How does deindustrialization occur in the American way and which sectors occupy a shrinking share of industry?
If we evaluate long-term transformations over 15-20 years, the industry (manufacturing, mining, and energy) lost 3.7 p.p in the US economy, agriculture decreased by 0.16 p.p, and construction (residential, commercial, industrial, and infrastructure) decreased by 0.45 p.p.
In total, the real sector (industry, agriculture, and construction) lost 4.3 p.p, reducing its share from 22.48% in 2007 to 18.18% in 2024.
The state's participation in the economy decreased by 1.76 p.p. The value added of the public sector is mainly the sum of labor costs (salaries of public servants) and capital (depreciation of state property) used to provide public services, including defense. These calculations DO NOT include current transfers from the state to the population.
The real sector of the economy plus the government reduced its share of GDP by 6.06 p.p, but where did this share redistribute?
• Professional, scientific, and technical services – 1.35 p.p (legal, consulting, marketing, accounting, architectural, engineering, and related services, specialized design services, computer system development and related services, research and scientific development)
• Real estate, rental, and leasing – 1.11 p.p (activities of agents and brokers in real estate sales, management, valuation, and rental of real estate, plus estimated rent of homeowners)
• Medical and social services – 1.11 p.p
• Food service – 0.54 p.p
• Information and communication – 0.49 p.p (including software developers, IT services)
• Transportation, logistics, and warehousing services – 0.46 p.p
• Financial and insurance services – 0.3 p.p
• Retail trade – 0.3 p.p
• Culture, sports, and entertainment – 0.2 p.p
• Office, support, auxiliary services, and waste disposal – 0.2 p.p.
Why is there such a low share of trade (wholesale and retail) when turnover is almost an order of magnitude higher? According to BEA methodology, the value added in the trade sector is the value created by the trading enterprises themselves through their activities, which is then distributed to pay for the labor of trade workers, gross profit, and production taxes.
It is not the value of the goods they sell, but the value of the services they provide to bring the goods to the consumer, essentially, the trade markup.
The largest sectors in the US economy, collectively representing over 75% of the entire economy, are:
• Real estate, rental, and leasing – 13.79%;
• Trade – 12.16%, where wholesale trade is 5.85%, and retail trade is 6.31%;
• Public sector – 11.29%;
• Manufacturing – 9.98%;
• Professional, scientific, and technical services – 8.16%;
• Healthcare and social services – 7.58%;
• Finance and insurance – 7.42%;
• Information and communication – 5.38%.
Industry has a very powerful multiplicative effect on intersectoral balances, closing many areas of the services sector: electricity, heating, water supply, waste collection and disposal (usually included in the calculation of industry), construction, transportation and logistics, maintenance and repair, communication and information technology, legal, marketing, accounting, engineering, design, research, financial, insurance, consulting, administrative, managerial, and other business services.
However, the American industry represented in other countries is effectively served by the American services sector.
When analyzing transnational industrial companies in the S&P 500, there is an understanding that they are widely represented in foreign markets not only in terms of product sales but also in terms of production, but to support production in other countries, engineers, scientists, programmers, architects, designers, marketers, and managers in the American services sector are required.
The main constraint on industrial development in developed countries is high costs and the lack of available labor.