America's Advanced Industries: New Trends
Leaders in cities, metropolitan areas, and states across the country continue to seek ways to reenergize the American economy in a way that works better for more people. To support those efforts, this report provides an update on the changing momentum and geography of America’s advanced industries sector—a group of 50 R&D- and STEM (science-technology-engineering-mathematics)-worker intensive industries the vitality of which will be essential for supporting any broadly shared prosperity in U.S. regions.
What emerges from the update is a mixed picture of progress and drift that registers continued momentum in the manufacturing sub-sector; a major slump in energy; and strong, widely distributed growth in high-tech services— all of which adds up to a somewhat narrowed map of growth overall.
Three major findings emerge:
The aggregate sector continued to expand between 2013 and 2015 despite global headwinds.
Growth, however, emanated from a narrower set of auto manufacturing and “tech” service industries in the last two years. In fact, just three auto industries and four digital services industries accounted for more than 60 percent of the nation’s advanced-sector growth over the time period.
The sector’s distribution grew more uneven across the country between 2013 and 2015. While a solid minority of the nation’s largest 100 metros achieved strong advanced-sector growth, some 59 saw advanced sector output or employment slow in those years.
Overall, these trends reveal both the value and evolving distribution of advanced economic activity and the need for federal and state-local strategies focused on boosting the sector’s growth and broadening its reach.
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Summer 2016 finds the U.S. economy still performing only modestly well.
Output growth remains positive but middling, given sluggish labor productivity that limits the possibility for fast gains in standards of living.
Employment growth remains steady if unspectacular, but more than one-half of the nation’s hiring since 2010 has been concentrated in lower-wage industries with pay levels under $52,000 a year.
And otherwise, many are frustrated as the nation continues to debate what a rebuilt American economy that works better for more people might look like.
Which is why the Metropolitan Policy Program at Brookings has for the last several years been arguing that to truly rebuild America’s drifting economy, city and metropolitan area leaders—supported by their states and Washington—must work to build an “advanced economy that works for all.”
What would such an economy look like? An advanced economy that works for all would achieve a higher trajectory of long-run growth by improving the productivity of individuals and firms in ways that raise the standards of living for all people while reducing racial, spatial, and income disparities.
How might cities, metro areas, and the nation build such an economy? One step is certain: Along with improved innovation and training initiatives, stronger labor standards, and a rewoven social safety net, a key element of the needed reconstruction is a metro-by-metro rejuvenation of the nation’s high-tech “advanced industries” sector.
The importance of these high-value innovation and technology industries to any future shared prosperity is why the Metro Program began to focus on the sector in the wake of the 2008 economic crisis. Likewise, the centrality of these advanced industries’ progress to the nation’s long-run productivity and economic inclusion is why the program formally defined and began to track the growth of the sector, beginning with the 2015 report “America’s Advanced Industries: What They Are, Where They Are, and Why They Matter.” That report outlined 50 “advanced” industries that conduct inordinate amounts of R&D and employ large STEM (science, technology, engineering, and mathematics) workforces—key determinants of high-value economic enterprise.
Hence this expansion of that report. By adding two more years of data to the earlier trend analysis, this update looks beyond the immediate recovery years and into what has been a restive “new normal” characterized by a U.S. high-tech boom shadowed by a global trade slowdown, an oil and gas glut, and stubbornly high rates of poverty and disaffection.
In this fashion, the following analysis takes a fresh look at the changing momentum and geography of 50 industries whose vitality will be essential to any future a broadly shared prosperity in U.S. metropolitan areas. Output and employment growth data for the years 2013–2015 are compared to those for 2010–2013 for the 50 advanced industries at the national level, across all 50 states, and in the largest 100 metropolitan areas. New trends are identified across both industries and places.
What emerges is a mixed picture of continued progress in the manufacturing sector; a slump in energy; and rapid, accelerating, and widely distributed growth in high-tech services. Given these developments, the report depicts a somewhat narrowed map of growth overall. At the same time, the strong and surprisingly wide dispersion of digital services industries suggest the potential for broad gains through the diffusion of technology.
To present this story, the report first explains what advanced industries are and why they matter. It next charts the changing momentum and geography of the sector, with a special focus on these trends as they surface in larger metropolitan areas. Finally, a discussion section offers some takeaways for regional and national policymakers and economic development leaders. Maps, charts, and individualized state and metropolitan area “trend profiles” are available on the report website.
Overall, the trends reveal both the value and evolving distribution of advanced economic activity and the need for urgent federal as well as state and local efforts to boost their growth and broadening their reach.
Before assessing the location and performance of the nation’s advanced industries, it bears discussing what advanced industries are and why they matter.
What advanced industries are
This analysis like its predecessor asserts that a particular set of high-tech, high-skill technical industries constitutes the nation’s highest-value commercial sector—and so sets out to identify and track those industries.
Accordingly, the report reprises the definition employed in “America’s Advanced Industries” to designate as “advanced” those industries that conduct significant R&D and employ a disproportionate number of STEM workers. More precisely, advanced industries are those in which R&D spending per worker ranks among the top 20 percent of industries and the share of workers with a high level of STEM knowledge exceeds the national average. (See Chapter 3 and the methodology appendix of "America's Advanced Industries" for more background on this definition and related analytic issues.)
On the basis of this definition, the U.S. advanced industries supersector encompasses 50 diverse industries, including 35 manufacturing, 3 energy, and 12 service industries. These industries include advanced manufacturing industries like aerospace, auto, medical devices, and pharmaceuticals, energy-oriented industries such as oil and gas extraction and electric power generation, and high-tech service activities such as computer system design, R&D services, software, and telecommunications.
As such, the supersector includes a wide array of industries using a wide variety of technologies. Yet, despite the variety, the flow of technology use and business transformation among the advanced industries appears to be erasing conventional industry and sector distinctions and turning the super-sector into the leading focal point of technology convergence in developed economies.
Along these lines, the advanced sector can be characterized as the nation’s prime site for technology development, application, and hybridization. Multiple developments in this supersector reveal this nexus:
The physical and digital worlds are converging in these industries as the “digitization of everything” pervades all of its fields, transforming nearly all enterprises with software, “big data,” and connectivity to the internet
The related Internet of Things (IoT)—the convergence of industrial machines, sensors, data, and the internet—is unleashing new ways to optimize the functionality, efficiency, and reliability of physical systems
Advanced robotics, artificial intelligence, and machine learning are making it possible to automate more and more worker tasks, opening the possibility of both productivity gains and labor marketdisruption
Applied physics, materials science, and chemistry are interacting to develop advanced materials with