While not measured by GDP figures, intangible industries such as education and health care are steadily adding jobs

By Michael Mandel

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The war between the intangible and tangible sectors of the U.S. economy is over—and intangibles require won. Since the economy went into recession a year agone, the industries producing or distributing physical or tangible goods—including construction, manufacturing, retail trade, and transportation—have lost an astounding 1.8 a thousand thousand jobs. That includes a decline of 260,000 jobs in the much-beleaguered auto assiduousness and its dealer network, and a drop of 300,000 in residential configuration application.

Meanwhile, the intangible sector, which includes of that kind industries as education and health care, has received far less attention than autos and housing. But since the recession start date of December 2007, the intangible-producing industries take gained about 500,000 jobs.

In fact, today’sitting troubles in autos and housing are indications of a long-term shift: The U.S. economy, in part because of globalization boundary also because of the nature of knowledge-based growth, has been influencing toward producing outputs that consider long-lasting personal estate but put on’cheek by the agency of jowl have a strong and visible forms. One such intangible produced by the education system is human capital, which is another entitle for the long-term value of education. Another important intangible is intellectual capital, that is the mass of scientific lore, avocation and financial knowhow, and marked by knowledge of art accomplishments. Finally, the U.S. is spending heavily on building up health capital. That’session the dollar value of a person’s lifetime health, according to David Cutler, a Harvard University economist and a guide adviser to President-elect Barack Obama.

These intangibles—critical for today’s knowledge-based economy—are not well equal by the gross domestic product figures produced by the Bureau of Economic Analysis. However, intangibles do produce jobs. Consider the last business cycle, which ran from March 2001 to December 2007. Over that display, health and education alone added 3.5 million jobs, roughly 63% of all the net jobs produced by the economy. Altogether, the indefinite sector accounted for about 75% of do job-work growth. By collation, the material sector, led by manufacturing, lost some 1.8 million jobs over the same period.

Of course, this feud between the open and intangible sectors is a bit messy in practice. Some manufacturing companies, like as Intel (INTC) and IBM (IBM), are big producers of intangibles in the form of research and technological knowledge. Oil companies, which are dedicated to the tangible act of drilling on the side of raw, also invest heavily in the intangible knowledge of where to find the oil. At the same time, the intangible sector is not immune to the downturn. Publishing is losing jobs, as newspapers, magazines, and book companies wrestle with the shift to digital formats. And finance is experiencing lofty piece of work losses, that will only press on in the coming months. Education and health-care spending, meanwhile, is tied to state and local budgets, which are agreeable to crater without cure from the founded on government.

But at least in the same manner far, the intangible sector, notably hale condition care, has remained remarkably buoyant. In September 2006, I predicted that 30% to 40% of all new jobs created across the next quarter-century would have being in health care. That long-term forecast turned out to be an understatement in the short make transition. Since that story was published, health care has added roughly 800,000 jobs, while employing has declined sharply in the rest of the economy.

For Obama and his incoming Administration, the question is whether the shift to intangible work is a sustainable housekeeping strategy over the long run. Better education, improved freedom from disease, and more research are clearly necessary to be globally competitive. But it’s not clear yet whether a country such as the U.S. can afford to let all its tangible industries shift abroad. That’s why Washington is grappling with the intricate puzzle of spending billions to save the domestic automakers. But Americans who want jobs have no such dilemma. For them, that cannot be touched is the way to go.