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Is the decline in manufacturing economically “normal”?

Deciphering the phases of economic development

The FRED graph above tracks the proportions of employees working in three industries—construction, mining and logging, and manufacturing—since 1939. Construction (the blue line) has remained roughly horizontal. Mining and logging (the green line) has steadily declined. And manufacturing (the red line) has noticeably declined as well. This trend may look like weakness for the U.S. economy, but is it something to worry about?

Let’s take a step back: Historically, economic development has led to a declining share of workers in goods-producing sectors. The first sector to decline is agriculture,* whose workers moved to manufacturing and mining during the Industrial Revolution (which pre-dates our graph by a century or so). In the 19th century and beyond, the U.S. economy grew further and progressed to the next phases of development, with mining and manufacturing losing relative importance.

So if the U.S. economy is growing, where is it growing? The graph below shows the service sector has taken up the slack. At the start of the graph, in 1939, this sector had already made up 50% of non-farm employees, and it has continued to grow. The remaining sector, government, has remained relatively flat over the 80 years of this data series. Clearly, the U.S. economy is now much less focused on “making things.” Rather, the emphasis is now on education, health, leisure, retail, information, and finance.

How these graphs were created: Search the Current Employment Statistics release table and choose Table B-1 (seasonally adjusted); select the series you want and click “Add to Graph.” From the “Edit Graph” panel, for each line add series “All employees, non-farm” and apply formula a/b*100.

*Why don’t we show agricultural employment here? For one thing, it’s really hard to count: Many are part-time/seasonal workers and relatives that work on family farms.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: CES0800000001, MANEMP, PAYEMS, USCONS, USGOVT, USMINE

Move along. Nothing to see here. (Seriously.)

Searching for financial stress

You may be relaxing over the holidays, but Team FRED Blog feels a little contrarian, like that uncle you can never agree with. So let’s talk about stress.

FRED offers three series from different regional Federal Reserve Banks that are intended to alert us to financial stress. All three indices use available data from the financial sector to try to establish an aggregate that highlights the level of risk in that sector, with higher values showing more stress.

The good news? Today, things are looking pretty steady. You could even say that there’s nothing to see here. At least as far as financial stress goes.

But the data overall show a couple of things quite clearly: The Great Recession was definitely financial in nature, with great financial stress, whereas the preceding recession was not. And all three indices show the same course: As early as July 2007, conditions were getting worrisome. Still, it’s good to be careful when reading indicators like these, as increasing stress doesn’t always signal an impending recession.

How this graph was created: Search FRED for “stress,” check the two series, and click “Add to Graph.” From the “Edit Graph” panel, use the “Add Line” tab to search for “Chicago Financial Conditions” and add that line to the graph.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: KCFSI, NFCI, STLFSI

Shop till your drop…your credit score

Credit card delinquency rates

You may be out buying last-minute presents, but the elves here at the FRED Blog are still at work contemplating credit card delinquency rates. It’s not the most festive topic, but there are at least a few interesting observations.

The graph above shows delinquency rates that range from slightly below 2% to slightly below 7%. This range could seem high, given these are unsecured loans: that is, without any collateral, such as a house to back up a mortgage loan. Or this range could seem low, given the relatively high interest rates that credit cards typically carry.

Beyond the obvious increase in delinquencies during recessions, we notice that smaller banks now have noticeably higher delinquency rates than the largest 100 banks. This is a new development. Have the smaller banks become significantly worse at selecting their credit card customers? Or has the composition of the pool of smaller banks changed in some other way?

Finally, we don’t detect any seasonal aspects in these rates. So, your last-minute December shopping may not have an immediate impact on your ability to repay your credit card. So, happy holidays!

How this graph was created: Search for “delinquency rate,” check the relevant series, and click “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: DRCCLOBN, DRCCLT100N

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