Table 3. Percent change in major
components of gross
domestic product, for the
average postwar recession
and the 1990-91 recession,
seasonally adjusted constant

dollars
[Annualized rates]
Percent change
Component Average | 1990-91
recession | recession
Gross domestic product ... a1 | -18
Personal consumption
expenditures 6 | -18
Durable goods... ......] -49 | 59
Nondurable goods =1 | -15
Services . eee 24 -5
Gross private domestic
investment, ..... aeeenee -17.2 =13.1
Nonresidential ... -84 | ~66
Residential ....0..0......{ 83 | -132
Net exports
Exports ....eeeeeceeeeee| 24 18
Imports : -52 -60
Government purchases 9 22
Federal... eee. s css -18 42
State and local... 35 8

Note: The 1990-91 recession officially began during
the third quarter of 1990 and lasted unti the first quarter

of 1991,
Source: Bureau of Economic Analysis.

Goods-producing employment began falling in
1989, attributable to losses by manufacturing in-
dustries. Through the end of 1992, this sector had
reduced employment by 9.4 percent, in contrast to
average losses of 9.1 percent in prior contractions.
Manufacturers still fared better during the latest
downtum than they had in the past—losses of 8.1
percent versus 9.4 percent—despite the long dura-
tion of the contraction in factory employment.
Much of this relative improvement reflects the
significant industry restructuring that had oc-
curred during the mid-1980’s. Companies, in gen-
eral, are much leaner and more competitive than
they were in the past; this has reduced the need for
layoffs of prior proportions. Conversely, the con-
struction industry’s downturn was much deeper
than normal, with job losses of 16.3 percent. This
weakness stemmed from the severely depressed
building market, particularly the commercial seg-
ment, of the late 1980's and early 1990's.

Industry details

Mining. Mining industries lost 5,000 jobs, or 1
percent of their work force, during the July 1990-
March 1991 period. Coal mining, which had

slowly declining employment for quite some time,
accounted for most of the drops during the reces-
sion. Oil and gas extraction, the dominant mining
industry, actually added several thousand jobs
during the recession, in part as a reaction to expec-
tations of an oil shortage and the resulting sharp
increases in prices, followmg Iraq’s invasion of
Kuwait.

While the overall economy subsequently im-
proved, mining losses became more pronounced
and continued through 1992. Indeed, between
March 1991, the economy's low point, and the
end to 1992, nearly 100,000 mining jobs were
eliminated. The bulk of the cutbacks were in oil
and gas extraction, reflecting lower oil prices from
increased orec production. This industry’s job
growth during the recession thus proved fleeting.
After rising in late 1990, the U.S. rig count, an in-
dicator of domestic drilling activity, fell by one-
third during the 1991-92 period. The exploration
for and extraction of oil in the United States has
dropped dramatically as available reserves have
fallen. Given the prevailing low price of oil, drill-
ing prospects have been dim.

Construction. Construction employment fell by
almost 400,000 during the 1990-91 recession,
representing 7-1/2 percent of payrolls. Of the three
primary construction industries, general building
contractors was the first to begin a period of em-
ployment cutbacks, peaking more than 2 years
prior to the start of the recession. This industry lost
200,000 jobs during the April 1988-March 1991
period, or 14 percent of its work force. Employ-
ment in heavy construction fell by 35,000 (5 per-
cent) and by 265,000 (9 percent) in special trade
contractors between May 1990 and March 1991.”
While losses in the first two industries continued
through 1992, employment in special trade con-
tractors reached a low point in February 1992 and
began growing slightly.

The housing market typically foreshadows
weakness in the general economy and the latest
recession upheld this tendency. New home sales
peaked in mid-1989 and subsequently fell 25 per-
cent through July 1990. Meanwhile, sales of ex-
isting homes fell by 16 percent—or half a million
nits—in the 12 months after January 1990.’ Re-
flecting the lower sales volume, housing starts
plummeted in 1990."

Activity in the commercial market also fell
sharply, following vigorous growth during much
of the 1980's. Many builders failed to fully antici-
pate the economy’s impending recession, and this
contributed to an overabundance of office space.
Builders’ woes may have been exacerbated by
tighter access to credit, induced partially by the
savings and loan crisis. The value of new nonresi-
dential construction reached a high point in July

Monthly Labor Review July 1993

19


Industry Employment

Chart 3. Employment in industries related to the defense, construction, and automobile markets

fn s] Untilied orders?
Defense-related employment (billion colar),
—- 160
1,400 fF- 4
r 1 150
er jent
1,300 F- a q
[ | 140
Unfilled orders 4
1,200 + Prckuntoncicirns J 20
[ 1 120
1100 1985 1986 1987 1988 1989 1992000
Construction employment Related industries
5,500 3,800
lf 1 3,600
5,000 4
b —| 3,400
4,500 | 4
L Construction employment | 3,200
—<———<——— 4
4,000 |- 4
Related industries 3,000
t ‘remnant .
3,500 S A 1 __ 4 re oer ee 1 1 2,800
" 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992
Motor vehicles employment Related industries
950 1,500
—1 1,400
1,300
1,200
Motor vehicles employment J 1100
Related industries -| 1,000
— 4 oe a 1 1

1982 1983 1984 1985 1986 1987 1988
' Data for unfilled orders are from the Bureau of the Census.

designated indusry. Data are seasonally adjusted.

