What Is the Service Sector?
Let me tell you directly: the service sector is all about activities that help people, offer support, or perform tasks, without creating or selling physical items. It produces intangible goods—services, to be precise—and according to the U.S. Census Bureau, it covers industries like warehousing and transportation, information services, securities and investments, professional services, waste management, health care and social assistance, and arts, entertainment, and recreation. If you're in a country with an economy centered on services, it's considered more advanced than those relying on industry or agriculture.
Key Takeaways
- The service sector is the third sector of the economy, following raw materials production and manufacturing.
- It includes a wide variety of tangible and intangible services, from office cleaning to rock concerts to brain surgery.
- The service sector is the largest sector of the global economy in terms of value-added and is especially important in more advanced economies.
Understanding the Service Sector
You should know that the service sector, or tertiary sector, is the third tier in the three-sector economy. It focuses on services like maintenance, repairs, training, or consulting, not product production. Think of jobs in housekeeping, tours, nursing, and teaching as examples. In contrast, the industrial or manufacturing sectors produce tangible goods like cars, clothes, or equipment.
Countries that emphasize the service sector include the United States, the United Kingdom, Australia, and China. In the US, the Institute for Supply Management (ISM) releases a monthly index on business activity in this sector. This index serves as a key metric for the country's overall economic health, since about two-thirds of US economic activity happens here.
The Service Sector in the Three-Part Economy
The service sector is the third part of a three-part economy. The primary sector handles farming, mining, and agricultural activities. The secondary sector deals with manufacturing and producing tangible goods from primary sector raw materials. Even though it's classified third, the service sector drives the largest portion of global business activity.
Technology in the Service Industry
Technology, especially information technology systems, is reshaping how businesses in the service sector operate. These businesses are increasingly focusing on the knowledge economy—surpassing competitors by understanding what customers want and need, then delivering it quickly and at minimal cost. Across nearly all industries in this sector, new technology boosts production, increases speed and efficiency, and reduces the need for employees. This directly cuts costs and improves revenue streams.
Other articles for you
A qualified mortgage is a type of home loan that meets specific regulatory requirements to protect lenders and borrowers while facilitating secondary market sales.
This text explains Government-Sponsored Retirement Arrangements (GSRAs) in Canada and compares them to other tax-advantaged savings plans.
Subprime mortgages are high-interest loans for borrowers with poor credit, which played a key role in the 2008 financial crisis.
A spot exchange rate is the current price for immediately exchanging one currency for another, primarily determined by the forex market.
Discretionary income is the money left after taxes and essentials for nonessential spending, differing from disposable income and impacting economic health.
The UTXO model tracks unspent cryptocurrency outputs to manage ownership and transactions in blockchains like Bitcoin.
A FICO score is a credit rating tool used by lenders to assess a borrower's reliability based on their credit history.
A board of directors governs an organization by setting strategy, managing executives, and protecting stakeholder interests.
A perpetual bond is a fixed-income security without a maturity date that provides indefinite interest payments, often treated as equity rather than debt.
Original face is the initial total principal value of a mortgage-backed security at issuance.