Academic journal article Monthly Labor Review

Strong Job Growth Continues, Unemployment Declines in 1997

Academic journal article Monthly Labor Review

Strong Job Growth Continues, Unemployment Declines in 1997

Article excerpt

The unemployment rate fell to a 28-year low fast year, as job growth accelerated; real earnings reached their highest level yet in the 1990s

The labor market continued to improve in 1997 as job growth accelerated from the previous year and unemployment declined. Total nonfarm payroll employment increased by more than 3 million workers and the unemployment rate fell to 4.7 percent in the fourth quarter of 1997, the lowest level in nearly 28 years. During this sixth year of job market expansion, earnings growth accelerated and real average hourly earnings of private production or nonsupervisory workers posted their largest increases in 21 years.

This article summarizes labor market developments for 1997 and describes the economic context in which these developments occurred. Unless otherwise noted, the data presented are quarterly averages, and 1997 changes represent the difference between the fourth quarters of 1996 and 1997.

Overview

The U.S. economy expanded at a solid pace in 1997. The gross domestic product, or GDP, adjusted for inflation grew by 3.8 percent over the year, much faster than in 1996. (See table 1.) Almost every sector of the economy showed improvement in 1997. For most of the year, consumers reacted to a strong job market and rising personal incomes by increasing their expenditures on goods and services. The consumer confidence index advanced by nearly 17 percent to record levels by yearend. Consumers also benefited from modest price increases; in 1997, the Consumer Price Index for All Urban Consumers (CPI-U) rose by just 1.9 percent, a very small advance by historical standards. The housing market also continued to show strength in 1997, although the pace of new home sales slowed somewhat from 1996.

Table 1. Percent change In selected economic Indicators, fourth-quarter averages, 1994-97(1)

                                       1994-95    1995-96   1996-97

Nonfarm employment                        2.0        2.1       2.5
Real gross domestic product(2)            2.0        2.8       3.8
Gross private domestic: investment(2)     1.6        7.8      11.5
Real disposable personal income(2)        3.3        2.3       2.9
Personal consumption expenditures(2)      2.4        2.6       3.3
Home mortgage interest rates(3)         -17.7        3.9      -6.4
New home sales                            3.4       11.2       5.7
Sales of existing                        -3.9        7.2       8.7
Consumer confidence(3)                    1.4       11.4      16.6
Industrial production                     1.5        4.1       9.9
Inventories-to-sales ratio                 .4       -1.3       -.7
Consumer Price Index for All
  Urban Consumers (CPI-U)                 2.6        3.2       1.9

(1) Seasonally adjusted annual rates, unless otherwise indicated.

(2) Annual percent changes, adjusted for inflation.

(3) No seasonally adjusted.

Industry employment

The U.S. job market remained strong throughout 1997. (See chart 1 and table 2.) The annual rate of employment growth as measured by the Current Employment Statistics (CES) survey was 25 percent, four-tenths of a percentage point above that posted a year earlier.

[Chart 1 OMITTED]

[TABULAR DATA 2 NOT REPRODUCIBLE IN ASCII]

By the end of 1997, the nonfarm job market had completed nearly 6 years of uninterrupted growth. Following the 1990-91 recession,(1) employment floundered for a year before turning upward in 1992. Job growth then accelerated until peaking in 1994, when 3.8 million jobs were added. Employment growth slowed in 1995, but strengthened slightly in 1996.

Employment growth accelerated again in 1997 and nonfarm payrolls increased by more than 3 million workers, although the pace of job growth varied considerably across industries.(2) Nine of seventy-three major industry groups added more than 100,000 workers. …

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