The Eighties in America - Salem Press (2009)

private-capital investments. However, home mort-
gage rates continued to decline, although they were
still around 10 percent in 1989. Private-capital ex-
penditures, after adjustment for inflation, were rela-
tively flat between 1984 and 1988.

Growth and Stability After its rough start, the econ-
omy performed increasingly well across the decade.
The recession officially ended in November, 1982,
and it was followed by an economic boom and ex-
pansion that continued over ninety-two months un-
til July, 1990. The average annual unemployment
rate reached a peak of 9.7 percent in 1982, then de-
clined every year to a low of 5.3 percent in 1989. The
Michigan index of consumer sentiment, which had
fallen below 60 in 1981, shot up to well over 90 by
1984 and remained high until 1990. Improving eco-
nomic conditions played a big part in President Rea-
gan’s reelection in 1984.
Improvement in the economy reflected the rela-
tively balanced expansion of both aggregate demand
(need or desire for goods and services combined
with sufficient purchase power) and aggregate sup-
ply (growth of productive capacity). Both demand
and supply were stimulated by the continued growth
of the U.S. population, which rose from 228 million
in 1980 to 247 million in 1989. Besides natural in-
crease, the United States received about 600,000 im-
migrants each year. During the economic expan-
sion, the economy created 17 million additional
jobs. The number of employed women increased by
11 million, while employed men increased only 7
million. Labor productivity increased more than 10
percent over the decade. An important contributor
to higher productivity was a steady rise in the average
educational level. The proportion of the labor force
with some college education rose from 40 percent in
1980 to more than 45 percent in 1989. The propor-
tion with no high school degree declined by a similar
amount.
Higher productivity resulted in an improvement
in real incomes and consumption. Real disposable
income per person rose about 18 percent from 1979
to 1989, and real personal consumption rose about
20 percent, meaning that some of the increase in
consumption was driven by a corresponding increase
in debt. The increase in income was not driven by
an increase in real wages, which actually declined
slightly during the decade. Higher fringe benefits
offset some of that downward trend, but household

incomes rose mostly because of lower unemployment

rates and an increase in the proportion of house-

holds with more than one wage earner. Further-

more, household incomes from interest, dividends,

and government transfer payments such as Social

Security rose more rapidly than did labor income,

contributing to the rise in income.

In 1980, about one-eighth of the population was

classified as living in poverty. That proportion rose

slightly during the recession, then declined slightly

again to end in 1989 very close to the 1980 level. This

apparent stability masked a high rate of turnover:

Many recent immigrants and young people just en-

tering the labor force were in poverty initially but

soon rose out of it to be replaced by other immi-

grants and young workers. The poverty rate was

disproportionately high among persons with little

education and among female-headed families. The

latter category increased by one-fourth over the de-

cade and accounted for much of the poverty among

children.

Sector Output and Employment All major sectors

of the economy experienced increased output over

the decade of the 1980’s. Agricultural output ex-

panded by more than 50 percent, despite a decrease

in employment. The increased output reflected the

continued rise in labor productivity, helping to di-

minish world hunger but putting downward pres-

sure on farm prices.

One startling pattern was that, while manufactur-

ing output continued to increase, employment in

manufacturing declined. Higher productivity meant

companies could produce the same amount with

fewer workers. The impact of higher labor pro-

ductivity was even more visible in mining, where em-

ployment fell by one-third despite rising output.

Weakness in manufacturing and mining employ-

ment contributed to wage stagnation and to a de-

cline in union membership.

The decrease in manufacturing employment

generated controversy. Critics blamed it on competi-

tion from imports and urged more restrictions

against goods from abroad. Management experts in-

sisted that Japanese firms were managed better than

were American firms. Perhaps paradoxically, during

the 1980’s, six major Japanese automakers opened

manufacturing facilities in the United States. Lo-

cated in areas of low population density where work-

ers did not insist on union membership, they were

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