27 Charts That Will Change How You Think About The American Economy - Vox

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Bill Pugliano / Getty
27 charts that will change how

you think about the American
economy
by Timothy B. Lee on October 10, 2016
The US economy is changing — and not always in the ways people

expect. Fewer people are working in the manufacturing sector, yet
we're producing more manufactured goods than ever. In many
ways, the US economy is less dynamic than is commonly believed
— the number of startups is dropping, people are changing jobs
less often, and worker productivity is growing at its slowest pace
in decades.
Meanwhile, American cities are

enjoying a renaissance, with job growth This article is part of New Money (
and home prices soaring in the biggest http://www.vox.com/new-
money), a new section on
cities. Read on for 27 charts that show economics, technology, and
the surprising evolution of the US business.
economy.
A massive shift from goods to services
1 Yes, America still makes things

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Manufacturing sector: real output
Declining manufacturing employment over the past

30 years has given a lot of people the impression
that America's manufacturing sector is in decline.
But that's actually wrong, as this chart shows.
Since 1987, US manufacturers have increased their
output by 80 percent at the same time as they
have reduced their workforce by about 17 percent.
In other words, American factories are about twice
as efficient today as they were three decades ago.
So we're producing more and more stuff, even as
we use fewer and fewer people to do it.
2 Manufacturing employment is
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dwindling, while more and more
people provideservices
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Employment in goods and
services
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In 1965, 20.6 million people worked in industries

that produced goods like clothing, cars, or
airplanes. Now, 50 years later, there are a million
fewer people working in these same industries —
despite the fact that the US population is about 60
percent larger. Meanwhile, jobs in the service
sector — like nursing, teaching, waiting tables, and
selling real estate — have exploded, with more than
three times as many people doing them today as in
1965.
3 Services keep getting more

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expensive while manufactured
goods get cheaper
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If you ask a middle-class American family about the

biggest sources of financial stress in their lives,
they're unlikely to name basics like food, clothing,
or even transportation. Instead, American families
worry about the soaring costs of college tuition,
health insurance, and child care. And this isn't a
coincidence — in fact, it's the flip side of the trends
shown in the previous two charts. The US
manufacturing sector has enjoyed big productivity
gains, but the inherently labor-intensive service
sector hasn't seen the same efficiency gains. As a
result, the cost of these services — relative to the
overall inflation rate — has zoomed upward,
consuming more and more of our spending. The
cost of housing has also risen, but for different
reasons having to do with the scarcity of land and
regulations limiting high-density development.
Image credit: Timothy B. Lee / Vox
A very long-term perspective on

4 ( https://www.facebook.com/sharer/sharer.php?
interest rates
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term%20perspective%20on%20interest%20rates)
The yield on a 10-year Treasury bond — that is, the

interest rate the government pays when it borrows
money for 10 years — is below 2 percent. Interest TWEET SHARE
rates tend to move together, so this also means
that the interest rate you pay to buy a house — as
well as the interest rates you can get from a savings
account — are also at record lows. That freaks out a
lot of people because they remember the much
higher interest rates of the late 20th century and
worry that today's very low rates are a sign that
something has gone badly wrong with the
economy.
But taking a much longer view suggests a different

interpretation. From the nation's founding until
about 1950, interest rates were on a clear
downward trend. This makes sense: As society
gets richer, there's more money available to lend,
and so the price to borrow money naturally goes
down. From this perspective, the high interest
rates of the 1970s, '80s, and '90s look like an
aberration driven by the unusually high inflation of
that era. And today's low rates look more like the
resumption of a 200-year trend toward ever-lower
borrowing costs. So don't panic — enjoy your 3.5
percent mortgage.
A disappointing recovery
5 A big economic mystery: What

happened to the missing output?
economy&text=A%20big%20economic%20mystery%3A%20What%20happened%20to%20the%20missing%20output%3F)
Most recessions are followed by a period of faster-

