WASHINGTON — This is not your economy. It's not even your parents' economy. To a surprising degree, this is your great-grandparents' economy.
Quietly, while attention has focused on the technology, finance and service sectors, businesses that stood astride 19th century industrial America but then collapsed have been resurrected to meet the needs of a feverishly industrializing world. In the process, much of what Americans think they know about their economy is being upended.
Steel makers, railroads, mining concerns and agriculture, long considered part of a fading past, suddenly have bright futures. And segments of the economy long lauded as the wave of the future are undergoing an old-fashioned, and very painful, consolidation.
"The wheel has turned. What was up is down, and what was down is up," said San Francisco investment executive Frank Husic. "And it's all because an emerging world wants to eat, drive and live in houses, things we take for granted and have for well over a century."
Dan Basse, president of AgResource Co., a Chicago agricultural forecasting firm, agreed. "The tech industry offered us things to occupy our minds and entertain us. But we're moving back to a world of stuff, whether that's vegetable oil or copper or zinc or cotton. Stuff that you can hold in your hand and drop on your foot."
The twin turns of fortune for the nation's old and new economies are letting once-struggling behemoths such as U.S. Steel Corp. put modern marvels such as Microsoft Corp. to shame. The price of U.S. Steel's stock has shot up 1,000% in recent years, while Microsoft's has essentially flat-lined.
And the changes are lifting much of America's geographic middle at the expense of its coasts. Personal income in the nation's manufacturing, mining and farming states, which are concentrated in the heartland, has been growing at an average annual rate of 6.5% in the last five years. The rest of the country has managed only a 5.4% pace, according to government statistics assembled by Moody's Economy.com.
"The new trends in the economy bode well for the middle and very badly for the edges," Husic said.
There's one huge catch: While the heartland's revival is producing lots of new revenue and profits for old-economy companies, and while it's pushing up the incomes of their employees, it's not generating lots of new jobs.
Still, those industries are doing substantially better than former high-growth sectors like finance or retail, which are laying off workers by the thousands. And the benefits of fatter paychecks and steadier employment ripple throughout the heartland states to millions of people not directly involved in the booming industries.
The slow growth of new jobs does mean, however, that the spillover to the rest of the country is likely be quite limited, and the economy as a whole will have to keep relying on high tech and services if it is to experience new growth in income and employment.
Steel production has risen almost 5% over the last five years, according to the American Iron and Steel Institute. But steel employment has fallen 10%, according to the Bureau of Labor Statistics. Corn production has jumped 30% during the same period, and farm payrolls have fallen by nearly the same percentage, U.S. Department of Agriculture figures show.
There's also a mitigating element in the revival. As the value of the dollar has dropped sharply over the last five years, the prices that foreigners pay for U.S. pelletized iron ore, steel plates, corn and coal also has declined.
Once the overall U.S. economy recovers, the dollar is likely to head back up, erasing part of the advantage that U.S. farmers, miners and manufacturers now have.
Few analysts think, however, that the weak dollar alone is what's powering the comeback of the old economy, and few expect it to fade when the dollar recovers.
"We're in the midst of 2 to 3 billion people around the world rising out of abject poverty and demanding they have a better living standard," said Daniel R. DiMicco, head of Nucor Corp., America's largest steel company. "That means we've got a 20- to 30-year bull market in basic stuff."
AgResource President Basse said, "This is called globalization. It turns out we have some things [foreigners]want too."
The new vitality is reflected in a major surge in exports of U.S. goods, up about 80% over the last five years, to $316 billion in the first quarter of 2008 from $176 billion in the first quarter of 2003, government figures show.
Foreign demand has helped drive U.S. Steel from a loss of $420 million five years ago to a nearly $880-million gain last year. Mining giant Freeport-McMoRan's profit is up 1,539%, from $181.7 million to nearly $3 billion. Fertilizer maker Mosaic Co.'s earnings went from $54 million for all of 2003 to $521 million for just the three months ended in February.