Tracking the BEA regional projections, 1988-91.

Downey, George K. ; Hackmann, Duane G. ; Spatz, Lyle 等

In this article, the Bureau of Economic Analysis (BEA) tracks its most recent projections of regional and State employment growth for 1988-91 by comparing them with the current BEA regional estimates of employment for that period. BEA tracks the projections to alert users about the industries and regions for which the projections differ markedly from the measured estimates and to help in the preparation of the next set of projections.(1)

Regional and State projections to the year 2000 of employment and earnings by industry and of total personal income, population, and per capita personal income were published in the May 1990 Survey of Current Business and in a three-volume set. (See the box on data availability at the end of this article.) The projections were based on extensions of historical trends through 1988 in regional and State data to show the regional and State distribution of economic activity that was projected to occur, assuming steady (noncyclical) growth in the national economy at full employment (defined as a 5-percent rate of unemployment). Thus, the projections were not intended to--and indeed did not--capture the effects of the 1990-91 recession: From 1988 to 1991, the unemployment rate for the national economy increased from 5.5 percent to 6.7 percent, and, as a result, the growth paths in some regions and States departed from the trends.

This article tracks the projections of employment, which is measured in BEA'S regional program on a job-count basis for both wage and salary workers and proprietors.(2) The tracking is complicated by revisions that were made to BEA'S State employment series after the projections were published. The employment series was revised to incorporate detailed industry statistics collected by the Census Bureau in the economic censuses for 1982 and 1987 and to shift the detailed industry distribution of employment from the 1972 Standard Industrial Classification (sic) to the i987 sic. The revisions affect the differences between projected and measured employment, particularly for service-type industries and, within manufacturing, for instruments and for electric and electronic equipment.(3)

This article has two major sections. The first section tracks national projections of employment at approximately the two-digit sic level of detail. In construction and in most manufacturing industries, projected employment exceeded measured employment, largely reflecting the 1990-91 recession. In several detailed service-type industries, such as business services and personal services, differences between projected and measured employment largely reflected the shift to the 1987 SIC.

The second section tracks employment projections for the eight BEA regions; tracking is mainly at the one-digit sic level, in order to minimize the effects of the revisions. In the New England, Mideast, Far West, and Southeast regions, employment growth was overprojected; the overprojections largely reflected weakness in durables manufacturing and in construction during the 1990-91 recession. In durables manufacturing, the cumulative effects of cutbacks in Federal defense spending beginning in the late 1980's contributed to weakness; in construction, the effects of overbuilding during the boom years of the 1980's contributed. In the Great Lakes, Plains, Southwest, and Rocky Mountain regions, employment growth was on target or underprojected; in general, growth in employment in the service-type industries benefited the economies of these regions.

National Projections

The revisions made to the employment series after the projections were published make it difficult to determine precisely the extent to which differences between projected and measured employment in 1991 reflect departures from employment growth trends. Table 1 shows measured and projected, employment by detailed industry for the Nation. The revised estimates of employment for 1988 and measured employment for 1991 are based on the 1987 sic. Projected employment for 1991(4) and the previously published estimates for 1988--that is, the estimates that were available when the projections were prepared--were based on the 1972 sic. The differences between the previously published estimates and the revised estimates for 1988 reflect both the sic shift and data revisions. The differences between the projected and the measured estimates of employment for 1991 reflect departures from the trends, as well as the sic shift and data revisions. For a given industry, provided that the difference for 1988 is small, a relatively large and negative (or positive) difference for 1991 probably indicates that the level of employment in 1991 is above (or below) the trend.

[TABULAR DATA 1 OMITTED]

The revised estimates of total employment for 1988 were about 1.6 million jobs more than the previously published estimates. Thus, if the national economy had grown steadily at full employment in 1988-91, measured employment for 1991 would also have been about 1.6 million jobs more than projected employment. However, largely as a result of the 1990-91 recession, measured employment for 1991 was 277,000 jobs less than projected employment.

