Question

Identify two significant effects of the shift from a U.S. economy led by manufacturing to one led by services

Answer 1

During the Second World War, manufacturing jobs rose dramatically, but after the war ended, they began to return to their pre-war level. Manufacturing employment subsequently had a complex history with a peak in the late 1970s and then a secular decline. Here are some findings of the past seven plus decades on manufacturing and services: manufacturing is much more responsive to the business cycle. For example, compare the relative manufacturing and service actions relative to the bars of recession.

Service growth began to accelerate in the 1960s and slowed again after the early 1980's double-dip recession. Production increased in the 1960s at a slower pace and then oscillated with the four recessions from 1970 to 1982 around a flat line in sync. In June 1979, jobs in the manufacturing sector peaked. It has never recovered from the 1980-1982 double-dip recession.

Employment in the service industry started to level off with the onset of the recession in 2001. Growth started to accelerate again in 2004, but growth rates were well below what we saw in the eighties and nineties. Employment services reached its all-time peak in January 2008, the Great Recession's second month. Employment in services is slowly improving, but remains below the rate of 2008 by about 2.6 percent.