Is the increase in financial services (FIRE- finance, insurance, real estate, and rentals) as a share of GDP another reason for low rates? The financial services share of value added has grown from 13% in the 1950s to 22% in 2019.
The FIRE sector uses a lower proportion of intermediate goods than most other sectors, so a $1 billion increase in FIRE sector wages or profits does not increase demand for other sectors' goods by as much as a $1 billion increase in manufacturing sector wages or profits. Despite comprising 22% of value added in GDP in 2019, FIRE used only 17% of overall intermediate goods -- and the majority of that went back into FIRE and to professional and business services.
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