U.S. Economy

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.

In addition, a host of other professions offer financial services to

individuals and corporations. Insurance companies provide insurance as

well as a variety of other services, including deposit accounts, pension

management, mutual funds, and other investments. Stockbrokers, investment

experts, pension managers, and personal financial consultants advise

consumers on investing money. In addition, corporate finance managers,

accountants, and tax consultants make recommendations on financial

planning to businesses and individuals.

C1b Travel and Tourism

One of the largest service industries in the United States is travel and

tourism. In 1997, individual U.S. citizens took 1.3 billion trips within

the United States to destinations that were at least 100 miles

(equivalent to 160 km) from home. In increasing numbers, domestic and

foreign travelers are visiting theme parks, natural wonders, and points

of interest in major cities, and the convention business is booming. New

York City is a popular destination, and tourism is a mainstay of the

economies of California, Florida, and Hawaii.

In recent decades, visitors from overseas have become an increasingly

important part of the U.S. tourism business. In 1970 about 2.3 million

overseas visitors came to the United States, spending $889 million. By

1997 the number of overseas visitors—chiefly from western Europe, Japan,

Latin America, and the Caribbean—was 48 million. Millions of visitors

from Canada and Mexico also cross the border every year. Estimated annual

expenditures in the United States by Canadian travelers totaled $6

billion, and spending by Mexicans was $5 billion.

America’s historic sites and national parks draw many visitors. In 1998,

287 million visits were made to the more than 350 areas administered by

the National Park Service. Millions of people each year visit the

national monuments, buildings, and museums in the Washington, D.C., area.

More than 14 million visits are made annually to Golden Gate National

Recreation Area in the San Francisco region. More than 19 million people

per year travel on the Blue Ridge Parkway in North Carolina and Virginia,

and about 6 million visit the Natchez Trace Parkway in Mississippi,

Alabama, and Tennessee. Located within a day’s drive from most parts of

the eastern United States, Great Smoky Mountains National Park is the

most popular national park in the United States, receiving nearly 10

million visitors annually.

C1c Transportation

Transportation-related businesses are an important part of the service

industry. Trucks, railroads, and ships transport goods to markets across

the country. Commercial airlines, railroads, bus companies, and taxis

move tourists and commuters to their destinations. The U.S. Postal

Service and a number of private carriers deliver goods as well as mail to

consumers. The U.S. transportation network spreads into all sections of

the country, but the web of railroads and highways is much denser in the

eastern half of the United States, where it serves the nation’s largest

urban, industrial, and population concentrations.

As of 1996 the 10 largest railroad companies in the United States

operated 72 percent of tracks. Takeovers and mergers among the major

private railroad companies were common during the 1980s and 1990s. Amtrak

(the National Railroad Passenger Corporation), a federally subsidized

organization, operates almost all the intercity passenger trains in the

United States. It carried 20.2 million passengers in 1997. Although rail

passenger travel has declined in importance during the 20th century, some

U.S. cities still maintain extensive subways or commuter railways,

including New York City, Washington, D.C., Chicago, and the San Francisco-

Oakland area of California.

During the early decades of the 20th century, motor vehicle transport

developed as a serious competitor of the railroads, both for passengers

and freight. Federal aid to states for highway construction began with

the passage of the Federal-Aid Road Act of 1916.

The federal aid program was greatly expanded in 1956 when the government

began an ambitious expansion of the Interstate Highway System, a 74,165-

km (46,084-mi) network of limited-access highways that connects the

nation’s principal cities. This carefully designed system enables

motorists to drive across the country without encountering an

intersection or traffic signal. It carries about 20 percent of U.S. motor-

vehicle traffic, though it accounts for just over 1 percent of U.S. roads

and streets. The system is designed for safe, efficient driving, with

gentle curves, easy grades and long sight distances. Entering and exiting

the highway system is permitted only at planned interchanges.

