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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

February 3, 2015 at 10:34 AM

Advanced industries: The news is promising and scary

The most arresting finding in a new report on advanced industries in the United States is that employment in these fields has been stagnant since 1980.

First, though, a little sugar. The Seattle-Tacoma-Bellevue metropolitan area ranks very well in the new Brookings Institution report. Using 2013 data, we were:

  • No. 2 out of 100 metros in advanced industries’ share of all jobs (16 percent; almost twice the national average);
  • No. 5 in share of total output (32.6 percent);
  • No. 7 in output ($80.2 billion);
  • No. 9 in  total jobs in advanced industries (295,010);
  • No. 20 in change in output from 2010-2013 (5.7 percent)
  • No. 25 in change in jobs (4.2 percent).

Our largest advanced sectors are aerospace; software publishers; computer systems design; architectural, engineering, and related services; and management, technical and scientific consulting.

Our challenge is that we’re very deep in the top two sectors, but not nearly as broad as the most competitive metros (as pointed out in my Sunday column on Seattle and Boston).

The sectors are important because, as the report states:

These industries encompass the nation’s “tech” sector at its broadest and most consequential. Their dynamism is going to be a central component of any future revitalized U.S. economy. As such, these industries encompass the country’s best shot at supporting innovative, inclusive, and sustainable growth.

They also pay more than twice what the average worker makes and have grown well over time, adjusted for inflation, while so many have seen their earnings stagnate or even fall.

Here’s a quick look at how selected Northwest metros stack up against the 100 measured on the share of advanced industry jobs in their economy:

  • Boise, 56th;
  • Portland, 17th;
  • Spokane, 80th.

But the report contains several sobering conclusions, including the one with which I began this column. Indeed, our employment is low compared with other advanced countries and falling rapidly.

In addition, the United States runs a trade deficit on most advanced industries (aerospace is an exception). We’re losing ground to other countries despite having the most productive such sectors on the planet.

“Overall,” the report says, “the geography of U.S. advanced industries has narrowed.” In 1980, 59 of the 100 largest metros had at least 10 percent of their workforce in advanced sectors. But only 23 major metros had those concentrations by 2013.

 

In addition, the American advantage is slipping because of cutbacks in R&D. “For example, the U.S. share of global R&D and patenting is falling much faster than its share of global GDP and population, meaning that U.S. slippage cannot simply be attributed to demography or macroeconomic convergence. Likewise, America’s research dominance looks less impressive after adjusting for the size of its working age population.”

One of the major recommendations of the report concerns training and education. For example, the United States ranks 32nd among developed countries in graduates with majors in science, technology, engineering and math. But I’m not sure more STEM majors alone is going to cut it.

One problem is the massive offshoring of advanced industry jobs, exemplified by the loss of domestic scaling and innovation in high-tech  lamented by Andy Grove in a famous essay. All the incentives, especially from Wall Street, are geared to sucking maximum profitability in the short run. No wonder these sectors have suffered. There are also problems with “rent seeking” in patents and other barriers to innovation. And federal R&D spending, which was essential to establishing America’s lead, has been falling in most areas in recent years.

So STEM is fine. But policy must be changed across the board to recapture the full potential of these future-leaning industries. Otherwise, we’ll have plenty of math majors working as barristas.

You can read the report here, including interactive features.


Today’s Econ Haiku:

Glum, but I’m still in

This bad call didn’t end up

Causing recession


 

Comments | More in Tech economy | Topics: Advanced industries, Northwest economy, Seattle economy

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