1989 1990 1991 1992

NOTE: Related industries are those for which a majority of employment is devoted to the production of goods or services for the

dential area, as commercial activity continued to
fall. The overall construction segment, therefore,
was not induced to expand its work force signifi-
cantly.

Auto-related industries. The automobile market
was one of the first segments of the economy to
demonstrate weakness, with new vehicle sales be-
ginning to recede after reaching a high point in
1988—well before the official onset of the reces-
sion.” Employment in motor vehicle manufactur-
ing began falling in February 1989, dropping by
135,000 through March 1991, for a reduction of

24 Monthly Labor Review July 1993

15 percent. These losses corresponded to a 3-per-
cent drop in motor vehicle production in 1989 and
a further 10-percent drop in 1990.2

Meanwhile, other industries associated with the
automobile market became sluggish as well.
Manufacturing industries producing inputs, such
as glass and body stampings, together with trade
industries distributing and selling the vehicles
themselves, have thousands of jobs tied to the au-
tomobile market. Employment in these auto-re-
lated industries closely followed that of motor ve-
hicle manufacturing.* (See chart 3, panel 3.) Their
aggregate employment began falling ! month after



recession—attributable largely to cutbacks in
the trucking industry—and 100,000 through
mid-1992. Trucking’s loss was consistent with
declines in industrial production. Manufacturers
began increasing output in April 1991, and truck-
ing employment started to rebound 2 months later.
Air transportation also contributed to the cutbacks.
in transportation and public utilities, although
the industry did not undergo job losses until after
December 1990. Continued industry consolida-
tion as well as less discretionary flying caused
air transportation to lose 40,000 jobs between
December 1990 and 1991, The communications
industry represented another sluggish segment,
losing 55,000 during the 1990-92 period. Vir-
tually all of this drop stemmed from telephone
communications which has been restructuring
its work force.

Wholesale trade. Employment in the Nation's
wholesalers reached a high point in March 1989,
2 months after manufacturing employment did.
Reflecting the situation in manufacturing, the
bulk of the ensuing job losses was concentrated
in durable goods distribution. Wholesale trade
employment fell by 85,000 (1-1/2 percent) dur-
ing the recession, but by 175,000 between its
1989 peak and the third quarter of 1992; durable
goods accounted for all of the declines during
the extended downturn.

Specifically, the durables group fell by
215,000 and the losses were especially notable in
machinery, lumber and other construction materi-
als, and electrical goods. Not coincidentally, the
corresponding manufacturing industries were also
among the weakest in that segment. Job cutbacks
in the durables group reflected a 6-percent decline
in sales during the recession."*

Nondurable goods wholesalers reduced pay-
rolls by 25,000 during the recession, but began re-
bounding 2 months after it ended. The industry
added twice as many jobs in 1992 than it had pre-
viously lost.

Retail trade. Employment in this industry
grouping fell by 285,000 during the July 1990-
March 1991 period, a drop similar in proportion
(1-1/2 percent) to that experienced in wholesale
trade. Employment in retail trade reached a high
point in January 1990, almost a year after whole-
salers did, but 6 months prior to the official start of
the recession. Retail sales also peaked in January
1990, at $125 billion, before falling 6 percent
through January 1991; sales subsequently im-
proved, but remained well below the long-term
trend.'* During the industry’s entire downturn,
which lasted through the fourth quarter of 1991,
450,000 jobs were lost. Half of these drops were
recovered in 1992.

Table 4.

Change in employment by major manufacturing
industries during the overall factory downturn,

seasonally adjusted

{Numbers in thousands}

32 | Stone, clay, and glass products ........ 511

Change,
Level, January 1989
se Industey December December 1992
Number | Percent
Durable goods
37 | Transportation equipment ........... 1,784 300
36 | Electronic and other electrical equipment 1514 260
35. | Industrial machinery and equipment . 1,909 214
34 | Fabricated metals... .. : 4,310 - 150
38 | Instruments and re‘ated products. 903 -12?
33 | Primary metals . 683
24 | Lumber and wood products . 683

25 | Furniture and fixtures . 477
39 | Miscellaneous manufacturing 362
Nondurable goods

23 | Apparel and other textile products .. 992 ~85 -79
22 | Textile mill products 670 -57 -78
27 | Printing and publishing 1,501 -53 -34
31 | Leather and leather products 118 -21 15.4
30 | Rubber and miscellaneous plastics 876 10 -14
26 | Paper and allied products. 686 -8 12
21 | Tobacco products : 48 “4 -77
29 | Petroleum and coal products... . 156 “1 ~8
28 | Chemicals and allied products 1,080 13 12
20 | Food and kindred products....... 1,650 19 12

Building materials stores, furniture stores, and
automotive dealers were the first retail segments
to experience sustained job losses, al! beginning in
the first half of 1989. This weakness coincided
with the sluggish construction and automobile
markets that foreshadowed the recession.

Apparel stores also reflected weakening de-
mandearly, withemploymentreachingahigh point
in late 1989, and dropping through most of 1992.
These cutbacks corresponded to dectining apparel
sales of 1 percent in 1990 and 3 percent the fol-
lowing year, in real terms.'’ Sales growth of 5
percent in 1992 was not sufficient to stem the job
losses.

