The Industry Map

Think of the American economy as a living organism with thirteen major organ systems, each operating at its own pace. Some — the heart, the lungs — pulse rapidly. Others — bones, tendons — renew themselves over years. The Business Dynamics Statistics reveals exactly this kind of hierarchy among industries. Natural resources and mining, which includes oil and gas extraction, logging, and agriculture support services, churns through 25% of its workforce every quarter. That means one in four jobs in the sector is either newly created or recently destroyed in any given ninety-day window. At the other extreme, utilities — the power plants, water systems, and gas distributors that keep the lights on — churn just 4.7%. A job at a utility is, statistically speaking, one of the most stable positions in the American economy.

Between those two poles lies a revealing gradient. Construction runs at 16.4% churn, leisure and hospitality at 16.1%, other services at 14.1%, professional and business services at 12.5%. Then a cluster in the middle: transportation and warehousing at 11.2%, retail trade at 10.1%, information at 10.0%. And at the bottom, the anchors: financial activities at 8.8%, education and health services at 8.7%, wholesale trade at 8.4%, manufacturing at 6.5%, and utilities bringing up the rear at 4.7%. The entire spectrum, from fastest to slowest, spans a factor of more than five. These are not modest differences. They reflect fundamentally different business models, capital structures, and relationships to the business cycle.

Why does natural resources churn so fast? Because the sector is dominated by small firms whose fortunes are tied to volatile commodity prices. When oil trades at $80 a barrel, drilling crews are hired in the Permian Basin. When it drops to $40, they are laid off within weeks. The average natural-resources establishment is small, the work is often seasonal, and the industry’s output — barrels, board feet, bushels — is subject to price swings that no company can control. A single well-site services company might hire 15 workers for a six-month project, then release them all. That is creative destruction in its most literal form: resources being constantly reallocated from less productive uses to more productive ones, quarter after quarter, at a pace that would be inconceivable in a sector like utilities.

Utilities, by contrast, are the economy’s antitype. They are capital-intensive, heavily regulated, and operate as local monopolies. A power plant takes years to build and decades to depreciate. The workforce that runs it tends to stay put. The BDS shows that utilities created jobs at a rate of just 2.5% and lost them at 2.2% in Q1 2024. That net gain of 0.3% translates to roughly 2,000 jobs in absolute terms — a rounding error in a sector that employs about 600,000 people. Utilities don’t churn because they don’t need to. Their customers aren’t going anywhere, their competitors don’t exist, and their investment horizons are measured in decades, not quarters.

Not all job creation is created equal. The BDS decomposes gross job gains into two channels: expansions (existing establishments adding workers) and openings (new establishments hiring their first employees). The balance between these two channels varies dramatically by industry, and the variation reveals something important about how each sector grows. In natural resources, 87% of job gains come from expansions — existing mines, wells, and logging operations scaling up — while just 13% come from brand-new establishments. In professional and business services, the split is 78% to 22%. In education and health, it’s 80% to 20%.

The expansion-dominated industries tend to be those where starting a new business is expensive and difficult. You don’t open a new copper mine on a whim. The barrier to entry is high — permits, equipment, mineral rights — so growth comes primarily from existing operations ramping up when conditions improve. The opening-heavy industries, by contrast, tend to be those where barriers to entry are low: restaurants, consulting firms, medical practices, tech startups. Professional and business services leads all sectors in the opening rate (1.4%), reflecting the ease with which a new accounting firm, law office, or marketing agency can hang out a shingle. Leisure and hospitality is close behind at 1.9%, reflecting the eternal optimism of would-be restaurateurs.

On the loss side, the decomposition is equally revealing. Manufacturing loses jobs almost entirely through contractions (2.8%) rather than closings (0.4%). When a factory lays off workers, it typically doesn’t close — it shrinks. The auto plants in Detroit didn’t all disappear at once; they whittled down their headcounts over decades, from three shifts to two to one, from 5,000 workers to 3,000 to 1,500. Construction, by contrast, has a relatively high closing rate (1.6%), reflecting the project-based nature of the industry: when the building is done, the job site closes. Transportation and warehousing tells its own story. Its loss rate of 6.9% dramatically exceeds its gain rate of 4.3%, yielding a net rate of −2.6% — the worst of any sector in Q1 2024. This is the hangover from the pandemic shipping boom, when Amazon, FedEx, and their subcontractors added hundreds of thousands of workers, only to find that the surge in e-commerce was partly temporary.

The composition of creative destruction matters because it determines who bears the cost. In an industry where most job losses come from contractions, existing workers lose their jobs but the firm survives — meaning some institutional knowledge, some supplier relationships, some community presence is preserved. In an industry where losses come from closings, everything is lost. The workers, the firm, the customer relationships, the know-how — all dissolved. The BDS data shows that American creative destruction is overwhelmingly an expansion-contraction phenomenon, not an opening-closing one. Most job churning happens at the margin of existing firms, not through the birth and death of new ones.

