The Financialization of the US Economy

Services are Hopping. The #1 Biggie is Hopping the Fastest. It all adds to GDP!

Service-producing industries dominate the US economy, accounting for over 70% of GDP. And this sector is hopping. Revenues in the major services categories rose 5.3% in the second quarter of 2019, compared to the same quarter a year earlier, to $4.05 trillion, not seasonally adjusted, according to the Commerce Department’s Quarterly Selected Services Estimates released today. For the first two quarters of 2019, service revenues rose 5.5% to $8.0 trillion. The pace of growth so far this year is slightly lower than the hot 6.0% growth for the year 2018.

Four biggies dominate the service sector, and the US economy overall. They accounted for $2.92 trillion in revenues in Q1, or about 72% of total service revenues, with the biggest of them all, finance and insurance, accounting for 32%, up from 31% at the end of last year. It is also the fastest-growing segment, even faster than healthcare, as the US economy is getting more and more financialized. The share of each of the big four of overall service revenues:

  • Finance and insurance: 32%
  • Healthcare: 17%
  • Professional, scientific, and technical services: 12%
  • “Information” services, such as telecommunications, software, and data processing: 11%.

#1 Biggie: Finance and Insurance.

Revenues in the finance-and-insurance sector rose 7.0% to $1.28 trillion in Q2, a new record, and the fastest growth of any major sector. For the first two quarters, revenues rose 6.9% to $2.54 trillion.

The sector includes the Federal Reserve, whose 12 regional reserve banks are privately owned institutions. But with its $26 billion in revenues in Q2, it’s a minor line item, representing 2% of total finance and insurance revenues. Its revenues fell 7.7% in Q1 and 6.9% so far this year, in part due to its shrinking balance sheet – and thus shrinking interest income. Without the drag of the Fed, finance and insurance revenues rose 7.4% in Q2.

The largest sub-segment of the “finance” part is banking: Deposit-taking banks (commercial banks, credit unions, and the like); and nonbanks or shadow banks (lenders that don’t take deposits). Revenues jumped 7.0% in Q2 to a record $360 billion, with shadow banks having bypassed deposit-taking banks some time ago.

The “insurance” part of this sector is even larger than the “finance” part, in terms of revenues, with blistering growth rates approaching 10% (if your smartphone clips the table, turn the device in landscape position):

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Finance & insurance  1,280 7.0% 2,539 6.9%
Finance & insurance (except the Fed) 1,254 7.4% 2,485 7.2%
The Fed 26 -7.7% 54 -6.9%
Banks & Nonbanks 360 7.0% 714 8.2%
Deposit-taking banks 164 6.7% 326 8.2%
Nonbanks 168 8.0% 334 8.8%
Activities related to credit intermediation 27 3.8% 53 5.0%
Securities, commodity contracts, and other financial investments 175 3.0% 347 1.5%
Securities and commodity contracts, intermediation & brokerage 80 4.1% 160 2.4%
Securities and commodity exchanges 3 12.2% 6 5.4%
Other financial investment activities 92 1.9% 181 0.6%
Insurance carriers and related activities 720 8.6% 1,424 8.2%
Insurance carriers 622 9.6% 1,228 9.0%
Agencies, brokerages, and other insurance related 98 2.7% 196 3.5%

#2 Biggie: Healthcare and Social Assistance

Healthcare and social assistance revenues are only about half the magnitude of finance and insurance revenues. However, this sector does not include the goods-portion of healthcare, such as pharmaceutical products, medical devices, supplies, etc. Revenues rose 5.1% in Q2 to $695 billion; and 4.9% year-to-date to $1.37 trillion.

The table below shows the four categories of healthcare services. The largest, “ambulatory health care,” generated $270 billion in revenues in Q2, about half of which are generated by doctors’ offices. Note the much higher growth rates in some segments, such as social assistance, up 6.9% (if your smartphone clips the table, hold the device in landscape position):

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Health care and social assistance 695 5.1% 1,373 4.9%
Ambulatory health care (doctors, diagnostics, outpatient, home health care) 270 3.6% 531 2.9%
Offices of physicians 132 3.3% 259 2.3%
Offices of dentists 33 3.6% * 0.0%
Outpatient care centers 37 5.2% 74 5.4%
Medical and diagnostic laboratories 13 1.3% 26 0.9%
Home health care services 22 2.3% 43 3.3%
Other ambulatory health care services 10 3.0% 19 2.6%
Hospitals 307 5.9% 610 5.9%
General medical and surgical hospitals 286 5.9% 568 6.0%
Psychiatric and substance abuse hospitals 7 2.5% 14 3.0%
Specialty (except psychiatric and substance abuse) hospitals 14 7.5% 28 6.7%
Nursing and residential care facilities 66 6.0% 131 7.0%
Social assistance 52 6.9% 101 7.2%
Individual and family services 27 7.3% 53 8.2%
Community food and housing, and emergency and other relief services 9 6.5% 17 6.5%
Vocational rehabilitation services 4 9.3% 8 7.0%
Childcare services 12 5.5% 23 5.3%

#3 Biggie: Professional services

Revenues grew 4.2% in Q2 to $511 billion; and 4.1% year-to-date to nearly $1 trillion. This sector is dominated by “computer systems design and related services,” which generated $116 billion in the quarter, up 7.1% year-over-year. The second largest segment is “legal services,” as is appropriate for the world’s most litigious society, up 4.2% in Q2 to $83 billion.

Advertising was the only segment in professional services, and one of the few segments in the overall service sector, where revenue growth was negative, for the quarter and year-to-date:

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Professional, scientific, and technical services 511 4.2% 998 4.1%
Legal services 83 1.9% 159 4.4%
Accounting, tax preparation, bookkeeping, payroll services 47 1.8% 102 2.5%
Architectural, engineering, and related services 89 4.6% 172 1.3%
Computer systems design and related services 116 7.1% 226 7.5%
Management, scientific, technical consulting services 71 6.0% 138 4.1%
Scientific research and development services 48 11.5% 92 9.9%
Advertising, public relations, related services 26 -2.1% 50 -2.3%

#4 Biggie: Information Services

Revenues rose 6.1% in Q2 to $430 billion, and 6.4% year-to-date to $847 billion. The sector is dominated by telecommunications, with $157 billion in Q2, up 2.0%. The fastest growing segments were software publishers (+11.4%), data processing services (+13.6%), and other information services (+14.8%):

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Information 430 6.1% 847 6.4%
Publishing industries (except Internet) 93 7.3% 184 8.8%
Newspaper publishers 6 -2.6% 12 -2.3%
Periodical publishers 7 -2.3% 13 -3.8%
Book, directory and mailing list, other publishers 10 -6.0% 18 -4.6%
Software publishers 71 11.4% 141 13.3%
Motion picture and sound recording industries 29 1.8% 56 1.3%
Broadcasting (except Internet) 43 3.3% 85 2.4%
Radio and TV broadcasting 21 7.6% 42 5.7%
Cable and other subscription programming 22 -0.6% 43 -0.7%
Telecommunications 157 2.0% 313 2.2%
Wired carriers 78 0.9% 156 0.7%
Wireless carriers (except satellite) 66 2.2% 132 3.0%
Other telecommunications 13 8.1% 25 7.5%
Data processing, hosting, related services 52 13.6% 100 14.3%
Other information services 56 14.8% 109 15.0%

#5: Transportation services

Ranging from transporting passengers by air to transporting crude oil by pipeline, this sector grew 2% in the quarter to $254 billion and 2.9% year-to-date to $491 billion.

Truck transportation, the sector’s largest segment, experienced declining revenues (-2.2%), which has been clear all year, given the downturn in the industry that is hitting certain corners of it much harder:

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Transportation and warehousing 254 2.0% 491 2.9%
Air transportation 61 4.2% 113 4.1%
Water transportation 12 7.3% 23 8.1%
Truck transportation 74 -2.2% 143 -0.7%
Transit and ground passenger 10 3.4% 21 4.6%
Pipelines 12 3.9% 26 4.9%
Scenic, sightseeing transportation 1 11.0% 2 11.8%
Support activities for transportation 49 0.6% 97 2.4%
Couriers and messengers 25 6.6% 49 5.9%
Warehousing and storage 10 8.0% 19 8.6%

#6: Administrative & Support Services.

