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The rise of the service economy


One constant throughout economic history is that, as an economy develops, its service sector keeps growing. The graph shows that this is certainly true for the United States. It divides nonfarm payrolls into three categories: government (at all levels), goods-producing industries (mining, manufacturing, construction…), and service-providing industries. Although government is roughly constant, services have far surpassed goods.

Is this bad? Of course not. The standard of living has clearly improved since 1939, when the graph starts. Indeed, goods can now be produced with fewer people—thanks to technological progress and automation…and perhaps also automatization. This transformation allows the economy to direct more of the labor force to enhancing our lives in other ways, such as tourism and entertainment, advanced health care, and anything related to the Internet, all of which are services that were either nonexistent or luxuries in 1939.

How this graph was created: Using the nonfarm payrolls by industry sector release table from the establishment survey, check the series and click “Add to Graph.” From the “Edit Graph” panel, open the “Format” tab and select graph type “Area” and “Stacked.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: CES0800000001, USGOOD, USGOVT


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