The Economy of the United States

Manufacturing is the single most important sector of the American economy. It employs roughly a fifth of the nation's labor force and produces about a fifth of the gross domestic product. The United States produces an enormous range of both consumer and industrial goods. No other country equals it in total production and consumption of manufactured items.

By most indicators of industrial strength, such as the production of steel, cement, and chemicals, the United States ranks among the world's top producing nations. Advanced technology has contributed heavily to the United States' preeminent position, especially since the early 1900's. In the late 1990s the United States lead a number of advanced technology fields, such as pharmaceuticals, biotechnology, and aerospace.

The Midwest and the South are the chief manufacturing regions, each contributing about one-third of the nation's output, in terms of value added by manufacture; the Northeast contributes almost one-fourth, and the West accounts for the remainder. California, New York, Ohio, Texas, Illinois, and Michigan are the leading manufacturing states.

A growing trend among many American companies, especially since the early 1980's, has been to move manufacturing and assembling operations to foreign countries, where labor is cheaper. From there finished goods are shipped back to the United States or to other destinations.

The chief manufactured products, by groups, are transportation equipment, foods, chemicals, machinery, electrical and electronic equipment, printed materials, fabricated metal products, instruments, paper and paper products, and primary metals. (These groupings are based on those used by the U.S. Department of Commerce in its periodic Survey of Manufactures and are somewhat arbitrary.)

The manufacturing of automobiles, trucks, recreational vehicles, and related parts and equipment is the nation's leader in terms of value added by manufacture. It centers in the Great Lakes area, especially in Detroit and other cities of southeastern Michigan. There are also large assembly plants elsewhere, especially in other parts of the Midwest and in California.

The production of aerospace equipment, including airplanes and space vehicles, is a considerably smaller industry by value and employment than that of motor vehicles. Major centers of production are on the Pacific Coast, mainly in or near Seattle and Los Angeles.

America's shipbuilding industry is small and unable to compete on a cost basis with large foreign builders. It survives at a number of coastal locations, from Maine to California, largely because of federal expenditures for naval vessels.

Feeding America's huge population requires a giant food-processing industry. Some foods, such as dairy products, are processed in all parts of the country; others, such as meat, fruit, and vegetables, are processed mainly in major producing areas. Meat processing and packing is done mainly in the Midwest and in Texas and California. The canning and freezing industry is largest on the Atlantic Coast, in the Great Lakes states, and on the Pacific Coast.

Chemical manufacturing yields such products as industrial chemicals, drugs, plastics, and soaps and cleaners. Production takes place in many parts of the nation, but is most heavily concentrated in the Northeast, especially in New York, New Jersey, and Pennsylvania, and in Illinois, Ohio, and Michigan. Large chemical plants are also located along the Texas and Louisiana coast and in California.

The machinery group, the nation's leader until the early 1980's, consists primarily of machines for farms, mines, construction, factories, offices, and homes. Electronic computers and related equipment make up the most valuable single category in this group. The Northeast and the Great Lakes states lead in the production of most kinds of machinery. California, Massachusetts, New York, and Minnesota are the principal states in the manufacturing of electronic computing equipment.

Manufactured goods in this group include home appliances; electric lighting equipment; transformers; motors; generators; and radio, television, telephone, and other communications equipment. The manufacturing of these and related products is done mostly in the Northeast and in the Midwest. However, the making of electronic components, chief of which are semiconductors, centers primarily in California, New York, Pennsylvania, and Texas.

The printing industry in the United States is large and diversified. Packaging materials, newspapers, periodicals, books, and business forms are the chief products. All large cities and most smaller ones have printing plants. By far the largest center is the New York City area.

are those that have been made into finished items from primary metals. Among them are forgings; stampings; hardware such as nuts, bolts, and screws; and metal cans and containers. The industrial areas of the Northeast and the Midwest lead in production. New England has long been a center of hardware manufacturing.

A variety of goods are produced in this group, including search and navigation equipment, medical instruments, photographic equipment, and watches and clocks. The northeastern states, especially New York and Massachusetts, lead in the production of most instruments. California is also important.

including pulp, paperboard, and various containers, are produced mainly in the Midwest and the South. Wisconsin leads all states in the manufacturing of these products. Minnesota, Georgia, and Pennsylvania are also important producers.