Perhaps the most striking finding in the industry data is that every single sector has become less dynamic over the past 25 years. Not some. Not most. All thirteen. The universal slowdown documented in Episode 2 is not driven by one or two outlier industries dragging down the average. It is a genuinely economy-wide phenomenon, operating across every category of economic activity the BLS tracks.

Natural resources fell from 39.5% churn in 2000 to 25.0% in 2024 — a decline of 14.5 percentage points. In absolute terms, that is the largest drop of any sector, but because the sector started from such a high base, it remains the most dynamic by far. Construction fell from 25.3% to 16.4%, a decline of 8.9 points. After the housing bubble burst in 2008, construction churn spiked briefly as firms hemorrhaged workers, but the long-term trajectory has been unmistakably downward. The sector never returned to the frantic pace of the early 2000s, when homebuilders in Las Vegas and Phoenix were putting up subdivisions as fast as they could pour concrete.

The middle-tier sectors tell the story of the services economy settling into maturity. Professional and business services — the vast category that includes management consulting, legal services, advertising, and temp agencies — fell from 18.5% churn to 12.5%. Retail trade dropped from 15.7% to 10.1%, reflecting the consolidation of the industry under a handful of giants (Amazon, Walmart, Costco) and the corresponding decline of the independent shopkeeper. Information, which includes publishing, broadcasting, telecommunications, and tech, fell from 14.6% to 10.0%. The dot-com era was, in hindsight, the high-water mark of dynamism in the information sector. The tech giants that emerged from that wreckage — Google, Amazon, Facebook — are far more stable employers than the startups they supplanted.

Even the sleepiest sectors got sleepier. Manufacturing, which was already among the least dynamic sectors in 2000 at 9.4% churn, fell to 6.5%. Utilities dropped from 7.9% to 4.7%. The slowdown is not proportional, either: the most dynamic sectors lost the most dynamism in absolute terms, but the least dynamic sectors also declined. There is no sector that got more dynamic over 25 years. Zero. The American economy is cooling uniformly, like a pot of water taken off the stove. Every corner of it is becoming more settled, more stable, and arguably more ossified.

Churn tells you how fast an industry is moving. Net creation tells you where it’s going. In Q1 2024, the thirteen industries split into three camps: net growers, the essentially flat, and the actively shrinking. Construction led all sectors with a net creation rate of +1.6%, adding 137,000 more jobs than it lost. Despite its ongoing dynamism decline, construction remains one of the economy’s most reliable net job producers, buoyed by the infrastructure spending boom under the CHIPS Act and Inflation Reduction Act. Every new semiconductor fabrication plant, every battery factory, every data center that Intel, TSMC, or Microsoft is building across the Sun Belt requires armies of construction workers who will be employed for years before the facility opens.

Education and health services posted the second-best net rate at +1.3%, adding 306,000 jobs in a single quarter. This sector is the economy’s great accumulator: it creates jobs at a moderate pace (5.0%) but destroys them at a very low pace (3.7%). Healthcare establishments rarely close. A hospital might cut staff, but it almost never shuts down entirely. The aging of the baby-boom generation ensures that the sector’s tailwind will persist for at least another decade, as the number of Americans over 65 is projected to grow from 58 million today to 82 million by 2040. The sector added 79,000 new establishments in Q1 2024 while losing only 41,000 — a birth-to-death ratio of nearly two to one, the highest of any sector.

At the other end of the spectrum, transportation and warehousing posted a net rate of −2.6%, losing 170,000 more jobs than it gained. This is the single worst net rate of any sector, and it reflects the unwinding of the pandemic logistics boom. Between 2020 and 2022, e-commerce surged, supply chains seized up, and every company in America scrambled to add warehouse space and delivery capacity. Amazon alone hired more than 400,000 workers in 2020. By 2024, the binge was over. E-commerce growth had normalized, warehouse vacancy rates were climbing, and the sector was shedding the excess capacity it had built during the panic years. The BDS captures this hangover in brutal clarity: a gain rate of just 4.3% against a loss rate of 6.9%.

Financial activities also posted a slight negative (−0.2%), reflecting the interest-rate shock that swept through banking and real estate in 2022-2023. When the Federal Reserve raised rates from near zero to 5.5% in barely eighteen months, mortgage originations collapsed, refinancing dried up, and real estate brokerages began laying off agents. The sector lost more jobs from closings (1.1%) than any sector except transportation, suggesting that many financial firms — particularly small mortgage brokers and insurance agencies — simply ceased to exist rather than merely shrinking. Manufacturing, with a net rate of +0.1%, was essentially flat: creating 413,000 jobs and losing 415,000, a wash that has characterized the sector for years.