Industry output and employment projections to 2012: employment in the dominant service-providing sector is expected to grow at a slower pace than in the 1992-2002 period, thereby slowing the projected growth in total employment

Monthly Labor Review, Feb, 2004 by Jay M. Berman

The Bureau of Labor Statistics projects total employment in the United States to increase by 21.3 million during the 2002-12 period, rising from 144.0 million to 165.3 million. This increase results in a projected annual growth rate of 1.4 percent, which is slightly slower than the 1.6-percent rate of growth experienced during the preceding decade. The increase of nonfarm wage and salary jobs, from 131.1 million in 2002 to 152.7 million in 2012, is expected to account for most of the growth in total employment. The number of nonfarm self-employed workers and unpaid family workers is expected to increase by 144,000. Countering these gains, agricultural employment, which includes wage and salary workers, the self-employed, and unpaid family workers, is projected to decrease by 340,000 to settle at 1.9 million by 2012. (See table 1.)

Real industry output is projected to expand to $23.3 trillion by 2012, an increase of $6.4 trillion from the $16.8 trillion level achieved in 2002. (1) This translates into a projected 3.3-percent average annual growth rate and parallels the rate of growth exhibited during the past decade. Accounting for approximately 70.8 percent of the growth in total nominal output, the service-providing industries are projected to reach $15.5 trillion by 2012. Even though output in this sector is expected to grow by $4.5 trillion by 2012, its projected 3.5 percent growth rate is slightly slower than that generated during the past decade. This is contrasted against the 3.0-percent annual growth expected by the goods-producing sector, which is faster than the historical 2.3 percent growth rate that this sector experienced between 1992 and 2002. Even with the relatively accelerated rate of output growth in the goods-producing sector, excluding agriculture, its share of current-dollar total output, however, will continue to decline from 31.4 percent in 1992 to 25.1 percent by 2012. (2) Annual output growth in agriculture is expected to grow slightly from the previous 10-year period, to 1.6 percent annually. Its share of total output, however, will also decline, dropping from 2.2 percent in 1992 to 1.3 in 2002. (See table 2.)

The aggregate picture of the 2002-12 economy sets the projected labor force growth rate equivalent to that of the previous 10-year period, assumes a slower growth rate for GDP, and projects output to continue to outpace labor force growth due to productivity gains. Macroeconomic factors provide the foundation for the industry and output projections and include the labor force and demographic changes, Government defense spending and tax policies, foreign economic activity, business investment decisions, personal consumption patterns, and aggregate productivity trends. (3)

Ten-year comparisons

BLS projects the labor force to grow at an annual rate of 1.1 percent between 2002 and 2012. This mirrors the 1.1-percent growth rate experienced over the 1992-2002 period. The growth rate of the nonfarm labor productivity index is projected to average 2.1 percent per year from 2002 to 2012, which is about the same rate that was observed over the previous 10 years. Annual GDP growth is expected to marginally retreat from its 3.2-percent rate over the 1992-2002 period to 3.0 percent over the projection period. Fixed nonresidential investment, with a projected 6.6-percent annual rate of growth, is expected to be the cop component with the fastest growth potential, followed by exports' 5.7 percent. Expected to still account for almost 70 percent of the economy's output, personal consumption expenditure is expected to grow at 2.8 percent over the projected period.

Trends by sector and industry. Virtually all of the projected employment growth in the economy will be posted by the service-providing sector, reflecting its large relative size. Making up 75.3 percent of total employment in 2002, this sector will continue to enhance its dominance by almost eclipsing the 130 million job mark by 2012 and increasing its share of total employment to 78.2 percent. The goods-providing sector is expected to add 262,000 more jobs over the projected period than it did over the past decade, for a total employment level of 23.3 million jobs in 2012. However, its relatively slow 0.3-percent projected annual rate of growth is dwarfed by the expected 1.8-percent pace and the 20.8 million jobs created by the service-providing sector. Three out of four jobs in the U.S. economy are accounted for by the service-providing sector. (4)

Within the service-prodviding sector, education and health services and professional and business services represent the industry divisions with the strongest employment growth, both in terms of absolute and percentage changes. Education and health services is expected to grow at an average annual rate of 2.8 percent and professional and business services is projected to grow 2.7 percent--double the expected rate for the economy as a whole, adding 5.1 million and 4.9 million jobs respectively--both making up almost half of the total employment increases that are expected by 2012. State and local government will be responsible for the economy's next largest source of employment growth, increasing by 2.5 million jobs. This sector's employment will grow to 21.2 million workers in 2012, while Federal Government employment is expected to hold steady at its 2002 level of 2.8 million jobs.