America’s FIRE Economy

We suspect you’ve seen a version of the following chart, which illustrates the secular decline in manufacturing and the rise of finance, insurance, and real estate (FIRE) in proportion to U.S. GDP.   We’ve added a few years to the data series to give a better historical perspective of what’s taken place in the U.S. economy over the past 60 years.   Note the crossover in 1986 and depending on where you sit it was either the Death Cross or the Golden Goldman Cross.

(click here if chart is not observable)

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19 Responses to America’s FIRE Economy

  1. Pingback: Manufacturing vs Finance Insurance Real Estate | The Big Picture

  2. MSM says:

    Innovation in manufacturing has been a big contribution to its declining share. Productivity really has improved, in addition to the off shoring, and its increase has arguably been a sign of material progress.

    The innovations of the FIRE sector seem to have more to do with reaping the rewards of the manufacturing and other sectors rather than contributing to societal economic benefit, per se.

    • Anonymous says:

      This is not labor force participation, which would be explained by productivity increases, it’s GDP or productivity participation vs the rest of the economy. In that sense, productivity is already reflected, and manufacturing is nevertheless in decline, proportionally speaking.

  3. bill says:

    Do you have or know how to get a data for occupied space by these sectors over time. How does comparative employment look? Anyway, nice chart. Thanks.

  4. Pingback: Manufacturing vs Finance Insurance Real Estate | Ace Campaign

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  6. Denis says:

    Seems like biased chart porn…

    How about adding a second chart that shows by how much the industrial sector’s output grown (in value) since 1947?

    And while we’re at it, how about tossing agricultural output and share of the economy as well, with a series beginning in the 19th century.

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  8. Bad point, do you think there was death cross for agriculture in the US vs. manufacturing? Let us all weep and holler at the demise of agriculture at http://seekingalpha.com/article/251420-parsing-out-january-s-ism-report-what-decline-in-manufacturing

    • macromon says:

      This is no point, it’s just the data. I do think given the secular weakness of the dollar’s purchasing power, manufacturing is about to make a big comeback. Especially if Obama can cut a deal on the corporate tax rate.

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  14. A. Sevins says:

    People need to realize that neither of these intertwined economies can GROW forever in this physically finite world, with global crude oil production peaking in 2006.

    Declining EROEI causes oil prices to invariably rise in a bouncing supply/demand cycle as bell-curve depletion seals the fate of cheap-oil-based growthism. Coal and natural gas follow the same curves, just delayed a few decades, but oil is more versatile and critical.

    The assumption of endless cheap energy is at the core of any grow-forever economic model, and it needs to be ditched for a reality check. The scale of FIRE economy was a luxury of the cheap energy golden years.

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