Right. The decline in manufacturing is a tricky subject. First off, in developed economies the manufacturing employee makes up less than 1/5th of the population. Let's be honest, manufacturing will never come back to developed nations like it was in the early 20th century.
We aren't "declining" in productivity. We've continued to increased productivity at the same historic rate as previous industries. (http://www.bls.gov/lpc/prodybar.htm)
We are accomplishing this productivity gain with less people. Increased productivity allows for companies to increase their output with less people.
As Peter Drucker predicted, if these productivity gains aren't matched in the service and knowledge worker sectors, then we'll see an increase in social tensions and class warfare. No one can deny the social acrimony that continues to surface in the news.
This will be the challenge of the 21st century. What to do with a nation that doesn't require a majority of its workforce employed in moving or making things.