The opening line in the Wall Street Journal's story on today's employment numbers (Payrolls Growth Slowed in July As Unemployment Rate Rose) is a follows:
U.S. employment growth slowed and the jobless rate ticked up last month as job losses in manufacturing, construction and government offset healthy gains in many services industriesA quick read of that analysis would simply confirm the general impression of an ongoing switch from manufacturing to services. But closer analysis of both this month's employment numbers and the overall trend suggest a much different picture.
The quick "manufacturing down; services up" take on today's numbers misses that employment in some services, specifically retails and education were down. Within the "services" sector, employment in business services was up, but so was employment in bars and restaurants. To me this is one more indication that we need to move way from the old manufacturing versus services categorization. Long ago economists figured out that there was a difference in economic impact between durable and non-durable goods production. It is time that we do the same for services.
Last year, I put together a presentation on the intangible economy in the Greater Washington DC area. I divided economic sectors into whether they were tangible goods/services or intangible goods/services. A tangible service is one involving the movement and/or processing of energy and physical matter. For example, a cab driver or a barber are tangible services. It was a very crude approximation. But my findings were surprising. In the DC Metro area which is one of the most intangible driven areas in the world, 43% of employment was in tangible sectors. Tangible economic activities -- the movement of atoms rather than bits -- continue to play a huge role in the Intangible Economy.
As we move forward in crafting policy for the I-Cubed Economy, we need to keep this fact in mind. It is not simply a shift from manufacturing to services. It is a shift within manufacturing and services, between tangibles and intangibles. Both atoms and bits play a role.