App Economy is ‘job leader’ into the future

Last spring Technet asked me to examine the size of the ‘App Economy’, focusing on the number of jobs being created.  The official job statistics from the BLS were no help, given the speed at which the App Economy was evolving.  Instead, I developed an innovative methodology for using a ’21st century’ database, The Conference Board Help-Wanted OnLine, to track App Economy jobs.

The study, “Where the Jobs Are: The App Economy,”  has just been released by Technet. I found that

 App Economy now is responsible for roughly 466,000 jobs in the United States, up from zero in 2007 when the iPhone was introduced. This total includes jobs at ‘pure’ app firms such as Zynga, a San Francisco-based maker of Facebook game apps that went public in December 2011. App Economy employment also includes app-related jobs at large companies such as Electronic Arts, Amazon, and AT&T, as well as app ‘infrastructure’ jobs at core firms such as Google, Apple, and Facebook. In additional, the App Economy total includes employment spillovers to the rest of the economy

I want to make several points here.

  • In earlier research done for the Progressive Policy Institute, I looked at ‘job leaders’–industries that, coming out of recession,  manage to create new jobs  well before the rest of the economy.  I found that the industries which are the job leaders during a recession tend to be the big drivers of the expansion that follows. So during the recession of 1990-91, the job leaders were infotech services such as software, computer systems design and data processing services, all of which turned out to be big job creators in the tech boom of the 1990s.  Similarly, the job leaders in the recession of 2001 were finance, real estate, and residential construction, signalling the housing and financial job growth from 2001-2007
  • Today, the App Economy is clearly a job leader. It managed to create jobs during the worst recession since the Great Depression, suggesting that the App Economy will be a major driver of  job growth during the coming expansion.
  • The App Economy cross-cuts industries, including  leading internet companies such as Google and Facebook, hardware/software developers such as Apple and Electronic Arts, smaller app developers,  and wireless providers such as AT&T.
  • State and local governments that want to participate in the coming expansion should think about encouraging App Economy jobs. The methodology I used enabled me to identify App Economy jobs by state and MSA. Much more could be done along these lines.
  • The federal government needs to adopt policies to encourage App Economy growth. More about this in my next post.

Comments

  1. Great work, Michael. Looking at “job leaders” is an excellent way to get a handle on where our economy is going and the benefits, at least in jobs, that are going to be big drivers over the next term.

  2. What is the indication that the “app economy” really needs encouragement?

    As you say it’s doing well and will probably do better…

    What can the federal govt add to the mix?

    • Totally agree.

      Study says something’s broken? Here’s a policy recommendation. Not broken? Here’s a policy recommendation for that, too.

      Leavemalone!

  3. I am sorry, but the iPhone did NOT start the whole “app” thing. For example in 2002, more than 5 years prior Palm had already 13000 apps available for its PDA’s, more than 150000 developers (ok, most of those probably not full time), which clearly makes this whole thing much older and renders the time dimension of your analysis rather more complicated….

    • Hi,
      Yes,What you are saying may be true and at the same time, Apple was the one that gave Apps the meaning that they have now. The layman started identifying with “Apps” because of Iphone. Thus, Apple released the actual movie on what Apps can do and has pretty much led this revolution. Thus things will get interestingly complex with the ease of launching Facebook apps and having an open platform like Android.

  4. Great post up to the penultimate sentence. Why in the world do we need to spend other peoples’ money to assist a dynamic growth industry? Leave it alone. Soon enough that industry will learn the art of rent seeking and come knocking on the door. Let free enterprise work until that dreary day.

  5. I read this somewhat different, thinking at first that it was jobs in app companies plus app jobs in other companies. Looking at the actual study clarified that you used a multiplier to include the overall economic impact of app jobs. All well and good, but I was hoping the final number was defined as I originally thought.

    However, I will point out that in my experience the initial mulplier, tech jobs to non-tech jobs within app companies, is almost certainly low. I understand that the relative youth of these companies means that there are more engineers and fewer support people, but every software company I’ve worked for had development groups that made up a quarter of the total employees or less. Throw in management, sales, administration, marketing, etc, and the multiplier has to be larger once there is a product to sell.

  6. Tom Shillock says:

    Keynes thought that digging holes and filling them up was acceptable if it employed people and stimulated. Electronic analogues would have been fine with him.

  7. Reblogged this on Gravity7.

  8. The virtual ‘app economy‘ creates real jobs.

  9. Mikko I Arevuo says:

    Reblogged this on Making Sense of the Age of Uncertainty and commented:
    The impact of ‘apps’ on economic activity has not been studied in this side of the Atlantic. Dr Mandel’s paper examining the size and employment impact of the “App Economy’ in the USA makes riveting reading.

Trackbacks

  1. [...] 4. Jobs in the App Economy. [...]

  2. [...] of my favorite economists, Michael Mandel writes: Last spring Technet asked me to examine the size of the ‘App Economy’, focusing on the [...]

  3. [...] innovationandgrowth.wordpress.com – Tagged: Big Numbers View on Counterparties.com → Share this: Amazon.com [...]

  4. [...] That’s why I was surprised by the Technet study concluding that the App Economy has created almost half a million jobs since 2008.  The author, economist Michael Mandel, made a few further notes concerning the study on his blog. [...]

  5. [...] The virtual ‘app economy‘ creates real jobs.  (Mike Mandel) [...]

  6. [...] How many jobs has the app economy created since the recession [...]

  7. [...] has been made recently of how the App Economy is a “job leader.” People are saying that the App Economy has “managed to create jobs during the worst [...]

  8. [...] the App Economy total includes employment spillovers to the rest of the economy”–Michael Mandel, February 7, [...]

  9. [...] To read more about what this could mean going into the future, as well as what governments could do to take advantage of this, click here. [...]

  10. [...] The virtual ‘app economy‘ creates real jobs.  (Mike Mandel) [...]

  11. [...] Recent research indicates that roughly 500,000 jobs have been created as part of the “App Economy” since the launch of the iPhone in 2007. [...]

  12. [...] Institute, says increased regulation in the mobile sector could also have an negative impact on employment. He says it is important for policy makers to know that “getting in and mucking it up with [...]

  13. [...] could end up looking like the artisanal-craft economy,  or it could end up looking more like the App economy.  Either way, we will be ending up with a lot more entrepreneurs and small-business owners. A large [...]

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