Revenues rose 3.1% in the quarter to $229 billion, and 4.5% year-to-date to $451 billion:

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Administrative and support 229 3.1% 451 4.5%
Employment, and travel reservation servies 103 4.7% 209 7.4%
Travel arrangement and reservation services 13 0.9% 25 1.9%
Other administrative and support services 12 2.0% 217 2.1%

#7: Rental and leasing services

Dominated by services related to real estate, the segment grew 6.6% in the quarter, to $187 billion (this does not include the cost of the product, such as the leased car or house, but only services related to the leases):

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Rental and leasing, real estate, auto, etc. 187 6.6% 356 6.0%
Real estate 128 6.6% 245 6.5%
Lessors of real estate 71 5.7% 140 6.2%
Offices of real estate agents and brokers 30 2.9% 53 2.8%
Activities related to real estate 28 13.4% 52 11.1%
Rental and leasing services 45 6.4% 86 5.2%
Auto, truck, equipment rental & leasing 17 7.3% 32 6.2%
Consumer goods rental 6 4.5% 12 3.5%
Commercial, industrial machinery, equipment 21 6.6% 41 5.1%
Lessors of nonfinancial intangible assets  (except copyrighted works) 13 7.5% 24 4.8%

#8 Utilities

This measure of services provided by utilities does not include government-owned utilities but only privately-owned utilities. And it only includes revenues from services, such as line charges for distribution, etc., but not revenues from the products (such as natural gas), and revenue growth from those services wasn’t so hot:

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Utilities 136 -1.8% 291 -0.1%
Electric power generation, transmission and distribution 112 -1.7% 226 -0.2%
Natural gas distribution 20 -3.2% 58 0.0%
Water, sewage and other systems 4 1.0% 7 0.2%

#9: Arts, entertainment, and recreation:

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Arts, entertainment, and recreation 74 6.5% 140 7.4%
Performing arts, spectator sports,  & related 31 0.9% 59 6.2%
Performing arts companies 5 -2.5% 9 3.2%
Spectator sports 11 -2.3% 20 1.1%
Promoters of performing arts, sports, and similar events 9 14.8% 15 13.9%
Agents, managers for artists, athletes,  entertainers, and other public figures 2 4.1% 5 14.0%
Independent artists, writers, and performers 4.6 -10.6% 10 5.2%
Museums, historical sites, and similar  4 -0.3% 8 1.8%
Amusement, gambling, and recreation industries 38 12.4% 73 9.1%

#10: Accommodation Services.

This is not exactly a high-growth area. Last year, for the full year, it was the only sector that booked a revenue decline.

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Accommodation, traveler and RVs 65 1.2% 124 2.0%
Traveler accommodation 63 1.1% 121 1.9%
RV (recreational vehicle) parks and recreational camps 2 4.6% 3 5.7%

Some other services.

Waste Management and Remediation, small, but fast-growing (the Census sticks this somewhat incongruously under Administrative Services):

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Waste management and remediation services  27 7.2% 52 6.4%

The hodgepodge of services that don’t fit anywhere else in the Census Bureau’s lineup, experienced declining revenues overall in Q2, but an increase for the year so far:

Q2 2019, $ billions Change fr. Q2 2018 YTD 2019, $ billions Change fr. YTD 2018
Other services (except public administration) 146 -2.6% 289 9.3%
Repair and maintenance 48 3.5% 93 1.3%
Death care services 5 -0.8% 9 -1.1%
Drycleaning and laundry services 8 6.9% 15 5.2%
Religious, grantmaking, civic, professional, similar organizations 67 17.9% 136 18.1%

None of this data is adjusted for inflation. So, the 5.5% service revenue growth so far this year would be lower in “real” terms, with the CPI for services at the end of Q2 rising by 2.6% compared to a year earlier.

And a recession?

Most of the private-sector services experienced strong revenue growth. Finance and insurance, with a growth rate of 7.0% in Q1, came out on top as the fastest growing component of the service sector, always pushing the financialization of everything to the next level.

The goods-based sector, which is much smaller and more volatile, can pull the economy easily into a low-growth phase, but for the economy to sink into a recession, service revenue growth would need to slow down significantly. It won’t have to drop into the negative, but it would have to get closer to stall speed. And that is not happening yet.


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  143 comments for “The Financialization of the US Economy

  1. Bologna says:

    Is the USA really booming out of organic growth or is is just the good oldcredit cards making all them retail / restaurant purchases

    • Wolf Richter says:

      Credit card debts rose by about $50 billion over the past four quarters. Service sector revenues rose by about $800 billion over the same period. So you can tell that growth in credit card debt is helpful to GDP, but only in a minor way.

      • Al Jones says:

        A better question is how much inflation is there within the service industry?

        I ask this because the price of services that our family use (dental, medical, insurance, travel costs, restaurant prices) are increasing at rates way above inflation in goods.

        • Anon1970 says:

          Some services are now performed in low cost labor countries such as India e.g. Dell tech support. In 2013, several Dell techies in India spent hours with me helping me to upgrade to Windows 8.1 on my new dell computer at no extra cost to me.
          The cost of stock broker services i.e. commissions, has dropped over 95% since 1982 when you compare what a major wire house charged then and what a large online discounter charges today.
          On the other hand, dental services are hard to “import” unless you live close to the Mexican border and can drive there to get your root canal work done.
          Medical costs are out of control. In 2008, my insurance company was charged $1,500 for my ambulance ride to a nearby hospital when I had a medical emergency. The gross medical bill was about $15,000 for an overnight stay in the hospital (plus the cost of the ambulance ride). My net cost was $120 for a blood transfusion and $50 related to the ambulance ride (deductible). For people with no insurance or bad insurance, medical bills can easily put a family into bankruptcy.

        • Wolf Richter says:

          Al Jones,

          For every example, there is a counter example: The costs of data services (cellphone, broadband, data storage, etc.) have plunged even while bandwidth has multiplied by factors of 20 to 1000, and while other aspects of these services have improved dramatically.

        • Nels Nelson says:

          Back in March of 2011, Fed Governor William while giving a talk made a statement that came to be known as the “let them eat iPad2s” comment.

          This from the WSJ at the time.

          The central banker told the audience “I certainly acknowledge food prices have gone up.” But he added some prices are lower and noted “Today you can buy an iPad 2 that costs the same as an iPad 1, that’s twice as powerful,” as an example of favorable price dynamics. His example was greeted with widespread grumbling in the audience, in a display of conspicuous discontent unusual for a Fed speaking event.

        • Nels Nelson says:

          That was Fed Governor William Dudley

        • I would say all of those sub industries are highly competitive, use Trivago?

        • mr_dood says:

          Wolf Richter:

          “For every example, there is a counter example: The costs of data services (cellphone, broadband, data storage, etc.) have plunged even while bandwidth has multiplied by factors of 20 to 1000, and while other aspects of these services have improved dramatically.”

          Information/technology is unfairly used to demonstrate lower CPI figures. Examples:

          1. Computers are much faster today and cheaper, especially when inflation adjusted. The truth: you now need that faster computer because the OS is slower than the one before. Or, you need it because it is required, not for its speed, but because the old one is unsupported: new software/app won’t run on old computer, eg.

          2. Does productivity go up by the same factor, 20 to 2000 times because of that faster connection? Obviously not. In most cases, people are clicking on web pages and you will have a slightly (if that) faster page load. Because of the overhead in the protocols, you might not even notice a difference. Faster bandwidth is beneficial only when you need it (eg., downloading GBs at a time). Also, if a twelve-core processor drops 50%, there won’t be a 100% increase in value for most users. Same with RAM and storage.

          3. What is being consumed and by whom? A steak dinner going from $25 to $35 is hardly inflationary for a rich person, but cuts deeply into an average earner’s standard of living. No inflation for the rich guy, lot’s for the poor.

          With that said, I acknowledged there are those who exaggerate inflation numbers.

        • Zantetsu says:

          That’s some very neat goalpost moving, mr_dood.

    • Old-school says:

      I own a highly traded small cap.Average holding time is about 1 month. I estimate that trading costs even though very low per share equals about 20% of company profits. I wouldn’t necessary change the system, but that is 20% that is being lost from investors to financial service industry.

  2. Joe blow says:

    As an expert in the service field the future looks great! Hooray for all janitors! Hooray future!!

    • Wolf Richter says:

      The big four service segments, accounting for 72% of all service revenues, are staffed with highly paid people such as doctors, engineers, financial wizards, architects, lawyers, and the like. Sure, each hospital and investment bank has some janitors, but they’re not a large part of the employees.

      • d says:

        “The big four service segments, accounting for 72% of all service revenues, are staffed with highly paid people such as doctors, engineers, financial wizards, architects, lawyers, and the like.”

        And the rest of society lives on “CRUMB’S” that fall from their table.

        All this growth in a localised sector of the econmy is a symptom of the innequality in America,

        ” For all their power, modern multinationals like Amazon and Facebook do not maintain standing armies, or directly rule over millions of another nation’s citizens. ” YET.

        The American peopel can not improve their lot if they can only get work at shining shoes and giving haircuts. Which is what the vast Majority of them are being reduced to.

        Which is the scary side of what these allegedly GREAT Service NUMBERS tell. Which very few wish to see.

        As I have said for some time.

        Corporate America ” The Globalised Vampire Corporates” allied with ccp china, are currently the most dangerous group of entities on this planet. Probably the most dangerous threat common humanity has ever faced.

        And I find a History of their model recently published. Hence the link.

        It is interesting that only entities like BEI not Governments have what it takes to face down blatantly Mercantile states like china.

        This does not excuse the behaviors of BEI but does explain the rationale behind much of their actions.

        This also is a worrying omen for the future.

        Private armies are not far away Blackwater, the entities guarding many ships in the Indian Ocean, gulf regions.

        • alex in San Jose AKA Digital Detroit says:

          Exactly. I’d be far, far ahead of the game if I’d gone to barber’s college (which I can’t afford now; even the trade schools are incredibly expensive now) and never learning even Ohm’s Law much less the stuff about electronics I learned.

