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Jobs:The Tangible Sector Takes it On the Chin

Posted by: Michael Mandel on February 06

This morning’s employment report was absolutely horrible, with the unemployment rate rising to 7.6% and almost six hundred thousand jobs lost, in just one month.

But in the midst of the gloom, it’s essential to point out that the damage is still concentrated in the ‘tangible sector’—that is, those industries which either produce,move, or distribute physical goods. In January the percentage of job losses coming from the tangible sector fall somewhere in the range of 75%-85%. (The exact number depends on how many of the temporary help layoffs are in manufacturing, construction, and retail—there’s no way to tell).

Meanwhile, the jobs losses in the intangible sector are much more moderate. Education and healthcare are still growing, and other intangible-producing industries have relatively small losses.

This fits the hypothesis that there is a global oversupply of productive capacity for goods (see Peter Coy’s deflation story this week).

More later.

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Reader Comments


February 6, 2009 10:54 AM

That's a reasonable theory, but two questions come to mind:
1. Is it (an economy built on the intangible sector) sustainable?
2. If the answer is a qualified yes, can we break down the intangible sector more? Clearly, our economy can't subsist only on education and health care, but not all services are created equal.

Larry Geater

February 6, 2009 02:15 PM

When you refference andther article could you please provide a link?


February 6, 2009 02:49 PM

How does that end up balancing the current account?


February 6, 2009 08:08 PM

I agree that we have a global over- supply in the tangible sector.The over-supply resides mostly outside the US and therefore the rest of the world will suffer the most when we finally learn to live within our means.The sooner we get there the better and all these bailouts will only postpone the date,but will saddle our kids and grandkids with trillions of dollars of additional debt!!


February 7, 2009 03:39 PM

If there is an oversupply of goods, doesn't that sort of imbalance correct itself within the course of 6-9 months? Inventory corrections never take longer than that on a macro level.


February 7, 2009 07:25 PM

For how long can my intangible spirit remain healthy if my tangible body is sick?
Time will tell me the answer.

Joe Cushing

February 8, 2009 09:26 AM

What happened to the 300,000,000 Chinese consumers that are supposed to be coming online?


February 8, 2009 11:42 AM

Maybe the Chinese know better than to buy a lot of the junk they make for Wall-Mart?
My friend's wife is from China, and she says a running joke there is "Who buys this junk?!?!"


February 9, 2009 02:53 PM

they do if consolidation of companies is required to reduce production, but governments keep bailing out the local suppliers. The existing players know they can't cut production too much and remain competitive, but the market isn't "allowed" to kill them. Or they are they are a division of a parent company trying to get into a new market and don't buy that the consumption reset is permanent.
Think DRAMs, PCs, flash memory, cars, telecoms, heavy manufacturing, cell phones, general consumer electronics, etc. There are plenty of examples. It's so much easier to go after an existing market (even one with overcapacity) than to try to create a new one that has a high likelihood of generating significant profit or employment. Welcome to modern capitalism.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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