American manufacturing has shed 38,000 jobs since the start of 2025 whilst artificial intelligence investments have soared, creating a widening gulf between two industries both championed as central to the country’s economic future.
The diverging fortunes of the sectors carry significant implications for workers and wealth distribution, reports The Washington Post.
Manufacturing employment has declined to fewer than 13 million workers from a 1979 peak of 19.5 million, with an additional 78,000 positions lost in the year ending August 2025. Factory investment fell approximately 6 per cent in the 12 months to July, marking the first decrease since early 2021, according to Bureau of Economic Analysis data.
The slump contrasts sharply with unprecedented AI-driven growth. Investment in data centres jumped nearly 37 per cent in the first half of 2025 compared with a year earlier, whilst factory construction slipped approximately 3 per cent over the same period. Domestic investment in computer equipment rose more than 45 per cent year over year, whilst spending on traditional industrial equipment barely moved.
Shipments of servers, high-end chips and power systems have surged 64 per cent year-to-date, reflecting the intensity of the data centre boom, according to analysis of US Census Bureau import data.
“You have the software and services world accelerating, and becoming almost a monomania for the culture, at the same time that manufacturing remains flat or worse,” said Mark Muro, senior fellow at the Brookings Institution. “The AI boom is kind of papering over some other parts of the economy that aren’t going well.”
Tariffs implemented by the Trump administration have failed to stem manufacturing’s decline. Executives from General Motors, Caterpillar, John Deere and other manufacturers collectively flagged billions of dollars in tariff-related costs in recent investor discussions. US automakers saw lower profit margins in the second quarter of 2025 than at any time since the coronavirus pandemic, according to government data analysed by Michigan State business professor Jason Miller.
“The jobs gained by protecting sectors like steel and aluminium, for example, were far outweighed by losses due to those inputs becoming more expensive,” said Meagan Martin-Schoenberger, senior economist at KPMG.
Annual manufacturing investment more than doubled in the two years following the 2022 Chips Act before peaking in 2024. Many of those projects remain under construction. The Semiconductor Industry Association stated that semiconductor operations directly account for approximately 345,000 jobs and another two million indirect or induced US positions.
Overall, factory investment has decreased since 2024, largely because Biden-era chip investments began winding down, according to experts.
Concerns are mounting that AI infrastructure will generate fewer employment opportunities than traditional manufacturing. Data centres typically employ between 100 and 300 workers when operational, compared to several thousand employees in a traditional auto factory occupying the same square footage, according to Stephen Ezell, vice president at the Information Technology and Innovation Foundation.
“One interesting implication of all this will be that this AI [spending] boom is likely to create less jobs, particularly blue-collar ones, than previous waves of infrastructure buildouts,” said Stephanie Aliaga, global market strategist at JPMorgan.
Manufacturing jobs tend to pay better than equivalent positions in other industries for almost every group of workers, according to Todd Tucker, director of industrial policy and trade with the Roosevelt Institute. Chipmaking operations can similarly benefit communities through high-paying engineering positions and training pipelines, but remain less labour-intensive than 20th century assembly lines.
Questions persist about whether AI tools are generating sufficient revenue to match current hype. Michael Strain, economist with the American Enterprise Institute, suggested artificial intelligence may represent a net loss for productivity in the short term.
“My guess is that AI has lowered productivity at this point rather than raised it — it’s not generating a lot of revenue but is taking a lot of time and money,” Strain said.
Economists warn that an unwinding of AI-related stock market euphoria could create cascading economic effects. “If the AI investment boom were to collapse like a house of cards, I think you would have a significant drag on growth,” said Oliver Allen, senior US economist at Pantheon Macroeconomics.
White House spokesman Kush Desai stated the Trump administration is implementing pro-growth policies to support US manufacturing, citing tariffs and tax incentives for equipment. Numerous foreign firms have promised to build US factories, though those investments could take years to materialise.