          I wish I knew my income would level off to a ceiling of $15k a year by age 50; they don’t tell you that. This is what you have ahead of you, no matter how “techie” you are, and your probability of doing better is about the same as winning big on lottery tickets or the casino.

      • Hooverville Smack says:

        Speaking as an architect, we are hardly highly paid. Add in the years lost in college becoming said architect, completing an internship, plus student loans, and an architect will hardly make more than a truck driver that consistently brings in $55-60k a year over a lifetime. I’m hanging on to my crumbs, find your own.

        There are exceptions, like working for the government. Amazing what the government pays in contrast to a private architecture firm.

    • timbers says:

      Joe blow –

      “As an expert in the service field the future looks great! Hooray for all janitors! Hooray future!!”

      Let me help you rephrase that to make it accurate:

      “As an expert in the health insurance field / Medical Complex / Private Equity Finance, the future looks great with us making people die sooner (we are) while paying much higher prices (we are), and sorting profits for CEO’s and stock buy backs (there happening) and using private equity investments to bill vulnerable patients in sneaky ways so the health insurance / Medical Complex doesn’t pay, you do!”

      Health insurance and medical cost are soaring and we’re dying sooner and getting poor.

      According the Fed’s gaggle if various reports among them it’s Inflation Fraud index, that’s called low inflation because rising productivity and increasing GDP.

      As Trinity in The Matrix would say:

      “I don’t have time for the B.S. Bring on NIRP.”

      • Dale says:

        The healthcare, financial, and education sectors profit by having extraordinarily low productivity. It’s really a case of the village idiots being crowned kings. But only because of thorough padding of politicians’ pockets.

    • Calm Horizons says:

      Janitors? Ahem, the preferred term is sanitation technician or custodial engineer these days.

      • Brant Lee says:

        Funny with these people doing what may be the most important service for us there can be (sanitation, landfill operation, cleaning toilets, washing dishes, washing clothes, etc), these poor people are seen and paid as sub-human.

    • Halsey Taylor says:

      We used to be a nation of people who made things. Now, everyone’s just got his hand in the next guy’s pocket.

    • van_down_by_river says:

      I wish I was a janitor. Janitor is an extremely competitive field – good luck getting on that gravy train. The real jackpot is if you can get a janitor job on a government payroll – goodbye stress!

  3. ZeroBrain says:

    Finance and insurance does not deliver a tangible good or service. Their only good is in improving economic efficiencies of other businesses that do deliver tangible goods and services. To the extent that finance and insurance has profit itself, it is parasitic. They have extracted wealth but not produced it.

    • Wisdom Seeker says:

      I agree, we should be looking at GDP minus finance, and I would add also only after subtracting off the change in the national debt.

      Or the US could become even more like China, and simply goose the national debt by enough to make the GDP come out wherever we want it to each year? (And then hide the debt so no one knows how much there really is!!)

      • Unamused says:

        I agree, we should be looking at GDP minus finance, and I would add also only after subtracting off the change in the national debt.

        Excellent. You get it.

        Also subtract off household and business debt. Other elements should also be deprecated.

        Do that, and the numbers become very disturbing. There are a lot of ways to look at it, and for most people none of them are at all pleasant.

        • Wisdom Seeker says:

          You and I generally agree on the problems. I was disturbed from late 2005 through early 2008, horrified from 2008-2016. Enough of the veil came off in 2016 that I saw awareness spreading and became more optimistic.

          So our main disagreement is that I’m still optimistic about long-term prospects. Humanity’s ability to cope and adapt is greater than many appreciate. So is Earth’s.

        • Unamused says:

          So our main disagreement is that I’m still optimistic about long-term prospects.

          The triumph of hope over experience. Still, I suppose it may be better to light a single candle than to curse the darkness, but that never works in a hurricane, and the storm is rising.

          The Machine was correct: it is in your nature to destroy yourselves. History has proven this consistently, from Farârud to the Great Plains to Mexico to Rapanui to Tasmania and a hundred other examples overwhelming the counterexamples. All you lacked, until now, were the appropriate tools, on an appropriate scale, to finish the job comprehensively, rather than piecemeal.

          Plastic waste will outlast humanity’s greatest buildings by thousands of years, a monument to all its achievements, and a metaphor for its passing. And that, as they say, will be that.

    • Senecas’s Cliff says:

      Historically as empires reach their apex and start to decline they more and more become rentier societies. In other words more and more people try to make there living off of some kind of tollbooth. Much of what is outlined here as the service economy seems to be a classic rentier economy. In particular, financial services, legal, todays healthcare system, insurance and more. Historically this works for a while until everyone is manning a toll booth a no one is pulling the wagon .

      • alex in San Jose AKA Digital Detroit says:

        Yep I believe this is exactly how it went with Rome. Now, it was slow-motion so it wasn’t as bad as we have coming, but near the end those with the wherewithal went out into the countryside and bought estates they ran, or tried to run, self-sufficiently. They also hoarded gold and silver, precious metals as modern-day survivalists call “PM’s”, and this is how hoards of Roman coins are periodically found in England and France etc. by people plowing their fields or cutting down an old tree etc.

        If you insist on being productive, at least pick something that’s hard to offshore like mail carrier, janitor, etc. I wish I’d been smart enough to do this!

        • Wolf Richter says:


          The median salary (meaning that half of the employees earn more, and half earn less) at Facebook is $240,000 per year. Other tech companies pay less, but they still pay a lot to their developers. Contract developers make less, but they still pull in $500 or $600 a DAY, or more, for a full day’s work.

          Janitors however are normally employed by janitorial companies that have a contract with Silicon Valley companies. And these folks that work for the janitorial companies and keep the Silicon Valley offices clean make about the local minimum wage or a little above it.

          So, Alex, do I get this right: you recommend that it’s better to work for a janitorial company and get sent to a fancy office to clean the bathrooms there than learn how to write code and work for the actual company as a developer and get a tech salary?

          The other day you said that you are near-homeless or something similar. Look, I feel for you. It’s tough out there. Our culture can be brutal and self-righteous. But this puts you in no position to give credible advice about education, careers, job choices, and personal finance. When you give this type of advice, it just sounds like a bad joke.

          Also, you mentioned mail carriers. So I did a little research for you to help you out. The USPS has job fairs in the Bay Area. They’re looking for carriers, among others. Those are federal government jobs. Pay is pretty decent. Benefits are great. I see a lot of older carriers here in SF. So check out the USPS job fairs. Next ones are in Oakland and San Jose next weekend. So get your butt over there next weekend instead of coming up with excuses why that won’t work, and TRY for crying out loud!!!


        • alex in San Jose AKA Digital Detroit says:

          Wolf – Since a bike accident in the 80s (I only remember setting off from work at the end of the day, then waking up in the hospital) my back’s not been up to heavy lifting as is required for a newb at the USPS, UPS, FedEx etc. If I had the eyesight, I’d drive a truck but I don’t and frankly I’m amazed the DMV keeps issuing me a “civilian” driver’s license.

          What’s wrong with min. wage? It’s the new gold standard as all pay reverts to it. Ask that 40+ guy who worked at Google etc what he can demand now. If he can get hired at all. The streets are littered with once-great coders here.

          And it doesn’t matter how smart or capable you are, these are people who went to Gunn HS or prepped at Andover etc., they are not simply smart kids, they are smart kids with connections.

          W/o connections your best chance to get noticed was to be a black hat hacker then turn white hat, I realized this in the 90s. But in the 90s kids were being sent to prison and being brutalized (broken arms etc.) for having telephone parts in their van so it was not a path any prudent person would try. So it was still a very, very long shot.

          Really this tech stuff reminds me of someone giving “advice” in the 1950s to get a guitar and learn to play rockabilly.

        • Wolf Richter says:

          Alex, at least in your comments — and hopefully not in real life — you’re completely given to defeatism. This is a disease, and it can be cured, but you would need to want to cure it.

          A few years ago, when I reached out to you via email and offered to discuss with you a paid writer gig at Wolf Street — because you’re a very good writer with a different point of view — that could have increased your stated monthly income by 60%, for a few hours of work once a week, and that could have led to more if it worked out, you gave me all the reasons why you couldn’t do it, without even discussing the opportunity with me.

          This defeatism, from a human point of view, is so sad to me. It makes everything unreachable and impossible.

          If I had had this attitude, this website would have never come about. In August, it got over 1.2 million hits (page views).

        • rhodium says:

          A lot of boomers told me that you should just go to college and it doesn’t matter what degree you get, it will be enough to get you in the door at least. It was a rather humorous idea after going to the campus career fair. A few optimistic liberal arts majors of various lower economic values dared to show their faces, maybe they thought with enough confidence they could land a job in hr. I have never been able to forget the look of this one young woman with a tag saying psychology major striding around confidently only to see her ten minutes later looking confused and utterly dejected. It sounds like you got screwed over by well intentioned people who said it was a good idea to become an electronics technician but were wrong. Unfortunately there’s no way to know the future and as much good advice is out there, there may be just as much bad advice. Trying to establish a career these days is rough, but I personally wouldn’t recommend being a janitor. The goal is usually to enjoy your job or at least the money. These days the latter happens to be in technology, medical, and financial areas so I guess people should look that way. I still don’t know how you could have an economy with an inner circle of coders and financiers and everyone else just lives in relative poverty, but that’s kind of a caricature sketch of where things look to be going. A consumer based economy without strong consumers is doomed to change or suffocate. That’s why the last 10 years has seemed like an ongoing economic emergency, debt fueled consumption is the only thing holding it all together. Creditors get to feel rich even though in the end they will be giving it all away, which is what they should have done in the first place.