Reflecting the lingering effects of the recession in 1991, measured employment was about 500,000 jobs less than projected employment in construction and about 1.1 million jobs less than projected employment in manufacturing. In four manufacturing industries--instruments, food and kindred products, chemicals and allied products, and rubber and plastic products--measured employment was more than projected employment. In instruments, a 23.2-percent underprojection was due mainly to the sic shift, which moved about 300,000 jobs to instruments from electric and electronic equipment.

Despite the recession, measured employment in 1991 was about 700,000 jobs above trend in each of two service-type industries--State and local government and health services. In most of the other service-type industries, the differences were largely due to data revisions and the sic shift. Industries affected by data revisions included retail trade and the finance-insurance-real estate group. Industries affected by the sic shift included business services, personal services, amusement and recreation services, social services, and miscellaneous professional services. In particular, the shift in jobs from business services, from personal services, and from miscellaneous professional services to a new industry classification--engineering, accounting, research, management, and related services--resulted in large differences for 1988 and 1991.

Regional Projections

As noted earlier, the employment projections for regions and States are based on extensions of historical trends in a noncyclical, full-employment national economy. Such projections can differ substantially from subsequent measures of employment, which reflect the effects of the national business cycle. For 1988-91, which includes the 1990-91 recession, an analysis of the differences between projected and measured employment growth tends to highlight the severity of the recession in particular regions and States. The regions hardest hit by the recession--New England and the Mideast--show large overprojections of employment growth. Employment growth was also overprojected for the Far West and the Southeast regions. Growth for the other regions was either on target or underprojected.

Regions with overprojected growth

New England.--Total employment declined 2.2 percent per year in 1988-91, compared with a projected increase of 1.0 percent per year (table 2, at the end of the article, and chart 1). The region was projected to gain 249,000 jobs, but it lost 524,000 jobs, largely as a result of the 1990-91 recession. The cumulative effects of cutbacks in defense spending beginning around 1988 led to job losses in defense industries and in other high-technology industries, which had been the source of much of the region's growth since the early 1980's. These job losses dampened consumer demand, further slowing economic activity.

Employment growth was overprojected in all industries; all except services showed job losses. Excluding mining (which is quite small in terms of employment), the largest overprojections were in manufacturing, in construction, and in retail trade. In manufacturing, the projections anticipated declines in response to cutbacks in defense spending, but job losses proved to be substantially more than was projected. In construction, substantial job losses reflected the effects of overbuilding during the boom years of the 1980's, as high real estate costs and slow population growth dampened demand for residential and commercial structures.

In each State, total employment was overprojected; employment was overprojected in each State for each industry, except for government in Maine and Vermont and for the transportation-public utilities group in Maine (chart 2). Each State was projected to gain jobs; instead, each lost jobs. The six New England States were among only eight States in the Nation with job losses. In the major industrial States of the region--Connecticut and Massachusetts--shares of U.S. total employment and of U.S. manufacturing employment fell to their lowest levels since 1969.(5) Connecticut's share of the Nation's employment in primary and fabricated metals manufacturing reached the lowest level since 1969, reflecting cutbacks in defense-related industries. Massachusetts' share of employment in machinery plummeted partly because of a global shift in demand from minicomputers to personal computers.

Mideast.--Total employment declined 0.5 percent per year in 1988-91, compared with a projected increase of 0.9 percent per year. The region was projected to gain 682,000 jobs, but it lost 367,000 jobs, largely as a result of the 1990-91 recession.

Employment growth was overprojected in all industries except government; most industries showed job losses. Excluding mining and farming (which are relatively small in terms of employment), the largest overprojections were in construction, in manufacturing, in the finance-insurance-real estate group, and in trade. In construction, the region lost 163,000 jobs; the losses reflected the effects of overbuilding during the boom years of the 1980's. In manufacturing, the cumulative effects of cutbacks in defense spending led to substantial job reductions by firms that produce high-technology and defense-related equipment. In the finance-insurance-real estate group, reduced employment followed from weakness in financial markets in the late 1980's. in trade, job losses reflected weakened consumer demand.

