After two years of retrenchment, IT-producing industries now show signs of resuming the dynamic role they played during 1996–2000.
• Evidence through the third quarter suggests that in 2003 IT-producing industries, which supply about 8 percent of GDP, will contribute about 0.8 percentage points of the estimated 2.9 percent rate of real U.S. economic growth.
• Performance varies by sector. IT service industries, which grew, though at a reduced rate, during 2001–2002, continued to grow at a moderate pace during 2003. Computer and semiconductor manufacturers are rebounding from major losses suffered in 2001–2002, but communications equipment makers show continued weakness.
• IT output is increasingly concentrated in IT services suggesting that future growth in the IT sector may be more modest and less volatile than in the past.
Use of IT continues to be a source of strength in the U.S. economy.
• Investment in and use of IT have played a major role in the recent strong labor productivity growth. From 1989 to 2001, IT-intensive industries experienced average annual labor productivity growth of over 3 percent—much faster than the 1.6 percent pace of the overall non-farm economy.
• Firm- and plant-level research by the Census Bureau’s Center for Economic Studies shows that a range of related factors affect IT’s role in productivity growth. In addition, the roughly 50 percent of U.S. manufacturing establishments that have computer networks also have higher productivity than manufacturing establishments without networks, even after controlling for many of the plant’s economic characteristics in the current and prior periods.
• The use of IT in life sciences R&D exemplifies the dynamic role IT can play in creating new economic opportunities. In bioinformatics (a new field created by the intersection of life sciences R&D with IT-enabled data processing capabilities), IT has expanded R&D horizons by enabling life scientists to acquire, manage, and analyze much larger amounts of and more complicated biological data. This has increased demands on IT producers for more advanced computers and software.
IT employment, which fell sharply during 2001–2002, has been slow to recover.
• Since 2000, the number of workers in IT-producing industries has declined by 11.2 percent (to 4.8 million workers) compared with a decline of less than 2 percent in all private industries. Workers in IT occupations (employed by all industries) totaled 5.9 million in 2002, 8 percent less than in 2000.
• Initially, IT job losses were concentrated in IT manufacturing industries and low-skilled IT occupations. However, the recent job losses have been widespread across almost all ITgoods and services producing industries, and across all IT skill levels.
• In 2002, the average annual wage for workers in IT-producing industries was $67,440, down 1.3 percent from the average of $68,330 for 2001. In contrast, the average annual wage for all private workers increased 1 percent to $36,520. One explanation for this 85 percent wage premium in IT-producing industries is that most IT jobs tend to be high skilled.
U.S. IT producers remain the most competitive in the world.
• In 2002 (the most recent year for which data are available), estimated sales by U.S. IT companies and their overseas affiliates topped $1 trillion, even as the United States experienced a record foreign trade deficit in IT. The United States remains the world’s largest exporter of IT goods and services.
• The side-by-side occurrence of world-class U.S. IT-producing companies and the Nation’s chronic deficit in IT goods trade appears to be largely a result of the globalization of production and distribution of IT goods and services—especially the tendency of U.S. IT companies to supply foreign and American markets from off-shore production centers, and the increasing incidence of intra-firm IT trade.
Ongoing challenges to U.S. IT producing companies cannot obscure the immense and still growing importance of IT in economic and other dimensions of social life.
• The digital revolution has altered our relationship with information itself. We now expect that any information we need will be easily and almost instantaneously accessible. IT has enabled new channels for interaction—both for individuals and businesses. Many transactions are now conducted online (e-commerce) and firms are improving business processes through increased use of IT (e-business).
• These remarkable developments also create new challenges—especially challenges to the security of individual identity—that have created a need for new security tools.