Primary metals are obtained from ores by smelting, refining, and other processes. Related products include metal plates, sheets, rods, bars, and foundry castings. Of all primary metals, iron and steel are produced in the greatest quantity. The nation has three main iron and steel centers—the Pittsburgh-Youngstown area, in Pennsylvania and Ohio; the Chicago-Gary area, on the southern shore of Lake Michigan; and the Buffalo-Cleveland area, on Lake Erie. Steel production, however, has declined substantially, by roughly a fourth, since peaking in the late 1960's.

Manufactured goods of lesser overall value include textiles and clothing; rubber and plastic items; stone, clay, and glass products; precision instruments; petroleum and coal products; lumber and wood items; furniture and office and store fixtures; tobacco products; and leather and leather goods.

The United States is one of the world's leading agricultural nations even though the relative importance of agriculture in the economy has declined steadily over the years. Farming now accounts for less than 3 per cent of the nation's labor force and about 2 per cent of the gross national product. Nevertheless, it makes the nation virtually self-sufficient in food and, by value, provides about one-eighth of the nation's exports of merchandise.

In the production of many farm commodities the United States ranks among the world's top producing countries. Among these products are corn, wheat, cotton, soybeans, peanuts, tobacco, citrus fruit, meat, milk, and eggs.

Since the 1930's agriculture has been marked by a large decline in the number of farms and a sharp rise in the average farm size. In the late 1980's there were about 2,170,000 farms; the average farm size was 460 acres (186 hectares). Large farms, those with more than 1,000 acres (405 hectares), account for roughly 60 per cent of all land in farms. Many of the largest farms are owned by corporations. Owners of small farms, because of high operating costs, often have difficulty in making a reasonable profit.

In general, agriculture is highly mechanized. Scientific methods of cultivation and livestock breeding are widely used. Hybrid seeds, chemical fertilizers, insecticides, and fungicides have contributed greatly to high crop yields. The average yield of corn per acre, for example, has tripled since the early 1940's.

By value, the leading farm products in the United States are cattle, milk, corn, soybeans, hay, and hogs.

The Midwest is the nation's leading agricultural region. It is the chief producer of corn, hogs, and soybeans and is a major producer of cattle, milk, wheat and other grains, and many fruits and vegetables.

New England is predominantly a dairying area. Farther south along the Atlantic seaboard, from New York to Maryland, farming is more varied. Among the items produced are dairy products, cattle, truck crops, and broilers.

Farming is also varied in the South, where cattle, soybeans, corn, tobacco, broilers, cotton, peanuts, dairy products, citrus fruit, and rice are among the chief farm products. Cotton, once the Smith's predominant crop, is the leading farm product only in Mississippi.

Throughout the Great Plains the raising of cattle and wheat prevails. Cattle are the chief source of farm income in most states in and west of the Rocky Mountains. Irrigation is practiced on the Great Plains and in the West. Highly specialized kinds of irrigated farming are practiced in parts of the West, particularly in California. By value of production, California is the nation's leading agricultural state. California produces dairy products, cotton, and many kinds of vegetables, fruits, and nuts in addition to cattle.

The fisheries of the United States are among the largest and most productive in the world. The United States has exclusive fishing rights in the area extending seaward 200 nautical miles (370 km) from the Atlantic, Gulf, and Pacific coasts, which total some 12,300 miles (19,800 km) in length. The United States also fishes in international waters, beyond the 200-mile limit.

The catch consists of both edible and inedible fish; the latter are processed mainly into meal and oil for industrial and agricultural use. Chief among the edible species, by total value, are salmon, shrimp, crabs, tuna, lobster, scallops, flounder, and oysters. Most of this catch is marketed fresh or frozen; the rest is marketed canned or cured. By tonnage, the catch of menhaden, an inedible species, surpasses that of any other fish, accounting, on the average, for roughly a fifth of the nation's total catch.

The Pacific catch accounts for nearly three-fifths of the total tonnage of fish caught; Atlantic and Gulf catches account for about a fifth each. The Pacific catch also leads in value of fish caught. Alaska and Louisiana are the top fishing states.

Commercial fishing on the Great Lakes is of limited significance, both in quantity and in value of the catch.

