The US tradable sector is growing.

The tradable sector accounts for just 30 of the US economy (by value added), and employment growth in the tradable sector is negligible.

If employment growth in the non tradable sector dominated by government and health care falters, the tradable sector will have to take up the slack.

As a result, the large non tradable sector and the domestic demand portion of the tradable sector cannot serve as engines of growth and employment.

With the tradable sector neutralized and the non tradable sectors maxed out, the economy lacks sufficiently powerful growth engines.

Labor intensive industries in the tradable sector must be allowed to decline.

The main point is that restoring growth requires a careful analysis of structural balance, attention to demand constraints in the non tradable sector, and a focus on the impediments to expanding the tradable sector.

Many of these jobs will be in the domestic, urban, non tradable service sector.

If exports are to grow substantially, the scope of the tradable sector must expand.

Particularly in the US, employment generation has been disproportionately in the non tradable sector.

In an open economy, deleveraging does not necessarily impair the tradable sector so thoroughly.

In the economy s tradable sector, comparative advantage always shifts, causing structural change and creative destruction.

The tradable sector is expanding and is not dependent on leverage to generate aggregate demand.

And yet, given that the non tradable sector is constrained by its reliance on domestic demand, recovery if it comes will depend on the tradable sector s growth potential.

High value added, higher paying jobs, especially in the tradable sector, generally require highly educated people.

America needs to expand its share in external global demand, which requires public sector investment, structural change, and improved competitiveness in the tradable sector.

The limited fiscal resources that are available should be targeted on areas that affect competitiveness in the tradable sector.

Investment in equipment the key to strengthening productive capital in the tradable goods sector has generally suffered even more.

That will require restoring and creating competitiveness in an expanded set of value added components in the tradable sector.

With domestic demand in short supply, this slow road essentially postpones or impedes growth via expansion of the tradable sector.

But, given adverse trends in the tradable sector and the non tradable sector s exhaustion as a source of job creation, a more likely scenario is that unemployment remains stubbornly high, despite a return of normal growth.

As Spain s tradable goods sector contracted in response to the expansion in Germany, it could respond in one of only three ways.

But more scientific and engineering degrees might promote job growth and together with some public sector investment in promising technologies it might also expand the scope of the tradable sector as well.

And that contribution is probably an underestimate, because income generated on the tradable supply side produces income that becomes demand on the non tradable side a multiplier effect that crosses the tradable non tradable boundary.

An undervalued currency also tends to produce an unbalanced growth model of the opposite kind an outsize tradable sector and insufficient domestic aggregate demand.

The negative shock adversely impacts the non tradable sector, which is large (roughly two thirds of an advanced economy) and wholly dependent on domestic demand.

Of course, more and better education does not by itself guarantee that the number of such jobs is significantly expandable, given the scope of the tradable sector.

That means increasing capital and human capital intensity across both the tradable and non tradable sectors of the economy.

The US economy did not have a conspicuous unemployment problem until the crisis of 2008 because the non tradable sector absorbed the bulk of the expanding labor force.

When the deleveraging cycle begins, the private sector starts to adjust structurally a pattern clearly seen in the data on growth in the tradable side of the US economy.

In particular, although China s tradable sector is highly exposed to developed economies, the government is likely to accept some short run slowdown, rather than adopting potentially distorting stimulus measures.

Meanwhile, the non tradable side should grow.

The truth is that all the net employment growth in the US economy over the last 20 years has been in the non tradable sector, where Americans don t have to compete.

Rising incomes require rising productivity. That means increasing capital and human capital intensity across both the tradable and non tradable sectors of the economy.

In principle, Germany could try to boost domestic demand by leveraging up but, unless the exchange rate adjusts upward to shrink the tradable sector at the margin, doing so would be inflationary.

Moreover, not only is the tradable sector of Japan s economy highly vulnerable to a slowdown in China, but the recent conflict over the Senkaku Diaoyu Islands raises the prospect of economic decoupling.

This scheme implements tradable quotas among the EU States.

Until the crisis of 2008, middle and lower income job growth occurred entirely in the non tradable sector of the economy, which accounts for roughly two thirds of advanced countries output and employment.

Because the non tradable sector in advanced economies tends to create more jobs, this model can lead to an employment problem (even if it is partly masked by cutting hours rather than workers).

In such economies, that pattern not only typically depended on leverage it also enlarged the non tradable side of the economy and shrank the tradable side.

While the appreciation of the real s exchange rate kept a lid on prices for tradable goods, non tradable goods, especially services, remained a source of inflationary pressure.

Modern services are becoming increasingly tradable, providing new export opportunities.

But there is a much better strategy than tradable permits.

El Salvador is constrained by inadequate production incentives in tradable goods.

Look more closely, however, and you will discover that these countries vaunted growth models cannot possibly be replicated everywhere, because they rely on large external surpluses to stimulate the tradable sector and the rest of the economy.