The United States leads all nations in the value of its yearly manufacturing output. Manufacturing employs about one-sixth of the nation’s workers and accounts for 17 percent of annual GDP. In 1996 the total value added by manufacturing was $1.8 trillion. Value added is the price of finished goods minus the cost of the materials used to make them. Although manufacturing remains a key component of the U.S. economy, it has declined in relative importance since the late 1960s. From 1970 to
1995 the number of employees in manufacturing declined slightly from 20.7 million to 20.5 million, while the total U.S. labor force grew by more than 46.2 million people.

One of the most important changes in the pattern of U.S. industry in recent decades has been the growth of manufacturing in regions outside the Northeast and North Central regions. The nation’s industrial core first developed in the Northeast. This area still has the greatest number of industrial firms, but its share of these firms is smaller than in the past. In 1947 about 75 percent of the nation’s manufacturing employees lived in the 21 Northeast and Midwest states that extend from New England to Kansas. By the early 1990s, however, only about one-half of manufacturing employees resided in the same region. Since 1947, the
South’s share of the nation’s manufacturing workers increased from 19 to
32 percent, and the West’s share grew from 7 to 18 percent.

In the North, manufacturing is centered in the Middle Atlantic and East
North Central states, which accounted for 38 percent of the value added by all manufacturing in the United States in 1996. Located in this area are five of the top seven manufacturing statesa—New York, Ohio, Illinois,
Pennsylvania, and Michigan—which together were responsible for approximately 27 percent of the value added by manufacturing in all states. Important products in this region include motor vehicles, fabricated metal products, and industrial equipment. New York, New
Jersey, and Pennsylvania specialize in the production of machinery and chemicals. This area bore the brunt of the decline in manufacturing’s value of national output, losing a total of 800,000 jobs from the early
1980s to the early 1990s.

In the South the greatest gains in manufacturing have been in Texas. The most phenomenal growth in the West has been in California, which in the late 1990s was the leading manufacturing state, accounting for more than one-tenth of the annual value added by U.S. manufacturing. California dominates the Pacific region, which specializes in the production of transportation equipment, food products, and electrical and electronic equipment.

B1a International Manufacturing

United States industry has become much more international in recent years. Most major industries are multinational, which means that they not only market products in foreign countries but maintain production facilities and administrative headquarters in other nations. In the late
1990s, giant U.S. corporations began a wave of international partnerships, with U.S. companies sometimes merging with foreign companies.

Beginning in the early 1980s, U.S. companies increasingly produced component parts and even finished goods in foreign countries. The practice of a company sending work to outside factories to reduce production costs is called outsourcing. Foreign outsourcing sends production to countries where labor costs are lower than in the United
States. One of the first methods of foreign outsourcing was the maquiladora (Spanish for “mill”) in Mexican border towns. Manufacturers built twin plants, one on the Mexican side and one on the United States side. Companies in the United States sent partially manufactured products into Mexico where labor-intensive plants finished the product and sent it back to the United States for sale. Outsourcing to Mexico became more widespread after the North American Free Trade Agreement went into effect in 1994. Firms in the United States also outsource to many other nations, including South Korea, Indonesia, Malaysia, Jamaica, and the Philippines.

In the 1990s, few products were made entirely within the United States.
Although a product may be fabricated in the United States, some component parts may have been produced in foreign countries. Despite outsourcing and the international operations of multinational firms, the United
States is still a major producer of thousands of industrial items and has a comparative advantage over most foreign countries in several industrial categories.

B1b Principal Products

Ranked by value added by manufacturing, in 1996 the leading categories of
U.S. manufactured goods were chemicals, industrial machinery, electronic equipment, processed foods, and transportation equipment. The chemical industry accounted for about 11.1 percent of the overall annual value added by manufacturing. Texas and Louisiana are leaders in chemical manufacturing. The petroleum and natural gas produced and refined in both states are basic raw materials used in manufacturing many chemical products.

Industrial machinery accounted for 10.7 percent of the yearly value added by manufacture. Industrial machinery includes engines, farm equipment, various kinds of construction machinery, computers, and refrigeration equipment. California led all states in the annual value added by industrial machinery, followed by Illinois, Ohio, and Michigan.

