A Blog by Jonathan Low


Feb 11, 2015

Employment Growth in Intangibles Producing Industries Exceeds That of Tangible Industries

A post-industrial society is, by definition, more service oriented. The weight of the economy, both metaphorically and actually, is lower as production moves from physical assets like steel and locomotives, to intellectual assets like software and apps and financial trading.

This is arguably neither good nor bad. It is cyclical and evolutionary and will almost certainly change due to the influence of forces we can not yet imagine let alone see.

But in order to get a handle on what this means in the current context, it is helpful to understand how those theoretical constructs translate into real impacts on sales, organizations,  income and jobs.

One of the problems in doing that sort of analysis is that accounting conventions do not apply because those responsible can not agree on what to measure and how, not to mention that there is considerable unease from those who think that changes will disadvantage their businesses, their clients and, oh yes, themselves.

There are those who despite those obstacles are attempting to measure the changes in this economy. And as the following article explains, some of those differences are becoming clearer. That industries in which intangibles are the primary source of output are generating more jobs may not be wholly surprising, but the fact that these deltas can be identified, tracked and explained will go a long way to making the present and future both more comprehensible and actionable. JL

Ken Jarboe reports in The Intangible Economy blog:

Employment in intangible producing industries has exceeded employment in tangible producing industries since the Great Recession.
(January) job numbers from BLS show a steady economy. Employment was up by 257,000 in January with a 5.7% unemployment rate. As BLS notes, employment was up in retail trade, construction, health care, financial activities, and manufacturing.
While the sector breakdown from BLS is useful, today I am a unveiling a preliminary attempt to take a different look at the U.S. economy and employment. According to my estimates, employment in tangible producing industries grew by 154,100 in January. The biggest gain in percentage was in Construction & Mining and Repair & Maintenance. Intangible producing industries added 103,800 jobs with the biggest percentage gains in Information and Financial Activities.
As the charts below show, U.S. employment is roughly divided in half between tangible producing industries and intangible producing industries. However, employment in intangible producing industries has exceeded employment in tangible producing industries since the Great Recession. While the structure of the U.S. economy is shifting, tangible production is still (and always will be) a major part of the Intangible Economy. And there are lots of intangibles in the tangible producing industries not captured by this data.
Jan 2015 tangible & intangible employment.png
Jan 2015 pie.png
As readers of this blog know, I believe that the standard mental image of the economic as made up of manufacturing and services is outdated. Rather than break up the economy into manufacturing versus services, it may be more useful to look at the economy as tangible and intangible. Tangible activities are primarily physical; intangible are primarily mental. Cutting hair, ringing up a sale at a cash register, making a car, harvesting a crop - all of these are primarily a physical activity. The transaction involves the movement of atoms. Designing a poster, negotiating a deal, writing an article for the Washington Post - these are primarily mental involving the manipulation of information bits.
Intangible, mental activities are more important than ever in this information economy. But tangible, physical activities are just as important. Some of those physical activities are captured by the current classification system as part of construction, agriculture and manufacturing. And some of those mental activities are correctly classified as services. Only some, however. For example, the construction sector contains many mental activities such as architecture, engineering and logistical planning. The service sector contains physical activities, such as truck drivers, barbers and gardeners.
The tangible sector is made up of the following industries: Construction & Mining; Manufacturing; Trade, Transportation & Utilities; Accommodation & Food Services; Repair & Maintenance; Personal & Laundry Services; Telecommunications; Tangible business services (such as Waste Management & Remediation Services, Services to Buildings & Dwellings, and the U. S. Postal Service); and Tangible education & health services (such as Nursing & Residential Care Facilities and Child Day Care Services).
The intangible sector consists of Membership associations & organizations; Arts, Entertainment, & Recreation; Information (excluding telecommunications); Financial Activities; Professional & Business Services (excluding tangible services); Educational & Health Services (excluding tangible services); Government (excluding Postal Service).
Admittedly, this is not a perfect breakdown. But I believe it is a close enough approximation to give us a better understanding of the Intangible Economy.


Stock Tips said...

As we can see in the figures and charts mentioned above that employment growth in Intangibles industries Producing is increasing more and more rather than in tangible industries.

Jon Low said...

Agreed. But again, what is being done in terms of business or public policy to optimize the impact of that trend?

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