The West, with its vast evergreen forests, is the principal timber-producing area of the United States. Much of the lumbering there is done in large, scientifically managed forests owned by corporations. Vast tracts of federally owned land are also used for commercial production. Prominent among the species felled in the Western states—mainly for lumber and plywood—are Douglas fir, true firs, western hemlock, Ponderosa pine, and lodgepole pine. Oregon, California, and Washington are the leading timber-producing states in the West.

The South, with a warm, moist climate that promotes rapid forest growth, is the second-ranking lumbering region. It is primarily a producer of pines, particularly longleaf, shortleaf, loblolly, and slash pines. Lumber, pulpwood, and paper are the chief forest products of the South; Georgia is the leading producer.

Most of the nation's hardwood production comes from a band of deciduous forests extending from Missouri and Arkansas eastward to the Atlantic.

Mining employs less than 1 per cent of the labor force and produces only about 3 per cent of the gross national product. It is, nevertheless, a vital activity, supplying the raw materials needed by many other industries. Despite abundant and varied production, the United States is totally or heavily dependent on imports for numerous minerals. Among them are mica, manganese, bauxite, cobalt, chromium, platinum, asbestos, tin, nickel, potassium, zinc, mercury, and tungsten. Petroleum and petroleum products are the largest and most costly of the nation's mineral imports.

Fuels, primarily petroleum, natural gas, and coal, account for about 85 per cent of the value of all minerals produced. The chief oil-supplying states are Texas, Alaska, Louisiana, California, and Oklahoma. Natural gas comes mainly from Texas, Louisiana, Oklahoma, and New Mexico. Coal is the nation's most abundant fossil fuel, with estimated reserves sufficient to last for centuries. Kentucky, West Virginia, Wyoming, Pennsylvania, and Illinois are the leading producers of bituminous coal. Anthracite coal is mined in small amounts in Pennsylvania. Uranium, for nuclear reactors, is also mined, principally in New Mexico, Wyoming, and Texas.

The chief metals mined in the United States, by value, include copper, gold, iron, magnesium, silver, zinc, lead, and molybdenum. In general, the greatest quantities of metallic minerals are mined in the southwestern and Rocky Mountain states. Iron ore comes mainly from Minnesota and Michigan. Bauxite, nickel, tin, and tungsten are also produced.

Stone, sand, gravel, and other minerals used in building construction are produced in most states. Phosphate rock, used in making fertilizers and chemicals, is mined mostly in Florida and North Carolina. Sulfur and salt, which are also used in making chemicals, come mainly from the Gulf states. Large amounts of potash and other minerals are also produced.

The United States depends to a great extent on fossil fuels for energy. Petroleum products alone account almost 40 per cent of all the energy consumed, natural gas for about 24 per cent, and coal for about 22 per cent. Petroleum is used chiefly to provide fuel for transportation and heating, while coal provides the bulk of the power for generating electricity. Natural gas is consumed mainly by households for heating and cooking and by industrial users.

Hydroelectric, nuclear, geothermal, and solar power together provide about 26 per cent of the nation's energy. These energy sources are primarily used to generate electricity. Hydroelectric power is produced and used most extensively in the West and Pacific Northwest and in the Southeast. Nuclear power plants are scattered throughout the nation, but are most numerous east of the Mississippi. Solar and wind power are minor energy sources.

At the end of the 1990s the construction industry was the largest industry in the United States in terms of employment. Construction accounts for about 4 per cent of the gross domestic product. Since the end of World War II, a large increase in the nation's population and the expansion of suburbs and cities have generated much construction.

In general, housing is the leading type of construction-usually between one and two million new dwelling units, mostly single-family homes, are built each year. Office buildings, retail buildings, factories, facilities for public utilities, and highways make up a large part of the nonresidential construction. Most construction is privately financed; generally less than one-fifth is publicly funded. Since the 1950s there has been an especially large increase in construction in the Sun Belt and in the West. California, Texas, and Florida usually lead the nation in new construction.

Commercial banks, savings and loan associations, credit unions, insurance and finance companies, and other financial institutions account for about one-seventh of the gross national product. The 50 largest commercial banks, many of them international in scope, hold roughly 40 per cent of the banking industry's total deposits. Most of the largest banks are in New York, California, Texas, and Illinois. New York City has long been the nation's principal financial center and home of its principal stock exchanges. Smaller stock exchanges are located in Boston, Philadelphia, Chicago, and San Francisco.

