Service-sector growth in the economy soon will slow dramatically, leaving the nation little choice but to restore its manufacturing might or risk creating an underclass dependent on declining wages, according to a leading economist.
"The United States is probably at a fundamental turning point," Lester Thurow of the Massachusetts Institute of Technology concludes in a new study."For the past 40 years, service employment has supplied the bulk of the new jobs in the United States, and for the past 10 years all of them. In the decade ahead this pattern is apt to change," he said.
The government last week reported the slowest month-to-month growth in the service sector in nearly three years, although it still expanded while manufacturing posted declines.
According to Thurow, dean of MIT's Sloan School of Management, the downward trend in manufacturing has to end for a number of reasons, primarily the need of the United States to erase its trade deficit, running at an annual rate of $115 billion so far this year.
"Eventually, the dollar will fall to whatever level is necessary for the United States to balance its international accounts," Thurow concluded in the study. "At that point the United States will either export more manufactured goods or replace imported manufactured goods with domestically made alternatives."
Foreign debt has cost the United States more than 4 million manufacturing jobs, Thurow projected, saying the formula for solving the trade deficit was restoring those manufacturing jobs in addition to any added by general economic growth.
As a practical matter, Thurow said those jobs also will be necessary to prevent higher unemployment because of his projected halt in service-sector growth.