General merchandise stores, the weakest seg-
ment of retail trade, experienced declines begin-
ning in early 1990. This industry lost over 150,000
jobs through 1991, accounting for one-third of the
cutbacks during the overall downtum in retail
trade. These losses were disproportionately large,
as the industry only represented 13 percent of total
retail trade employment.

Both food stores and eating and drinking places
began cutbacks after the start of the recession.
Food stores lost jobs through January 1992 and
remained sluggish throughout the year. However,
in percentage terms, the drop in food stores was
the lightest of any retail trade segment. Employ-
ment in eating and drinking places only fell
through the third quarter of 1991 and reversed all
of its losses over the subsequent 8 months,

Monthly Labor Review July 1993 21



Industry Employment

1990 and dropped by more than one-third through
1992, in constant dollars."

Spurred by low interest rates, sales of new and
existing homes began rising in early 1991. Hous-
ing starts also began rebounding from their se-
verely depressed levels, although virtually all of
the growth was attributable to single-family
homes which require less labor than multi-family
units. Employers were apparently able to cope
with the enhanced residential activity without sig-
nificant job increases. Meanwhile, the commercial
market remained stagnant, with nonresidential
construction expenditures continuing downward
through 1992. Although construction employment
edged up in the spring of 1992, attributable largely
to growth among special trade contractors, there
were further losses later in the year.

Manufacturing. Employment in manufacturing
dropped sharply during the recession, with losses
of more than 600,000 jobs (3 percent). This
industry’s declines preceded the official start of
the recession: Employment reached a high point
in January 1989, 17 months earlier than nonfarm
industries in general. Employment in the factory
work force fell by 1 million through March 1991
and the cyclically sensitive durable goods group
accounted for more than 85 percent of the drop.
Manufacturing layoffs continued through 1992,
with losses totaling 1.6 million from the 1989
peak level.

Employment in durable goods industries fell
by half a million during the recession, and by a
total of 1.4 million in the 3 years after manu-
facturing’s downtum began in early 1989. Be-
cause they represent major consumer purchases or
business investment, sales of durable goods prod-
ucts are heavily dependent on the general state of
the economy. New orders for durable goods had
reached a high point in December 1988, at $135
billion.’? They had dropped 20 percent over the
following 2 years, reaching a low point in the
same month the recession had ended. While new
orders trended upward thereafter, the backlog of
unfilled orders—those not yet produced and
shipped to customers—dropped throughout the
1991-92 period. Because new orders remained
below the level of shipments, employment had to
be reduced during this time span.

Although nine of the ten major durable goods
industries reduced payrolls by 50,000 jobs or
more during manufacturing’s downtum, four in-
dustries accounted for 60 percent of the overall
decline in the factory work force. (See table 4.)
Employment in transportation equipment was
particularly vulnerable, losing 300,000 jobs dur-
ing the 1989-92 period. Within the transportation
equipment industry, the motor vehicles segment
contributed 70,000 of this drop, after falling sales

20 Monthly Labor Review July 1993

forced automakers to idle capacity and reduce out-
put. The two aerospace segments, aircraft and
guided missiles, together lost 190,000 jobs, as
lower defense spending compounded lower pri-
vate-sector demand. Meanwhile, employment in
electronic equipment fell, attributable largely to
the electronic components segment, which has be-
come increasingly competitive. Industrial machin-
ery employment also declined substantially during
the 1989-92 period, reflecting reduced capital in-
vestment. The computer and office equipment
portion accounted for almost half of this industry’s
drop. Lastly, fabricated metal product’s work
force experienced large losses. This industry pri-
marily produces a variety of intermediate products
for other manufacturers and for the construction
industry.

In contrast to the situation in durable goods,
employment in nondurable goods industries did
not begin a downward trend until mid-1990, as
demand remained firmer a while longer. Losses by
nondurable goods manufacturing ceased tempo-
rarily in the middle of 1991, but soon resumed,
continuing through 1992, Between January 1990
and December 1992, 225,000 jobs were lost. Al-
though new orders for nondurable goods were es-
sentially static in 1989, they rose in the following
year, reaching a high point in October 1990. The
subsequent employment losses proved far smaller
than those by durable goods industries because the
downtum in orders was of shorter duration and
smaller magnitude—only 7 percent from high to
low point. Nevertheless, a healthy increase in de-
mand for nondurable goods in 1992 was not re-
flected by corresponding employment growth, as
manufacturers remained wary of the resilience of
the economic recovery.

Several nondurable goods industries were in
the midst of long-term structural declines when the
economy became recessionary. Textiles, apparel,
and leather had all been reducing payrolls for
years, with the downward trend interrupted only
by partial business-cycle rebounds.

The bulk of the cyclical declines in nondurable
goods employment stemmed from printing and
publishing and rubber and miscellaneous plastics.
Much of the weakness in printing stemmed from
falling demand faced by commercial printing
which had previously benefited from the large
number of business formations and increased ad-
vertising associated with the economic expansion
of the 1980's. Meanwhile, employment in rubber
and miscellaneous plastics reflected the weakness
in the construction, automobile, and packaging
markets, the industry’s chief customers.

Transportation and public utilities. Employ-
ment in transportation and public utilities indus-
tries dropped by 30,000 (0.5 percent) during the


employment weakness during the recession, al-
though for varying reasons. While the downturn in
defense industries should be viewed as structural
in nature, the construction losses were primarily
cyclical, and those of the automobile market
stemmed from both cyclical and secular forces.
This section examines the impact of these three
markets on groups of related industries.