Most financial institutions are regulated by the federal government, some by the states. The Federal Reserve System exercises certain central banking functions.

Technological advances in communications and data processing have permitted financial institutions to expand their role in the economy greatly. For example, the bank credit card—whose widespread use was made possible by computerized billing and collection systems—has replaced the use of cash in many transactions.

The United States has a vast system of railways, highways, and pipelines, and virtually every large city is served by a commercial airport. Inland waterways provide important transportation routes in many parts of the country.

In the mid-1990's about 38 per cent of intercity freight shipments (in ton-miles) were by rail, 28 per cent by truck, 18 per cent by pipeline, 15 per cent by inland waterway, and less than 1 per cent by air. Passenger traffic (in passenger-miles) during the same period was handled primarily by automobiles—about 81 per cent according to government estimates. Airlines accounted for 17 per cent of the passenger-miles, railways and huses for the remainder.

In the mid-1990's there were about 3,905,000 miles (6,284,000 km) of roads, highways, and streets in the United States—the largest highway system in the world. Roughly four-fifths of the mileage is accounted for by roads and highways in rural areas, connecting cities and towns. Most of the roads are hard-surfaced.

The best highways are those of the Interstate system, a national network of highspeed, limited-access superhighways linking the major cities. The system, begun in 1956. totals about 45,600 miles (73,200 km). In addition to the Interstate system there is a much larger network of federally aided state roads known as "US highways."

Railway mileage in the United States has declined steadily since the 1930's. In the mid-1990's there were about 169,000 miles (272,000 km) of tracks. The volume of traffic hauled by rail, however, has increased steadily despite severe competition from trucks, barges, and pipelines.

Unlike railways in most other countries, those in the United States are privately owned and operated. Most intercity passenger trains, however, are operated by Amtrak, a government-controlled corporation. Some privately owned railways still provide commuter service.

Since the first successful flight of the Wright brothers at Kitty Hawk, North Carolina, in 1903, the United States has been a leader in developing aviation. All large cities and many smaller ones are served by one or more of the many scheduled airlines. A number of domestic lines and dozens of foreign lines provide international flights. Air travel is especially important in Alaska and in connecting Hawaii with the mainland. Chicago's O'Hare and Atlanta's Hartsfield are the busiest commercial airports in the nation.

The nation's most heavily utilized waterway consists of the Mississippi River and its major tributaries, including the Illinois, Missouri, and Ohio rivers. The Great Lakes also provide excellent transportation, especially for bulk cargo such as iron ore, coal, and grain. The St. Lawrence Seaway, opened in 1959, links the Great Lakes and the Atlantic Ocean.

The Intracoastal Waterway is a largely sheltered route extending along the Atlantic and Gulf coasts. Major shipping canals are the Cape Cod Canal and the Chesapeake and Delaware Canal, both part of the Intracoastal Waterway; and the Chicago Sanitary and Ship Canal, the Sault Ste. Marie Canal, the Houston Ship Channel, the New York State Barge Canal, the Sacramento Deep Channel, and the Lake Washington Ship Canal.

The United States' merchant marine has declined sharply since the 1950's, mainly because of greatly increased foreign competition and the registration of many American-owned ships under foreign flags. As a result, only a small part of the nation's foreign trade is carried on ships flying the United States flag.

In terms of total tonnage, the leading shipping area is the Gulf Coast, whose ports include New Orleans, Houston, and Baton Rouge. Petroleum accounts for much of the Gulf Coast tonnage. In terms of total value, the leader is the Pacific Coast. Major ports here include Los Angeles, Long Beach, Oakland, San Francisco, Portland, and Seattle. Major Atlantic ports include New York City, Philadelphia, and Baltimore.

provide a relatively cheap means of moving crude petroleum, petroleum products, natural gas, and other commodities. In the early 1990's some 420,000 miles (676,000 km) of petroleum and natural gas pipelines were in operation, excluding intrastate lines. Products flow in greatest quantity from the Gulf Coast and southern Great Plains northeastward to the Midwest and Atlantic Coast.