In each State, total employment was overprojected; employment was overprojected in each State in manufacturing, in construction, in trade, and, except in Delaware, in the finance-insurance-real estate group. Employment was projected to increase in each State, but it increased only in Delaware and Pennsylvania. Employment changed little in Maryland, and it declined in New Jersey and New York. New Jersey and New York were among only eight States in the Nation with job losses; in these two States, job losses were most severe in construction, in manufacturing, and in trade.

Far West.--Total employment grew 1.4 percent per year in 1988-91, compared with a projected increase Of 1.7 percent per year. Measured growth fell short of projected growth mainly because of the effects on California of the 1990-91 recession.

In California, whose workforce accounts for 72 percent of the region's total employment, employment growth was overprojected in all industries except nondurables manufacturing and government. In durables manufacturing, the State lost 160,000 jobs; this loss more than accounted for the industry's job loss in the region. The cumulative effects of cutbacks in defense spending led to substantial job losses in defense-related industries, particularly in instruments, transportation equipment, electrical machinery, and fabricated metal products. In construction, California lost 64,000 jobs because of an oversupply of commercial and residential structures following the building boom in the 1980's, while each of the other States in the region gained jobs. In trade, below-average job growth reflected weakened consumer demand.

In Alaska, Hawaii, Nevada, Oregon, and Washington, employment growth was underprojected in most goods-producing industries and, except in Alaska, in all service-type industries. In mining and construction--industries with job losses in the Nation as a whole--the five States generally had substantial job gains. The building of new hotels and other structures pushed the rate of job growth in Hawaii's construction industry 10 percentage points above the projected rate. In service-type industries, the five States gained 480,000 jobs, more than one-half of all new jobs in the region.

Southeast.--Total employment grew 1.1 percent per year in 1988-91, compared with a projected increase Of 1.2 percent per year. Reflecting the adverse effects of the recession, employment was overprojected for all goods-producing industries. These industries were projected to gain 133,000 jobs, but they lost 316,000 jobs; construction and manufacturing together accounted for 8o percent of the job losses. Service-type industries, which were less sensitive to the recession, had underprojections of job growth. These industries gained 1.3 million jobs; services and government together accounted for 76 percent of the job gains.

By State, measured employment grew slower than projected employment in Florida, Georgia, North Carolina, Tennessee, and Virginia. All of these States had job losses in goods-producing industries; construction and manufacturing lost nearly 300,000 jobs. In Georgia and Virginia--the States with the largest overprojections of total employment growth--the recession contributed to job losses in construction and in manufacturing; these job losses contrasted with job growth at about the U.S. average rate in service-type industries.

Measured employment grew faster than projected employment in Alabama, Arkansas, Kentucky, Louisiana, Mississippi, South Carolina, and West Virginia. The underprojections in these States mainly reflected job growth in service-type industries. In each State, employment in service-type industries, which was projected to grow slower than the U.S. average, grew faster than average. In Louisiana--the State with the largest underprojection--job growth in construction and in manufacturing--particularly in chemicals, petroleum refining, and fabricated metals--contributed to job growth in service-type industries, particularly business services, health services, and legal services.

Regions with on-target or underprojected growth

Great Lakes.--Total employment increased 1.0 percent per year in 1988-91, the same as the projected increase. The on-target projection reflected the combination of relatively small overprojections in goods-producing industries and relatively small underprojections in service-type industries. In construction, measured growth nearly equaled the projected growth; the industry was insulated from the effects of the speculative overbuilding of the late 1980's, partly because the region's economy had been unusually slow to recover from the 1981-82 recession. In durables manufacturing, jobs declined at a faster-than-projected rate, but the rate of job loss was less than that in the Nation. In the 1990-91 recession, durables manufacturers were not so adversely affected by slackening domestic demand, because they were well-positioned to compete in still-expanding markets abroad as a result of their extensive modernization of plant and equipment in the 1980's.

