July employment in tangible and intangible industries

Today’s employment numbers from the BLS show continued job growth with payrolls up by 215,000 in July. This was only slightly below economists’ forecast of 225,000. Last month’s number was also revised upward to 231,000. The unemployment rate was steady at 5.3%.
In a reversal of earlier trends, employment in tangible producing industries grew faster than in intangible producing industries. Employment in tangible producing industries was up by 126,500 in May. Trade, Transportation & Utilities and Accommodation & Food Service were once again the biggest gainers. Intangible producing industries added 88,600 jobs. Professional & Business Services and Educational & Health Services had the overall largest gain. Arts, Entertainment & Recreation employment declined for the second month in a row – the only sector that had a decline in July.
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For background on the methodology, see our working paper Employment in tangible-producing and intangible producing
industries
.

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Going beyond technical to other intangible skills

One of the key points of the intangible capital framework is that it stresses the importance of multiple forms of capital. Technical assets and skills, embedded in both human capital and structural capital, are only part of the equation. This example (from a Forbes article “That ‘Useless’ Liberal Arts Degree Has Become Tech’s Hottest Ticket”) about OpenTable’s experience illustrates the point:

Suddenly OpenTable needed salespeople. Years of selling helped OpenTable slip its software into more than 10,000 restaurants by 2008. That was a fragile triumph, however. Open-Table’s engineers kept upgrading the company’s seating systems and data analytics, only to discover that restaurateurs weren’t paying attention. That created a greater risk of customer churn. If OpenTable wanted strong, lasting connections with restaurant managers and owners, it needed a second team of frontline relationship-builders.
So OpenTable executives began hunting for people who had waited on tables, tended bar or managed restaurants earlier in their careers. The company was moving beyond its beginnings as an automation tool. The new priority, as sales chief Mike Dodson explains, was to find or train evangelists who could “show how tech can enrich the dining experience.”

In other words, relational capital, tacit knowledge and what is often called “social intelligence” are just as important to success in the Intangible Economy.

Agriculture as an information intensive industry

A number of years ago I wrote a report for the Economic Development Administration on Knowledge Management as an Economic Development Strategy. In the report I made the point that rural areas and agriculture are part of the information/intangibles economy by noting the following example of using local knowledge as an economic advantage:

For example, AgriImaGIS is an agricultural imaging business run by a former farmer. His knowledge of how to translate the information from satellite images into information for farmers on vegetation density, crop quality and the specific needs for fertilizer and pesticides was gained through 20 years of farming. (Cited from a story in the San Jose Mercury News

Earlier this week the New York Times ran a piece on “The Internet of Things and the Future of Farming”. The story describes a recent conference presentation by Lance Donny of OnFarm Systems:

In his presentation, Mr. Donny placed the progression of farming in three stages. The first, preindustrial agriculture, dating from before Christ to about 1920, consisted of labor-intensive, essentially subsistence farming on small farms, which took two acres to feed one person. In the second stage, industrial agriculture, from 1920 to about 2010, tractors and combine harvesters, chemical fertilizers and seed science opened the way to large commercial farms. One result has been big gains in productivity, with one acre feeding five people.
The third stage, which Mr. Donny calls Ag 3.0, is just getting underway and involves exploiting data from many sources — sensors on farm equipment and plants, satellite images and weather tracking. In the near future, the use of water and fertilizer will be measured and monitored in detail, sometimes on a plant-by-plant basis.
Mr. Donny, who was raised on a family farm in Fresno, Calif., that grew table grapes and raisin grapes, said the data-rich approach to decision making represented a sharp break with tradition. “It’s a totally different world than walking out on the farmland, kicking the dirt and making a decision based on intuition,” he said.
The benefits should be higher productivity and more efficient use of land, water and fertilizer. But it will also, Mr. Donny said, help satisfy the rising demand for transparency in farming. Consumers, he noted, increasingly want to know where their food came from, how much water and chemicals were used, and when and how it was harvested. “Data is the only way that can be done,” Mr. Donny said.

With cloud computing, intelligent software and cheap sensors, the Internet of Things will only increase the data available. Combined with autonomous vehicles and robotics, agriculture will become even more information intensive. (See also my earlier posting.)
PS – the company I cited in the report is still doing agricultural imaging:

Agri ImaGIS, working with a German satellite imagery company, uses a software mapping system to make satellite images more useful to farmers. The ag producers use the information to improve their farming operation, particularly in fine-tuning the amount of seed and chemical they apply.