        • GirlInOC says:


          I enjoy reading your comments, and maybe i’m reading the comments differently than everyone else, but I don’t read yours as “advice” in a way that suggests you know more/better/how-to-do-it. Just that this is the life you live, take it or leave it. As someone who has a loved one that struggles with addiction and is intermittently employed as a result, I get that sometimes disabilities, mental illnesses, addictions, and handicaps can get in the way of the American Dream.

        • Rejected By Target says:

          I recovered from five years of unemployment by teaching English online to Chinese students, have you looked into this? All you need is a degree in anything, pay is about $20/hr for kids, a bit less for adults. There are a few good Facebook groups that can help you with this if you wanna look into it (search for “hired ESL teachers with reviews”)…

          (You really learn a lot from these students, for ex one was a manager in a factory that makes high-end consumer goods, I asked her how are the tariffs affecting their business and she said they’re not, “we just send everything to our Vietnam location and export them from there.” That made me laugh out loud.)

        • alex in San Jose AKA Digital Detroit says:

          Wolf – I am thoroughly unqualified to write for this site, being 10 years too young and about a million USD too poor. I can’t come up with the kinds of charts and graphs and financial tech-speak it takes, and I am not any more interested in developing at least the tech-speak than a Himalayan Sherpa would be in learning about shell-collecting on Sanibel Island. It’s simply ludicrously far from my day to day, year to year, experience.

        • Wolf Richter says:


          You give me nothing but STUPID reasons — “I am thoroughly unqualified to write for this site, being 10 years too young and about a million USD too poor” — why you cannot do something. You’re your worst enemy. For example, Adam Williams, who writes the tech articles here and the farming article last week is in his early 30s. Over the years, I have published many articles by fairly young authors. The median age of the 280,000 unique visitors last month of this site is in the mid-40s. Ales, your entire thinking process has been polluted by defeatism, as I said. I tried to help you but I cannot because you won’t let me.

        • alex in San Jose AKA Digital Detroit says:

          Wolf …. I read the articles here and they’re chart and stat rich, and written from the viewpoint of someone who’s honestly a decade older an at least a mil richer than I am.

          I can’t write articles of this type. I don’t have stocks or bonds or real estate, I’m not interested in drawing graphs (and they’d actually be hand-drawn) or doing calculations I’d have to go out and buy an HP 1112C to do.

          There is nothing I have to offer that would interest the crowd here. I simply post here to show the crowd here that there’s a whole ‘nother 90% of the population who live closer to how I do than to how they do, and that they could easily fall into my situation.

          I really don’t think I’m being defeatist. I’m trying to work out what can work out for someone in my situation. So far my conclusions are that I must leave the US, preferably in my teens or 20s and it’s too late for that, but not too late to retire outside the Empire. At least I hope! And, if everyone else is doing it, like coding/biotech/investing/etc either it’s very competitive to get into, or I don’t have the capital, or both.

          So for me it’s get out, find a niche that can support me, and that’s the plan.

          In your case, you’ve found a niche, and probably had already reached FIRE (Financial Independence Retire Early) when you started this. You can spend all your waking hours on this thing (and I still have no idea how any mere individual can make a thin dime on the internet) and horray for you.

        • alex in San Jose AKA Digital Detroit says:

          Oops! I mean HP 12C financial calculator. I’m not sure what an HP1112C would look like, maybe two 12C’s taped together back to back.

      • Nels Nelson says:

        Amen brother!

        That’s why the classical economists including Adam Smith called for the “euthanasia of rentiers”.

    • Just Some Random Guy says:

      Engineers don’t provide any value because all they do is design the things that other build. So really, engineers are useless and parasitic. Who needs ’em?

      Try starting a business without any access to capital and see how far you get. If you think providing capital to the engine of our economy is parasitic, you truly haven’t a clue about how the world works.

      • ZeroBrain says:

        Do you have an MBA or business degree by any chance?

      • Frederick says:

        There’s my buddy ranting again about the virtues of our parasitic banksters Oh my what a joke

      • red pill economics says:

        Obviously, you are uninformed and have no idea what you’re talking about. Without Engineers you’d still be living in the Dark Ages and I we wouldn’t be blogging comments on the internet. Are you really that obtuse? Western Civ. vs. Barbarism. Choose wisely.

        The productive economy is being supplanted by the non-productive economy of government and the finance, insurance, and real estate (FIRE) sector. RE is now the largest contributor to GDP, and yet, housing is only shelter; a place to live, and a rapidly depreciating asset with high carrying costs.

        Please read “Atlas Shrugged” by Ayn Rand. The problem today is the looters and the moochers. “Galt’s Gulch” may soon be a real place.

        “When you see that in order to produce, you need to obtain permission from men who produce nothing – When you see that money is flowing to those who deal, not in goods, but in favors – When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – When you see corruption being rewarded and honesty becoming a self-sacrifice – You may know that your society is doomed.” – Ayn Rand, Atlas Shrugged

        “It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor—your claim upon the energy of the men who produce.” – Ayn Rand, Atlas Shrugged

        • NBay says:

          No beef with your general thoughts, UNTILL you dragged that nasty old “free market” hag into it. (BTW, are you an architectural engineer? She had the hots for architects and building.)

          Since we are using movie analogies (the red pill), how abouts we make a movie about her growing up during Blackhawk Down and enjoying all that no government interference? Her ambitious genius book heroes would have changed their tunes on what guns can do, that’s for sure!

          Government is not the problem, the corporate control of it is. Lincoln warned us about how in just 50 years they had gone from completely untrusted and very highly regulated (in fact, ENDED when their mission was done) to “enthroned”….Ronnie gave them even more power, as did moron #2.
          Organizations who’s ONLY motivation is PROFIT for all involved, taken from anything or any one, in any way….no limits.
          We are infected with these big sovereign dictatorships, lot’s of them.
          At least know your enemy, too few do.

        • mr_dood says:

          Government is not the problem, the corporate control of it is.

          Corporations are not the only one’s, what about labor unions, lawyers, religious groups, and not to mention, busybody not-in-my-back-yarders, which you can thank for sky-high rents and lack of manufacturing jobs? There’s lot’s of blame to go around.

        • NBay says:

          Really? So all those crumbling steel mills and trashed housing all around them that literally cover this country, were a result of the former tenants telling the mills and factories to “get out of town”?
          And unions are a joke now.
          No, it is corporations that wield most of the power in DC, make the ultra rich richer, and simply run over most states, as they beg for $15/hr assembly jobs using parts from who knows where.
          You must have a nice fat stock portfolio, eh? Well guess what! If you are posting here you are not along for the ride, and likely next on the menu.

        • dr_doomz (was mr_dood) says:

          A corporation is a fictitious entity. How does it decide anything? The largest corporations (C-Corps) are usually traded on Wallstreet. The owners of these corporations are grandmothers, neighbors, sisters, ministers, police men, your friends (and foes too), etc. Write a grievance letter to them, you poor suffering victim.

          – Grannie sue – How DARE you not pay me a living wage!

          – Reverend, you BIG TIME polluter!

          – Big sis, I always knew you were superficial!

          – Police man, STOP oppressing me with your tiny CUBICLES!

          And your local busybody community members, council members, and labor unions are a big reason why manufactures (and their employees) are run out of business.

        • NBay says:

          If having the last word is important to you, then you are quite welcome to it. Glad I didn’t write it.

      • kevin says:

        @JSRG (Just Some Random Guy), you and your rabid ranting again!
        The last time, I asked you for simple evidence to back-up your claims and you went silent.

        Wolf should ban you from making your farting noises here.

        “Engineers don’t provide any value because all they do is design the things that other build”??? WTF are you talking about?

        Engineers are THE ones who design AND BUILD stuff that you use on a daily basis, you moron.

        Get out of your mom’s basement and go do something useful.

        • Wolf Richter says:


          LOL. I think you missed the dry and biting sarcasm of Just Some Random Guy. From what I remember he said in his other comments (and he can correct me here), he is a software engineer.

        • kevin says:

          Well Wolf, sorry me if I completely missed his ill-formed “sarcasm”, if there’s any at all to speak of.

          As you can see above, I’m not the only one here who didn’t appreciate this particularly bad representation of a “software engineer”. I’ll bet this JSRG only did spaghetti code, which is why he couldn’t build anything working or at least bug-free.

          You can censor my comment for being too personal, but I still stand by my comment that he is a moron :)

    • d says:

      Also it takes a VERY SMALL % of the population to extract it, and an even smaller population % get any real remuneration beyond subsistence level from this.

      • Frederick says:

        Hasn’t that been the plan all along d? George Carlin taught us that or should have anyway

        • d says:

          An evil few always have such “Their shall be only 1” plans.

          However these plans are badly flawed.

          As they always lead to violent revolt (an Obviously predictable occurrence when all the wealth and power lies in the hands of very few), which drives the development of a better society backwards yet again.