By State, total employment grew at about the projected rate in Michigan and Ohio, slower than projected in Illinois, and faster than projected in Wisconsin and Indiana. In Illinois, total employment in goods-producing industries and in service-type industries was overprojected. In Wisconsin and Indiana, underprojections in all the service-type industries more than offset overprojections in most of the goods-producing industries.

Plains.--Total employment grew 1.3 percent per year in 1988-91, compared with a projected increase of 1.0 percent per year. With measured job growth nearly twice as fast as the U.S. average, the region departed from its historical trend of below-average growth. Employment growth was underprojected or on target in all industries except farming, mining, and durables manufacturing. In all of the service-type industries except government, employment grew faster than the U.S. average. As a result, job gains in the service-type industries more than accounted for the region's total gain Of 391,000 jobs. In construction, the employment projection was on target; the industry was little affected by overbuilding.

By State, total employment was underprojected in all States except Missouri. Iowa, Nebraska, and South Dakota had the largest underprojections; in each State, job growth was underprojected in all service-type industries except the transportation-public utilities group, in construction, in nondurables manufacturing, and, except in Iowa, in durables manufacturing.

In Missouri, job growth was overprojected in most industries. Cutbacks in defense spending contributed to a loss of 18,000 jobs in durables manufacturing; these losses dampened demand for the output of service-type industries, leading to slower-than-projected employment growth in service-type industries.

Southwest.--Total employment grew 1.6 percent per year in 1988-91, compared with a projected increase of 1.3 percent per year. Measured growth exceeded projected growth largely because the recovery from the regional recession stemming from the sharp drop in oil prices in 1986 was stronger than anticipated. The recovery brought industrial diversification, as growth in service-type jobs reduced the region's dependence on goods-producing jobs. Job growth was underprojected in all service-type industries except the finance-insurance-real estate group. Job growth was overprojected in all goods-producing industries except nondurables manufacturing. In mining, the number of jobs declined more than had been projected; in 1991, employment in mining accounted for less than 3 percent of total employment, down from more than 5 percent in 1982.

By State, measured employment grew faster than projected employment in Texas, Oklahoma, and New Mexico. These States showed job growth in industries that had job losses in the Nation. In Texas and Oklahoma, job growth in construction was faster than that projected. In Texas and New Mexico, job growth in nondurables manufacturing was faster than that projected.

In Arizona, measured employment grew slower than projected employment. Nonetheless, the growth rate was faster in the State than in the Nation, and the State gained 64,000 jobs.

Rocky Mountain.--Total employment grew 2.4 percent per year in 1988-91) compared with a projected increase of 1.4 percent per year. Like in the Southwest, measured growth in this region ,exceeded projected growth largely because the recovery from the oil-price recession in the energy States in the late 1980)s was stronger than anticipated. The recession had been particularly severe in mining and in mining-related construction. After 1988, job growth was particularly strong in construction, services, and trade. In services, jobs grew about 50 percent faster than projected, increasing 123,000; in trade, jobs grew more than twice as fast as projected. In mining, job losses further eroded that industry's formerly large share of regional employment.

By State, total employment was underprojected in all States and in most industries in each State. With the following exceptions, job growth was faster than projected in construction, in manufacturing, and in all service-type industries: Durables manufacturing in Colorado and Montana, wholesale trade in Wyoming, and the finance-insurance-real estate group in Colorado, Utah, and Wyoming.

Table 2 follows.

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Data Availability

BEA Regional Projections to 2040 is published in three volumes. Each volume presents the following: Projections of economic activity and population for 1995, 2000, 2005, 2010, 2020, and 2040; the corresponding historical data for 1973, 1979, 1983, and 1988; and a discussion of the methodology used to prepare the projections. Volume 1: States presents projections of total personal income classified by major income components, of per capita personal income, of population for three age groups, and of earnings and employment for 57 industrial groups. Volume 2: Metropolitan Statistical Areas and Volume 3: BEA Economic Areas present projections of total personal income, of per capita personal income, of total population, and of earnings and employment for 14 industrial groups.