Factories in the United States build millions of computers, and the
United States occupies second place in the world in the production of electronic components (semiconductors, microprocessors, and computer equipment). Electronic equipment accounted for 10.5 percent of the yearly value added by manufacturing, and it was one of the fastest growing manufacturing sectors during the 1990s; production of electronics and electric equipment increased by 77 percent from 1987 to 1994. High- technology research and production facilities have developed in the
Silicon Valley of California, south of San Francisco; the area surrounding Boston; the Research Triangle of Raleigh, Chapel Hill, and
Durham in North Carolina; and the area around Austin, Texas. In addition, the United States has world leadership in the development and production of computer software. Leading software producers are located in areas around Seattle, Washington; Boston, Massachusetts; and San Francisco,
California.

Food processing accounted for about 10.2 percent of the overall annual value added by manufacturing. Food processing is an important industry in several states noted for the production of food crops and livestock, or both. California has a large fruit- and vegetable-processing industry.
Meat-packing is important to agriculture in Illinois and dairy processing is a large industry in Wisconsin.

Transportation equipment includes passenger cars, trucks, airplanes, space vehicles, ships and boats, and railroad equipment. This category accounted for 10.1 percent of the yearly value added by manufacturing.
Michigan, with its huge automobile industry, is a leading producer of transportation equipment.

The manufacture of fabricated metal and primary metal is concentrated in the nation’s industrial core region. Iron ore from the Lake Superior district, plus that imported from Canada and other countries, and
Appalachian coal are the basis for a large iron and steel industry.
Pennsylvania, Ohio, Indiana, Illinois, and Michigan are leading states in the value of primary metal output. The fabricated metal industry, which includes the manufacture of cans and other containers, hardware, and metal forgings and stampings, is important in the same states. The primary metals industry of these states provides the basic raw materials, especially steel, that are used in making metal products.

Printing and publishing is a widespread industry, with newspapers published throughout the country. New York, with its book-publishing industry, is the leading state, but California, Illinois, and
Pennsylvania also have sizable printing and publishing industries.

The manufacture of paper products is important in several states, particularly those with large timber resources, especially softwood trees used to make most paper. The manufacture of paper and paperboard contributes significantly to the economies of Wisconsin, Alabama,
Georgia, Washington, New York, Maine, and Pennsylvania.

Other major U.S. manufactures include textiles, clothing, precision instruments, lumber, furniture, tobacco products, leather goods, and stone, clay, and glass items.

B2 Energy Production

The energy to power the nation's economy—to provide fuels for its vehicles and furnaces and electricity for its machinery and appliances—is derived primarily from petroleum, natural gas, and coal. Measured in terms of heat-producing capacity (British thermal units, or Btu), petroleum provides 39 percent of the total energy consumed in the United
States. It supplies nearly all of the energy used to power the nation’s transportation system and heats millions of houses and factories.

Natural gas is the source of 24 percent of the energy consumed. Many industrial plants use natural gas for heat and power, and several million households burn it for heating and cooking. Coal provides 22 percent of the energy consumed. Its major uses are in the generation of electricity, which uses more than three-fourths of all the coal consumed, and in the manufacture of steel.

Waterpower generates 4 to 5 percent of the nation’s energy, and nuclear power supplies about 10 percent. Both are employed mainly to produce electricity for residential and industrial use. Nuclear energy has been viewed as an important alternative to expensive petroleum and natural gas, but its development has proceeded somewhat more slowly than originally anticipated. People are reluctant to live near nuclear plants for fear of a radiation-releasing accident. Another obstacle to the expansion of nuclear power use is that it is very expensive to dispose of radioactive material used to power the plants. These nuclear fuel materials remain radioactive for thousands of years and pose health risks if they are not properly contained.

Some 33 percent of the energy consumed in the United States is used in the generation of electricity. In 1999 the nation’s generating plants had a total installed capacity of 728,259 megawatts and produced 3.62 trillion kilowatt-hours of electricity. Coal is the most common fuel used by electric power plants, and 57 percent of the nation’s yearly electricity is generated in coal-fired plants. The states producing the most coal-generated electricity are Ohio, Texas, Indiana, Pennsylvania,
Illinois, West Virginia, Kentucky, and Georgia.

Natural gas accounts for 9 percent of the electricity produced, and refined petroleum for 2 percent. The states producing the most electricity from natural gas are Texas and California. Refined petroleum is especially important in Florida, New York, and Massachusetts. The leading producers of hydroelectricity are Washington, Oregon, New York, and California. Illinois, Pennsylvania, South Carolina, and California have the largest nuclear power industries.

