A Tail of Two Cities: FIRE and Manufacturing in the US

A question came up on another blog about the changing structure of the US economy. The graph below quits just before the “great moderation” ended. What you are looking at is the changing share of selected sectors of the US economy in total value added. What is interesting and I do not think a coincidence is that manufacturing saw a 12% decrease or (50% of its original share) in VA, while FIRE (finance, insurance, real estate and BS) increased its share by 12% to 33% of total VA. The other interesting thing to note is that while 1980 would seem to be the switch point the trend was already cast in the die which fits with the stylised facts that we have about evolution of the financialization of the US economy.

Click on graph for a crisper image.

The open question is what if anything is the link between the rise of Wall Street and the decline of main street?

2 thoughts on “A Tail of Two Cities: FIRE and Manufacturing in the US

  1. there is undoubtedly a long decline, but the area of interest and you can see it in your graph is the bump after 2000, that was about 3.5 million jobs lost in manufacturing, and then back to the slow decline until the great recession, and then another 3.o or more loss in manufacturing jobs. So it obviously does translate by these metrics, but potentially not as crisply. Of course manufacturing jobs, at least at one point paid a whole lot more than many other jobs and therefore the effect on main street has been predictably devastating. Call me old fashioned, but I still am not a believer in the whole- knowledge based economy aspect- it surely has not translated into a replacement employment strategy- yet.

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