Is the US manufacturing Sector Collapsing

Everyone seems to look at the decline in manufacturing employment.  And, yes, it is decling.  But... 

Here's another set of facts:  The Fed has a monthly index of real manufacturing output (from 1972 on) and data on personal consumption expenditures monthly as well.  I used the personal consumption deflator data to calculate real PCE, and then constructed a PCE index.  If you graph real manufacturing output and real consumption expenditures, they move almost in perfect sync.  (The difference is that manufacturing output fell much more sharply than did consumption during the 2008 recession, and, although it has increased from its trough at about the same rate as PCE, it never made up the lost ground.)

Basically, then consumption and manufacturing output have moved together.  The decline in manufacturing employment is a result of rising productivity--higher output per worker-hour--in manufacturing...