Economics of the Fashion Industry

Fashion Industry Terms  Fashion Terms E

Economics is the social science that describes the factors that determine the production, distribution and consumption of goods and services.  The fashion industry contributes to the economy with a very wide range of products and services.  Think about all of the clothes, shoes, handbags, fashion accessories in the world.  Then think about all of the people and services involved with the design, manufacturing, transportation, warehousing, wholesale distribution, retailing, etc.

Fashion Industry Economy in the United States

In 1931, the Garment District in New York was home to the highest concentration of apparel manufacturers in the world.

New York City is considered by many to be the fashion capital of the world ahead of Paris, Milan, and London.19 According to the New York City Economic Development Corporation (NYCEDC), an estimated 900 fashion companies have their headquarters in New York City and the city is the largest retail market in the country, generating more than $15 billion in annual sales.

 Many of these jobs have since moved offshore. According to the JEC staff calculations based on data from the Bureau of Labor Statistics, OES Survey, 2013, "Over the past two decades, U.S. employment in the apparel manufacturing industry has declined sharply, from almost 940,000 in 1990 to about 144,000 in 2013."

As the U.S. economy continues to grow and evolve, one of the many bright spots of our new creative economy is the fashion industry. With a growing number of high-value jobs that pay high wages, fashion is now having a big impact not only in fashion centers on the coasts, but also in smaller cities around the country.

The numbers change yearly, but here is an example of the significance of the garment industry from 2015 as a point of reference.  "Fashion is a $1.2 trillion global industry, with more than $250 billion spent annually on fashion in the United States, according to industry analysts.1 Fashion and apparel industries employ 1.9 million people in the United States and have a positive impact on regional economies across the country.2 New York City and Los Angeles are the two largest fashion hubs in the United States, with over two-thirds of all fashion designers employed in these cities."

Fashion is a structurally diverse industry, ranging from major international retailers to wholesalers to large design houses to one-person design shops. It employs people across occupations—including fashion designers, computer programmers, lawyers, accountants, copywriters, social media directors, and project managers.

While many apparel manufacturing jobs have left the United States, new high-value fashion industry jobs are being created in New York, Los Angeles, San Francisco and other U.S. cities. As with many industries in the manufacturing sector, the United States now concentrates on the high-value parts of the apparel global supply chain: research and development (R&D), design and marketing.

The U.S. apparel manufacturing industry currently runs a trade deficit. In 2014, U.S. apparel exports totaled roughly $6 billion, while imports were about $82 billion. (source: United States Department of Commerce International Trade Administration, Office of Textiles and Apparel (accessed February 5, 2015).

Over one-third of U.S. apparel imports come from China (36 percent), with Vietnam (11 percent), Bangladesh (6 percent), Indonesia (6 percent), and Mexico (5 percent) rounding out the top five. (source: Ibid.)

While much apparel manufacturing now takes place overseas, what remains in the United States is focused on high-fashion, high-value, quick-turnaround, high-margin orders. Computer-aided design helps designers turn concepts into samples, and helps manufacturers move from prototype to finished product on an accelerated timetable.

The term “fast fashion” refers to the rapid turn-over of low-cost garments in the global clothing industry.

More than 200 schools across the country offer fashion-related programs and prepare students for high-wage jobs in the fashion industry. Three of the most prominent design schools are located in New York City—Parsons The New School for Design, Pratt Institute, and Fashion Institute of Technology (FIT). Los Angeles is home to 14 private and public undergraduate schools with programs dedicated to apparel design and merchandising. Rhode Island School of Design and Columbus College of Art and Design also are well-known for their strong design programs.  Learn more about fashion schools from our fashion school summary.

High fashion is big business. In New York City alone, it is a $98 billion industry.40 While much of the industry’s impact is concentrated in New York and Los Angeles, where most U.S. fashion designers live and work, cities in the South, Midwest, and West are seeing positive economic impacts from growth of the fashion industry in their communities. As retailers and fashion designers cluster outside the traditional fashion hubs, this can help facilitate innovation in the fashion industry and benefit other industries in those regions as well.

International Fashion Industry Economics

How large is the fashion industry?  Let's be honest, the full scope is difficult to truly measure.  According to some estimations, fashion is a 1.2 trillion global industry, with more than $250 billion spent annually on fashion in the United States.

International economics is concerned with the effects upon economic activity from international differences in productive resources and consumer preferences and the international institutions that affect them. It seeks to explain the patterns and consequences of transactions and interactions between the inhabitants of different countries, including trade, investment and migration.

The fashion industry is global in many ways.  Fabrics, trims, clothing, shoes, etc., are manufactured and distributed around the globe.  The supply chain is constantly evolving based on a wide variety of factors including labor costs, tariffs, labor skills, etc.

The fashion industry is a highly sophisticated industry involving fashion and market research, brand licensing/intellectual property rights, design, materials engineering, product manufacturing, marketing and finally, distribution.

Learn about the fashion industry financials.

You may also find our business of fashion term to be of interest for further reading.

When you are done browsing above, don't forget to check the following sections to further expand your knowledge of the garment & textile industry.

History of the Fashion Industry

Fashion Industry Overview

Thank you for taking the time to research the fashion industry and its effect on the economy.  Fashion industry economics is an important area of study.

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