But the effects of recessions on the work force have not followed
these proportions. In fact, it’s backwards: in recent recessions, even
though the goods-producing portion of the economy is smaller and
smaller, it’s those workers that bear most of the unemployment.
The graph below illustrates the composition of the U.S. labor force
since 1950. The blue line is the services sector, the red is goods, and
the green is government.
Click on the graph to see a larger version
To me, the path of the goods line is striking: there has been no
growth in manufacturing employment since 1950. And that’s not the share
of the workforce; it’s the number of workers, hovering around 20
million for 60 years, while the total labor force has grown from 50
million to 150 million.
The nature of the change is logical, when you consider that
manufacturing has become highly automated, and that its importance to
the U.S. economy has dwindled. In the late 1940s, goods businesses made
up about 50 percent of GDP, while services contributed about 40
percent. (The remainder is a category called “structures,” which has
made up a persistent eight to 12 percent of output since the 40s.)
In the mid 1950s, goods and services were about equal, at 45 percent
each, but by 1960 the mix had turned in favor of services. By 1970 the
allocation was 51 percent to 38 percent, and it has moved slowly but
persistently since, to 66 percent to 26 percent in third quarter 2009.
(Two-thirds also happens to be the proportion of the economy made up by
consumer spending, but that a view from a different perspective, and
that the proportions are the same is coincidental. I think.)
But consider this — over all this time that the services sector has
grown, its employment has been very stable. Look at the blue line in
the graph, and how during recessions it hasn’t dropped much (with the
exception of the current downturn). Most of the unemployment has fallen
to the goods producing sector:
In the 2003 recession, followed by a so-called “jobless recovery,” service sector employment rose by about a million.
Today the goods-producing sectors have about 18 million workers,
equal to the level of 1951, down from 22 million in late 2007. Services
employment has fallen more in this recession than ever before, from
about 116 million in early 2008 to 113 million in December.
The bottom line: manufacturing has been in a jobless recovery for at
least 30 years, while services employment has been more resilient.
Where will the new jobs be coming from in this recovery?