          On The path to destruction the few have a wonderful life, The epitome of the indolent champagne socialist existence.

    • Rat Fink says:

      Not much different than paying people 150k per year for digging holes and filling them back in.

    • van_down_by_river says:

      We should be grateful for the high frequency trading firms out their. What would we do without them picking the pockets of people trying to save for retirement – people would one day be able to retire and I think we can all agree that would be bad. Really, really bad. Thank-you Ben (makin) Bankee for your heroic service to the economy.

      A valuable addition to our “GDP”

  4. Calamity Jane says:

    What happens to the Services economy when the Goods based economy comes to a grinding halt? The image of Will E. Coyote spinning his legs running in thin air over a chasm comes to mind.

    When people start to get laid off, when construction slows down, all those big cell-phone bills, in-app purchases and buying from Uber Eats all get cut from the family budgets. They might be able to ride out such a storm, if they don’t have tons of corporate debt they foolishly came out of the top of the economic cycle carrying. Ooops. Winter is Coming. And their are vulture capitalists coming out of the snowy mists.

  5. Javert Chip says:


    As a user of mortgage services, property insurance (I live in FL; think Dorian), leasing car services, auto insurance, brokerage & investing services, banking services (free checking…), credit card services, I guess I disagree with you.

    • ZeroBrain says:

      There is real complexity and there is human-invented complexity. Real complexity is physics, medicine, software, etc. Human-invented complexity is laws, real estate titles, banking transfers, etc. Many of the services you mention extract wealth simply due to human-invented complexity that has evolved organically and exists for purely historical reasons, to the benefit of entrenched industries that should not even exist *at all*.

      For example, you use auto insurance. Why isn’t that simply pooled across society as a utility, at cost? Unlike developing widgets, car insurance has a reasonably well understood risk profile and minimal innovation occurs. The rest is just marketing and wealth extraction. In this area, there is no need for a marketplace of ideas and competition that capitalism provides – it can be done with better efficiency already and very simply. The reason that hasn’t occurred is because no individual has a strong incentive to create a profit-free insurance company. But it would be simple to do so, if one had access to capital, so any state could do it if there were a political will. But it would be career suicide for the politician.

      • Kent says:

        Great comment. Auto insurance is a great example. I live in Florida too. The state requires that I carry auto insurance. So, to me, the state should provide it if they require that I have it.

        Basic auto insurance requires that I have personal injury protection and liability (if I hit damage someone else’s property). Of course I already have health insurance that would pay for any personal injuries.

        Suppose we had medicare for all. There would be no need for health insurance or PIP in auto insurance. Suppose state law said that auto insurance could only pay for your auto (in an accident, your insurance pays for your car and the other guys paid for his car). And suppose it wasn’t mandatory. The cost for auto insurance would collapse. In fact, I wouldn’t carry any because it is a pure loss for me.

        Think about homeowner’s insurance. Make it illegal for mortgage providers to require homeowner’s insurance. You would immediately see the end of building along Florida’s beaches and flood-prone rivers because no one would provide a mortgage, and there wouldn’t be a need for much insurance anyway.

      • NBay says:

        As one of the Rockefeller’s told Bucky Fuller, “Why make business simple when you can make it complicated”.

        People really should read the short synopsis he wrote for this same guy about how corporations evolved, and, needless to say, they have evolved more since Bucky’s day, changing law as needed.

        In Lincoln’s youth, lobbyists were called “borers”, like the termites on our government they are.

  6. peasant43 says:

    complex societies need much greater energy flows for upkeep than simple ones, by many orders of magnitude….

    complexity → more networks between individuals, more hierarchical controls to regulate them, more info processing, more specialists and need for surpluses…

    society becomes more complex, support costs for every individual rise and larger portion of energy budget is dedicated to maintaining the social structure…

    but investment in complexity needs to increase, and is subject to laws of diminishing returns…

    similar to economic law of marginal product and average product – eventually, increased investment into sociopolitical complexity becomes costly and unproductive…

    • FromKS says:

      I’m not 100% sure of what you’re saying, but I like what you’re saying.

    • Rat Fink says:

      Spot on. But this is going to fly over the heads of most people.

    • Xabier says:


      Complexity starts as the solution which becomes the problem: sufficient energy flows fail (infinite growth in these being physically impossible) leading to eventual disintegration after a very painful phase of rising and unsustainable burdens, and economic and social disfunction -what we in fact see today.

      The historic move to mostly service economies in the ageing industrialised states answered the need to address the eventual failure of manufacturing as the basis of an economy.

      But in time it becomes an all-consuming vampire encouraging the illusion of life – great GDP, great careers for those in certain sectors – but preying on a corpse animated only be unjustifiable debts.

      And this is why we can place our own industrial, globalised, civilisation as being already quite far advanced along the what might be termed the Arc of Collapse, starting perhaps in the early 1970’s.

      Anyone unfamiliar with the concept of complexity collapse should take a look at the work of Joseph Tainter, just to start with: well reasoned, with historical examples.

      The moral: Carpe Diem.

      • RD Blakeslee says:

        It is still possible to live a relatively uncomplicated and very satisfying life in the U.S.

        The essentials are two: locate yourself “under the radar” in a low population area, and devise as much as is reasonable of your own sustenance – build your own house, for example.

        “Grandfather Says” writes about that elsewhere, at some length.

    • Ensign_Nemo says:

      One of the major problems that the US has today is that the people at the top are adding layers of complexity for the sole purpose of extracting resources, without doing anything at all to provide actual goods or real services.

      The best example of this that I have encountered is a CDO-cubed – a derivative of a derivative of a derivative. By the time the actual physical asset, such as house backed by mortgage, is put through the meat grinder of financial butchery, it’s next to impossible to figure out how it affects the CDO-cubed *unless* the organization that created the thing in the first place is tracking things closely. Quite often they just sell the damn things and then quit paying any attention after they collect the fees.

      IOW, only the bank that spawned the beast can figure out how it should be valued properly. It’s highly unlikely that any other person or organization knows exactly what sorts of “mystery meat” were used to make the sausages.

      This was one of the reasons for the financial crash, and was one of the reasons why the Secretary of the Treasury was warning about “tanks in the streets”. If the crisis had gone a bit further, most of these CDOs, CDO^2s, and CDO^3s would have become toxic waste, and whoever held them would have been wiped out.

      How can you properly value something that has been abstracted this far away from reality unless you created the damn thing in the first place?

      Nobody else knows what these things are worth in a crisis, when things such as counter-party risk are anyone’s guess.

      As they become more abstract, and even more abstract, and more abstract still, then later as a crisis escalates they become worth less, and worth even less, until they are worthless.

      It’s “baffling them with BS” to the third power.

      The same concept applies equally well to Congress and lawmaking, where thousand-page omnibus spending bills are voted on just before major holidays. Nobody even reads them first, and the media pay little attention because the reporters are already out of town on holiday when the last vote is cast.

      • NBay says:

        Here are a couple more examples of needless complexity for the purpose of profit, e.g., “digging a hole, and someone else filling it”, with plenty of executives and their support people, to see both are done correctly, and, of course, lobbyists.

        1-Hospital corporations write their own code numbers and costs for various medical procedures. They are considered proprietary information, by law. Insurance companies must therefore employ people to make sure they make a profit deciphering these codes “correctly”. Medicare is an exception, it has it’s own codes and if they want to be paid by Medicare, hospital corps must use them.

        2-Drug companies, again by law, consider the prices they charge various organizations or groups proprietary. CA recently lost a battle where the various State Organizations using large quantities of drugs could not tell the others what they were being charged, and I assume there must be many “negotiators” involved, but maybe not.

        If medicare for all was suddenly implemented, an estimated 1 million people on either side of JUST the procedure coding battle (hospital side, and insurance company side) would lose jobs, likely decently paid, and of course the usual layers of support, executives, lobbyists, advertising, etc, etc.

        Ref: Elenor Rosenthal, Kaiser Health News (which BTW is a non-profit foundation supported by the Kaiser family itself. Evidently they feel some guilt over this “managed health care” thing they started, for their workers, originally) and have nothing to do with the present Kaiser HMO many here may use. The Kaisers were really just into steel and building things with it.

        What is paying for all this nonsense? My guess is it shows up eventually as stock, bond, and “derivative” market “value”, national debt, and Fed balance, as I know little of the (choke, gag) “science” of Economics.

  7. Rowen says:

    Never-ending defense spending and Boomers accessing Medicare services will keep us out of a technical recession.

    • alex in San Jose AKA Digital Detroit says:

      In my experience Medicare is really hard to get. There’s probably a 10%-20% level at the bottom where you’ll be “too poor” and yes, I have no idea how that’s supposed to work but it’s one way to save costs I guess.

  8. GSH says:

    In the first bucket, it is interesting to note that the insurance industry (56%) is larger than the finance industry (44%). It also grows like a weed at 9.6%. It matches my personal experience. I spend an order of magnitude more on insurance (cars, properties, umbrella, RV, boat,….). Bottom-line: We really should name the first bucket the Insurance bucket

    • RD Blakeslee says:

      Once in awhile it pays to be old: We recently cut our Auto insurance payments about in half because we only drive about 2000 miles per year, anymore.