Air transport began to compete with other modes of transport in the

United States after World War I (1914-1918). The first commercial flights

in the United States were made in 1918 and carried small amounts of mail.

Passenger service began to gain importance in the late 1920s, but air

transport did not become a leading mode of travel until the advent of

commercial jet craft after World War II. By the 1990s a growing number of

Americans flew for personal and business travel, in part because of the

need to cover long distances and in part because they like to get to

their destinations quickly. In 1997 airlines in the United States carried

598.1 million passengers, the vast majority of whom were domestic

travelers.

By the end of the 20th century, large and small airports across the

nation formed a network providing air transportation to individual

travelers. The nation had 5,129 public and 13,263 private airports in

1996. The largest airports in the United States by passenger arrivals and

departures are William B. Hartsfield International Airport near Atlanta,

Georgia; Chicago-O’Hare International Airport in Illinois; Dallas-Fort

Worth Airport in Texas; and Los Angeles International Airport in

California.

The United States has a relatively small commercial shipping fleet. In

1998 only 473 vessels of 1,000 gross tons and larger were registered in

the United States. Only 56 percent were in use; most of the remainder

formed part of a government-owned military reserve fleet. However, many

American ship owners register their vessels in foreign countries such as

Liberia and Panama, where crew wages, taxes, and operating costs are

lower.

In terms of the number of ships docking, New Orleans, Louisiana, is the

busiest port in the nation; each year it handles more than 6,000 vessels.

Other leading ports include Los Angeles-Long Beach, California; Houston,

Texas; New York, New York; San Francisco-Oakland, California; Miami,

Florida; and Philadelphia, Pennsylvania. Crude petroleum accounts for 22

percent of the waterborne tonnage of the United States. Petroleum

products make up 18 percent. Coal accounts for 14 percent, and farm

products for 14 percent.

The inland waterway network of the United States has three main

components—the Mississippi River system, the Great Lakes, and the coastal

waterways. Some 66 percent of the annual water freight traffic is on the

Mississippi River and its tributaries, 17 percent is on the Great Lakes,

and most of the remainder is on the coastal waterways. A major

thoroughfare of the coastal waterways is the Intracoastal Waterway, a

navigable, toll-free shipping route extending for about 1,740 km (about

1,080 mi) along the Atlantic Coast and for about 1,770 km (about 1,100

mi) along the Gulf of Mexico coast. About 45 percent of the total annual

traffic on all coastal waterways travels on the Gulf Intracoastal

Waterway, about 30 percent is on the Atlantic Intracoastal Waterway, and

about 25 percent is on Pacific Coast waterways.

Most goods in the United States travel by railroad and truck, which

compete vigorously for freight transport. In 1996, 38 percent of all

United States freight moved by rail and about 27 percent traveled by

truck. However, other modes of transportation more easily handle special

freight items. An additional 20 percent of all freight, by volume, moved

through pipelines, mainly oil and natural gas pipelines originating in

Texas and Louisiana with destinations in the Midwest and Northeast.

Another 16 percent, mainly bulk commodities like coal, grain, and

industrial limestone, moved by barge on inland waters.

C1d Government

Federal, state, and local governments provide a sizeable portion of

services delivered in the nation. In 1996, government workers made up 4

percent of all workers and together produced 12 percent of GDP.

Government services include items as such Social Security benefits,

national defense, education, public welfare programs, law enforcement,

and the maintenance of transportation systems, libraries, hospitals, and

public parks.

The government sector in the U.S. economy has increased dramatically in

size during the 20th century. Federal revenues grew from less than 5

percent of total GDP in the early 1930s to more than 20 percent by the

late 1990s. Much of this growth took place during two time periods. In

the 1930s, following the economic downturn of the Great Depression, U.S.

president Franklin D. Roosevelt instituted sweeping social programs

designed to provide basic financial security to individuals and families.