Defense-retated industries. Employment cut-
backs by defense firms exacerbated the impact
of the sluggish economy. Government defense
expenditures had actually begun declining in the
fourth quarter of 1987, following a rapid buildup
during the first portion of the decade.'? Indus-
tries’ backlog of unfilled orders for defense
capital goods flattened during the 1986-89 pe-
riod, after sharp growth; it fell dramatically after
mid-1990, dropping 20 percent through 1992,
thus reducing many industries’ work force
needs, In contrast, unfilled orders for all durable
goods continued rising until mid-1991. Further,
while the backlog of defense capital goods had
accounted for more than 40 percent of the
unfilled orders for all durable goods earlier in
the decade, by 1992, its share had dropped be-
low 30 percent.

Employment in defense-related industries
fell significantly during the 1990-92 period,
with losses totaling almost 300,000 jobs. (De-
fense-related industries are defined here as those
for which a majority of employment was de-
voted to the production of defense goods in
1987, the high point for real defense spending.)
These industries manufacture such products as
aircraft, missiles, and tanks, Employment trends
in defense-related industries have closely mir-
rored changes in the level of pending orders:
sustained increases ended in 1986, followed by a
fairly stable period, until mid-1990; thereafter,
large drops ensued. (See chart 3, panel 1.) Since
1990, almost one of four manufacturing job
losses has come from this group of industries.
Aircraft and parts represented the weakest in-
dustry component, losing 55,000 jobs in 1991
and 70,000, in 1992. Guided missiles (45,000)
and search and navigation equipment (60,000)
also experienced large drops during the 1991-92
period. Most of the defense-induced cutbacks
were structural in nature, reflecting the perma-
nence of lower defense spending. Affected
workers, therefore, could not expect to be re-
called to their jobs because the lower demand
did not stem from cyclical factors.

It is important to note that not all of the jobs in
these industries are attributable to defense spend-
ing; many of the workers produce commercial
goods. Similarly, there are defense jobs in other
industries which did not meet the selection criteria

used here. The series, thus, can by no means be
regarded as a complete count of defense jobs but,
rather, as a proxy to monitor general employment
trends,

Construction-related industries. While the
construction industry itself directly accounted
for almost 400,000 job losses during the reces-
sion, the downturn in the building trades af-
fected many other industries throughout the
economy, from mining and manufacturing, to
trade and services. Indeed, few activities have
the ripple effect that construction does. Employ-
ment in construction-related industries—de-
fined here as nonconstruction industries for
which a majority of employment is dependent on
construction activity?'—reached a high point in
January 1989, a year before the construction in-
dustry itself did. (See chart 3, panel 2.) These re-
lated industries together lost 185,000 jobs dur-
ing the recession, and 295,000 between the high
point and the February 1992 low point. These
losses follow the vigorous growth of the 1983—
89 period: while builders themselves added 1.5
million jobs during this time-span—surpassing
the pre-1980 recession peak by three-quarters of
a million—construction-telated industries con-
tributed another 700,000 jobs.

Employment in construction and related indus-
tries grew slightly between late 1991 and 1992.
Building activity did begin increasing in early
1991, but it remained at depressed levels. Further-
more, the improvement was confined to the resi-

Table 5. Change In employment during the 1990-91 recession
by major services industries, seasonally adjusted
{Numbers in thousands}
Change, 1980-91
Level, recession
se Industry Marsh 1991
Number | Percent
— | Totalservices ...........0....2..) 28,167 159 06
Job losers
73 | Business services...... 5,048 -114 | -22
87 | Engineering and management services 2,434 -50 -20
70 | Hotels and other lodging places ....... 1,597 -38 | -23
76 | Miscellaneous repair services, 337 -37 | -99
75 | Auto repair services o 861 -%6 -39
sob gainers
80 | Health services... 8,075 243 34
83 | Social services ...... 1,812 76 44
82 | Educational services 1715 a7 28
‘86. | Membership organizations 1,999 45 23
79. | Amusement and recreation service: 4,108 38 36
Little change
07 | Agricultural services 489 -3 -8
81 | Legal services on ~1 -4
78 | Motion pictures . : 413 1 2
84 | Museums and botanical garders « _— 69 3 45
72 | Personal services... i aint 7 6

Monthly Labor Review July 1993

23


Christopher J.
Singleton

Christopher J. Singleton is
an economist in the Office
of Employment and
Unemployment Statistics,
Bureau of Labor Statistics.

Industry employment
and the 1990—91 recession

During the most recent economic downturn,

job losses were less severe overall,

but were more widespread than in prior recessions;
the ensuing recovery proved less than vigorous

officially ended in July 1990 as the

economy entered its first downtum since
the 1981-82 period. Nonfarm employment had
peaked a month earlier, in June 1990, and then fell
for 10 consecutive months. Nearly 1.5 million
jobs—1-1/2 percent of the work force—were lost
through April 1991.' The labor market subse-
quently improved in relative terms during mid-
1991, as the job losses became smaller and less
persistent. Employment finally reached a low
point in February 1992, but the job recovery re-
mained fairly modest through the remainder of the
year.

