Service Industry

The industries of any economy are usually divided into three main groups: agriculture; goods producing; and service producing. The goods-producing industries are: 1) mining, 2) manufacturing, and 3) construction. There are five service-producing industries: 1) services; 2) trade; 3) finance, insurance and real estate; 4) government; and 5) transportation, communication, and utilities. Such categories are important in understanding employment trends and changes in the economy; but it is important to understand that these categories are somewhat arbitrary and therefore not completely precise. Despite these inherent weaknesses in the categories, there is value in using them to view changes in employment over the decades.

In Utah during the early pioneer period, agriculture was the dominant industry. In both the 1850 and 1860 censuses over 50 percent of the labor force was employed in agricultural work. A decline in agricultural employment subsequently occurred and has continued to the present. Today, agricultural employs about one percent of the total Utah labor force. This trend is a national one. As science and new inventions improved agricultural productivity, fewer farmers were needed to supply the demand for food and other agricultural products. The result was that farmers left for the cities to find new employment opportunities.

During the early years of territorial Utah, goods-producing industries, especially manufacturing and construction, were also major employers. In the 1850 census almost half of all nonagricultural workers were employed in the goods-producing industries. The largest was manufacturing, employing just over 30 percent of all nonagricultural jobs. Construction employed about 16 percent. Mining, the other goods-producing industry, had not had much of a chance to get started in Utah and employed less than two percent.

The service-producing sector was small in 1850, employing about 12 percent of the nonagricultural workers. The largest industry in the service-producing area was services. Professional services employed seventy-five people, while another twenty-four worked as educators. Trade employment was second to services, employing almost five percent of the nonagricultural work force. Financial services in early pioneer times was a nascent industry. Government work, likewise, was almost nonexistent. These two sectors combined employed only about one percent of the nonagricultural work force.

As the population of Utah grew and the territory became more established, employment trends changed. More services became available to Utah citizens. By 1890 (the census just before statehood) Utah showed some significant growth in the service-producing sector. Service- employment had more than doubled since the 1850 census. Domestic and personal services, which had employed only two people in 1850, now employed more than 6,000 and represented nine percent of the total work force. Professional services, which had employed 51 in 1850, now employed over 1,800 people. Domestic, personal, and educational services now employed 13 percent of all workers. Trade had also grown; in 1890 this industry increased its share of the work force to seven percent.

The transportation and communications industries were very small in early Utah. The United States mail service was established with a post office in 1850. The firm of Russell, Majors, and Waddell held the mail contracts for many of the early years. The transportation industry was dominated by overland freighting, most of which was done by individual entrepreneurs. A few large firms such as Halladay and Warner as well as Livingston and Kinkead operated until the coming of the railroad. Both the telegraph and railroad came to Utah in the 1860s, tying the state into the national economy and national affairs.

By 1890 Utah employment trends were showing signs of the modern era. Railroads employed almost 2,100 people. Financial services had grown from five workers in 1850 to over 1,900, and employed three percent of the nonagricultural work force. Government, too, had grown by 1890; though it still was the smallest sector, it employed 1,231 people–785 in the military and 446 in civilian work.

The Great Depression had a dramatic impact on employment trends throughout the United States. One of its main impacts was the establishment of the welfare state and the corresponding growth of government services and regulation. In 1940 things had changed dramatically. Government in Utah now employed around 7,000 people, about 2,900 of them federal employees. With America not yet in the war, only 121 Utahns were in the military.

The 1940 census, taken just prior to America’s entrance into World War II, showed the continued shift to the services industries. Services were employing 56 percent of the work force. Reflecting the modern era, major growth was seen in transportation, communications, and public utilities. These industries had grown from 8 percent of the work force to almost 11 percent. The fastest-growing industry in this sector was utilities. Twenty years earlier, only 235 people were employed in the electric and gas utilities, but in 1940 more than 2,200 people worked in this burgeoning industry. The two major employers were Utah Power and Light Company and Mountain Fuel Supply Company. Wholesale and retail trade also continued its rapid growth. In 1920 about 15,000 people were employed in this field; by 1940 that number had grown to almost 29,000. Professional, domestic, and personal services had grown from 20,000 employees in 1920 to 27,000 in 1940. As a result, this industry grew from 13.7 percent of the work force to 18.2 percent.