than-usual catch-up growth. This means that in the
absence of a catastrophic event like a war or an
epidemic, there's no reason for the US economy to
suffer a big, permanent decline in output. Yet as
this chart shows, that's exactly what happened in
the wake of the 2008 financial crisis. Between mid- TWEET SHARE
2007 and mid-2009, inflation-adjusted national
output fell by 3.5 percent. Since the economy
normally grows at about 3 percent per year
(illustrated by the dotted red line), this means the
economy fell about 9 percent behind its pre-2007
growth trend. And because the economy never
experienced a period of rapid catch-up growth,
that lost output appears to be gone for good.
Image credit: FRED
 6 Productivity is growing at its

slowest pace in decades
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Economic progress ultimately occurs because we

figure out ways to produce more stuff with every
hour of work. In the long run, if workers don't
become more productive, then they can't earn
higher wages. So there's reason to worry about the
fact that productivity per hour grew at just 1
percent per year between 2010 and 2015 — that's
the slowest pace of the postwar period. If this
slowdown continues in the coming years, it will
mean much slower improvement in living standards
than occurred during the 20th century.
Image credit: Javier Zarracina / Vox.com
7 Fears of out-of-control inflation

have proven unfounded
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Inflation rate
Percent change in the consumer price level from one year
earlier
Percent change
From the 1960s through the 1990s, the main

concern of the Federal Reserve, America's central
bank, was to keep inflation rates down. The
problem reached its apex with an inflation rate of
13 percent in 1980. So when the Fed cut interest
rates to zero in 2008 — and then kept printing more
money — a lot of people warned that inflation
would come roaring back. But these inflation hawks
were wrong. After eight years of near-zero interest
rates, inflation has remained stuck below the Fed's
2 percent target. And while that might seem like
something to celebrate, too little inflation can be a
sign that the Federal Reserve isn't doing enough to
support the economy.
 8 America is getting older — and that

matters
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As life expectancy has grown and fertility rates

have declined, the fraction of the population over
age 65 has steadily increased. And thanks to the
demographic bulge of the baby boom, the over-65
share is growing faster during the current decade
than ever before. This has serious economic
consequences. Research suggests (
http://www.vox.com/a/new-economy-
future/aging-population-slow-growth) that the
drag from an aging population could be making a
significant dent in the overall rate of economic
growth. And of course it's also going to require
adjustments in programs like Medicare and Social
Security to allow a smaller share of workers to
support a rapidly growing retired population.
Image credit: Rcragun / Wikimedia Commons (

https://commons.wikimedia.org/wiki/File:Percentage_of_US_Population_Over_Age_65_1950-
2050.png)
9 Don't blame robots for job losses

economy&text=Don't%20blame%20robots%20for%20job%20losses)
There's a lot of concern about the possibility of

robots displacing human workers and causing
mass unemployment. But this chart from the
International Federation of Robotics helps to put TWEET SHARE
those concerns into perspective. It shows that the
global supply of robots in 2014 was 229,000. That's
a big jump from the 178,000 robots sold in 2013.
But in absolute terms, it's a tiny number in a world
where workers number in the billions. Even if robot
sales continue to grow at a rapid pace, it will take
many years before there are enough robots to pose
a significant competitive threat to human workers.
Image credit: International Federation of Robotics (

http://www.ifr.org/industrial-robots/statistics/)
Big changes in how we live and work
10 Average workers' wages have been

falling far behind productivity
growth
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For the first few decades after World War II,

productivity growth and wage growth went hand in
hand. Workers produced more and more per hour,
and they were rewarded with higher and higher
wages. But in the 1970s, this tight connection
between productivity and the wages of the median
worker started to break down.
Workers have continued to get more productive

