More sunny or cloudy days ahead for the economy?
Economists love numbers -- some might call it an occupational hazard. Numbers are our window into the workings of the economy. Without numbers, we’d have a difficult time understanding how the economy is changing, both in positive and negative ways.
But all economic numbers aren’t created equally. For example, many of the economic statistics released monthly -- such as the job numbers -- are based on statistical samples. This means they are not 100 percent counts. Anytime a sample is used, the number will be an estimate, not a certainty.
So when a census -- which is as close to 100 percent count as we get -- is released, the excitement level of economists rises. This was the case recently when the first numbers came out from the 2012 Economic Census.
The Economic Census is done every five years and is, in the words of the U.S. Census Bureau, the “official five-year measure of American businesses.” Information is collected from 4 million businesses, which is more than half of all business operations in the country. Data about what the business produces, how much the business produces, the number of workers employed, and what those workers are paid are among the items published from the census.
The just-released 2012 numbers are for the country. Beginning next year we’ll have individual state information. So, for now, we’re limited to looking at national trends.
Comparing the 2012 census numbers to the previous 2007 census numbers is important for one major reason: The year 2007 was the last year before the start of the Great Recession, whereas 2012 was a year in which the economy was recovering from the Great Recession. Therefore, comparing the two years allows us to study the impact of some changes that occurred as a result of that extraordinary downturn.
So what are some of the key insights about our economy from the 2012 Economic Census? Let’s begin with one of the hottest -- and sometimes controversial -- economic sectors: energy. Energy discovery and extraction has boomed in the last five years. The value of production is up one-third, employment is up one-fourth to almost 1 million workers, and payroll has risen by 50 percent. Clearly this sector is booming.
Two other big growth sectors have been education and healthcare. Together the two giants employed almost 2 million more workers in 2012 than in 2007, and the number of firms jumped by 60,000. With the country’s added focus on education and our growing elderly population, growth should continue in these people-driven businesses.
The information sector -- including publishing, broadcasting, entertainment production, telecommunications and data processing -- displayed some interesting trends in the five years between 2007 and 2012. The values of both output and payroll rose by 15 percent, but the number of information firms, as well as employment, slid.
This economic sector is clearly in a state of flux: Consolidation is occurring. Also changing are who produces programming and how programming is delivered to customers. So there are likely to be winners and losers in the information sector in the years ahead.
Both retail and wholesale trade also appear to be transforming. These are huge sectors employing more than 20 million people nationwide, but the number of workers actually dropped between 2007 and 2012, even while sales were increasing. Information technology is likely impacting retail and wholesale trade firms, with such technology replacing some workers. The shift to more on-line buying is also affecting job opportunities in these firms.
The finance and real estate sectors were still smaller -- especially in jobs -- in 2012 than in 2007. Of course, these sectors were hit hard by the housing crash, and they have not yet fully recovered.
Now, what about manufacturing? Manufacturing is still a vital part of our economy, accounting for 10 percent of all economic activity in the nation and 20 percent in our state. The value of manufacturing production actually rose between 2007 and 2012 -- by a healthy 8 percent. But there were more than 30,000 fewer manufacturing businesses in 2012 than five years earlier, and jobs were down by more than 2 million. Manufacturing is continuing its trend of using more machines and technology and fewer workers in its production. Also, many manufacturing firms simply didn’t survive the recession.
There were also big shifts within manufacturing. Important for North Carolina, textiles, apparel and furniture all retreated on every measure -- number of firms, value of output, payroll and employment -- between 2007 and 2012. In contrast, food, chemical, machinery and transportation equipment manufacturing gained in value of output -- although not in numbers of workers. This says that even for manufacturing firms that are making and selling more, employment opportunities may be sparse.
To me there are three big “take-aways” from all these 2012 Economic Census numbers. First, business made some gains between 2007 and 2012, despite the horrific recession. Second, our economy is -- as it always has been -- in a state of change and transformation: Some businesses are expanding while others are shrinking. Third, output and jobs don’t necessarily go together. With the increasing use of machinery and advanced technology, more of our economy can run without workers.
So, based on these new numbers describing our economy, are there more sunny or cloudy economic days ahead? You decide!
Mike Walden is a William Neal Reynolds Distinguished Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of North Carolina State University’s College of Agriculture and Life Sciences.