Although generally milder than the typical
postwar recession, the 1990-91 downturn was
exacerbated by several external factors such as
the Persian Gulf crisis, the savings and loan col-
lapse, and continued job cutbacks as a result of
lower defense spending. Furthermore, a renewed
emphasis on efficiency and cost containment
prompted firms, particularly large firms, to re-
structure their work forces. Reflecting the in-
creased competitive environment confronting
many companies, this phenomenon has tempered
the recovery of lost jobs . Also, healthy growth in
labor productivity, to some extent, has mitigated
against the need to rapidly expand industry work
forces.

This article details the job performance of
nonfarm industries during the 1990-91 recession,
both as officially delineated and over specific
cycles corresponding to their employment down-

T he Nation’s longest peacetime expansion

turns and subsequent recoveries. The experiences
of industries during the recession also are com-
pared with those of prior recessions. In addition,
the effect of the recession on several of the
economy’s key markets is examined.

Overview

Total nonfarm employment fell by 1.1 million
during the July 1990-March 1991 span, the
economy’s official recessionary period.’ (See
table 1.) Total losses amounted to 1.5 million jobs,
as the employment downturn lasted 20 months
(une 1990-February 1992). Leading up to the
1990-91 recession and during the actual down-
turn, the trend in nonfarm employment corre-
sponded closely to the changes in gross domestic
product, with growth slowing in 1988 and 1989
before declining during the 1990-91 period. (See
chart 1.) However, while the Nation’s output rose
after the first quarter of 1991, employment failed
to grow accordingly. The job losses were not com-
pletely recovered until February 1993, 12 months
after the low point and 23 months after the official
end of the recession.

The 1990-91 recession extended to every ma-
jor industry group except services and govern-
ment, with goods-producing industries accounting
for 90 percent of the job losses. Manufacturing and
construction, as in past recessions, again demon-
strated the most weakness, losing 1.0 million jobs
between them. (See chart 2.) Within the private
service-producing sector, the majority of the cut-

Monthly Labor Review July 1993 15


auto manufacturing did, in March 1989. These re-
lated industries lost 140,000 jobs through January
1992; a 10-percent drop. Beginning in April 1991,
auto manufacturers began recovering from the re-
cession, adding 65,000 through 1992. Auto-re-
lated industries finally began rebounding in early
1992, adding 15,000 jobs through the end of the
year. However, these job gains still left the auto
segment below prior employment levels.

Footnotes

THE 1990-91 RECESSION marked a shift from prior
downturns. The magnitude of the actual job losses
was relatively small, especially given the 7-1/2-
year employment expansion that preceded the re-
cession. Nevertheless, the job recovery has proven
extremely sluggish as noncyclical factors ranging
from increased global competition to protracted
defense cutbacks force industries to maintain lean
payrolls. im

‘Employment data are from the Current Employment Sta
tistics survey and appear in Employment, Hours and Earn-
ings, 1981-93, March 1992 Benchmark Revisions and
Historical Corrections (Bureau of Labor Statistics, forth-
coming). The temporary Census Bureau workers hired and
dismissed in 1990 are excluded from all data.

2 The timing of recessions is officially determined by the
National Bureau of Economic Research, Cambridge, MA.

*Stephen K. McNees, “The 1990-91 Recession in Histori-
cal Perspective,” New England Economic Review (Boston,
Federal Reserve Bank of Boston, January/February 1992),
p. 16.

* Survey of Current Business (U.S. Department of Com-
merce, Bureau of Economic Analysis, December 1992), pp.
30-32. All gross domestic product data cited are in billions of
constant 1987 dollars, seasonally adjusted, and are expressed
at annual rates.

‘Comparisons for Hotels, Auto repair services, and Mis-
cellaneous repair services are based on the 1973-75 19
and 1981-82 recessions. Employment estimates for these in-
dustries are not available for earlier recessions.

“Baker Hughes Incorporated, Hughes Christensen Rig In-
formation Network, Houston, Tx.

? Although, on the surface, February 1990 seems to be a
high point for construction in general, as well as for heavy
construction and special trade contractors, data for the first
part of that year were affected by unusual weather patterns.
Unusually large employment increases in January and Febru-
ary were largely reversed the following 2 months. From an
analytical standpoint, May 1990 is a more appropriate refer-
ence point.

* New One-Family Homes Sold, Current Construction Re-
ports, Series C-25 (Bureau of the Census, various issues).

* National Association of Realtors.

‘° Housing Starts, Current Construction Reports, Series
C-20 (Bureau of the Census, various issues)

‘Value of New Construction Put In Place, Current Con-
struction Reports, Series C-30 (Bureau of the Census, various
issues).

"? Manufacturers’ Shipments, Inventories, and Orders:
1982-1991 (Bureau of the Census, 1992), p. 37. Data for
1992 are from various monthly releases. All industry orders
data cited are from these sources.

8 Combined Annual and Revised Monthly Wholesale
Trade Report, Current Business Reports (Bureau of the Cen-
sus, April 1993).

“Combined Annual and Revised Monthly Retail Trade
Report, Current Business Reports (Bureau of the Census,
April 193).

°S Survey of Current Business (U.S. Department of Com-
merce, Bureau of Economic Analysis, January 1991, Decem-
ber 1992, and January 1993). Retail sales deflated by cPI-U
for apparel and upkeep

'* Leah N, Spiro and Michele Galen, “Are Fewer Banks
Better?,” Business Week, Aug. 17, 1992, pp. 92-93.

