A tale of Two Cities: FIRE and Manufacturing in the US (PII)

Yesterday I took a look at the changing share of value added between the FIRE and manufacturing sector in the US. Today I have thrown up a graph plotting the relative decline in manufacturing employment and the relative ascendency of employment in the FIRE and BS sectors of the US economy. Clearly the two are inversely related but a causal connection between the two remains an open question.

One of the things that complicates the analysis is that many of activities that once were done in-house from accounting, to facilities management, through to recruitment and equipment procurement are now done at arms-length via outsourced contractors.

To illustrate what I am getting at here the following example may help. In 1980 ACME car company decides to contract out for its cleaning services prior to 1980 these cleaning duties were performed by unionised janitors. So, prior to 1980 the cleaning labour would have been included in manufacturing employment and after 1980 in business services.

Nonetheless, the graph on value added shares from yesterday’s post that something more than just redefinitions are at work. In the next post I will drill down into the FIRE and BS sectors to see what is the main driver of employment growth in those sectors.

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