factories do close and workers do lose jobs. But working life tends to improve as less manual labour is done on farms, and less menial labour is done in factories. The most tedious and hazardous jobs get automated, and workers tend to shift to easier conditions in other sectors.

So, if the trade deficit or manufacturing decline do not correlate with unemployment, what does? One key factor that does correlate with unemployment is the price of crude oil.