"" See David Hiles, “Health services: the real jobs ma-
chine” in the Monthly Labor Review, November 1992, pp.
3-16.

"For details on the effect of temporary census workers,
see Employment and Earnings (Bureau of Labor Statistics,
February 1991), p. 7.

” Survey of Current Business (U.S. Department of Com-
merce, Bureau of Economic Analysis, various issues).

2 The series was derived from the Bureau's input-output
model. Industries with a majority of employment involved in
the production of defense goods were included, based on
1987 employment requirements.

2 Derived from the Bureau’s input-output model. Indus-
tries with a majority of employment dependent on the con-
struction market were included, in addition to some trade
industries which distribute construction supplies.

2MVMA Motor Vehicle Facts & Figures 1992 (Detroit,
Motor Vehicles Manufacturers Association, 1992), p. 13.

* Ibid, p. 3.

% Derived from the Bureau’s input-output model. Indus-
tries with a majority of employment dependent on automo-
bile production were included, in addition to some trade
industries which distribute automobiles.

Monthly Labor Review July 1993 25


Industry Employment

Finance, insurance, and real estate. This broad
industry grouping lost 20,000 jobs during the re-
cession and 170,000 during its downturn of Au-
gust 1990-92. Most of the weakness was concen-
trated in finance which had reached a high point in
February 1990 and then reduced payrolls by
145,000 jobs over the succeeding 2 years. Real
estate lost 10,000 jobs during the recession and
continued to edge down through mid-1992, Mean-
while, the insurance industry actually added
40,000 jobs during the July 1990-March 1991
period. By April 1991, however, this segment be-
gan to experience sustained cutbacks, losing
60,000 jobs through the following year.

Within the finance industry, savings institu-
tions accounted for a disproportionately large
share of job losses. Its problems can be traced
largely to the relaxed lending practices during the
real estate boom of the prior decade, and the sub-
sequent insolvency of many commercial develop-
ers, Employment in the industry stopped growing
in October 1987, falling by 155,000 jobs over the
following 4 years. This 30-percent decline re-
flected the collapse of hundreds of savings and
loan institutions.

Commercial banks also contributed to the
weakness in finance, losing 90,000 jobs between
early 1990 and late 1992. Increasingly, banks
have been forced to compete with other sources
of capital, such as pension and mutual funds, to
meet customers’ credit needs. Moreover, nu-
merous mergers took place during this period, as
banks sought to consolidate market power and
realize cost efficiencies. There were 500 an-
nounced bank mergers in 1991, with many
leading to job cutbacks as the new institutions
eliminated duplicated tasks.'*

Offsetting some of the cutbacks in finance and
Teal estate, insurance carriers, primarily life and
medical and health, added 35,000 jobs during the
recession. Medical and health insurance, in par-
ticular, is not a very cyclical industry.

Services. Employment in this grouping rose by
160,000 (1/2 percent) during the recession, as cut-
backs in certain consumer- and business-oriented
services industries were offset by hiring in indus-
tries which provide less discretionary services.
(See table 5.) After three sluggish quarters, ser-
vices began to add jobs more steadily, beginning
in May 1991. Employment subsequently grew by
1.4 million jobs through the end of 1992.

Among the services industries with job losses
during the recession period, business services ex-
perienced the largest, declining by 115,000. More
than three-fourths of these cutbacks were in per-
sonnel supply services, as the demand for tempo-
tary contract workers fell along with the fortunes
of the contracting companies.

22 Monthly Labor Review July 1993

Several services industries proved recession-
resistant, compensating for the cutbacks in the
more cyclically sensitive industries. In particular,
health services employment continued to grow
vigorously throughout the 1990-92 period; and
the industry added almost a quarter of a million
jobs while the general economy contracted.'7 In
fact, this industry created 30,000 jobs per month in
both 1990 and 1991, little changed from its growth
of the preceding 2 years. Although health services’
job gains slowed in the first quarter of 1992, the
industry still managed to add 350,000 jobs during
the year. Social services (which includes residen-
tial care and child day care) proved recession-re-
sistant as well, with growth slowing only slightly.
Educational services also continued to grow dur-
ing the recession, with two-thirds of the increase
coming from colleges and universities. Educa-
tional services continued adding jobs through
early 1991, but experienced some losses over the
following year. Similarly, membership organiza-
tions continued their job growth through the re-
cession, but like educational services, began losing
jobs after it had ended.

Government. Public sector employment rose
during the recession, despite increasingly tight fis-
cal environments at the Federal, State, and local
levels. Budget constraints were nonetheless evi-
dent, as growth was substantially slower than that
in prior years. Excluding the effect of temporary
decennial census workers hired and dismissed in
1990,'* 130,000 government jobs were added dur-
ing the recession, growth of Jess than | percent.

Federal Government employment fell by
20,000, with most of the weakness occurring in
late 1990, The Department of Defense was the
chief source of job losses, reflecting the cancella-
tion of defense projects prompted by a reassess-
ment of U.S. security needs. Federal Government
employment grew during most of 1991 before fall-
ing again the following year.