  9. David Calder says:

    When were financial services first factored into our GDP? Most of what I’ve read considered finance to be a drain on the real economy as wealth extraction and not wealth creation. Extraction certainly made a few very wealthy but at the expense of the many.

  10. Brant Lee says:

    I wonder in what year services overcome production as a percentage of GDP in the US? But who needs to be an entrepreneur, when so much money is made in the stock market.

  11. Just Some Random Guy says:

    I will never understand why so many people think a $50K a year manufacturing job is somehow a better (and more real) job than a $150K a year finance or tech related job.

    I’m not denigrating manufacturing in any way. I respect anyone who gets up in the morning and goes to work, no matter what they do. But this notion that somehow a job where you don’t use your hands or do back breaking labor is somehow a fake job is ridiculous.

    As for finance ruining the economy….I’d love to see this utopia where there are no banks, no insurance companies, no capital markets, no ability for start ups to get funding, no ability for govts to borrow money for infrastructure, no ability for business to borrow money in order to expand. What a great society we’d have huh? Everyone could just exchange gold with each other. Or something.

    • Jos Oskam says:

      This sounds a bit like a strawman. As far as I can see nobody here is advocating some kind of completely finance-free utopia. People are just questioning whether the value contributed to GDP by the finance & insurance sector is qualitatively comparable with the value contributed by other sectors.

      When finance & insurance continuously grow faster than the economy as a whole, I personally find such a trend worrying. Where will this end? I can’t imagine an economy where everyone is getting their income from playing with somebody else’s money. So evidently this cannot go on forever.

      And if something cannot go on forever, it will stop. (Herbert Stein).

    • Frederick says:

      Yup it was done by indigenous people for millennium and I will venture to speculate that most of them lived a more happy and content existence than modern western man But many will argue that theory of course Back to my avocado toast and whatsapp

      • GrassRanger says:

        Yep, they were satisfied with it because for thousands of years no one thought they could avoid the possibility of being eaten by a hyena while you fetched water from the river or having your camp raided, you husband killed, and your children abducted into slavery. When people found they could organize society in a way to reduce or eliminate those and other traumatic possibilities, they were glad to accept the inconveniences that come with their new modern lives.

  12. Paulo says:

    I wonder why Death Services are in decline? Seems to me it is about the most stable industry out there, plus it isn’t exactly a sought after gig as far as I can determine. Competition? Have you ever met anyone who wanted to be an undertaker? (I haven’t). Prices are high and expensive, even for simple cremation.

    Seriously, when you have to make the call you’re damn glad someone picks up the phone.

    I bring this up because we have just dealt with two parents dying and another could go any day. Mind you, I’m taking my Father-in-law fishing on Tuesday….in the boonies…and I’ll leave it to your imagination to see how this could be a problem at 20% heart function plus a dodgy valve. Coho are running and he wants to go!!

    • Wolf Richter says:

      Why would you get a full-fledged funeral and burial, when you can get basic services and cremation for much less. In big cities, more and more people are choosing a cheaper route out of this world.

      • alex in San Jose AKA Digital Detroit says:

        Let’s say a cremation etc is $1000. It’s $1000 your family doesn’t have. I see an increase on people disappearing at sea, things like that. In this savage economy that’s only getting worse I’m really glad I don’t have family to get stuck with expenses like this.

        • Just Some Random Guy says:

          “In this savage economy that’s only getting worse”


        • Heff says:

          “I see an increase on people disappearing at sea, things like that”

          I really get a kick out of reading your posts, Alex. I’m not sure why though. Maybe the odd way you perceive reality…

      • RD Blakeslee says:

        Not just big big cities, Wolf. We live in a rural place and my late wife’s ashes were placed under a Norway pine we planted 40 years ago.
        Mine will go there pretty soon.

    • Frederick says:

      Yes I’ve met many during my University years I had friends who were Mortuary Science majors Most if not all of them were sort of oddballs to be honest but like the computer geeks who couldn’t get any cute girls I suppose they got the last laughs

  13. joanrn says:

    The financialization of the economy has led me to become a shadow bank of sorts. We get such poor interest rates for our savings that we have sold property and carried papers ourselves, as well as pay off our kids student loans and let them pay us back interest free.
    we just used your technique when we purchased a new car. We financed it at first to get the best deal then we paid it off in cash. Thanks for the tip.

  14. Martok says:


    Have to agree with you 100% about the service sector carrying the GDP.

    My college professor said the USA will continue to recede from a manufacturing giant that would be moved overseas, to a a service sector economy, and that was back in the 70’s.

    I furiously argued with him back then, however he was right, to my dismay of today.

    This is our reality today, I have seen the same stats.


  15. Patrick says:


    While I don’t always agree with your conclusions, it’s refreshing to find an econ blogger like yourself who lets the data speak for itself vs twisting it to support a predetermined bearish or bullish bias.

    There’s certainly no shortage of negatives to be found within the US economy (especially it’s debt), but looking at the foreign outlook places most of them into a better perspective.

    As they say, you don’t have to outrun the bear…

  16. max says:

    GDP fails to accurately assess the value of goods and services provided or estimate a society’s standard of living. It is a ruler with irregular hash marks and a clock with erratic ticks.
    As proof, observe this absurdity: in 1990, Soviet GDP equaled half of US GDP, according to the 1991 CIA Factbook. No one visiting the Soviet Union in 1990 would believe their economy came close to 50 percent of the quality and quantity of the goods and services produced in America. GDP-defined production may have been strong, but laying roads to nowhere, smelting unusable steel, and baking barely edible breads stretches the definition of “production.”

    GDP understates the economy as a whole while grossly overstating its consumption component relative to business investment. A better measure of overall production was employed in 2014, when the US Commerce Department began publishing Gross Output which incorporates intermediate transactions.

    Using Gross Output, the commonly cited statistic of consumption accounting for 70 percent of all economic activity quickly falls to a mere 40 percent.

    If GDP purports to measure economic activity which benefits society, the inclusion of government expenditures is dubious. GDP “produced” in the Soviet Union is no different than GDP “produced” by any government — the difference is but one of scale. All government spending is to some degree malinvestment,

    If you do not include government spending in GDP, the economy will appear to be shrinking in the middle of a war or in a recession, even though the government is spending money hand over fist. From the point of view of politicians who wanted the government to spend more on goods and services (and yes, war), including government spending in GDP made total sense, because you want to be able to tell the citizens the economy is growing. Politicians have been spinning data and news for ages. Whether we’re talking about the results of reading sheep entrails or of dicing modern economic data, the information is spun to make the politicians look good. The controversial decision to include government spending in GDP was a political move made by President Roosevelt and the Democrats, who were in charge during the Great Depression.

    Within a short time, the inclusion of government spending in GDP was accepted as economic dogma by all major economic institutions. This of course made it easier to argue for and act on Keynes’s assertion that a government should spend during recessions, stimulating the animal spirits of consumers and driving up consumption. Who could even question such an assumption? Only troglodytes, the less-educated along, and other sorts of deplorables.

    • Wolf Richter says:


      This article wasn’t about GDP but about dollar-revenues of companies in the service sector, such as banks and insurance companies, which is a very different animal than GDP. So go ahead and read the article. It won’t bite, I promise :-]

  17. John Taylor says:

    I love the title – Financialization of the US economy.

    You’ve written a lot about the problems associated – short-term corporate thinking, using ratcheting and stock buybacks to game the system for upper management, leveraged buyouts to gut and kill companies like Toys-R-US and Sears.

    Here’s an interesting one I was just made aware of…
    A couple weeks ago I had to move out because the homeowners son was moving into my “granny shack” – so I went to hotels for a bit. My employer found a 2-bedroom apartment on for me and another worker. The whole apartment complex has been converted into a hotel … No front office, but passcodes on every door and everything a day-to-day rental. I looked it up and many apartment complexes and condo complexes have been fully converted in both LA and San Francisco.

    A city has to approve a zone change from residential to commercial, right? So why are these cities approving this in the midst of a housing crisis? Particularly in LA and San Fran where the ruling elites try to pretend to care about the lower middle class?

    • Mars says:

      Out here in the fly-over flatlands the checklist for a zoning change to extended stay (unit with kitchen) includes assessing the need for more hotel rooms, adjacent zoning and use, as well as applicant making a presentation. Keep in mind the city may get more taxes from the hotel room rentals than apartments. In my town a city sales tax of 8.75% applies to hotel rooms but not apartments.

      • dr_doomz says:

        For sure. It’s the TOT (transient occupancy tax). LA areas can be as high as 15%.

  18. Joe says:

    The insurance industry has long enjoyed lobbying our politicians into making their parasitic services as essential and must be enforced through our laws and government policies.
    Their latest move is enforcing through our governments a 3 million dollar liability insurance to even open a lemonade stand…

    • Capt Steve says:

      Joe, your comments show how little you really know ….about anything.

      So you hate insurance, what about the families that have homes destroyed by hurricanes, tornados or floods? You think they regret paying those premiums?

      What happens when someone makes an error while driving, are you going to accept I’m sorry for the damages OR are you going to call their agent and file an “insurance claim”?