Volume 1 is out of print but is available from the National Technical Information Service (NTIS) (NTIS Accession No. PB 90-264532, $27.00 for a paper copy from microfiche or $9.00 for microfiche). For the NTIS sales and information desk, phone (703) 487-4650.

Volume 2 and Volume 3 are available from the Superintendent of Documents, U.S. Government Printing Office (GPO), Washington, DC 20402. Payment for Volume 2 (GPO Stock No. 003-010-00211-5, 17-00) and Volume 3 (GPO Stock No. 003-010-00212-3, $10.00) may be by check (made payable to the Superintendent of Documents) or charged to a GPO deposit account number, VISA, or MasterCard. For the GPO sales desk, phone (202) 783-3238.

The data from these publications are available on computer diskettes from BEA. Orders should specify the following item's accession number and price: For States, BEA Accession No. 61-90-40-201, 40-00 (two 5/4" DSDD diskettes); for metropolitan statistical areas (MSA'S), BEA Accession No. 61-90-40-202, $40-00 (two 5 1/4" DSDD diskettes); and for BEA economic areas, BEA Accession No. 61-90-40-203, $40-00 (two 5 1/4" DSDD diskettes).

Each set of diskettes includes a program so that users can extract selected records from the data files for importation into computer spreadsheets.

The projections for the States, the MSA'S, and the BEA economic areas are also available as part of the Regional Economic Information System (REIS) CD-ROM, BEA Accession No. 55-91-30-599, $35-00.

Send diskette and CD-ROM orders to the Public Information Office, Order Desk BE-53, Bureau of Economic Analysis, U.S. Department of Commerce, 1441 L Street, N.W., Washington, DC 20230. Payment by check or money order (payable to the Bureau of Economic Analysis) must accompany the order.

Recently, BEA completed projections for counties for the same measures and years as for MSA'S and BEA economic areas. In preparing the county projections, BEA restated its population projections for the Nation, States, MSA'S, and BEA economic areas to reflect the population levels from the 1990 Census of Population. These projections are available in paper (be a Accession No. 61-91-or as part of the CD-ROM. These projections are also available electronically on the U.S. Department of Commerce Economic Bulletin Board. For subscription information, phone 482-1986.

The county projections are available only on diskettes. A set of 13 diskettes (3 1/2" HD) Which provides projections for all counties in the Nation, as well as State and national totals, is available from Accession No. 61-91-40-352, $260.00. In addition, county projections for individual States are available at $20.00 per diskette. These diskettes include a program so that users can extract selected records from the data files for importation into computer spreadsheets. For more information, write to the Regional Economic Analysis Division, Bureau of Economic Analysis, U.S. Department of Commerce, 1441 L Street, N.W., Washington, DC 202230, or phone (202) 606-5341, or fax (202) 606-5321. (1.) BEA prepares regional and State projections every 5 years mainly to help other Federal agencies, State and local government agencies, and private organizations (1) to assess future demand for goods and services by households, businesses, and government, (2) to analyze economic trends in order to anticipate future economic problems, and (3) to develop baselines with which to compare policy forecasts in order to measure the effects of policies. (2.) In previous assessments of its projections, BEA tracked both employment and population. In 1991, BEA restated its population projections by recalibrating them to reflect the population levels from the 1990 Census of Population, and it presented the restated projections in the August 1991 issue of the Survey. In light of the restatement, the present article does not discuss population projections. (3.) "Service-type industries" comprises the transportation-public group, wholesale trade, retail trade, the finance-insurance-real estate group, services, and government and government enterprises. Manufacturing is part of the "goods-producing group," which also includes farming, mining, and construction. (4.) Projected employment for 1991 was derived by interpolation between the data for 1988 that were available when the projections were published and the published projections for 1995. (5.) The earliest year for which BEA measures State employment is 1969.