Meanwhile, both State and local government
continued to add jobs during the recession, prima-
rily in the education segments, although the rates
of growth did slow. State government increased
payrolls by 45,000, with 25,000 attributable to
education. Local government employment
jumped by 105,000; 80,000 in local education.
The latter is especially noteworthy, as it represents
growth of more than 10 percent.

Key markets

‘Three segments of the economy which have had a
substantial impact, both directly and indirectly, on
the Nation’s employment levels are the defense,
construction, and automobile markets. These seg-
ments were responsible for a sizable portion of the

i
i
|
i
if
i



Industry Employment

latest recession. Accounting for two-thirds of
cop, this segment fell 1.5 percent, well short of
its average recessionary growth rate of 0.6 per-
cent. Because they determine such a large share of
the Nation’s output, consumption expenditures
offset much of the relative improvement in the
other areas of the economy. All three categories—
durable goods, nondurable goods, and services—
were weaker, with the largest impact resulting
from services. Personal consumption expendi-
tures for services have become increasingly large
during the postwar period; such spending now ac-
counts for more than one-third of cpp. While ex-
penditures on services fell modestly during the
1990-91 recession—by one-half of one percent—
this contrasts sharply with average growth of 2.4
percent during earlier recessions. Had services ex-
penditures grown at their average rate, the drop
in cpp of $85 billion would have been narrowed
to $35 billion.

Industry employment mix. Besides being milder
in terms of total industry employment losses, the
1990-91 recession also differed from previous
ones in the distribution of those declines. While
the goods-producing sector accounted for the bulk
of the total nonfarm losses, these drops were not
partially offset by net growth in the service-pro-

Table 2. Change in employment during official recessions,
compared with industry-specific downturns, by major
industry grouping

[In percent]

Official reference Industry-specific
points downturns:
Industry -—
Average | 1990-91 | Average | 1990-91
recession | recession | recession | recession
Totalmontarm.............. | -28 ~10 -28 | -14
Total private ....... -33 -14 -36 | -20
Goods-producing -81 ~40 -91 | -94
Mining - 10.0 “7 _
Construction . ~62 -75 -11.2
Manufacturing -84 -32 -94
‘Durable goods -H2 4.4 128
Nondurabie goods -45 -16 -55
Service-producing 5 -2 -
Private service-producing . 1 -4 _
Transportation and public utiities. | 3.7 -5 -67
Wholesale trade . -7 -14 ~20
Retail trade 8 -15 -24
Finance, insurance, and
teal estate 17 -3 -25
Services 24 6 -
Government 16 7 - _
Note: Losses for cycles for goods-producing, mining, manutacturing, durable goods and
nondurable goods are as of December 1992; downturns had not reached low points as of this
date.
Official reference points were determined by the National Bureau of Economic Research,
Cambridge, wa.
Dashes indicate no downturns for period or none which closely correspond.

18 Monthly Labor Review July 1993

ducing sector, as they frequently had been in the
past. Indeed, rather than growing at the average
rate of 0.5 percent, employment in the service-pro-
ducing industries fell by 0.2 percent. This decline
translated into 140,000 job losses, in sharp contrast
to growth of 425,000 that would have occurred
had the recession been “typical.”

Five of the six major industry groupings within
the service-producing sector were significantly
weaker during the 1990-91 downturn. Both
wholesale and retail trade lost about 1-1/2 percent
of their respective work forces; twice the rate of
their average declines. Meanwhile, finance, insur-
ance, and real estate, which had added jobs during
each of the preceding recessions, lost 0.3 percent
of its employment. Government, which had ex-
panded employment by an average of almost 2
percent during prior recessions, grew by less than
half that amount.

The largest disparity, however, stemmed from
the services industry. Typically very recession-re-
sistant, services had grown, on average, by 2.4 per-
cent during the preceding eight recessions; growth
of at least 2 percent was consistently achieved
during the prior five, ranging from 2.3 to 4.8 per-
cent. Nevertheless, during the 1990-91 downtum,
services grew at only one-quarter of its average
recessionary pace. Had normal growth been
achieved, employment in services would have
risen by 675,000 jobs, rather than by only 160,000.
Among the services components, business ser-
vices lost the greatest number of jobs—115,000-—
despite having grown by about 30,000 during 4 of
the prior 5 recessions. Hotels, auto repair services,
and miscellaneous repair services each declined
by about 40,000, in contrast to stable employment
in prior recessions. And while the legal services
component was stable during the 1990-91 down-
tum, this marked a sharp departure from average
recessionary growth of 30,000.5

While the service-producing sector was notice-
ably weaker during the latest recession, the goods-
producing sector lost a smaller percentage of its
work force than it typically had. Specifically,
goods-producing industries reduced employment
by 4 percent in contrast to an average decline of
8.1 percent. Most of this improvement is attribut-
able to manufacturing, although mining fared bet-
ter as well. Manufacturing industries lost 3.2 per-
cent of their jobs which compares quite favorably
with an average drop of 8.4 percent. Construction,
on the other hand, proved weaker than normal,
falling by 7.5 percent, 1-1/2 percentage points
more than average.

Because downturns in goods-producing indus-
tries are generally more lengthy than those of other
industries, it is appropriate to compare their em-
ployment losses for entire contractions rather than
merely for the official recessionary periods.