over the past 40 years. But median compensation
— which includes cash income as well as benefits
like health insurance — hasn't kept up. Some of the
gap may reflect technical issues (
http://blogs.wsj.com/economics/2015/09/08/inside- TWEET SHARE
the-fight-over-productivity-and-wages/) with the
way these figures are adjusted for inflation. And a
large portion of the gap reflects growing inequality
among workers. The highest-earning workers have
seen their incomes rise along with productivity
growth, which isn't reflected by median income
figures. Still, it appears that the traditional link
between productivity growth and wage growth is
broken.
Image credit: Josh Bivens and Lawrence Mishel, Economic Policy Institute (
http://www.epi.org/publication/understanding-the-historic-divergence-between-productivity-
and-a-typical-workers-pay-why-it-matters-and-why-its-real/)
 11 A college education keeps getting

more valuable
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The growing returns to education
Median weekly earnings in 2014 dollars of people 25 years
and older
. K
. K
. K
Wage growth has been weak over the past 40

years, but the trend has been much worse for
those without a college degree. In 1979, the typical
worker with a college degree earned 38 percent
more than a worker with just a high school diploma.
By 2014, this college wage premium had risen to 78
percent.
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12 People have been dropping out of

the labor force since about 2000
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Labor force participation rate
The labor force participation rate measures the

fraction of the civilian, non-institutionalized
population, age 16 or over, that is either working or
looking for work. At the peak of the dot-com boom,
this figure reached 67 percent. That represented
an all-time high — a high that we haven't come
close to regaining over the past 15 years.
Participation in the labor force declined during the
2001 recession and then declined even more
dramatically between 2008 and 2010. The result:
Labor force participation is now at its lowest level
since the 1970s.
13 Men have been drifting out of the

labor force for decades
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Labor force participation rate by
gender
That last fact — that labor force participation is at

its lowest level since the 1970s — sounds pretty
alarming. But it's helpful to look separately at labor
force participation for men and women. The big
increase in labor force participation we saw
between 1965 and 2000 was driven by women
entering the workforce. Meanwhile, the
participation rate among men has been slowly but
steadily declining for as long as the Labor
Department has been keeping statistics. And over
the past decade, women have started to behave
the same way, slowly reducing their participation in
the workforce. So the declining labor force
participation of the past 15 years may simply be a
natural consequence of a society that keeps
getting wealthier.
 14 People do less job hopping than you

think
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Lots of people think that America has undergone

massive shift in its work culture. We used to devote
our careers to a single company, the story goes,
but now we're all free agents switching jobs every
couple of years. But this chart, taken from an
excellent report (
https://www.ebri.org/pdf/notespdf/EBRI_Notes_02_Feb15_Tenure-
WBS.pdf) by the Employee Benefit Research
Institute, shows that this story is greatly
overstated. It is true that fewer men are spending
their careers at a single company than they did a
few decades ago. But few women have ever had
that opportunity, and even among men it's always
been atypical.
Image credit: Employee Benefit Research Institute, based on BLS data
 15 The teen summer job is going out of

style
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Teen summer employment
July employment-to-population ratio for teens ages 16 to 19
As late as 1989, almost 60 percent of teens ages 16

to 19 had a summer job. But teenagers are working
less, especially during the summer months. Teen
summer employment fell to an all-time low of 31
percent in July 2011. It's rebounded a bit since
then, to 36 percent, but there are still way fewer
working teens than there were a generation ago.
This is partly because teens are working less year-

round: The number of 16- to 19-year-olds working
in February fell from 39 percent in 1994 to 28
percent in 2016. But the fall in July employment
— from 54 percent in 1994 to 36 percent in 2016
— has been much bigger.
16 More and more women are having

children before getting married
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In 1970, a typical American woman would get

married around age 21 and then have her first child
a year or two later. Since then, women have been
waiting longer for both of these milestones, but the
change has been larger for marriage. As a result,
the average woman in 2011 was having her first
baby a year before getting hitched. Of course,
these averages hide a lot of individual variation. In
1970, women without a high school diploma were
already having kids slightly earlier, on average, than
they got married — but the gap grew to five years
by 2010. On the other hand, while college-
educated women have been getting married later,
the gap between marriage and childbirth has
stayed about the same — at three years — over the
past half-century.
Image credit: National Marriage Project (