Many of these programs, such as unemployment insurance and Social

Security payments to retirees, have remained in place since then. During

the 1960s, U.S. president Lyndon B. Johnson instituted a series of

programs designed to fight poverty, promote education, and provide basic

medical coverage for less-affluent Americans. In addition, during the

last half of the 20th century, government expenditures increased for

medical care and national defense as a result of technological advances.

The cost of transportation construction also rose as the growing

population demanded more and better highway systems.

C1e Entertainment

Another leading industry is the entertainment business. Motion picture

production has been centered in Hollywood, California, since the early

decades of the 20th century, when the budding motion picture industry

discovered that the warm climate and sunny skies of southern California

provided ideal conditions for film production. Other entertainment

industries include theater, which tends to be located in larger urban

areas, particularly New York City, and television, with major networks

operating out of the New York City area. .

C2 Commerce The 1990s have been years of unrivaled prosperity

in the United States, with per capita GDP reaching $30,450 by 1998. This

high quality of life results partly from a rapid expansion of commerce in

the years following World War II.

C2a Domestic Trade

Convenience is the key to consumer markets in the United States, whether

it is fast food, movie theaters, clothing, or any of hundreds of

different types of consumer goods. Products are being delivered to

citizens in a more efficient manner, as industries and business firms

have decentralized to more closely fit the distribution of population.

Malls have sprung up in suburban areas, making the downtown department

store obsolete in many smaller cities. Manufacturers also market their

goods directly to customers in factory outlet malls. Prices are often

lower in these outlets than in regular retail stores. Customers often

travel hundreds of miles to shop at larger factory outlet malls. At the

other end of the spectrum, mail order catalogs and Internet sites have

made it possible for many consumers to purchase products directly from

companies by mail or using personal computers.

Wholesalers and retailers carry on most domestic commerce, or trade, in

the United States. Wholesalers buy goods from producers and sell them

mainly to retail business firms. Retailers sell goods to the final

consumer. Wholesale and retail trade together account for 16 percent of

annual GDP of the United States and employ 21 percent of the labor force.

Wholesale establishments conducted aggregate annual sales of $3.2

trillion in 1992. The leading type of wholesale business is the

distribution of groceries and related products, which accounts for 16

percent of all wholesale activity. Next in rank are motor-vehicle parts

and supplies; petroleum and petroleum products; professional and

commercial equipment, and machinery, equipment, and supplies. Wholesalers

tend to be located in large urban centers that enable them to distribute

goods over wide sections of the nation. The New York City metropolitan

area is the country’s leading wholesale center. It serves as the national

distribution center for a variety of goods and as the main regional

center for the eastern United States. Other leading wholesale centers

include Los Angeles, the main center for the western part of the United

States; Chicago; San Francisco; Philadelphia; Houston; Dallas; and

Atlanta.

In the mid-1990s retail establishments in the United States had aggregate

annual sales of $2.2 trillion. Automotive dealers, with 23 percent of the

total yearly retail trade, and food stores, with 18 percent, are the

leading retailers. The volume of retail sales is directly related to the

number of consumers in an area. The four leading states in annual retail

sales—California, Texas, Florida, and New York—are also the four most

populous states.

C2b Foreign Trade

The United States is the world’s leading trading nation, with total

merchandise exports amounting to $683 billion, and imports to $944.6

billion. Despite its massive size, large population, and economic

prosperity, the United States economy can provide a higher quality of

life for consumers and more opportunity for businesses by trading with

other nations. Foreign, or international, trade enables the United States

to specialize in producing those goods that it is best suited to make

given its available resources. It then imports products that other

nations can make more efficiently, lowering prices of these goods for

U.S. consumers.

Nonagricultural products usually account for 90 percent of the yearly

value of exports, and agricultural products account for about 10 percent.

Machinery and transportation equipment make up the leading categories of

exports, amounting together to one-third of the value of all exports.

Other leading exports include electrical equipment, chemicals, precision

instruments, and food products. Beginning in the mid-1970s, the nation’s

imports of petroleum from the Middle East and manufactured goods from

Canada and Asia (especially Japan) created a trade imbalance.