}



Chart 1. Quarterly changes in nonfarm employment and gross domestic product, seasonally
adjusted, 1988-92
Employment GoP
(in thousands) (in percent)
Lee
% yaa
s Q 2
E py
Q ye
g i - Abe °
Employment -l 2
500 L
GDP, constant dollars 7
I 4
ooo Le
1988 1989 1990 1991 1992
SOURCE: Bureau of Labor Statistics; Bureau of Economic Analysis.
—
Chart 2. Employment changes by major industry groupings during the 1990-91 recession,
seasonally adjusted
Total nonfarm
Total private
Goods-producing
Mining
Construction
Manufacturing
Service-producing
Transportation and
public utilities
Wholesale trade
Retail trade
Finance, insurance,
and real estate
Services
Government
“1,500 -1,000 -500 0 500 2 “4 6 8
Thousands Percent
NOTE: Changes are for the July 1990—March 1991 period, the official end points of the recession, as
designated by the National Bureau of Economic Research

Monthly Labor Review July 1993

17


Industry Employment

Table 1 Change in employment during
the 1990-91 recession and the
industry-specific downturns,

by major industry group

[In thousands]

Employment change
during—
Industry -
1990-91 heer
recession |govrrures
Total nonfarm .......... | ~1,143 - 1,493
Total private 200.1222.) ) = 11272 | 11835
Goods-producing ........ . ~2,372
Mining 102
Construction 865
Manufacturing... -1377
Durabie goods . -1'370
Nondurable goods . . 227
Service-producing . -196
Private sorvice-producing ....| 266 | ~458
Transportation and public
utilities . . -31 -119
Wholesale tra ~e5 | -173
Retail trade . 2] =286 | — 448
Finance, insurance, and real
estate . wae -22 -170
Services ee . 159 _-
Government eeeeee =

Nore: Losses for cycles for goods-producing, mining,
manufacturing, durable goods and nondurable goods are
as of December 1992; downturns had not reached low
points as of this date.

Official dates of the 1990-91 recession were determined
by the National Bureau of Economic Research, Cam-
bridge, ma.

Dashes indicate no downturns for period or none which
closely correspond.

backs stemmed from wholesale and retail trade,
which together lost 400,000 jobs.

Comparison with prior recessions

The 1990-91 recession was shorter than most of
the previous postwar recessions and characterized
by proportionately fewer job losses. Officially,
this recession lasted 8 months, in contrast to an av-
erage duration of 11 months for previous reces-
sions, and employment fell 1.0 percent, signifi-
cantly less than the average drop of 2.5 percent.
(See table 2.) Although the actual downturn in
nonfarm payrolls proved more lengthy, amount-
ing to a decline of 1.4 percent, this compares fa-
vorably with an average recession-related drop of
2.8 percent for prior downtums.

However, despite the fact that the downturn
of the early 1990’s was the mildest postwar re-
cession in terms of the percentage of jobs lost,
the job market appears to have been much more
sluggish, in retrospect, when the periods imme-
diately prior to, and immediately after, the
downturn are also considered. For instance, dur-

16 Monthly Labor Review July 1993

ing the 12 months preceding the nonfarm em-
ployment peak of June 1990, payrolls grew a
very modest 1.6 percent, the second weakest 12-
month period before a downturn; for the other
postwar recessions, employment growth aver-
aged 2.5 percent during comparable time spans.
Indeed, the Center for International Business
Cycle Research (at Columbia University) deter-
mined that the period beginning February 1989
marked the start of a “growth recession”—a pe-
riod of modest overall growth, below the trend.’ In
fact, the duration of the “growth recession” that
preceded the 1990-91 recession was longer than
that corresponding to any other postwar recession.

Moreover, the subsequent recovery has proven
unusually anemii well. Employment typically
begins rebounding the same month the overall
economy does. In the latest recession, however,
nonfarm payrolls did not begin a sustained—albeit
very modest—upturn until 12 months after its offi-
cial end. The modest job losses were finally recov-
ered ] year later, but the rebound was much
weaker than that of prior recoveries. In short,
while the officially designated recession was fairly
mild by historical standards and the overall job
losses were lighter, the reality of the job market
was an extended period of sluggishness.

Gross domestic product. The Nation’s gross do-
mestic product (cpp), the sum of all goods and ser-
vices produced by the economy, fell 1.8 percent, in
constant dollars, from the third quarter of 1990 to
the first quarter of 1991.‘ (See table 3.) This drop
in aggregate output was slightly less than the av-
erage decline in postwar recessions (2.1 percent),
but significantly lower than those of the preceding
three recessions."

Three of the four major components of cpp
performed relatively well during the 1990-91 re-
cession, compared with prior downturns, Net ex-
ports, the difference between the economy’s ex-
ports and imports, grew an average of $5 billion
during the prior 8 recessions. In contrast, they im-
proved by $41 billion during the last recession, as
exports grew by $7 billion and imports dropped by
$34 billion. Secondly, gross private domestic in-
vestment fared somewhat better during the 1990-
91 recession. Typically severely depressed during
economic downturns, investment spending fell by
13.1 percent, a noticeable improvement over its
average decline of 17.2 percent. A relatively
smaller decline in nonresidential investment was
largely responsible for this improvement. Lastly,
government purchases rose 2.2 percent during the
1990-91 recession, about 2-1/2 times their typical
increase; Federal Government purchases ac-
counted for this disparity.

In contrast, personal consumption expenditures
experienced an unusually large decline during the