      I’ve been an insurance agent for over thirty years, I’ve seen many claims that would leave people destitute, homeless and or bankrupt without insurance coverage.

      Proud of what I do and the services I offer!

      • I tell people about CEA, because most Californians have maybe 3/4’s of their net worth in their home, and sixty seconds from now, it could be gone. One good elderly (and well off) friend said, “I prefer to gamble”. When I was driving semi for a living I would see people driving completely recklessly, pass me at a high rate of speed, and down the road ten minutes there they are in pieces. Are you supposed to feel sorry for them?

      • dr_doomz says:

        “So you hate insurance, what about the families that have homes destroyed by hurricanes, tornados or floods? You think they regret paying those premiums?”

        I don’t think he hates insurance. He probably hates what they’ve become. Just like Norman Bates and his mother.

  19. Unamused says:

    For additional information see “Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy” by Michael Hudson.

    For historical background refer to “Tragedy and Hope” by Carroll Quigley. This was written back in the 1960s when there was still hope, which, as has been pointed out, is a cruel, cruel thing.

    Everybody who watches these things has their own favorite reading list, I suppose.

    Financialisation has accelerated since Quigley’s time, but as Hudson notes, it cannot go on forever. The Financial Economy will eventually damage the Real Economy until it can no longer support the expansion of financialisation.

    At that point the whole system collapses, in stages, as the Financial Economy attempts to maintain itself by resorting to increasingly extreme measures. Some of these measures have already manifested themselves, like rules recently put on the books which allow bank bail-ins, meaning the confiscation of bank deposits, and the abomination of negative interest rates, and of course skyrocketing debt in all major sectors. These measures are also unsustainable, and essentially amount to burning ones candle at both ends and at various places between them.

    Present trends, partly indicated in the cited graphs, show that central banks will be unable to delay the first stages of the collapse beyond 2026, sooner if somebody really stupid does something really stupid which damages the extraction mechanisms of the Financial Economy. Until then the gyrations of the CBs might be able to keep up weak pretenses to normalcy. It will be interesting to see if the DJIA can stay at record heights even as the Real Economy goes into recession, at least so long as the fictions can be supported. Recovery won’t be possible because ecological supports to the Real Economy have been cannibalised just as the Real Economy itself has been cannibalised, and those too are on track to collapse.

    Information technology has made this process a lot more efficient, to be sure, but more important, it has enabled the politicised establishment of a security infrastructure which guarantees that the general population can largely be forced to shut up and take it.

    It’s not as if any of this is a big secret. Why should it be? Any more, it’s not as if there’s any way to prevent it.


    • sierra7 says:

      Wow! I’m looking at my double!! (Or, reading him/her!)
      +1000 in my humble opinion!

  20. wkevinw says:

    It looks like insurance is one of the big ones. Sorry if I missed it, but I’m not sure if health care insurance is included in that. If so, it’s part of the health care cost problem/issue.

    Also, the “scientific services” sounds great, but again, I wonder how much of that is medical, and it’s pretty small.

    I guess there are some “engineers” in this sector, but maybe “software engineers”? If so, they truly are “all service”= they don’t design anything tangible.

    I think this area is like all the rest: a few getting rich at the top, but the vast majority of the jobs are at the bottom earning level.

  21. Tom Pfotzer says:

    When I was in college, my finance professor told me that the function of finance was to allocate capital to the highest social use. How would you rate the finance industry’s performance on that metric for the past 20 years? Dot-com, real-estate, then everything bubbles. Great investments in national asset-base, right?

    Retail banks are almost obsolete. Now we have “banks” whose assets are almost entirely software and customer accounts. No buildings, very few staff. The bank-to-customer interface happens on your smart phone.

    Commercial banks used to underwrite infrastructure investments. Not much new capacity coming online these days; no need for it.

    When Warren Buffet bought GEICO (auto insurance company) way back in the eighties, he said (paraphrasing) “it’s a license to print money”. As in “the risks are well-known, the process is well-automated, and the demand is forced by law (must buy insurance) and the price is set by an oligopoly well above the level of costs.

    The insurance industry, much like the health care industry, is a function ripe for disruption (e.g. like Amazon did to retail). They’re oligopolistic, inefficient, way too costly and prices are rising. Lot of unhelpful baggage on the cart.

    It is no surprise that health insurance is a boondoggle; it’s a combination of two of the most inefficient and overpriced functions in our economy.

    Once an economy makes the transition from inventing, engineering and building into consuming, re-hypothecating, delegating and debt-creating, it’s coasting on its prior momentum.

    Who has built some new industries lately? Elon Musk. Name some more.

    We are coasting, and the momentum won’t carry us over the next few hills.

    ====== Now for something discordant ====

    Even if finance was fully functional (effective and efficient allocation of capital)….what industries would it allocate into? More intensification of resource stripping / consumerism? Is that gonna help things?

    I think many of our concepts around economics and finance have reached the end of their useful life. We need some new basic assumptions.

  22. Augusto says:

    I think it was David Rosenberg, the economist, who when asked what was the most worrying number or stat in the economy, responded with the number of people working in the finance industry (in the millions). These people require financial churn to make money. From working in and with this industry, some of this churn adds value but much does not. This Everything Bubble gives the allusion of wealth and value, while a series of financial tricks and cons extract real value from savers and producers. Regulations, QE, low interest rates, deficit spending, are the true financial wizards behind the curtain. When these cons go away, having sucked up everything, there will not be millions working in the finance industry anymore.

  23. unit472 says:

    In 1966! Frank Zappa took a stab at social commentary with his prescient lyrics to “Trouble Coming Everyday” The last stanza is more true today than ever.

    You know we got to sit around at home
    And watch this thing begin
    But I bet there won’t be many live
    To see it really end
    ‘Cause the fire in the street
    Ain’t like the fire in the heart
    And in the eyes of all these people
    Don’t you know that this could start
    On any street in any town
    In any state if any clown
    Decides that now’s the time to fight
    For some ideal he thinks is right
    And if a million more agree
    There ain’t no Great Society
    As it applies to you and me
    Our country isn’t free
    And the law refuses to see
    If all that you can ever be
    Is just a lousy janitor
    Unless your uncle owns a store
    You know that five in every four
    Just won’t amount to nothin’ more
    Gonna watch the rats go across the floor
    And make up songs about being poor

    Blow your harmonica, son!

    • peasant43 says:

      It isn’t necessary to imagine the world ending in fire or ice. There are two other possibilities: one is paperwork, and the other is nostalgia.

      Frank Zappa

    • doug says:

      Ok now I have to go listen to Suzie Creamcheese…thanks.

    • stan6565 says:

      Must chuckle at Frank’s experiences with Tipper Gore. Should have told her he was a keen environmentalist. RIP.

    • The Colorado Kid says:

      unit472, a great song from one of the most underrated Albums of all time!

  24. Wolf, I think it is very premature to sound the all-clear on the U.S. economy based on this data. What was the Services Economy doing in the summer of 2007 and 2008 just before Collapse No. 1??? The U.S. and world economies are so over-leveraged today vs. 2008 even, that it doesn’t have to be a decline in services or goods demand by free spending America, but an internal or external shock to the financial system which is lurking just around the corner. Look at Deutsche Bank, Italy, S. America, Mexico, you do not have to look hard to see systemic failures already in the making. GDP in the U.S. can’t even post positive after adjusting for Man on the Street Inflation, the REAL INFLATION RATE.

    • Wolf Richter says:

      David W. Young,

      “What was the Services Economy doing in the summer of 2007 and 2008 just before Collapse No. 1???”

      Here’s the answer: the Finance & Insurance sector was collapsing in 2007/2008 — the biggest sector of the service economy and of the overall US economy was collapsing (this started in 2006). And it spread from there.

  25. Senecas Cliff says:

    Wolf is correct in that much of the modern service economy outside of restaurant dining and such is very sticky from an economics standpoint. It is easy to stop buying RV’s or electronic gadgets when the economy or your job security starts to look dodgy, but you have to keep paying for car and house insurance and the skim on what you have socked away in the 401K or state pension keeps going. But at some point it acts like the NOS button on the street racer. When your car and or house gets repo’d you dump the insurance too ( maybe before) and when you pull the the last nickels from the 401K to live on,bye bye annual percentage down at the Wall Street bucket shop.

  26. HollywoodDog says:

    Very useful data, Wolf! I’m going to use it for investing purposes. When I read “most litigious society,” though, I wondered if that was actually true or just a common belief. I did a little Internet research and found out that while the United States has the most lawyers per capita, we are not (by certain measures) the country with the most litigious behavior. That title goes to Germany. (Who knew?) According to (reliability unknown) and some other sources, the United States is number 5 in terms of litigious behavior. Let’s hear “We’re No. 5! We’re No. 5!”

    • Just Some Random Guy says:

      I think a lot of the perception is due to the media. All the lawyer shows on TV, LA Law, Boston Legal, Damages, etc don’t help. Plus purely speculating, but the US has to be #1 in terms of ridiculousness when it comes to the law. Like when someone gets $10M from McDonald’s after spilling her coffee. I have a feeling Germany doesn’t do that sort of thing.

