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Business AN EIGHTH DISTRICT PERSPECTIVE SUMMER 1985 Employment Growth During the 1975-77 and 1982-85 Recoveries: A Comparison The strength o f the current recovery is a frequently debated topic. Some analysts have argued that this recovery is stronger than average, while others have m aintained that it is typical o f recoveries in the postw ar era. The difference o f opinion hinges on which economic indicators are chosen as the basis for argum ent. This issue com pares the perform ance o f one indicator o f econom ic activity—em ploym ent—in the current recovery, to its perform ance in the 1975-77 recovery. Em ploym ent data are used because they are closely associated with trends in output. M oreover, employment is an indicator o f econom ic activity that is available by state, which perm its a com parison o f the two recoveries on a regional, as well as a national, level. The Recoveries: A General Overview District Manufacturing Employment in the Two Recoveries F or the first 22 m onths o f both recoveries, District m anufacturing em ploym ent behaved similarly (chart 3). M anufacturing em ploym ent grew at approxim ately a 7 percent rate for the first 15 m onths o f both recoveries, then slowed to roughly 2 and 1 percent rates for the next seven m onths in the 1975-77 recovery and the current one, respectively.1 The m arked divergence in the perform ance of District m anufacturing em ploym ent began at the 22-month m ark in the two recoveries; for the subsequent seven-month period, manufacturing employment resumed a more rapid 6.1 percent rate o f grow th in the earlier recovery, but has declined at a 1.6 percent rate in the current recovery. The current recovery is similar to the 1975-77 recovery U.S. Manufacturing Employment in that each was preceded by a contraction of the same dura tion, 16 months from the previous peaks to the respective U.S. manufacturing employment grew faster in the first troughs of March 1975 and November 1982. To the extent two years of the current recovery than it did in the 1975-77 that the length and vigor of a particular expansion is deter recovery (chart 4). After growing at identical 2.2 percent mined by the length and depth of the contraction that pre rates for the first six months of both recovery periods, ceded it, this would suggest that the two expansions might manufacturing employment during the next seven months be similar. A number of important differences exist, recorded a 7.6 percent rate of growth in the current however, not the least of which are the relatively higher recovery, but only a 5.7 percent growth rate in the previous value of the dollar and lower inflation rate that have per one. In the following 10 months of the current recovery, sisted during the current recovery. U.S. manufacturing employment grew at a 3.8 percent rate, A comparison of the growth in Eighth District and U.S. twice the 1.9 percent rate of growth registered in the same nonm anufacturing employment over the current and stage of the 1975-77 recovery. Since October previous recoveries shows a similar perfor o f last year, how ever, m anufacturing mance (charts 1 and 2). Nonmanufacturing employment has slowed in the United States, employment in the current recovery has as in the District, registering no growth in grown at much the same rate as in the the current recovery while it had continued THE previous one in both the District and the na FEDERAL to rise at a 5.2 percent rate over the same RESERVE tion. Manufacturing employment, however, period in the 1975-77 recovery. RANK of has followed different paths across the two ST. I jOLIIS recoveries. This different behavior is explored further in this issue. All growth rates are compounded annual rates o f change. FEDERAL RESERVE BANK OF ST. LOUIS Why the Recent Slowdown in Manufacturing Employment Growth? Many analysts have argued that the appreciation o f the dollar has had a strong detrim ental effect on m anufac turing industries because they are m ore sensitive than service industries to exchange rate effects on traded goods. Despite the fact that the real value o f the dollar rose at a 10 percent rate from N ovem ber 1982 through February 1985 (the first 27 months) o f the current recovery, the data show that m anufacturing employment in both the D istrict and the nation perform ed as well or better over the first 22 m onths o f this recovery, than it did over the corresponding phase o f the previous recovery.2 This is particularly interesting since over the same stage o f the earlier recovery, the dollar rose at only a 1.6 percent rate in real term s. M oreover, the sharp appreciation o f the dollar actually began in 1980. 