The White House likes to talk about manufacturing, and it's easy to fetishize the honor in "making things," but when you get right down to it, it's a services world, and we're all just living in it. The manufacturing sector makes up about a tenth of GDP. It's a crucial, productive, and fiery tenth. But it's just a tenth. The vast majority of us are working for the government, administering health care, serving food, manning an aisle, or doing something else while sitting in front of a computer for eight hours a day.
The Services Economy isn't a new development, but it's deepening with each passing decade. Between 1990 and 2008, we created 27.3 million net new jobs. Health care and government alone accounted for 40 percent of that growth, according to economist Michael Spence. Adding in retail, food services, hospitality, and construction*, these sectors accounted for two-thirds of job growth over those two decades.
The next decade will probably look like the last few decades, but even more so. The fastest growing jobs are for low-income health care workers, retailers, food preparers, and customer service reps. In other words, if you want to put your finger on the fastest-growing segment of the economy, it's low-income, low-education service jobs.
By 2020, these jobs are projected to make up "more than roughly
half of all projected new jobs -- 9.7 million, according to Bureau of Labor Statistics projections," Richard Florida writes on our Cities site. He maps a ten-year projection of service-class job growth across
U.S. metros based on their current mix of jobs. He gets this:
New York wins followed by Los Angeles (249,810),
Chicago (225,132), Houston (152,884), and Atlanta (135,680). But as you can see, if we're a services economy, the fastest-growing services cities are just going to look like the cities with the most people.
So he also plots
the projected percentage change in service-class jobs for U.S. metros, finding that two Texas metros - Brownsville (16.3 percent) and
McAllen (16 percent) - win, followed by three Minnesota cities and Goldsboro, North
The most important question about the services economy, I think, is whether we can get (or should even hope to achieve) the same kind of productivity from the services sector that we get from the manufacturing sector.
For some time, people worried that services as a group suffered from a kind of disease that made it impossible to make services more efficient. The Internet changed that a little. So did IT. So did Walmart. But even as we're making electronics and other manufacturing more efficient by the day, there are other industries whose efficiency gains are either totally flat (it still takes one human and one pair of scissors X time to cut one other human's hair) or perhaps getting less efficient even on a value-added basis (as we might be seeing in parts of the health care system). Finding our way through that problem is an important challenge, long after the recovery is over.
*Which is like manufacturing, in a way, but it's also not really "tradable." I can sell a toaster I make by putting it in a box and shipping it to China. I can't put a house in a box and ship it to China.