America’s Path To A FIRE Economy

We originally posted this chart in February 2011, which we just updated also breaking out the real estate industry from FIRE (finance, insurance, and real estate).   It is still is just as shocking as it was back when we first produced it.

Economy Jumps The Shark

The U.S. economy jumped the shark in 1990 when FIRE overtook the manufacturing sector in terms of its contribution to GDP.   More stunning is that real estate is now the largest sector of the U.S. economy in terms of value added output now surpassing manufacturing by 0.8 percent of GDP.

An Economy Of Flippers

Who would have thought in 1947 that output of the country’s manufacturing sector would decline from one-quarter of the gross domestic product to close to 11 percent and would be surpassed by the output of a bunch of real estate agents and house flippers?  Nothing against real estate agents, by the way, and Flipper was my favorite television show as a kid.

Real estate is now the largest industry as a percentage of GDP.

Higher Sensitivity To Interest Rates And More Leverage

No wonder why the economy and markets are so addicted to and can’t live without low-interest rates.  The danger is, however, the real estate sector is a highly leveraged industry.