The job market remains strong in 1999 - Statistical Data Included

Monthly Labor Review, Feb, 2000 by Jennifer L. Martel, Laura A. Kelter

The unemployment rate hit a 30-year low; services led job growth, and the recent downward trend in manufacturing employment abated in the second half of the year

The U.S. economy entered its 9th year of expansion in 1999. By the end of the year, 106 months of uninterrupted recovery from the 1990-91 recession had passed, equaling the lengthy expansion of the 1960s--the longest on record. Gross domestic product increased 4.3 percent in 1999, with the strength due, in large part, to exceptionally robust consumer spending. (See table 1.) Most indicators of labor market performance evidenced continued strength in 1999. Over the year, total non-farm payroll employment increased by 2.7 million, to 129.6 million in the fourth quarter, and the unemployment rate declined to 4.1 percent by year's end, a 30-year low.

Table 1. Over-the-year percent change in selected broad economic indicators, 1993-99

Indicator                             1997-98    1993-98    1998-99
                                                 average

Real gross domestic product(1)           4.6        3.9        4.3
Real exports(1)                          1.9        8.3        6.2
Home mortgage interest rate            -11.4        0.0       13.1
New home sales(1)                       15.4        4.5        4.5
Sales of existing homes(2)              11.8        3.7       10.0
Consumer confidence(2)                  -3.9       11.9        9.8
Consumer Price Index (CPI-U)             1.5        2.4        2.6

(1) Percent changes for 1998-99 are based on third-quarter comparisons.

(2) Not seasonally adjusted.

NOTE: Seasonally adjusted fourth-quarter data, unless otherwise noted.

With employment continuing to grow and unemployment continuing to inch down, concerns about the economy overheating and resultant inflationary pressures prompted the Federal Reserve to raise interest rates several times in the second half of the year. As the year progressed, wage growth remained tepid, and by the end of the year, consumer prices were up by only 2.6 percent from a year earlier.

The service-producing industries provided the overwhelming majority of employment growth in 1999. Job growth in construction also was healthy, buoyed by low interest rates and strong consumer confidence, although the rise in mortgage interest rates in the second half of the year dampened employment in homebuilding a bit. Manufacturing continued to lose jobs in 1999, as export growth remained sluggish in the wake of recent economic turmoil in several Asian economies. However, the rate of job loss in manufacturing was slower than in the previous year.

Workers in most major demographic groups benefited from the healthy labor market in 1999, as unemployment rates fell to their lowest levels in decades. Almost half of the employment growth over the year occurred in the higher paying managerial and professional specialty occupations. Men, women, whites, blacks, and Hispanics all reported increases in real earnings.

This article provides snapshots of several important developments or issues related to the U.S. economy and labor market in 1999. The primary sources of data are the Current Employment Statistics (CES) survey of establishments and the Current Population Survey (CPS) of households.(1) Both of these surveys are conducted monthly; however, quarterly averages are used in the analysis that follows, unless otherwise noted, and over-the-year changes are based on comparisons of fourth-quarter 1998 and 1999 data, unless otherwise noted.

More than half of all job growth in 1999 was in services, and companies that provide services to businesses led the way. Contracting for services and workers has grown at a rapid pace throughout the current expansion. Two factors provided further impetus for businesses to contract for services in 1999: tight labor markets and the need to rewrite computer programs so that they would work in the new century.

Nonfarm payroll employment grew by 2.7 million in 1999, somewhat less than the 2.9 million in 1998 (see table 2), but in line with the average for the current expansion. As in the past, the services industry led employment growth, adding almost 1.5 million employees during 1999. (See chart 1.) An industry ranking of jobs added within services reveals that the strongest performers were those industries that provided services to other businesses (business services and engineering and management services) instead of those driven by individual consumers or demographic trends (social services and health services). (See chart 2.)

[Charts 1-2 OMITTED]

[TABULAR DATA 2 NOT REPRODUCIBLE IN ASCII]

Businesses purchase services for many reasons. Some companies maximize their flexibility to respond to changing demand for their products and services by contracting for those services instead of directly hiring permanent employees for peak periods. Others contract out for services for which they lack expertise, such as installing new computer programs or implementing new accounting systems. In some companies, the growth of output increases the demand for routine services such as payroll or facilities management. Many companies meet peak workloads by contracting for workers through a temporary help agency. Among the services that businesses purchased, management and public relations, computer and data processing services, and personnel supply services each experienced employment growth greater than 7 percent in 1999, compared with 2.1 percent for all industries.