2 Compounded annual rate o f change in the real trade-weighted exchange rate. SUMMER 1985 Only in the last seven months has m anufacturing employ m ent in this recovery fallen behind its perform ance o f the 1975-77 recovery. It is possible that the recent slow down in the pace o f the economic expansion has resulted in a disproportionate slowing in the grow th o f m anufacturing em ploym ent in both the D istrict and the nation. From second quarter 1984 through first quarter 1985, real G N P grew at only a 2.2 percent rate, following a 7.1 percent rate o f growth in the previous six quarters of the expansion. The earlier recovery exhibits a sim ilar period o f little grow th in m anufacturing em ploym ent in the second and third quarters of 1976, in both the District and the nation. From first quarter 1976 to third quarter 1976, real G N P ex panded at a 2.5 percent rate, well below the 6.7 percent rate registered over the previous four quarters of that recovery. —Catherine Axtell Bieber Business—An Eighth District Perspective is a quarterly summary of business conditions in the area served by the Federal Reserve Bank of St. Louis. Single subscriptions are available free of charge by writing: Research and Public Information Department, Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, Missouri 63166. Views expressed are not necessarily official positions of the Federal Reserve System. 2 FEDERAL RESERVE BANK OF ST. LOUIS SUMMER 1985 EIGHTH DISTRICT BUSINESS DATA Growth Rates1 Current Period General Business Indexes2 Y ear-to-D ate 1985 1984 Feb-Apr - 0 .6 % 4.0 2.0 1.9 Arkansas Kentucky Missouri T en nessee Retail Sales 0.7% 4.7 2.3 2.6 3.1% 5.0 3.5 6.7 6.3% -5 .6 9.0 11.2 -9 .4 7.6% 2.4 0.1 9.0 10.9 3.3% 2.9 0.1 -4 .9 8.5 0.3 1.2 1.0 2.3 2.6 4.1% 3.8 4.6 3.7 4.0 2.8 3.3 3.7 3.9 4.8 4.9% 5.2 11.3 3.0 1.5 -0 .2 2.0 1.3 9.3 3.7% 2.6 -1 .7 3.5 3.6 5.5 6.1 6.2 5.7 Jan-Mar 6.3% -5 .6 9.0 11.2 -9 .4 United States A rkansas3 Kentucky3 Missouri T en nessee Feb-Apr Payroll Em ploym ent 3.1% 1.6 -1 .4 -6 .0 6.2 0.4 0.5 0.8 1.1 1.9 United States District Arkansas Little Rock Kentucky Louisville Missouri St. Louis Tennessee M em phis F e b -A p r A v e ra g e H o u rly E a rn in g s -M fg . 4.8% 6.6 15.5 5.2 2.4 0.2 1.2 1.3 10.8 United States Arkansas Little Rock Kentucky Louisville Missouri St. Louis Tennessee Mem phis 4th q u a rte r ’84 P e rs o n a l In c o m e United States D istrict Arkansas Kentucky Missouri Tennessee 9.2% 9.9 8.7 11.1 9.8 9.5 6.3% 5.7 3.9 4.6 6.2 6.8 Employment1 (current period Feb-Apr) Y e a r-to -D a te 1985 Y e a r-to -D a te 1 9 84 S am e P eriod 19 84 1 9 83 7.5% 6.8 7.9 4.5 7.5 7.1 Prices1 (current period Feb-Apr) Y e a r-to -D a te 1 9 8 5 S a m e P e rio d 19 84 K ey In d u s trie s F a b rica te d M etal P ro d u cts E le ctrica l and E le ctro n ic E q u ip m e n t N o n e le c tric a l M a ch in e ry T ra n s p o rta tio n E q u ip m e n t Food and K in d re d P ro d u cts T e x tile a nd A p p a re l P rin tin g a nd P u b lish in g C h e m ic a ls and A llie d P ro d u cts C o n s tru c tio n 1.9 % -6 .3 -3 .2 -4 .2 -7 .6 -5 .1 1.9 -2 .0 -2 6 .8 3 2 .9 % 10.4 16.4 13.9 -5 .3 7.0 6.3 -3 1 .3 -1 3 .0 0 .7 % 2.2 2.7 3.4 -1 .1 0.4 8.6 1.7 0.9 3 .0 % 4.6 3.2 2.4 9.4 3.4 9.5 3.1 5.6 3 EIGHTH DISTRICT BUSINESS DATA Current Period*12 3 U n e m p lo y m e n t R ate U n ite d S ta te s D is tric t A rka n sa s L ittle R ock K e n tu c k y L o u is v ille M isso u ri St. Lo u is T e n n e sse e M e m p h is C o n s tru c tio n C o n tra c ts 4 (m illio n s o f d o lla rs) D is tric t A rka n sa s K e n tu c k y M isso u ri T e n n e sse e Previous 3 Months Average Yearto-Date 1985 Average 1984 7 .2 % 8.1 8.7 6.7 9.1 8.3 7.0 7.6 8.4 6.7 7 .3 % 7.7 8.1 6.1 8.0 7.8 7.0 7.7 8.1 6.3 7 .5 % 8.4 8.9 7.1 9.5 8.6 7.2 8.1 8.5 7.2 $ 675.9 84.1 111.5 210.8 269.5 $ 771.4 9 1 .7 153.8 215.5 310.4 $ 830.4 115.7 167.5 251 .4 295 .7 F eb-A pr 7.3% 7.7 8.1 6.0 7.9 7.6 7.0 7.7 8.0 6.2 F eb-A pr $823.2 95.0 164.0 237.5 326.7 NOTE: With the exception of construction contracts and employment and prices in key industries, all data are seasonally adjusted. 1Data are presented as three-month averages to minimize distortions due to the large variability of monthly data. The current period growth rate is a comparison of the average of the current three months to the average of the previous three months. The year-to-date growth rate is from the average of the three months ended in December 1983. All growth rates are compounded annual rates of change. 2Sources: Arkansas and Missouri from Southwestern Bell, Kentucky and Tennessee from South Central Bell. 3Sources: Arkansas from Southwestern Bell and Kentucky from Kentucky Revenue Department; Missouri and Tennessee are seasonally adjusted by this Bank. 4Source: F.W. Dodge, Construction Potentials, McGraw-Hill Information Systems Company, proprietary data provided by special permission.
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