Charting where sectors such as advanced technology services, advanced manufacturing, and energy production are growing or slowing.
America has been de-industrializing for decades, as manufacturing becomes automated and moves to cheaper offshore locations. Meanwhile, a growing chorus of economists believe the United States economy has entered an era of ongoing stagnation and is no longer nearly as innovative as it once was.
But a report released Thursday by the Brookings Institution finds that what it calls advanced industries—which span the sectors of advanced technology services, advanced manufacturing, and energy production—have continued to grow and create good high-paying jobs. That said, this growth has not spread everywhere or in large enough measure.
The study, by Mark Muro, Siddharth Kulkarni, and David M. Hart at the Metropolitan Policy Program at Brookings, finds that U.S. advanced industries added $2.8 trillion to the economy in 2015, making up 17 percent of the total U.S. economic output. From 2013 to 2015, these industries accounted for 60 percent of U.S. exports. They employed almost 13 million people nationwide and accounted for 11.3 percent of all U.S. job growth in 2014 and 2015, adding more than 600,000 new jobs.
Advanced industries also generate an additional economic boost through their substantial “multiplier effects,” where the supply chains of these industries generate an additional 2.2 jobs for every one they create. The Brookings study finds that these industries directly or indirectly account for about 41.3 million total jobs, or 28 percent of total U.S. employment.
The average worker in advanced industries earned $95,000 in 2015, nearly double what the average worker in other sectors earned, which is about $53,000.
Advanced industries output growth by sector
But not every advanced industry is growing at the same speed, or necessarily growing at all. The sector’s growth is variable and often inadequate. As the chart above shows, advanced services—high-tech industries such as computer systems design; web search and internet publishing; software products; data processing and hosting; R&D services and consulting—have accounted for the bulk of this growth, expanding between 2013 and 2015 on average by 5.6 percent a year.
Indeed, the lion’s share of this growth comes from a narrow band of tech and auto-related advanced services industries. Just seven individual industries—three related to auto, and four to digital services—generated two-thirds of advanced industry growth.
Over the same period, advanced manufacturing sectors such as the automotive industry grew at a much more modest average of 1.7 percent a year from 2013 to 2015. In the midst of the global downturn in the energy market, advanced energy industries such as oil, gas, and fracking have declined an average of 1.8 percent a year from 2013 to 2015.
Growth in advanced industries has been highly uneven across the 50 states. As the map above shows, the far West, the Southeast and parts of the Midwest have seen the biggest gains in advanced industries, while the biggest losses have occurred in Wyoming, Alaska, New Mexico, West Virginia, and Vermont.
Employment growth has increased in “tech-intensive” Northeastern states such as New York and Massachusetts, and “tech-oriented” Western states such as California, Oregon, Colorado, and Utah. Employment growth has slowed in “manufacturing-intensive” states such as Michigan, Ohio, Wisconsin, Illinois, and Iowa, and it has slowed even further in energy states like Oklahoma and North Dakota, the center of the fracking boom. While the South consists of six of the 10 states where the advanced industries have grown the most, Tennessee, Georgia, South Carolina, and Kentucky, this region is beginning to see a slow-down as the post-Recession boom in automotive manufacturing crests.
This spiky and uneven pattern is even more amplified when we look at metros. The top 20 metros accounted for 80 percent of advanced industry growth in 2013–2015, compared to 71 percent in 2010–2013. At the same time, 53 metros actually became less specialized in these industries.
The map below shows the pattern for metros. Dark blue dots indicate the largest employment gains; red dots indicate the largest declines. (Also, check out Brookings’ online tool to compare sub-sectors of advanced industry output and employment levels in the 100 largest U.S. metro areas).
Note how varied the pattern is: Many states had both big winners and big losers among their metros. The biggest winners were the metro areas of San Francisco, Nashville, and Madison, while Bakersfield, Tucson, and New Haven saw the biggest declines. Knowledge and tech-based metros in the Bay Area and the Boston-Washington Corridor, along with Raleigh and Provo saw considerable employment growth. A number of metros with large advanced manufacturing clusters, such as Grand Rapids, Toledo, Nashville, Boise, and Indianapolis also did well. But many more struggled. Metros with large energy-based economies such as Oklahoma City, Tulsa, and New Orleans, or with large power-generation plants such as Birmingham, Little Rock, and Scranton saw substantial declines in employment.
The report notes that a single sector, computer design services, was the “big star” of advanced industry growth of 2013-2015. This sector is highly concentrated in six metros: San Francisco, San Jose, New York, Boston, Washington, D.C., and Los Angeles. But the industry also comprises one of the three largest sources of advanced industry job growth in 71 metros.
* * *
America’s advanced industry economy has been a powerful driver of its productivity and growth since the economic crisis. But that growth has been increasingly spurred by tech-based sectors, while advanced manufacturing has slowed and energy production has declined. Its impact has been uneven geographically as well. The growth of manufacturing-based states and metros has slowed, while energy-based states and metros have declined. The core pillar of sustainable U.S. economic growth remains tech, knowledge, and talent. And while all of those factors are highly concentrated in the superstar cities and tech hubs of the Bay Area, Southern California and the Boston-Washington Corridor, many other metros are benefiting from them to some extent.