For much of the last decade the manufacturing sector has been the bright spot (relatively speaking) in the economy and it has done the heavy lifting as far as bringing the US out of the recession. For more than a decade the manufacturer’s share of the economy has been around 12% to 13%. In 2009 that tumbled dramatically to just over 11% but since that time there has been a rebound and today the share is just over 11.9%. This puts the manufacturer approximately where they have been for the last several years and there has not been all that much lost ground.
During this period of up and down performance the high value service sector has been considerably less volatile and has now moved past manufacturing when it comes to contributing to the GDP of the US. Today these service categories account for 12.2% of the economy. Services have long been a big part of the US economy but this is a very broad category that includes everything from the guy putting on a roof to the person handing you your fries as well as the banker making the home loan. The category that accounts for this 12.2% share of GDP is termed business and professional services and this includes accounting, law, credit management and payroll management. These are the higher level business services that generally involve specialized training and education.
There are both obvious and subtle reasons for the expansion of this service sector. The most obvious is that there has been expanded demand for the expertise provided by accountants and lawyers and financial professionals as well as for the people who manage credit, handle payroll and manage the accounts for business. Some of this is due to the fact that business has become more complex and careful about has become subject to in the last few years.
The average business now has to hire far more people to contend with the bureaucracy that impacts their business. If one looks at banking alone it has been estimated that 68% of the new hires in the last year have been compliance officers who are dealing with the changes imposed by the Bank Reform Act. The banks may have wanted to hire people who would be able to make them money but they need to be sure they are not running afoul of the new laws.
There has been a dramatic increase in the use of outsourced solutions as well. The average company no longer uses their own employee to handle most of the accounting issues or legal issues and many are shifting to outsource solutions for everything from payroll to human resource management. This is due in large part to the complexity of these tasks and the need to have specialists on staff who can handle the issues. Estimates vary considerably but just in the area of human resources there have been over 5,000 new rules put in place this year alone. Many are minor but some could cost thousands if there is a violation.
Courtesy of Dr. Chris Kuehl, Armada Corporate Intelligence www.armada-intel.com