There are other differences in the structure of the global economy between now and 1929 that tend to limit the usefulness of industrial production alone as an index for overall economic activity, in particular the greater importance of the services sector in the major advanced economies today. The simplest way to draw this distinction is to look at the share of services in employment (figure 3). In the United States services rose from 55 percent of total employment in 1929 to 82 percent in 2007 (of which 66 percent is in private sector services and 16 percent in government employment).

Services are also considerably less volatile than goods sectors (figure 4). Employment volatility in the U.S. private services sector averaged only half that in goods production over 1960–2007, while volatility of government employment was only 40 percent as high. This provides a reason to conjecture that aggregate employment volatility today might be a good deal lower than in the 1930s.

Another angle on the lower volatility of services is to look at the behavior of real output in the goods and services sectors during recessions. Table 1 shows the percent change in real output in the four quarters after the start of a recession, for the last six U.S. recessions. The table shows that all of the output contraction in U.S. recessions occurs in the goods and structures sector. The services sector shows positive growth throughout. The table shows how the present recession is already more severe than the previous five studied in Table 1, even though in this case  we only consider three quarters through the first quarter of 2009. Nevertheless, one might hope that the greater weight of the more stable services sector will moderate overall output volatility compared to the Great Depression.

Figure 3. United States – Sector Employment Shares, 1929–2007 (% of total)


Figure 4. United States – Employment Volatility, 1960–2007


Table 1. Percent Change in Output Four Quarters after Preceding Peak in Six U.S. Recessions

Date of preceding peak 1973:4 1980:1 1981:3 1990:3 2000:4 2008:2*
Goods and structures −7.0 0.9 −6.9 −2.7 0.8 −8.7
Services 3 1.8 1.7 1.8 2.6 0.8