Petroleum is a key resource for an American lifestyle based on extensive use of private automobiles and trucks for commerce and businesses. Since
1947, when the United States became a net importer of oil, annual domestic production has not been enough to meet the demands of the highly mobile American society.

In 1970 domestic crude-oil production reached a record high of 3.5 billion barrels, but this had to be supplemented by imports amounting to
12 percent of the nation’s overall crude oil supply. Most Americans were unaware of the dependence of the country on foreign petroleum until an oil embargo imposed by some Middle Eastern nations in 1973 and 1974 led to government price ceilings for gasoline and other energy products, which in turn led to shortages. In 1973 the nation imported about one- fourth of its total supply of crude oil. Imports continued to rise until
1977, when about half of the crude and refined oil supply was imported.
Imports then declined for a time, largely because energy-conservation measures were introduced and because other domestic energy sources such as coal were used increasingly. As of 1997, however, 47 percent of the crude oil needs of the United States were met by net imports. Energy
Supply, World.

The United States consumes 25 percent of the world’s energy, far more than any other country, despite having less than 5 percent of the world’s population. The United States also produces a disproportionate share of the world’s total output of goods and services, which is the main reason the nation consumes so much energy. In addition, the U.S. population is spread over a larger area than are the populations in many other industrialized nations, such as Japan and the countries of Western
Europe. This lower population density in the United States results in a greater consumption of energy for transportation, as truck, trains, and planes are needed to move goods and people to the far-flung American citizenry.

As a result of the nation’s high energy consumption, the United States accounts for nearly 20 percent of the global emissions of greenhouse gases. These gases—carbon dioxide, methane, and oxides of nitrogen—result from the burning of fossil fuels, and they can have a harmful effect on the environment. C Service and Commerce Sector

By far the largest sector of the economy in terms of output and employment is the service and commerce sector. This sector grew rapidly during the last part of the 20th century, creating many new jobs and more than offsetting the slight loss of jobs in manufacturing industries. In
1998 commerce and service industries generated 72 percent of the GDP and employed 75 percent of the U.S. workforce. Most of these jobs are classified as white collar, and many require advanced education. They include many high-paying jobs in financing, banking, education, and health services, as well as lower-paying positions that require little educational background, such as retail store clerks, janitors, and fast- food restaurant workers.

C1 Service Industries The service sector is extremely diverse.
It includes an assortment of private businesses and government agencies that provide a wide spectrum of services to the U.S. public. Services industries can be very different from each other, ranging from health- care providers to vacation resorts to automobile repair shops. Although it would be almost impossible to list every kind of service industry operating in the United States, many of these businesses fall into one of several large service categories.

C1a Banking and Financial Services

In 1995 the U.S. financial market had a total of 628,500 institutions, which employed 7.0 million people. These institutions included investment, commercial, and savings banks; credit unions; mortgage banks; insurance companies; mutual funds; real estate agencies; and various holdings and trusts.

Banks play a central role in any economy since they act as intermediaries in the flow of money. They collect deposits and distribute them as loans, allowing depositors to save for future consumption and allowing borrowers to invest. In 1998 the United States had 10,481 insured banks and savings institutions with a total of 84,123 banking offices. Because of mergers and closures, the number of banks steadily declined in the 1980s and
1990s while the number of bank offices increased. Combined assets of insured banks and savings institutions totaled $5.44 trillion in 1998.

Banking in the 1990s was a highly competitive business, as banks offered a variety of services to attract customers and sought to stem the flow of investors to brokerage houses and insurance firms. Large banks in the
United States, in terms of assets, include Chase Manhattan Corporation,
Citibank, Morgan Guaranty Trust, and Bankers Trust, all headquartered in
New York City; Bank of America, headquartered in San Francisco; and
NationsBank, headquartered in Charlotte, North Carolina.

In 1998 the United States had 1,687 savings and loan associations (SLAs), with combined assets of $1.1 trillion. SLAs are similar to banks, in that they accept deposits from customers, but SLAs focus primarily on the housing and building industries by making loans to home buyers. The industry was substantially restructured in the late 1980s and early 1990s after some prominent SLAs became insolvent largely because of falling real estate prices in some parts of the country.

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