http://nationalmarriageproject.org/wp-content/uploads/2013/04/KnotYet-
FinalForWeb-041413.pdf)
Married, two-earner families

continue to enjoy income gains
economy&text=Married%2C%20two-
earner%20families%20continue%20to%20enjoy%20income%20gains)
The growing polarization of people's marriage

patterns seems to be connected to greater
economic polarization. Obviously, it's inherently
difficult — financially and otherwise — to raise a TWEET SHARE
child as a single parent. On the other hand, things
have gone pretty well for married couples with
both spouses working. Their earnings have
continued to rise steadily over the past 50 years,
surpassing $100,000 per year by 2015. Of course,
the causation could run in both directions: Getting
married could provide financial and emotional
support that helps people succeed at work, while a
challenging financial situation may make it more
difficult for people to become and stay married.
Image credit: American Enterprise Institute (

https://twitter.com/Mark_J_Perry/status/776040214556991488)
The urban recovery
 The current recovery is an urban

18 ( https://www.facebook.com/sharer/sharer.php?
recovery
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In the economic boom of the 1990s, most of the

job gains came in less populated areas — like outer-
ring suburbs and smaller cities. This seemed to
make perfect sense because big cities were
already densely populated, leaving little room for
further development. But as this chart from the
Economic Innovation Group (
http://eig.org/recoverymap) shows, the current
economic recovery has turned this logic on its
head, with the biggest cities enjoying the strongest
job gains.
Image credit: Javier Zarracina / Vox
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Was the housing bubble really a

19( https://www.facebook.com/sharer/sharer.php?
bubble?
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economy)
Inflation-adjusted housing prices
Change in same-home prices, adjusted for inflation, 1890 =
100
When the housing market crashed in 2008, a lot of

people became interested in this data from Yale
economist Robert Shiller. The index is computed
by comparing sale prices of the same home at
different times, providing an estimate of how
housing costs have changed holding the quality and
size of homes constant. It shows that for much of
American history, home prices were fairly constant,
with two big outliers. One was a big drop in housing
prices between the world wars. The other was a 70
percent rise between 1996 and 2006. Between
2009 and 2012, a lot of people projected that
home prices would return to the "normal" levels we
saw between 1946 and 1996. But that didn't
happen. Instead, average prices hit bottom in 2012
(still well above 1996 levels) and resumed their
upward march.
20 Housing prices have grown a lot
TWEET SHARE
faster than construction costs

economy&text=Housing%20prices%20have%20grown%20a%20lot%20faster%20than%20construction%20costs)
In a normal, competitive market, the price of a

product should rise and fall along with the cost of
producing that product. But this chart, created by
White House adviser Jason Furman using research
by Joseph Gyourko and Raven Molloy (
http://realestate.wharton.upenn.edu/research/papers/full/782.pdf),
shows that this relationship has broken down in the
housing market. Since 1980, there's been little
overall change in average, inflation-adjusted
construction costs. Yet housing prices — adjusted
for the size and quality of homes — have risen
about 60 percent. This likely reflects the scarcity of
land in desirable areas as well as housing
regulations that have limited the amount of housing
that can be constructed.
Image credit: Jason Furman (

https://www.whitehouse.gov/sites/default/files/page/files/20151120_barriers_shared_growth_land_use_regulation_and_economic_rents.pdf)
Apartment buildings are the new

McMansions
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The housing boom of the 2000s was mostly a

boom in the construction of single-family homes —
mostly at the edge of urban areas. But demand for
these exurban housing developments crashed
after 2007, and since then we've seen a big shift in
housing construction. Today, we're building fewer
than half as many new single-family homes per year
as we did at the peak of the housing boom in 2006.
On the other hand, construction of multi-family
housing has fully rebounded to the levels of the
2000s, and could go even higher if demand for
housing in high-density areas continues to grow.
Image credit: Jason Furman (

https://www.whitehouse.gov/sites/default/files/page/files/20151120_barriers_shared_growth_land_use_regulation_and_economic_rents.pdf)
Booms in smartphones and oil
 22 People are now buying a lot more

