The Changing U.S. Economy

An assignment in my Spring 2018 senior-level macroeconomics course had my students look up the total capital expenditure and total labor expenditure by economic sector. Each student was assigned a different year. I gave them a spreadsheet that ordered the sectors by labor/capital ratio and plotted them in a unit box. While the students were presenting their results, it occurred to us all that it would make an interesting movie. I slapped something together at the time, but I just went back and did it right this time.

About the plots

Each year, the capital per sector is divided by total capital, so that all capital adds up to one. Similarly, the labor per sector is divided by total labor, so that all labor adds up to one. The sectors of the economy are sorted by slope (labor divided by capital). That way, their plot forms an upward curving arc from (0,0) to (1,1).

BLS (U.S. Bureau of Labor Statistics) has payroll data starting 1939, but from 1936 to 1946, it only tracks one sector: manufacturing. Starting in 1947, two more sectors were added: construction, and mining & logging. Not until 1964 was the service sector added, when it already accounted for 50% more in payrolls than manufacturing. Added at that time was a sector combining trade, transportation, and utilities, then they were split out in 1972. BLS never tracked farm payrolls – agriculture is largely taboo at BLS, it seems.

The capital data from BEA (U.S. Bureau of Economics Analysis) is remarkably consistent over the years. The sectors in BEA data are slightly different from the sectors in BLS data. It was easier to combine all agriculture and mining to put together with the mining & logging sector labor data, so the plots will always overstate capital in that sector. From 1964 to 1971, when BLS combined trade, transportation, and utilities, the capital data are combined for those sectors. The combined sector is represented by a line striped in the colors for the individual sectors.

Things to note

  • The plots from 1947 to 1961 are not directly comparable with the other years because there are large, missing sectors during that time and especially at the end.
  • The  curvature changes considerably between 1971 and 1972, when trade, transportation, and utilities were split out. The transportation sector moves to the low-labor end, the utilities sector stays about in the middle, and the trade sector moves up to the high-labor end.
  • Manufacturing is always becoming less steep, that is, less labor-intensive (more automated). This appears as a clockwise rotation of the manufacturing line.
  • The labor from manufacturing seems to go to construction between 1947 and 1963.
  • The service sector accounts for about 30% of labor in 1964. This grows steadily to about 80% in 2016.
  • Growth in the service sector is very rapid between 1972 and 2010.
  • The clockwise rotation of the manufacturing line is even more rapid  between 1964 and 1971 as the services sector takes an increasing share of labor.
  • The slope of the manufacturing line is relatively constant from 1972 to 2000, but resumes it’s clockwise rotation from 2001 to 2010.
  • The size and slope of the manufacturing line are pretty stable from 2011 to 2016.

Acknowledgements

Thanks to: Kirsten Andersen, Kristin Carl, Brittany Chacon, Yu Ting Chang, Andrew Detlefs, Kyle Dougherty, Thomas Henderson, Darren Ho, Jack Hodge, Alanis Jackson, Madeline Kee, Eric Knewitz, Jackson Kniebuehler, Phuong Mach, Abraham Maggard, Alexander Palm, Luisa Sanchez-Carrera, Teran Villa, Tsz Hong Yu

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