A Lost Decade?

By Marshall J. Vest

Three months ago, we presented data on high-tech that showed employment levels lower today
than a decade ago. That measure includes more than 40 four-digit NAICS categories spread
across both manufacturing and service sector industries. Services-related accounts for roughly
two-thirds of total high tech employment.

High tech is not the only sector that has suffered. Professional and business services jobs are no
higher than in 2000. State government payrolls now rest at the lowest level since 1999. The information
sector is now back to 1996 levels. Construction employment now stands at levels first
reached in 1994. Finally, manufacturing jobs are the lowest since 1982 – almost three decades
ago! (See Graph 1).

Why were the decades of the nineties and aughts so different? In the nineties, money flowed
freely into new technologies. Dotcom companies were born, Internet retailing came into being,
communication portals were introduced, fiber optic cables were installed, new business models
based on information technologies we adopted, and the “New Economy” focused investors’ attention.
In short, these investments brought a surge in productivity and standard of living last experienced
during the 1960s.

During the aughts, money flowed into housing, which is a consumption good rather than investment
in a productive asset. During this period, money to support productivity-enhancing investment
dried up. References to the “false economy” of homebuilding often heard nowadays reflect
this. It’s the absence of growth in prosperity and the productivity-enhancing portions of the
economy that bring the sense of a lost decade.

The new decade just begun will be different, we just don’t know how. Where will the money flow
next? Will it bring widespread advances in prosperity?