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Chances are you work in services

March 17, 2018

 

And chances are that a U.S. export to other countries is an export of services. In 2017 the U.S. had a trade surplus in services of $232 billion, meaning we sell more services to other countries than we buy from them. This services export surplus helped bring down the overall U.S. trade deficit to $ 568 billion.

 

Let's hope the Trump move to slap tariffs on steel and aluminum imports doesn't lead to other countries slapping tariffs on our service exports.

 

The U.S. is mostly a services economy and most mature, high value economy work forces produce services far more than goods. Remember the line "Plastics" in the 1967 movie The Graduate with Dustin Hoffman and Anne Bancroft? Today that line would be "Services." We have become so good at producing goods, i.e., manufacturing things, using automation and assembly lines with high speed machines and robots and computer programs, that we need fewer workers to produce these things. For example, while the U.S. auto manufacturing output surged back from the depth of the Great Recession, auto industry employment has not says facethefatctsusa.org of George Washington University, "What’s missing from the resurgence is substantial growth in assembly-line jobs. At its peak point of employment in October 2004, the U.S. auto industry counted more than one million [1.1 million] workers. During the recession, auto industry employment slipped and by 2009, it had dropped to 622,700 workers. Since that low point, auto industry output has increased significantly, but employment only slightly." In 2011 there were still only 700,900 employed in U.S. automotive manufacturing. And in 2018 while producing far more vehicles than back in 2005 [value of gross output in motor vehicles and parts in 2005 was $524 billion and $716 billion in 2016], employment in the industry was still less in February 2018 at 963,000 versus the 1.1 million in 2005.

 

A recent New York Times article by Neil Irwin emphasizes  the phenomenon that we are now mostly a services economy. In February 2018, of the 148 million jobs in the United States only 20.5 million of them were in goods producing sectors of the economy. And it's not so much that we are producing fewer things. It's more that we are producing more things with fewer workers. As "The Fred Blog" of the St. Louis Federal Reserve puts it, "Manufacturing output is definitively trending up; that is, the number of things produced in this country has increased over time and is currently increasing. This production is accomplished, however, with fewer and fewer employees. It should be no surprise that an economy becomes increasingly better (quicker, more efficient, etc.) at producing things, thanks to increasing productivity per employee through innovations, ..."

 

The future is in services, not in goods producing (we'll continue to make goods but with fewer and fewer workers), and the U.S. is a leader in services, outpacing much of the world. One of the biggest services is travel and it appears that many foreigners like to and want to travel to and within the United States, for business or for leisure and when they spend their money here, that is a U.S. export of services, and when foreigners watch American films and listen to American musicians, and go to Broadway plays this is an export of services, and when foreigners pay to use American patents and licenses and trademarks and U.S. financial and insurance products and computer software and telecommunications and U.S. consultants, these are all service exports.

 

Barring a return to the dark ages of the pre industrial age, gravitating towards producing services is a natural progression of economic progress and economic growth. The United States was once an agrarian economy. In 1900 almost half the American work force worked in agriculture versus less 1.5 percent of the American work force today. While employment in goods production may never get to that low a percentage (who knows), it is likely to continue to shrink as a percent of the things that our workers do.

 

References:

 

Federal Reserve St. Louis FRED https://fred.stlouisfed.org/series/USAPEMANA

 

Federal Reserve St. Louis The FRED Blog https://fred.stlouisfed.org/series/USAPEMANA

 

Federal Reserve St.Louis https://fred.stlouisfed.org/series/USAPEMANA

 

Federal Reserve St. Louis https://fredblog.stlouisfed.org/2016/05/manufacturing-up-down/?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=fredblog

 

Statisa https://www.statista.com/statistics/258075/us-motor-vehicle-and-parts-manufacturing-gross-output/

 

U.S. Bureau of Labor Statistics https://data.bls.gov/pdq/SurveyOutputServlet

 

Face the facts USA https://www.facethefactsusa.org/facts/jobs-not-riding-us-auto-comeback

 

Neil Irwin New York Times https://www.nytimes.com/2018/03/16/upshot/most-americans-produce-services-not-stuff-trump-ignores-that-in-talking-about-trade.html?rref=collection%2Fsectioncollection%2Fbusiness&action=click&contentCollection=business&region=rank&module=package&version=highlights&contentPlacement=1&pgtype=sectionfront

 

 

 

 

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