14 May 2012

Reducing Unemployment: Manufacturing vs. Services

The graph above answers a question I've wondered about for a bit:
By how much would the services and manufacturing sectors each have to grow employment in order to reduce the current rate of unemployment by 1%?
The answer is 1.3% growth in employment in the services sector and 12.9% in the manufacturing sector. (Data is for April, 2012, and can be found here for employment and unemployment, and here for employment in the service sand manufacturing sectors).

This graph explains that while the current uptick in manufacturing employment is worth noting and welcoming, growth in manufacturing employment is not going to be the primary long-term solution to bringing down unemployment. That said, even though manufacturing and services are distinct categories of economic accounts, they are of course inter-related within the broader economy. However, claims that special treatment for manufacturing will reduce unemployment have a high hill to climb in terms of the simple math that follows from the small portion of the economy that manufacturing employment currently comprises. Productivity gains make that hill even steeper.

And of course, do not forget that from the perspective of employment rather than economic sectors, all jobs are service jobs.