While the media has been rightly focused on first quarter GDP and April employment numbers, which showed that the economy grew by a modest 0.6 percent in Q1 while overall employment edged down in April for a fourth consecutive month, the Commerce Department released a separate report last Tuesday on GDP by Industry for 2007 that you might find interesting.
According to the report, which breaks down the economy (GDP) by contributions by industry (as opposed to the typical Consumption+Investment+Government+Trade), the GDP grew by 2.2 percent in real terms on an annual basis last year. The manufacturing sector edged out the overall economy and grew a slightly faster 2.3 percent in 2007.
Here are some highlights of the report.
Manufacturing accounted for 11.7 percent of GDP last year, the same share as 2006 and virtually the same as the 11.9 percent in 2005.
Six of the 15 major industrial sectors, accounting for roughly a third (36 percent) of the overall economy grew faster than manufacturing last year. The Information sector (4.7 percent of GDP) grew the fastest, advancing 9 percent in 2007. The only individual sector larger than manufacturing which also grew faster than manufacturing was Professional Services, which at 12.2 percent of the economy grew by 4.6 percent last year.
8 sectors, accounting for roughly half (52 percent) of GDP grew slower than GDP. Not surprisingly, the only sector where there was an outright decline was construction. Following a 6 percent decline in 2006, construction GDP, which accounts for 4 percent of the overall economy, fell by 12.1 percent last year. This is the biggest yearly decline going back to 1988.
Over the course of the current expansion, the manufacturing sector has grown in tandem with the overall economy. From 2001 to 2007, manufacturing GDP has risen by 16.7 percent, nearly identical to the 16.9 percent rise in overall GDP.
During the ongoing presidential campaigns, the issue of NAFTA (the North American Free Trade Agreement) has repeatedly come up. Some have claimed that NAFTA has been bad for the U.S. economy and has contributed to the deindustrialization of America.
Well, with the latest data now available, here is what the facts show. In the 14 years since NAFTA went into effect, the U.S. economy has grown by 54 percent, which is 17 percent more than the 46 percent rise in GDP during the 14 years prior to NAFTA. At the same time, the manufacturing sector increased by 61 percent between 1993 and 2007, which is nearly 80 percent faster than the 34 percent rise in manufacturing GDP during the 14 years prior to NAFTA’s implementation (1979-1993).
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