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February 1997, Vol. 120, No. 2
William C. Goodman and Randy E. Ilg
Economic growth accelerated in 1996 from 1995, resulting in an increase in the rate of job growth and a small decline in unemployment. The number of nonfarm payroll jobs increased by 2.6 million overall; the largest gains occurred in services, retail trade, construction, and public school systems. Several industries, however, showed overall employment cutbacks. As unemployment trended down over the year, the jobless rate decreased from 5.6 percent at the end of 1995 to 5.3 percent by the third quarter of 1996, a level last reached in the second quarter of 1990.
In contrast to the strong performance of the labor market in general, 158,000 jobs were lost in nondurable goods manufacturing, continuing the trend of the preceding year. Civilian employment in the Federal Government decreased by another 65,000, bringing the total decline in Federal civilian employment since its most recent high point in May 1992 to a quarter of a million.
In 1996, many economic indicators accelerated compared to their performance in 1995. A 3.2-percent increase in gross domestic product after inflation included a 7.9-percent rise in private investment and a 2.7-percent increase in consumer spending. The index of consumer confidence rose 11.5 percent. Sales of new homes soared, increasing 11.5 percent also, which translates into an increase of 72,000 new homes sold on an annual basis. All of these indicators increased at a far greater rate in 1996 than in 1995. The year 1996 saw the rate of growth in GDP more than double, and consumer confidence increased more than 10 times as much as in 1995. (Table 1 shows these and other important economic indicators.)
In 1996, relatively low interest rates and low inflation contributed to economic expansion. The average 30-year fixed home mortgage rate, for example, was 7.91 percent in the last quarter of 1996, up 0.3 percentage point from the last quarter of 1995, but well below the average of 10.1 percent for the entire period from 1971 to 1995.1 Consumer prices rose 3.2 percent in 1996 (using the 198284-based CPI-U), somewhat above the 1995 increase of 2.7 percent, but still considerably below the historical average of 4.8 percent per year from 1960 to 1995.2
This article discusses some of the major changes in the labor market from 1995 to 1996 in terms of industries and individuals. Data are from the Bureau of Labor Statistics (BLS) two monthly surveys of employment, the Current Employment Statistics (CES) survey and the Current Population Survey (CPS).3
This excerpt is from an article published in the February 1997 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 Historical rates provided by Freddie Mac Media Relations.
2 The Consumer Price Index for All Urban Consumers (CPI-U) is used throughout this article, except for the section on hours and earnings, in which the Consumer Price Index for All Urban Wage Earners and Clerical Workers (CPI-W) is used. The annual changes are fourth-quarter to fourth-quarter comparisons.
3 The CES survey, conducted by the State employment security agencies in collaboration with the Bureau of Labor Statistics, collects information on payroll employment, hours, and earnings from about 390,000 nonfarm business establishments. The CPS, a nationwide sample survey conducted for the Bureau of Labor Statistics by the Bureau of the Census, provides information about the demographic characteristics and employment status of the civilian noninstitutional population aged 16 and over. In January 1996, the CPS sample was reduced from about 56,000 to approximately 50,000 households. Employment and unemployment data used in this article are quarterly averages, unless otherwise stated.
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