State by State, Year by Year, Employment by Sector & by Blue-Red Political Alignment [bumped]

This preliminary study started with a blog post I did several months ago entitled "New Jersey, the Sorry State", a deep dive into Bureau of Labor Statistics data showing that my state is hardly generating employment outside the government sector.

The blame for this sorry state of affairs I heaped on NJ's political culture, which is high-taxing, heavily-regulating, pro-union, anti-business, and Democrat-dominated. As the power of Democrats, the self-proclaimed friends of the working man, has risen in this state, fewer working men have actually had work.

One of my readers suggested extending the work to all states. A daunting prospect, but I have made a start. It's back to the BLS data for 51 deep dives. This time I'm looking longer term, with data from 1990 to the present.

To try to get to grips with party politics in all states through time, I researched affiliations of the governor and two senators and the plurality of the House of Representatives delegations and the state senate and legislatures for each year since 1990, using wikipedia and such other sources as I could find. No doubt there are some errors at this stage, particularly in identifying the leanings of state legislatures 15 or more years ago. These errors are minor; it's unlikely that I could mistake Idaho for a blue state or Washington for a red state, for example.

Those two next door neighbors bracket my best ranking of the 50 states + DC by political complexion, from most Democrat to most Republican:

>> bluest: WA DC WV MA AR NJ CA MD IL HI DE
>> next: NY VT IA WI RI MI OR CT ME NC
>> middle: NM MN MT LA COPA NH ND IN TN
>> next: SD VA MS NV AL MO NE KS OK FL
>> reddest: KY OH AZ SC WY AK GA UT TX ID

Let me point out a few things by way of caveats and highlight a few preliminary conclusions.

Conclusion 1: Government is not just New Jersey's growth industry -- it's a growth industry in most states, Democrat or Republican. In fact, it is only in a handful of blue states and territories that government employment has been static or falling: MA, MI, NY, DC, and RI.

Conclusion 2: The predominant pattern in the last ten years has been for employment in goods-producing industry to be declining, in service-providing business to be growing somewhat, and in government to be growing fastest of the three. That pattern is seen in no fewer than 37 states: AL, AK, AZ, AR, CA, CO, CT, DE, FL, GA, IL, IN, IA, KS, KY, MD, MS, MO, NE, NV, NH, NJ, NC, OH, OK, OR, PA, SD, TN, TX, UT, VT, VA, WA, WV, and WI; in MI it was declining but less than other employment. Government is growing at the expense of goods production. In the limit, this places fiscal drag on the economy, which reinforces the original trend and makes it worse. That is our New Jersey experience.

Conclusion 3: The states that have experienced the greatest declines in employment in goods-producing industry are (worst first): RI, MI, NJ, CT, NY, NC, OH, ME, MA, and PA. Mostly northeastern/midwestern, mostly unionized, and mostly Democrat.

Conclusion 4: The states that have done best in growing employment in goods-producing industry are (worst first): NE, CO, NM, SD, ID, MT, UT, WY, NV, ND. Near runners-up were TX, AZ, and OK. Mostly western, mostly right-to-work, and mostly Republican.

Conclusion 5: Only in Wyoming is employment growth in goods-producing industry consistently positive and higher than either services or government.

Caveat: A Democrat is not the same wherever you go, nor is a Republican. A Maine Republican is a very different animal than a Texas or Wyoming Republican; in fact, some say it is a RINO. A Mississippi Democrat in 2009 is not ever the same as a Massachusetts Democrat, nor does he necessarily resemble a Mississippi Democrat of twenty years ago.

Caveat, speaking of Massachusetts: In connection with the special election there on 1/19/2010, I and many others have taken to calling the Bay State "the bluest of all blue states." This is incorrect. Massachusetts yields to the blueness of the Washingtons (state & district) and West Virginia.

Caveat: Employment in goods-producing industry is not a holy grail and need not be the object of all economic policy. If someone leaves a job in the declining textile industry in North Carolina, retrains as a radiological technician and gets a better job in that field, no one argues that either that person or the state of North Carolina are worse off. The problem is when employment in the goods-producing sector as a whole is in total headlong decline. That means industry is giving up on a place. That means industry prefers to take its chances with the Chinese Communists than the Michigan Democrats.

Caveat: Productivity has improved in goods producing industry, meaning fewer workers are needed to do the same or greater work. I know that, of course. It's wonderful. But rising productivity itself should incentivize capital to come into a place and employ workers who have worked themselves out of their previous jobs. If it's not enough, other things are wrong, and the benefit of workers' productivity is not for workers to share. Politicians must ask the question, what else is needed to attract and retain industry? Republicans always ask that question. Democrats ask instead what other self-defeating social costs and regulations they can impose on job-creating enterprise, and the dismal results are there to see.

Here's one final caveat, and it is important. I don't know which way the causation runs. I am not sure whether the growth states of the West are Republican because they are prosperous, or prosperous because they are Republican. I am more certain that employment grows in right-to-work states because it can, without restriction; that's just economic common sense. "Capital goes where it is welcome and stays where it is well treated," as the great Milton Friedman said.

This much is clear. The employment restrictions and the class struggle nonsense offered by those friends of the working man, the Democrats, are utterly failing him. In the the Democrat fastness of the post-industrial Northeast and Midwest, there's little tangible economic return from workers' long-term political investment.