    • Wolf Richter says:


      In terms of the “most litigious society” being Germany, my BS-o-meter went redlining because in Germany it’s very tough filing a civil suit against a company for example. Class-action, forget it. From what I remember, you have to go to the authorities and press charges, claiming that the company violated a law (criminal!). If they didn’t violate a law, and it’s just a question of a monetary claim — who pays — as is typically the case in a civil suit in the US, it gets very tough in Germany. Here are some numbers from Harvard Law:

      • HollywoodDog says:

        Thanks, Wolf. Harvard Law does seem like a slightly more reputable source. I’m glad to know we’re still No. 1!

      • wkevinw says:

        Yes, the legal/judicial system is (by design) monopolistic- where else can you go to try a case? As such, the judges are the gate-keepers. They have to throw out ridiculous cases- but they don’t. This is the root cause.

        Judges have gotten worse over time.

      • NARmageddon says:

        Wow, awesome data, in BOTH senses of the word.

  27. nick kelly says:

    I didn’t see any mention of restaurants. Obviously not a financial service but a service and I think a lot of other non-financials were mentioned.

    I think restaurant volume is worth keeping an eye on because it is huge in terms of revenue and employees but largely discretionary. The sudden trend to delivery of even fast food is another bubble on top of the fast food bubble. I believe a third of the expenditure on food in the US is on restaurant fare, mostly fast food.
    An incredible stat to my way of thinking and illustrative of a very wealthy society or one living beyond its means.

    • nick kelly says:

      Restaurants employ 15.3 million workers or 10 % of the workforce. In terms of workers employed this must be either the largest sector or close.

  28. Ridgetop says:

    Excellent article. Interesting, first time I have seen the size of each sub group in relation to each other.

  29. NARmageddon says:

    Wolf, since the numbers listed are revenue numbers, to what extent is healthcare double-counted as both insurance revenue and hospital/provider revenue? Does it matter, is it any different from counting revenue of auto manufacturers and auto dealers separately>

    I guess what I’m really wondering is what is the ratio between everyone’s revenues and GDP. Revenue/GDP must be quite a bit larger than 1, right, maybe 2-3? Honest question, just thinking aloud about how the accounting works.

    • Jason says:

      I am being redirected to dodgy/potentially malicious sites when I land on this page.

    • Wolf Richter says:


      They’re not double counted here, but you cannot add them to GDP. GDP is based on “final consumption” and investment, not on wholesale activities and not on revenues by one company that sells something to another company that sells it to the end user. For GDP purposes, sales to the end-user count. What comes before doesn’t count. Some of these services are intermediaries. So you have to keep services revenues measures like these separate from GDP measures. They’re two different ways of looking at something, and they cannot be combined.

      • NARmageddon says:

        @Wolf, I agree with everything you said except the very first half sentence, “They’re not double counted here”.

        I mean that in the following way: If you look at total healthcare expenditure in the private sector, it will appear first as revenue in the insurance sector, and then about 80% (roughly) of that revenue will also appear as revenue in the healthcare service sector. That’s what I *mean* by the phrase double-counting revenue. And that is why, as you state, GDP cannot be calculated by adding sector revenues, but must and is calculated from revenue at the point of final consumption.

        I don’t think we disagree. It’s just a matter of being very precise about what is meant by double-counting revenue.

        PS: Heck, there could be even higher order multi-counting of revenue when there are several levels of sectors that act as middleman.

  30. We are moving toward all income no collateral microeconomics? I was going to ask what happens when you provide excess liquidity but the numbers on financial services tell it all. The countervailing force to this is “self” service, DYI. The point until now, has been outspending the Jones to stay ahead of them. Some middle class types still insist on value, a holdover from their parents probably.

  31. DR DOOM says:

    Memorial Misson hospital is the main hospital in Western N.C. 75% of its budget comes from Medicare , Medicaid etc. If this part of the GDP is doing so well crank up the printing press and give me UBI. Simultaneously we are probably using cow farts as part of the fracking production to also add to GDP. If I mention GDP at a cocktail party or a family get together their eyes glaze over and then they say,How ’bout them Tigers ?(Clemson football). Russia has a GDP the size of NY state according to the government and yet it is the only people transport to the ISS and it built the Kerch Bridge in 3 years while plowing its way under the Baltic Sea with Nord Stream 2 to turn Germany into the energy King Maker in Europe . Russian grain does not rot in the fields or drop out between the flooring of trains any more, no it’s now being delivered efficently to China in great quantities with profits for Russia. Russian Agriculture is booming.Legendary investor Jim Rodgers moved to China to be able to invest in Russian agriculture . Also as a side venture they sell fighter aircraft and a sought after S-400/200 surface to air interceptor missile system.And apparently for $10,000 of terrible and late FB ads were able to elect Trump. I must say however that NY can and does easily create a Russian size GDP out of thin air using Wall Street and the Fed generated fiat printing press.GDP data from the goverment is is as worthless as tits on a boar hog.

    • Wolf Richter says:

      DR DOOM,

      Go ahead, hold your nose and read the entire article, and not just the headline and the subtitle. This article wasn’t about GDP but about dollar-revenues of companies in the service sector, such as banks and insurance companies, which is a very different animal than GDP.

    • Nicko2 says:

      Jim Rogers actually lives in Singapore, small difference. But you sure like Russia a lot, they do have lots of natural gas, oil, and agricultural land…but the quality of their grains is suspect, and of course, the country is one of the most corrupt on the planet.

    • Wolf Richter says:

      And I don’t quite get why a Russia-is-so-great promo needs to be attached to an article about revenues in the US service sector.

      • DR DOOM says:

        It’s not about ” like Russia” or Russia “promo” , it’s the disconnect of what is added to create government GDP data and the economy that exists outside the coastal enclaves. These “additions” to the service sector are due “subtractions” such as loss of time value of money which are always excluded , this is pure folly of how GDP is calculated . GDP was a creation of Congress in the 30’s and was adopted officially at Bretton Woods at the launch of the CB. It’s author in Congress warned of use. It was a perfect term for Bretton Woods. GDP is a fiat word for a fiat system that can be manipulated and what is added to GDP such as the service sector is fair game for discussion.

  32. Hop over here:

    Look at the corporate CEOs, board members, major shareholders and other insiders selling their shares in job lots, smart money cashing out to the dumb money.

    • dr_doomz says:

      “Look at the corporate CEOs, board members, major shareholders and other insiders selling their shares in job lots, smart money cashing out to the dumb money.”

      Which they have been doing since this bull market began and was supposed to roll over tomorrow, next month, next year…. You will be right eventually though, like every broken clock is right twice a day.

  33. Michael Gorback says:

    Getting back to the USPS job fairs – in SF do they provide you with boots and free cleaning or do you buy your own boots and scrape the crap off yourself? The latter would be a dealbreaker for me.

    • Wolf Richter says:

      Been reading too much ZH again?

    • NBay says:

      I don’t read ZH, but that sounds like the Troika at Fox, Hannity, Laura, and Tucker. They find turds in the street quite important to their viewers, in between the usual conspiracy stuff. “They” are coming for your guns, bibles, and all freedoms….and busy making our president look bad….but,

      Let not your heart be troubled.

      • RoundAbout says:

        I’d be suspicious of ZH. Its informative to read the Wikipedia about it.

        • Wikipedia did a great job on this. Thanks for the link. I’m sympathetic to ZH’s Austrian and “antiwar” bias, and take a lot of their material seriously. That said, I don’t buy the conspiracy theories, and they promote a LOT of bad science in the name of climate skepticism.

        • d says:

          Another interesting thing about ZH.

          They USED to have a lot of very accurate information (Electricty production freight car movments ETC) on ccp china however as the ccp killed off the CIA sources in china after tehy obtained their ID’S via a hack the accurate ccp china information on ZH dried up although they are still perma bear on ccp china to the point of being ridiculous.

          Which makes one wonder who they are really shilling for, apart from add $.

        • China has gone from $500 billion in debt to over $40 trillion this millennium. There are good reasons to be bearish. The SOEs will require cash infusions to eternity.

  34. Dr doom says:

    Behold the five horsemen: FIRE finance, insurance, real estate, now joined by health care and social services. All unproductive consumptive plagues that drag down whatever is left of the real economy. The growth in the service sector is a hoax.

  35. KGC says:

    As much as Financial Services contribute to the US economy I’m willing to bet the same industry has a greater impact on that of Great Britain. It’s going to be interesting to see how that survives being cut off from the Common Market if/when Brexit happens.

    • d says:

      Brexit is starting to look extremely likely as the same turds that kept England out of the EEC with repeated Vetoes, until all the rules had been written in their favour, are now stating they will VETO any further Brexit extension.

      As i predicted tehy would some time ago.

      However I did not expect the Turds to announce the policy which means they are still trying to force the English to accept the colony agreement the forced on the unfortunate Thresa May.

  36. Jdog says:

    Does it bother anyone else that we have gone from spending our money on tangible assets to intangible services?
    At least when you purchase a tangible asset, you have something to show for your money. It has some value, and at least a portion of that value can be retrieved if you decide to resell.
    When most of your money is spent on intangibles, you have no asset which can be resold, and nothing of value to show for your money..
    What was the old saying about always having enough money to buy what you want, but never having enough to buy what you need….

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