Wednesday, April 29, 2009

Goods-Producing Sector Fell Below 19% in 2008

In a previous CD post, I suggested that "Since fewer than 10% of all U.S. jobs are now in the manufacturing sector, should we continue to rely on industrial production as a key economic variable, when the manufacturing share of overall employment continues to decline to record low levels?"

The chart above using annual GDP data by sector from the BEA shows the downward trend in the private goods-producing sector, from 40% in 1947 to less than 19% in 2008. More reason that the importance of industrial production as an economic indicator has been declining over time. (Note: The BEA defines these two sectors as "private goods-producing" and "private services-producing," with the remaining percentage in the non-private or government sector.)

See related WSJ article "Nation’s Goods-Producing Sector Continues to Shrink"

9 Comments:

At 4/29/2009 5:47 PM, Anonymous Anonymous said...

Those two total 87.1 Meaning something accounts for the remaining 12.9% of the GDP. What is it? I am affraid to think Government, as this is almost as much as the entire goods producing sector, but I suspect that is what the answer will be.

 
At 4/29/2009 6:30 PM, Anonymous Craig said...

If we have to use GDP as a measure of the economy, then I suppose you're right. But it's a lousy measure. Manufacturing's contribution to the national wealth is magnitudes larger than the GDP figures would indicate.

 
At 4/29/2009 7:47 PM, Anonymous Anonymous said...

but doesn't everyone that works in the service industry work at Taco Bell? This is what we're constantly told. Apparently, everyone not working in a factory is working Taco Bell or Flipping burgers somewhere.

 
At 4/29/2009 10:09 PM, Blogger QT said...

Anon. 5:47,

Other sectors of the economy would include agriculture, and primary industries such as mining, & forestry although your point is well taken.

How does one reconcile government share of GDP with the drain on economic growth to finance government expenditure? Have not really figured this out. Would appreciate your thoughts on this.

Anon 7:47,

Be careful what you read. Insurance, real estate, architecture, engineering, medicine...aren't these also services?..but then, I suspect you are being facetious. :)

 
At 4/29/2009 11:14 PM, Anonymous gettingrational said...

I think there is a semantical flaw in the term service producing. Service producing encompasses many expednditures such as transfer payments like Medicaid or foundation grants. Perhaps foundation grants could be investments but Medicaid produces what?

Transfer payments to recipients is not producing anything but future (quick term) spending. The architect should not be in the same producing category as the non-producing transfer payment.

Goods producing is still a significant factor as copmpared to service producing when stimulus spending, subsidies, medicaid etc. non-revenue producing factors are taken out. Am I correct on this?
If I am correct then there is always a bias to more deficit spending because of the increased GDP figures that can usually be bragged about by an administration.

 
At 4/30/2009 12:47 AM, Anonymous DG said...

Yes - because industrial output is more volatile than that in the service sector and therefore has an effect on the economy's growth which is disproportionate to it's economic share.
DG

 
At 4/30/2009 8:56 AM, Anonymous Anonymous said...

This has always confused me, but why are industrial jobs considered "better" then service jobs? I see this in small town in my state the are fighting for manufacturing jobs but let the service jobs go whereever they want.

This is what I think, but I want to get some input here.

It boils down to the importance of durable goods. As a nation we accumulate wealth/capital. My house was built many years ago, the roads are old, damns, bridges, factory equipment, even the dishwasher wasn't made this year. So when these types of goods are produced, they dont have to be "re-produced" soon.

But for a service job there is constant turn over. Every time I go out for dinner my "service" has to be created new. Every year I get a CPA to look at my taxes, every time I see a doctor, or get a hair cut. These things can't be accumulated or stored for hard times like grains or firewood. Thus they don't improve the long term well being of a society they only treat the short term needs and wants.

So anyways, am I on the right track here? And does anyone have some good resources to research this?

 
At 4/30/2009 1:05 PM, Anonymous gettingrational said...

My comments above used the term transfer payments but it should be specifically transfer payments for healthcare. The BEA uses healthcare payments as a consumer expenditure and thus part of "Service Producing". Other transfer payments such as welfare are separated out under government spending. But this is still a huge amount.

 
At 5/01/2009 4:08 AM, Blogger bob wright said...

Can we conclude from this chart that Service Sector built the middle class in the U.S., not manufacturing?

 

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