Slower Economic Growth Affects the 1995 Labor Market
Gardner, Jennifer M., Hayghe, Howard V., Monthly Labor Review
The labor market continued to expand in 1995, but at a much slower rate than in either of the previous 2 years. The rapid growth in payroll employment that characterized 1993 and 1994 continued into the first quarter of 1995, then slowed dramatically. Job gains were very moderate for the remainder of the year, but still were sufficient to keep the unemployment rate at about the level it had reached at the end of 1994.
The modest economic growth suggested by the employment data for 1995 is confirmed by other economic indicators. (See chart 1.) Real gross domestic product (GDPY)--which measures the overall output of the economy, adjusted for changes in prices--grew at a much slower pace in 1995 than in 1994. Contributing to the generally lackluster performance was the trend in government purchases, which fell in 3 out of the 4 quarters of 1995.
Sectors of the economy that are sensitive to consumer demand also showed weakness during the past year. Retail sales--a measure that, while volatile, provides insight into consumers' perceptions of current and future economic conditions--grew at a slower pace in 1995 than during most of the prior 2 years. The housing market also was weak, despite declines in mortgage interest rates to near-1993 levels (the lowest in two decades). Housing starts recovered from an early downturn in 1995, but remained below year-earlier levels.
This article reviews die important changes in the employment picture that occurred in 1995 as the economy was cooling down from 1994's robust expansion. It discusses the trends in nonfarm payroll employment by industry, as well as changes in the employment status of persons in various demographic and occupational groups. The data in this article were collected through the Bureau of Labor Statistics two monthly employment surveys, the Current Employment Statistics (CES) survey and the Current Population Survey (CPS).(1) Employment and unemployment data used in this article are quarterly averages, unless otherwise noted.
Job gains and losses
Nonfarm payroll employment growth slowed dramatically during 1995. While nearly 2 million jobs were added to nonfarm payrolls over the year ending in the fourth quarter of 1995, this was considerably fewer than in each of the preceding 2 years, as shown below(2):
Change in nonfarm payroll
Year ending with the Level Percent fourth quarter (in thousands)
1993 ...................... 2,691 2.5
1994 ...................... 3,513 3.1
1995 ...................... 1,866 1.6
Forty percent of the entire year's increase was realized in the first quarter. Throughout the rest of the year, job growth was sporadic, with virtually no net growth posted in some months.
Employment gains among most of the major industry groups were smaller than those in the prior year and losses occurred among two major groups. (See table 1 and chart 2.) The expansion of the services industry group continued at a brisk pace in 1995, despite a slight slowdown from the prior 2 years, as nearly all of its component industries had employment increases. The gain for services was so large relative to those of other industry groups that it accounted for more than 6 in every 10 jobs added to the economy during the year. In contrast, manufacturing was a net job loser. Characterization of the other major industry divisions was not as clear-cut, as there were many offsetting increases and decreases among their component industries. The following discussion high-lights employment developments in selected industries.
[TABULAR DATA 1 OMITTED]
The services group. The number of jobs in services rose by 1.2 million, or 3.6 percent, in 1995. Business and health services continued to add large numbers of jobs during the year, and other, much smaller industries also had relatively sizable gains. …