A statistical nod to cubicle workers

The Census tries to keep tabs on the key, and overlooked, service economy.

They are defined as waitresses or accountants, software publishers or garbage collectors. Some pull in top dollar, some the minimum wage. Some are in thriving industries, others face the threat of offshore outsourcing.

What they have in common is jobs in the service sector - a vital and growing segment of the US economy whose role until now has been poorly reckoned in government surveys.

The US Census Bureau Monday took a step to change that, unveiling a new quarterly report to provide better and more timely information on the nation's service economy. It's the first time in 40 years that the Census Bureau has launched a new "indicator," agency parlance for an ongoing regular survey.

The new numbers are a reminder of the transformation of an economy that was once largely agricultural, then industrial, before the era of cubicles and word processors. Services now account for more than two-thirds of national output, or gross domestic product.

The data could influence policy decisions from the Federal Reserve to corporate corner offices in areas where, as one economist puts it, "mistakes can be extremely costly."

"We like to think we know about ups and downs," says Lee Price, research director at the Economic Policy Institute, who worked at the Commerce Department in 2001. Problems estimating the software industry, he says, were a miscalculation that moved GDP slightly, crystalizing the need for better information. "We [haven't had] a good way of measuring those ups and downs."

The new report provides a faster pace of data, after years of annual reporting by the Census Bureau.

First report shows growth

Monday's snapshot showed growth (unadjusted for seasonal variation) in three types of services. The Census Bureau launched its report with a focus on these industries due to their volatility:

• Information industries, ranging from newspapers to movies and data processing, saw revenue grow 4.4 percent in the three months that ended June 30, compared to the previous three months. Revenue had fallen by 5.2 percent in the quarter before that.

• Professional, scientific, and technical services, had revenue growth of 6.3 percent in the most second quarter (ending in June), after a drop of 0.3 percent in the year's first quarter.

• Administrative, support, and waste-management services posted revenue growth of 5.6 percent after growing 1.2 percent in the first quarter.

Those three categories of services together account for 15 percent of GDP.

Commerce Secretary Donald Evans announced last week in a statement that the new data will "help close a critical measurement gap in the US economy."

Mr. Price says the Commerce Department focused on sectors in which output tends to vary. The data, which will be released a little over two months after the end of each quarter, are not as timely as manufacturing measures. Nor are they expected to be seasonally adjusted for about four years.

The so-called Quarterly Services Survey will expand in 2005 to include other service areas - hospitals, nursing, and residential care facilities.

Vast shift toward services

The economy's gradual shift toward services has been relentless, but sometimes deceptive.

Chicago's candy-factory workers and New York's longshoremen have long been overtaken by financial-service employees. In Boston, where shoe manufacturing plants have turned into biotech firms, the service sector now represents some 46 percent of all jobs in the city (up from 25 percent in 1970), according to one report. Nationally, in the 1960s the services industry accounted for only 42.8 percent of GDP, according to the Bureau of Economic Analysis.

To many Americans, the shift is profoundly unsettling. In some areas there is a perception that manufacturing provided more stable work. "There is a common feeling [that] steel and auto, those are real jobs," says Jeffrey Frankel, a professor at the Kennedy School of Government at Harvard University. In part, it's the idea that making a car is more tangible than, say, assessing foreign currencies.

Dean Baker, codirector of the Center for Economic Policy Research, a Washington think tank, says society has exaggerated changes in the new economy. The lines between services and manufacturing can be "blurry." For example, accounting that was once done in-house for a manufacturing company was once counted as manufacturing; now it is contracted out and categorized as a service.

Manufacturing remains a vital part of the economy, but productivity increases have allowed factories to do more with fewer workers. And from computers to textiles, many goods once made here are being imported from overseas.

That, coupled with the expansion of services from healthcare to restaurants, has changed the balance of jobs in America - and changed the overall economy.

Business cycles have historically revolved around inventories - and their buildups - in manufacturing. That's not an issue in most services, which "should dampen the cycles," says Mr. Baker. In fact, he says, they already have.

That doesn't mean services aren't volatile, though. The recession of 2001 proved that, Price says. Until then, there had been an assumption that the services industry was stable. But beyond education, government, and health, "certain parts of the nongoods sector are quite volatile," says Price.

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