Unlike communication facilities in most other countries, those in the United States are, for the most part, privately owned and operated, with the federal government serving as a regulatory body. Only the postal service is operated by the federal government.

Tremendous advances in communications technology have been made since the 1960's, notably the use of artificial satellites to relay television, telephone, and other transmissions. The Communications Satellite Corporation (COMSAT), a privately owned American company, provides international, maritime, and domestic communications satellite services—linking the United States with most countries of the world.

Virtually all households in the United States have television sets, the great majority of which are color sets. Four major commercial TV networks—ABC, CBS, NBC, and Fox—broadcast nationally, and there are more than 1,000 local commercial stations, most of them affiliated with the major networks. Commercial stations receive their revenue from advertisers. There is also a public television service—PBS—which is funded by the federal government and private sources. Cable television, available in most parts of the country, is operated on a subscription basis. AM and FM radio stations, most of them supported by advertising revenue, numbered about 10,000 in the early 1990's.

Periodicals, and Books. Roughly 1,700 daily newspapers and 8,200 weekly newspapers are published in the United States. In major cities, there are also foreign-language dailies. Virtually all the newspapers have regional readerships; only a few, notably the Christian Science Monitor, the New York Times, USA Today, and the Wall Street Journal, are circulated nationally.

The number of periodicals and books published in the United States has increased dramatically since the 1950's. Today, there are more than 11,300 periodicals, and each year more than 46,000 new book titles and editions are published.

The telephone is one of the most extensively used means of communication in the United States. Virtually every household has telephone service. Seven major regional companies and about 1,300 local companies, which are regulated by the states, provide wiring and local connections. American Telephone and Telegraph, General Telephone and Electronics, MCI Communications, US Sprint, and many smaller companies provide long-distance service.

Retail and wholesale trade together account for about 17 per cent of the gross national product and about 21 per cent of the labor force. Retail trade is conducted, to a large extent, by corporate-owned chain stores. The leading types of retail establishments, by gross sales, are grocery stores, motor vehicle dealers, department stores, restaurants, and gasoline service stations. Discount stores, franchised fast-food shops, and manufacturers' outlets have had especially rapid growth during the past few decades. Since the 1960's suburban shopping centers and malls have substantially increased their share of the retail market.

Wholesale trade is transacted mainly by wholesale merchants, manufacturers' sales agents, and brokers. The leading goods sold by wholesalers are processed foods and farm commodities, machinery, motor vehicles and equipment, petroleum products, and electrical goods. California, New York, Texas, and Illinois are the chief states in wholesale trade.

The United States leads all other countries in foreign trade, usually conducting about a seventh of the world's total (by value). In the early 1990's the nation's imports and exports amounted to a total of more than 885 billion dollars annually.

Until the 1970's exports exceeded imports in value, producing a favorable balance of trade. The first trade deficit in more than 75 years occurred in 1971 and was followed by more deficits and by devaluations of the dollar. Soaring costs of petroleum imports contributed heavily to the imbalance of the nation's foreign trade.

Canada is the chief trading partner; Japan, Mexico, Great Britain, and China also are major trade partners. The United States also trades to some extent with virtually every country in the world.

Exports consist largely of manufactured goods. Most important is machinery. Transportation equipment, mainly motor vehicles and aircraft, chemicals, and electronic devices and equipment are also major exports. The principal nonmanufactured goods exported are farm products—chiefly soybeans, vegetables and fruits, meat, corn, and animal feeds—and coal and lumber. Because of food shortages threatening much of the world, the demand for United States farm products, especially soybeans, has mounted sharply.

Imports consist primarily of crude petroleum, petroleum products, and manufactured goods. Transportation equipment, mainly automobiles, and machinery are the leading manufactured imports. Other imports include chemicals, iron and steel products, nonferrous metals, paper and newsprint, textiles, clothing, footwear, alcoholic beverages, lumber and wood pulp, and metal ores and scrap. Imported foods include fresh and processed meat and fish, coffee, sugar, and tropical fruits.

Since about 1950, services have accounted for a growing share of the gross national product, a sign of their increasingly important role in the economy. Today the service sector accounts for about a fifth of the GNP and employs about a third of the labor force.

