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Posts tagged with: "USGOVT"

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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

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

Government employment in context

The graph above shows the number of people employed in the U.S. government (excluding armed forces and intelligence agencies, but including the postal service). This number has increased almost continuously: The few exceptions are immediately after World War II, in the early 1980s, and since the previous recession. Note also that small spikes occur every ten years, owing to the temporary hiring for the census.

But does this picture tell a true story of an ever-expanding government? The graph spans almost 80 years, and over that period the U.S. population has continuously expanded. So a more-realistic picture would need to calculate the share of government employment in total employment. This is shown in the graph below. The picture looks quite different now: The current share of government employment is actually very low, and one has to go back to 1960 to find a lower number! The highest point is in 1975, not 2010 as in the first graph. Clearly, context matters.

How these graphs were created: Search for “government employees” and select “All Employees: Government” (series ID: USGOVT) for the first graph. For the second graph, add the series “All Employees: Total Nonfarm Payrolls” to series 1 through the “Modify existing series” option. Use the “Create your own data transformation” option to apply the formula a/b*100 to express the result in percentages.

Suggested by Christian Zimmermann

View on FRED, series used in this post: PAYEMS, USGOVT


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