A major Wall Street Journal article claims, “A group of economists that includes Messrs. Hanson and Autor estimates that Chinese competition was responsible for 2.4 million jobs lost in the U.S. between 1999 and 2011.” In a recent interview with the Minneapolis Fed, however, David Autor said, “That 2 million number is something of an upper bound, as we stress.” The central estimate was a 10% job loss which works out to 1.2 million jobs in 2011, rather than 2.4 million. Since 2011, however, the U.S. added 600,000 manufacturing jobs – while imports from China rose by 21% – so both the job loss estimate and its alleged link to trade (rather than recession) need a second look.
“The China Shock,” by David Autor, David Dorn and Gordon Hanson examined the effect of manufactured imports from one country (China) on local U.S. labor markets. That is interesting and useful as far as it goes. But a microeconomic model designed for local “commuting zones” cannot properly be extended to the entire national economy without employing a macroeconomic model.
For one thing, the authors look only at one side of trade – imports – and only between two countries. They ignore rising U.S. exports to China - including soaring U.S. service exports to China. They are at best discussing one side of bilateral trade. And they fail to consider spillover effects of China’s soaring imports from other countries (such as Australia, Hong Kong and Canada) which were then able to use the extra income to buy more U.S. exports.
Autor, Dorn and Hanson offer a seemingly rough estimate that “had import competition not grown after 1999” then there would have been 10% more U.S. manufacturing jobs in 2011. In that hypothetical “if-then” sense, they suggest that “direct import competition [could] amount to 10 percent of the realized job loss” from 1999 to 2011.