June trade in intangibles

This morning’s trade data from BEA shows a widening deficit as imports jumped by $2.8 billion and exports remaining basically flat (dropped by $100 million). The deficit grew from $40.9 billion in May to $43.8 billion in June. The size of the deficit was pretty much in line with economists’ estimates of $43 billion. A major contributor was a big jump in petroleum goods imports, reversing a downward trend for most of this year. [Note that last week the Census Bureau’s advance estimate showed the goods trade deficit jumping from $59.7 billion in May to $62.3 billion in June as export were down and imports up (see earlier posting). Today’s data shows a goods trade data of $63.5 billion.]
However, once again exports of pure intangibles continued to grow. While imports also rose slightly, the intangibles surplus increased to $15.7 billion in June. Business services exports grew faster than imports. However, continuing a worrisome trend, net revenues from the use of intellectual property dropped slightly as revenues from foreign sources (exports) were up but charges for the use of intellectual property paid out to foreign sources (imports) increased more. The surpluses in maintenance & repair services and in financial services grew with both exports and imports up. The deficit in insurance services improved slightly, while the very small surplus in telecommunications services declined. (See detailed charts below.)
Our Advanced Technology deficit rose slightly from $7.2 billion in May to $8.8 billion in May. Imports increased in all Advanced Technology industries except Flexible Manufacturing. Exports were generally up in almost every industry but not enough to counter the import surge. The biggest change in the deficit came from an increase in Information and Communications Technology (ICT) imports.
Advanced Technology goods also represent trade in intangibles. These goods are competitive because their value is based on knowledge and other intangibles. While not a perfect measure, Advanced Technology goods serve as an approximation of our trade in embedded intangibles. Adding the pure and embedded intangibles shows an overall surplus of $6.9 billion in compared with $8.3 billion in May.
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Note: I am now reporting the trade data using the new BEA classifications for services trade, which breaks services into more categories. In the past, the intangible trade data was the sum of Royalties and License Fees and Other Private Services. Under the new classification system, intangibles trade data is the sum of the following items: maintenance and repair services n.i.e. (not included elsewhere); insurance services; financial services; charges for the use of intellectual property n.i.e.; telecommunications, computer, and information services; other business services.


Charges for the use of intellectual property n.i.e. is simply a renaming of Royalties and License Fees. This includes transactions with foreign residents involving intangible assets and proprietary rights, such as the use of patents, techniques, processes, formulas, designs, know-how, trademarks, copyrights, franchises, and manufacturing rights.


Maintenance and repair services n.i.e., financial services, and insurance services, were previously included in Other Private Services. Telecommunications, computer, and information services is a combination of those two items (telecommunications and computer & information services) that were also previously included in Other Private Services. Three categories previously in Other Private Services — education-related and health-related travel and the expenditures on goods and services by border, seasonal, and other short-term workers — were removed and reclassified to travel. The new category of other business services is a continuation of the older category Other Private Services with those components removed.


Thus, other business services includes categories such as advertising services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; and industrial engineering services. It also includes personal, cultural, and recreational services which includes fees related to the production of motion pictures, radio and television programs, and musical recordings; payments or receipts for renting audiovisual and related products, downloaded recordings and manuscripts; telemedicine; online education; and receipts or payments for cultural, sporting, and performing arts activities.


For more information on the changes, see the March 2014 Survey of Current Business article, “The Comprehensive Restructuring of the International Economic Accounts: Changes in Definitions, Classifications, and Presentations.”

New data series on goods trade balance

Starting today, the Census Bureau is publishing a new advanced trade data series. This advanced data covers trade in goods only. (See Census Bureau notice.) Since this excludes services and intangibles trade, I will not be covering this data carefully
The next release of the full set of trade data is next week. I will publish my analysis of intangibles trade then.
According to Census, the goods trade deficit jumped from $59.7 billion in May to $62.3 billion in June. Export were down and imports up.

2Q 2015 GDP – advanced data

GDP data released this morning from BEA shows the US economy growing at an annual rate of 2.3%. Economist had predicted an annual GDP growth rate of 2.5%. This rate for the second quarter of 2015 is a large increase over the anemic 0.6% for the first quarter. And that revised figure for the first quarter was better that the previous data showing a contraction in the economy.
Investment in Intellectually Property Products (IPP) slowed down slightly to 4.9% from 7.4% in the 1st quarter of 2015 and 7.4% in the 4th quarter of 2014. [This is a revision downward for earlier quarters from previously published data.] R&D grew by 5.2% compared to 6.9% in 1Q and 8.8% in the 4Q. Investment in software grew by 7.8% compared to 9.1% in 1Q and 5.6% in 4Q. On the other hand, investments in entertainment, literary, and artistic original dropped by 2.4% while growing by 2.2% in 1Q and 4.9% in 4Q.
Today’s BEA release also contains data revisions going back to 1969. This includes earlier data on Intellectually Property Products. More analysis later of both the revisions and what the data tells us about previous decades.
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