In the 1950s the transportation, communications, and utilities industries peaked as a percentage figure of state employment–they were over 11 percent. Twenty-one thousand people worked in this industry, half of them for railroads. It was also the railroads’ apex. By 1970 railroad employment was half of what it had been in 1950. New competitors like trucking and airlines took much of the transportation business away from the iron horse. With the increased use of the telephone and radio and the beginning of television, the communications sector grew rapidly. Government also continued to grow during the 1950s, especially federal government. In 1950 government employment amounted to over nine percent of the state’s nonagricultural work force, with the federal government alone accounting for seven percent.

Between 1960 and 1970 the service-producing industries grew tremendously, from about 71 percent of the nonagricultural work force to almost 77 percent. Forty-three percent of the total growth came from government. During this time, government grew by 37,800 jobs–61 percent. The biggest factor in this growth in government services was the field of education. In 1960 education employees comprised 32 percent of government employment; by 1970 they amounted to 37 percent. The reason for this growth was the need to educate the nation’s baby-boom children–those born between 1946 and 1964. Two service industries also reflected the changing societal demands brought about by new technologies and a more affluent society: medical and health care services grew by almost 7,000 jobs (107 percent), and personal business services grew by about the same number of jobs, for a 57 percent increase.

During the 1970s, the trend to increased service employment was somewhat hidden because of an almost decade-long economic boom in Utah. The worldwide OPEC oil crisis created a great demand for Utah’s natural resources. Mining and manufacturing grew rapidly, and construction employment also grew because of this growing economy and because of the construction of the Intermountain Power Project in Delta. Goods-producing employment in the 1970s actually increased as a percent of total employment–from 23.3 percent in 1970 to 24.9 percent in 1980. This was in direct contrast to what was happening nationally. In the nation, goods-producing employment during the period fell from 33.3 percent to 28.4 percent.

Between 1980 and 1990, the state’s economy not only resumed its long-term trend toward greater service-oriented employment, but actually increased the rate of the shift. This is especially true of the following service-producing industries: services (especially business and health services), trade, finance, insurance, and real estate. The acceleration of the shift was due primarily to a downturn in the goods-producing sector. The energy boom of the 1970s became an energy bust in the 1980s. Prices for coal, oil, copper, and uranium all dropped dramatically, affecting employment in all these operations. With a decline in mining and construction employment and only modest gains in manufacturing, the employment growth in the service-producing industries was dramatized.

Service-producing employment created 97 percent of all new jobs in the state during the 1980s. Services created over 80,000 new jobs alone. The fastest-growing services again were medical and health services (18,600 jobs) and business services (13,000 jobs). Medical services employment growth was exemplified by the growth of the University of Utah’s Medical Center, which became one of the larger employer in the Salt Lake Valley. Its prestige made Salt Lake a regional medical center which was a major boom to Utah’s overall economy. Medical services and inventions such as the artificial heart were spin-offs of this huge facility. Utah also became a major center for computer-related business services. WordPerfect Corporation, for example, located in Utah County, became the largest word processing software program manufacturer in the world. The second-fastest-growing service sector was trade, which grew by 29 percent with the creation of almost 44,000 new jobs. Retail trade especially–with food stores up 8,000 jobs, eating and drinking establishments up 12,000, and general retail up 9,000– dominated trade growth.

One service-producing sector–government–bucked this trend of dramatic employment growth during the 1980s. Government continued to grow in actual numbers, but at a much slower rate. The result of this slower growth was that private-sector employment as a percentage of total employment grew dramatically. In 1970 government (federal, state, local) was the single biggest employer in the state, employing 28 percent of all nonagricultural workers. In other words, the private sector employed 72 percent of all workers. With the tremendous growth of the service-producing sector and the very modest growth of government, employment in the private sector rose from 72 percent in 1970 to a post-World War II high of 79.2 percent in 1990.

In summary, Utah, like the rest of the nation, in its beginning was dominated by an agricultural economy. However, as the state developed, the goods-producing industries–mining, manufacturing, and construction–became major employers. In the twentieth century, especially in the post-World War II period, Utah has shifted to a service-based economy. In 1990 approximately 80 percent of all nonagricultural workers were employed in the service-producing industries.

Michael E. Christensen