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Over time the U.S. economy has become increasingly involved in the production of services, rather than goods. Service industries do not produce tangible objects, such as automobiles or refrigerators. Rather they provide services such as transportation, banking, insurance, tourism, communications, entertainment, data processing and consulting. In fact, many services -- such as computer, engineering, legal, accounting and advertising services -- are used in the production of goods.
Between 1950 and 1990, total U.S. employment grew from 48.5 million workers to 118 million workers. Most of the increase was in services; in the decade of the 1980s alone the service-producing sector had a net increase of 20 million jobs, which exceeded the net 19 million job increase in the overall economy. The two industries adding the most jobs were business services, including the advertising and computer and data processing industries, and health services. Twenty-seven percent of the net employment gain during the 1980s was in those two categories. Computer and data processing industries added nearly half a million jobs during the 1980s.
The growth in service-sector employment has absorbed labor resources freed by rising manufacturing productivity. Manufacturing productivity increased at an average rate of 4.5 percent from 1982 to 1990, which allowed manufacturing to retain a roughly constant share of U.S. gross national product (slightly over 20 percent), even though only about half of the 3 million manufacturing jobs lost during the severe recession of 1981-1982 were regained by 1990.
Most experts now dismiss the idea of a rapidly eroding U.S. industrial base. Instead they believe the statistics demonstrate that the structural shift in the U.S. economy, from goods-producing to service-producing industries, has been a relative one, which has occurred primarily in employment. For example, the goods-producing sector accounted for 41 percent of nonfarm employment in 1946, 28 percent in 1980, and only 23 percent in 1990. Of course, many of the new service jobs did not pay as highly as did manufacturing jobs, nor did they carry the same benefits. This put a squeeze on many family incomes and forced large numbers of women into the work force during the 1980s. This trend is likely to continue.