I say if you want to work, go R. If you want to stand on the unemployment line complaining about the Man, go D.

_______________________

Notes:

1 My original post was inspired by William McGurn's article in the December 30 2008 edition of the Wall Street Journal, "New Jersey Is the Perfect Bad Example".

2 Next best alternative ranking is so similar to the first. Different methodology; of course the data set and workings are available:

>> bluest: DC WA WV MA AR MD CA HI NJ DE VT
>> next: IL RI NY MI OR CT IA WI LA NM
>> middle: NC ME MN ND MT IN PA VA NV CO
>> next: TN AL SD GA NH KY MS MO FL NE
>> reddest: AZ KS OH TX OK AK SC WY UT ID

3 It was Ted Kavadas, proprietor of the Economic Greenfield blog, who suggested doing the study nationally.

Freddie Mac CFO -- Apparent Suicide

Freddie Mac's Acting CFO David Kellerman, age 41, has been found dead in his home this morning in an apparent suicide.

I wonder if Senator Charles Grassley (R-IA) will now step forward to cite Mr. Kellerman's example with approval.

Employment in Manufacturing & Government & the Deficit with China

Around the 20th of January, I heard a couple of talkers on business news and talk radio note that government employment had exceeded manufacturing employment in the United States. When I looked into it, I found the origin of this meme at a blogpost of Fabius Maximus entitled America passes a milestone!, with interesting charts and analysis. The charts are from subscription site Contrary Investor. Instapundit, Dr. Melissa Clouthier and Citizen Paine are among the analysts who picked up the story from Fabius, and well done to him.

But I wanted to see the original data, and I found it on one of my favorite sources for primary material, the website of the Bureau of Labor Statistics, for which the relevant interactive dialog box is here.

It is the work of a few minutes to find that, yes indeed, according to BLS, the non-seasonally-adjusted figure for workers employed in the goods producing sector of the US economy was set preliminarily at 21,404,000 for 2008, down from 22,221,000 in 2007, while the comparable employment-in-government figures were 22,457,000 preliminarily for 2008, up from 22,203,000 in 2007.

The services sector is bigger than both put together, with a preliminary 115,648,000 employed for the year 2008.

It was two days after Fabius's article that Timothy Geithner had his confirmation hearings in the Senate Finance Committee. One of the hostile Senators, Jim Bunning (R-KY), roasted Geithner over the US-China trade and financial relationship. He got started in his opening statement:

Thank you, Mr. Chairman.

The financial crisis we are experiencing today did not happen overnight and it could have been avoided. As Mr. Greenspan now admits, the easy monetary policy that he and Mr. Geithner championed at the Federal Reserve created an asset bubble. Large capital inflows from countries like China, for the purpose of keeping its currency low, contributed to the bubble and they went unchecked. But, the collapse of the bubble would not have been so devastating if Mr. Geithner had been effective in his role as a regulator. . . .

. . . and in questioning he was if anything tougher, blaming Chinese manufacturers and workers, in effect, for the financial crisis in which we now find ourselves. This, I believe, is a dangerous new aspect of international financial and trade relations, as I stated in my posting of January 26.

It strikes me that there is a direct line between the manufacturing implosion and the current account deficit with China and certain other trading partners, if anyone just cared to draw it. And there's not a thing Mr. Geithner could have done about it in his role as a regulator.

The capital inflows that so trouble Senator Bunning are just the flip side of America's trade deficit with that country. It's a matter of double-entry accounting identities, rather than any cunning device to "keep its currency low."

It can be shown -- I have done the work, and will put it here at some point -- that a portion of the trade deficit with China is really with American companies who have investments there.

Nevertheless, it is clear that the US economy has gone post-industrial.

Our trading partners will not buy our manufactures if we do not manufacture.

They will buy very little of the output of our large and growing government sector.

They will buy some of our services, but of course in these times of financial crisis and straitened circumstances, they too have less need of the financial and creative services in which American business specializes.

Our trading partners will buy hardly any of the spa, tanning, psychotherapy, handyman, coaching, self-actualization, pet grooming, personal-shopping, kitchen-designing, dog-walking, SAT-essay tutoring, Search Engine Optimization consulting, skateboard training, party-planning, eBay-auctioning, credit-counseling, baby-sitting and similar personal services in which a huge number of Americans now occupy themselves and try to scratch a living.

An entrepreneurial Chinese person might as well try his hand at manufacturing. An entrepreneurial American might as well shoot himself in the head as try his hand at manufacturing. The thought of going into the business of manufacturing a product for sale, with all the nightmares of taxation and regulation that go with that in the United States in the year 2009, is not for the faint-hearted among the business-minded.

And that is why perfectly serviceable industrial parks near my home in New Jersey are rented out to ballet schools, medical offices, day care centers, basketball clinics, gymnastics facilities, skate parks, senior centers, art studios, martial arts gyms, fitness centers, churches, mosques, schools, and even government offices, but hardly at all to industry.

If this cannot be changed -- and if anything the anti-manufacturing tide is still at the flood stage -- then how can the US current account deficit be anything but a huge long-term structural problem for us?

The Household Initiative Plan is posted at Household Initiative Plan Blog