The presumed culprit is the growing trade deficit with Mexico as U.S. firms seeking lower labor costs locate across the border. Its hard to see how the growing auto-related manufacturing trade deficit impacted these sectors.
Evidence suggests otherwise.
Since 1994, U.S. employment has grown by more than 6.5 million jobs and the unemployment rate has been well below 6 percent. In the face of such rapid employment growth, the U.S. labor force has grown much faster than was expected. Both the labor force participation rate, 66.8 percent, and overtime in manufacturing were at post-war highs in 1996. The single-minded focus on the bilateral trade deficit with Mexico is flawed because it presumes a that imports and domestic production are simply substitutes for one another. But many U.S. imports from Mexico are actually complements U.S. production, becoming inputs to U.S. manufacturers.