D Information and Technology Sector

By the end of the 20th century, many technological innovations had been

introduced in the United States. Communications satellites orbited the

earth, computers performed day-to-day functions in many businesses, and

the Internet provided instant information on most aspects of U.S. life

via computer. Developments in communications and technology have

transformed many aspects of daily life in the United States, from

improvements in kitchen appliances to advances in medical treatment to

television broadcasts that are transmitted live via satellite from around

the world.

An increasing number of job opportunities are opening in fields related

to the research and application of new technology. Entirely new

industries have emerged, such as companies that build the equipment used

in space explorations. In addition, technology has opened new

opportunities for investment and employment in established industries,

such as those that manufacture medicines and machines used in the

detection and treatment of diseases and individuals who market and sell

products via the Internet.

D1 Communications

The communications systems in the United States are among the most

developed in the world. Television, radio, newspapers, and other

publications, provide most of the country’s news and entertainment. On

average there are two radios and one television set for every person in

the United States. Although the economic output of the communications

industry is relatively small, the industry has enormous importance to the

political, social, and intellectual activity of the nation. Most

communication media in the United States are privately owned and operate

independently of government control.

The Federal Communications Commission must license all radio and

television broadcasting stations in the United States. In 1997, 1,285

television broadcasters were in operation. All states had television

stations, and more than 40 percent of the stations were concentrated in

nine states: Texas, California, Florida, New York, Pennsylvania, Ohio,

Illinois, Michigan, and North Carolina. A rapidly growing number of U.S.

households (estimated at 64 million in 1997) subscribed to cable

television. An estimated 98.3 percent of U.S. households had at least one

television set. Telephone communication changed as cellular phones

allowed people to communicate via telephone while away from their homes

and businesses or while traveling. There were 69 million cellular phones

in use in 1998.

There were 1,489 daily newspapers published in the United States in 1998,

8 fewer than the year before. Daily newspapers had a circulation of

approximately 60.1 million copies in 1998. The top daily newspapers in

the United States according to circulation were the Wall Street Journal

(published in New York City), USA Today (published in Arlington,

Virginia), the New York Times, and the Los Angeles Times, each with a

circulation in excess of 1 million. Other leading newspapers included the

Washington Post, the New York Daily News, the Chicago Tribune, the

Detroit Free Press, the San Francisco Chronicle, the Chicago Sun-Times,

the Dallas Morning News, the Boston Globe, and the Philadelphia Inquirer.

Nearly 21,300 periodicals were published in 1997. These ranged from

specialized journals reaching only a small number of professionals to

major newsmagazines such as Time, with a circulation of 4.1 million a

week, and Newsweek, with a circulation of 3.2 million a week. Other mass

publications with vast audiences included the weekly TV Guide, reaching

13.2 million readers, and the monthly Reader’s Digest, with a circulation

of 15.1 million copies.

D2 Technology

One of the most far-reaching technological advances of the late 20th

century took place in the field of computer science. Computers developed

from large, cumbersome, and expensive machines to relatively small and

affordable devices. The development of the personal computer (PC) in the

1970s made it possible for many individuals to own computers and allowed

even small businesses to use computer technology in their operations. The

U.S. Bureau of the Census estimates that jobs in the computer industry

are growing at the fastest rate of any employment area, with job openings

for computer specialists expected to double from 1996 to 2006.

The Internet began in the 1960s as a small network of academic and

government computers primarily involved in research for the U.S.

military. Originally limited to researchers at a handful of universities

and government facilities, the Internet quickly became a worldwide

network providing users with information on a range of subjects and

allowing them to purchase goods directly from companies via computer. By

1999, 84 million U.S. citizens had access to the Internet at home or

work. More and more Americans were paying bills, shopping, ordering

airline tickets, and purchasing stocks via computer over the Internet.

This article was written by Michael Watts, with the exception of the

Chief Goods and Services of the U.S. Economy section, which he reviewed.

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