A Brief Digression: Employment and Output by Sector

I’d like to take a brief detour into some of the numbers around how employment and output have changed in the US over the past decade. This should provide some more concrete perspective on both meanings of ‘The Wealth of Humans’. All the following data from the the BLS.

The BLS uses the NAICS, which is hierarchical. To my limited knowledge, there’s no easy way to get R to play nicely with data coded in this manner, so what follows is intended to be more of a guide rather than anything definitive. Additionally, when I refer to productivity, I’ll be using the concept of output per worker, rather than the more traditional definition of output per labor hour. The reason is that the data I’m using doesn’t have information on hours worked, though apparently some people do prefer this conception. If there are major differences in average hours worked across sectors, this will lead to divergences between the two concepts of productivity. For now, this will have to do.

So to begin, I’ve plotted the compounded annual growth rate in output versus the compounded annual growth rate in employment for the major industry categories, sized by productivity. The dotted line is the 45 degree line, which signifies where output and employment growth have been equal. Industries above the 45 degree line have seen output grow faster than employment (high productivity growth), and those below have seen employment grow faster than productivity (low productivity growth). Using Cartesian notation, quadrant I has increasing output with increasing employment; II has decreasing employment and increasing output; III has decreasing employment and decreasing output; and IV has increasing employment and decreasing output. From an efficiency standpoint, quadrant IV is the worst place to be: jobs are being added that produce less output than before.


Next is the same graph, but broken down into subcategories for each industry.  It’s too messy to add all the labels for each industry, so it will be broken down subsequently.



The ideal world is one with big light blue bubbles in quadrant 1 above the diagonal:growing mass employment in highly productive sectors. The reality is one where employment is mostly growing in low-middling productivity sectors – like health care and retail. And the highest productivity sectors – manufacturing and information – have mostly declining workforces, despite increases in output. I’m not sure what it means, but it’s interesting that real estate has pretty much constant returns across the board despite large variations in employment change.

(As an aside, this graph also serves as a good illustration of what I see to be a problem with the NAICS system. Despite being updated every five years, it still seems clearly designed for another time: manufacturing has highly detailed subcategories, whereas information has only a few, despite being of increasing importance.)

Here are looks at each quadrant (with manufacturing removed,  it gets too messy and that picture is pretty clear from above):










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