smartphones than PCs
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The PC revolution that began in the 1980s was a big TWEET SHARE
deal. But the smartphone revolution Apple

launched with the iPhone in 2007 has the potential
to dwarf the PC — at least if you measure by the
number of users directly affected. PC adoption was
always concentrated among more affluent users in
richer countries. In contrast, the smartphone
revolution is on track to be truly universal, with
many poor people skipping PC ownership and
getting a smartphone instead.
In the US, smartphones have already reached

about 80 percent of the population, and globally
they're expected to reach billions more over the
coming decade. That has helped make Apple and
Google two of the world's most valuable
companies, and it's paved the way for smartphone-
based services like Uber and Lyft.
Image credit: Benedict Evans / Andreessen Horowitz
 23 America is becoming less and less

dependent on foreign oil
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Throughout the 1990s and early 2000s, America

was importing more and more oil and other
petroleum products, prompting concerns that the
US was becoming "dependent" on foreign sources
of oil. These concerns never made a ton of sense
given that US allies like Canada, Mexico, and the
United Kingdom are major oil producers — and
because major oil exporters are as dependent on
American money as we are on their oil. But in any
event, technological advances such as fracking
have dramatically reduced America's dependence
on foreign oil over the past decade. America's net
imports of crude oil and petroleum products
declined from 12.5 million barrels per day in 2005 TWEET SHARE
to 4.7 million in 2015. (
According%20to%20the%20Energy%20Information%20Administration</a>,%20in%202015,%20
Image credit: (
According%20to%20the%20Energy%20Information%20Administration</a>,%20in%202015,%20just%20)US
Energy Information Administration
A changing investment climate
 The way Americans retire is

changing
economy&text=The%20way%20Americans%20retire%20is%20changing)
In the mid-20th century, it was relatively common

for employers to offer a defined benefit pension.
Under this system, retired workers received a fixed
monthly payment determined by factors like years
of service and final salary at retirement. But in the
1980s, employers started to shift their employees
toward "defined contribution" retirement plans like
the 401(k). Under this system, employee savings
are invested in stocks or bonds, and an employee's
retirement income depends on how well these
investments perform. The new system has some
big advantages — it's more portable between
employers, and employees don't have to worry
about having their benefits reduced if a former
employer goes out of business. But it also shifts a
lot more risk and responsibility onto employees. If
an employee fails to contribute consistently to his
account — or chooses investment funds that have
excessive risks or high fees — he could wind up
without much of a nest egg during his retirement
years.
Image credit: Employee Benefit Research Institute (
https://www.ebri.org/publications/benfaq/index.cfm?fa=retfaq14) TWEET SHARE
 The racial savings gap is growing

economy&text=The%20racial%20savings%20gap%20is%20growing)
White workers earn more, on average, than black

workers, and this chart shows the cumulative
result of that earnings gap over the course of a
career. It also shows that — despite laws banning
discriminatory practices like mortgage redlining (
https://en.wikipedia.org/wiki/Redlining) — the
wealth gap between white and black families has
increased over the past 30 years.
It's also important to note that things aren't so rosy

even for many white families. Whites' average
savings of $130,000 is only enough to generate
retirement income of around $500 per month. And
this average is skewed upward by a minority of
white families with much more than $130,000
saved, putting them on track for a comfortable
retirement. On the other hand, the median white
family in 2013 had just $5,000 saved for retirement
— meaning that half of white (and nonwhite)
families have even less than that. Most of these
families will be entirely dependent on Social
Security for their retirement incomes.
Image credit: Urban Institute ( http://apps.urban.org/features/wealth-

inequality-charts/)
 The decline of the tech IPO

TWEET SHARE
economy&text=The%20decline%20of%20the%20tech%20IPO)
In the 1980s and '90s, the goal of most technology