Services in the business field—including such activities as product research and development, data processing, consulting, and advertising—are among the fastest-growing segments of the service sector. Data processing, which was virtually nonexistent until the 1960's, accounts for much of the growth in business services. Health care services have also expanded tremendously. Health care and business services generate the two largest shares of income from the service sector of the economy.

During the last several decades of the 20th century, hotels, motels, restaurants, and travel-related services (such as travel and car rental agencies) expanded, as travel in general increased. Also contributing substantially to the economy are such other service activities as legal work, engineering, repair work, and entertainment.

Government at the federal, state, and local levels is a major force in the nation's economy as a consumer and employer. At the end of the 20th century, government accounted for about one-ninth of the gross national product and a seventh of the labor force. Government employees include legislative, judicial, civil service, and military personnel; teachers; librarians; police officers; and fire fighters. The federal government is the largest single buyer of goods and services in the nation. Federal contracts provide the bulk of the business done by some of the country's largest corporations. Federal grants finance much of the nation's research activities.

Most government expenditures are financed through taxation; the rest, to an increasing extent, through borrowing. Federal spending is mainly for national defense; income security programs, such as social security and unemployment benefits; interest on the national debt; health; education; and veterans' benefits. At the state and local level expenditures are mainly for education, public welfare, highways, health, and interest on debt.

Agriculture was the dominant economic activity of the United States from early colonial times until about the end of the 18th century. Most factory-made goods were imported, mainly from Great Britain. Many products, mostly household and personal items, were made either at home or by artisans in small shops. Maritime commerce and shipbuilding were significant activities, as were fishing and whaling in Atlantic waters. Vast virgin forests provided timber for the construction of ships and homes; wood was extensively used as fuel. Power for mills was provided by water wheels at rapids and falls.

The early 19th century brought increasing industrial growth as a result of improved transportation, new inventions, and freedom from foreign intervention. Steam engines, steamboats, and canals contributed much to the growth. Coal from the Appalachians was used increasingly for fuel. Inland, the fertile agricultural lands of the central United States were opened as railways and settlements spread westward across the land. By the mid-19th century railways had replaced steamboats as the nation's chief means of transportation. In the South, the collapse of slavery after the Civil War brought a virtual end to the plantation system and the beginning of an era of small farms.

Rapid industrialization followed the Civil War, especially in the East and the Midwest. Contributing to the growth were a seemingly inexhaustible supply of natural resources, the increased use of mass-production methods, the development of large corporations, and an ever-expanding national market. Cheap immigrant labor also promoted rapid industrial growth. Toward the end of the century electric power became increasingly available. By the time of World War I the United States was a major industrial power.

Economic development in the West lagged behind that in the eastern part of the nation. Much of the West did not become part of the United States until the late 1840's, and in the early years trapping and the trading of furs were the only significant economic activities in many parts of the West. Mid-century gold rushes in California and Colorado brought many miners and the first large influx of permanent settlers to the region. The opening of transcontinental railway lines, beginning in 1869, provided an efficient means of moving goods and passengers between the East and the West. Later, the opening of the Panama Canal also helped tie the West more closely to the rest of the nation. Mining, cattle ranching, lumbering, irrigated farming, and commerce eventually became the economic mainstays of the West.

Except for the depression years of the 1930's, the economy of the United States expanded almost uninterruptedly after World War I. The use of moving assembly lines greatly increased production. Enormous industrial expansion occurred during and after World War II. Much of the 20th-century expansion was caused by diversification of products due to technological change. The automobile, chemical, electrical, computer, aerospace, and telecommunication industries brought about far-reaching social as well as economic change.

Automation—the use of machines requiring little or no human assistance—was increasingly used after the mid-1900's. During the same period much industrial growth occurred in the southern and southwestern states, the so-called Sun Belt, and on the West Coast, often at the expense of eastern and Midwestern states.

A mixed economy has evolved in the United States, largely since the 1920's. It is a combination of capitalism, with a degree of government regulation, and of socialism, with such enterprises as the postal system, local transit systems, and the Tennessee Valley Authority being government-operated. The economy is broad-based, but depends most heavily on manufacturing and the service industries. The nation's vast mineral resources, efficient transportation and communication systems, and technological skills help provide the people of the United States with one of the highest standards of living in the world.