startups was to offer their shares on the public
stock market. This process, known as an initial
public offering (IPO), made it possible for anyone to
participate in the technology boom by buying
shares in companies like Apple, Microsoft, Amazon,
and Yahoo. It allowed a startup's founders and early
employees to cash out by selling some of their
shares, and it made it easier for companies to raise
money by issuing shares. But since the dot-com
boom ended in 2000, companies have been
waiting longer and longer to go public. Amazon
went public in 1997 (
https://www.cnet.com/news/amazon-com-ipo-
skyrockets/), less than three years after its
founding, when it was worth just $400 million. In
contrast, Facebook waited until 2012 — eight years
after it was founded — when it was already worth
more than $100 billion. Uber has raised $11 billion (
http://www.vox.com/2014/12/4/7336433/uber-
worth-) from private sources and has no plans to
go public. The result: Non-wealthy investors now
rarely have the chance to invest in small tech
startups the way they could before 2000.
Image credit: Benedict Evans, Andreessen Horowitz
 ( 27
Americans are starting fewer
https://www.facebook.com/sharer/sharer.php?
startups than ever
economy&text=Americans%20are%20starting%20fewer%20startups%20than%20ever)
TWEET SHARE
High-flying technology startups like Uber and

Airbnb get a lot of attention in the media, but as
this chart shows, startups are becoming more and
more rare. Of course, most of these startups are
not — and never have been — efforts to create the
next billion-dollar technology company. Many are
small-scale, local affairs like restaurants, auto
repair shops, or IT consulting firms. And to some
extent, the decline reflects slowing population
growth — with more new people in general, there's
less need for new businesses to serve them. Still,
new firms are an important source of new ideas
and innovations, so declining entrepreneurship
could be contributing to America's growth
slowdown.
Image credit: Inc ( http://www.inc.com/magazine/201505/leigh-

buchanan/the-vanishing-startups-in-decline.html)

27 Charts That Will Change How You Think About The American Economy - Vox

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27 Charts That Will Change How You Think About The American Economy - Vox

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Bill Pugliano / Getty

27 charts that will change how

The US economy is changing — and not always in the ways people

Meanwhile, American cities are

A massive shift from goods to services

1 Yes, America still makes things

Declining manufacturing employment over the past

In 1965, 20.6 million people worked in industries

3 Services keep getting more

If you ask a middle-class American family about the

Image credit: Timothy B. Lee / Vox

A very long-term perspective on

The yield on a 10-year Treasury bond — that is, the

But taking a much longer view suggests a different

5 A big economic mystery: What

Most recessions are followed by a period of faster-

Image credit: FRED

 6 Productivity is growing at its

Economic progress ultimately occurs because we

Image credit: Javier Zarracina / Vox.com

7 Fears of out-of-control inflation

From the 1960s through the 1990s, the main

 8 America is getting older — and that

As life expectancy has grown and fertility rates

Image credit: Rcragun / Wikimedia Commons (

9 Don't blame robots for job losses

There's a lot of concern about the possibility of

Image credit: International Federation of Robotics (

Big changes in how we live and work

10 Average workers' wages have been

For the first few decades after World War II,

Workers have continued to get more productive

 11 A college education keeps getting

Wage growth has been weak over the past 40

12 People have been dropping out of

The labor force participation rate measures the

13 Men have been drifting out of the

That last fact — that labor force participation is at

 14 People do less job hopping than you

Lots of people think that America has undergone

Image credit: Employee Benefit Research Institute, based on BLS data

 15 The teen summer job is going out of

As late as 1989, almost 60 percent of teens ages 16

This is partly because teens are working less year-

16 More and more women are having

In 1970, a typical American woman would get

Image credit: National Marriage Project (

Married, two-earner families

The growing polarization of people's marriage

Image credit: American Enterprise Institute (

The urban recovery

 The current recovery is an urban

In the economic boom of the 1990s, most of the

Was the housing bubble really a

When the housing market crashed in 2008, a lot of

faster than construction costs

In a normal, competitive market, the price of a

Image credit: Jason Furman (

Apartment buildings are the new

The housing boom of the 2000s was mostly a

Image credit: Jason Furman (