Business and the economy in
the United States
Definition Structure and functioning of the U.S.
economy, including the production and
distribution of goods, services, and incomes and
related public policies
After a brief, mild recession in 1990-1991, the decade was
characterized by steady economic growth, relatively full em-
ployment, and relatively stable prices.
Between 1990 and 1999, the nation’s output (mea-
sured by gross domestic product, or GDP, adjusted to
remove inflation) increased from slightly over
$28,000 per person to nearly $34,000 per person, an
increase of 21 percent. However, real consumption
per capita rose only 12 percent over the decade.
The recession in 1990-1991 and subsequent slow
recovery increased unemployment rates, which av-
eraged around 7 percent in 1991-1993. This factor
figured prominently in the presidential election of
1992 and contributed to the defeat of incumbent
George H. W. Bush by Bill Clinton. For the rest of the
decade, unemployment trended steadily downward,
reaching 4.2 percent in 1999, the lowest rate since
- The decline was particularly large for black
workers, falling from 10 percent in 1990 to 7 percent
in 1999.
The inflation rate was consistently relatively low,
averaging 2.7 percent between 1990 and 1999. Much
of the increase in prices was matched by upgrades in
product quality and by introduction of new products
not fully reflected in the price indexes. Thus, the
purchasing power of the dollar declined relatively
little. Price stability was aided by the relative stability
of fuel and energy costs.
Health and Happiness One payoff from higher in-
come and the upgrading of technology was longer
life. Life expectancy at birth rose from 75.4 years in
1990 to 76.7 years in 1999. The increase was much
larger for men—from 71.8 to 73.9, thus narrowing
the traditional female advantage. Much of the in-
crease came from reduced incidence of heart dis-
ease and stroke, reflecting a combination of im-
proved medical treatment and improved lifestyles
(reduced smoking and fat consumption).
These gains came at a high cost. National health
expenditures were about 12 percent of GDP in 1990
and increased to about 14 percent by 1999. Most of
the increase was concentrated in 1990-1993, fol-
lowed by a period of relatively successful cost control
for government insurance programs. Between 1990
and 1999, the price index for medical goods and ser-
vices increased by 43 percent, far outracing the gen-
eral consumer price index, which rose only 24 per-
cent. The disproportionate rise in medical costs was
a predictable result of government programs, which
greatly raised demand but did little to augment sup-
ply of medical goods and services.
While people were healthier and wealthier, they
were not happier. A vast number of surveys asking
people about their level of happiness consistently
found the average had no tendency to increase over
time, despite rising annual incomes. The result is
not difficult to explain. A high-income society has a
high job turnover rate, meaning that many people
are losing a job or worry that they might or are anx-
ious about a new job they are starting. People com-
plained much about longer distances and time spent
commuting. Heads of households worried about the
rising cost of health insurance and about children’s
college expenses. For the working population, a pos-
sible higher income did not come with any more
time to enjoy it.Labor Force and Productivity The decade wit-
nessed a vigorous growth in jobs: The number of
workers employed increased from 119 million in
1990 to 134 million in 1999, helping to reduce the
unemployment rate. Manufacturing employment
registered a slight decline, falling from 17.7 million
in 1990 to 17.3 million in 1999. This decline oc-
curred in spite of a large increase in manufacturing
output—from $64 billion (dollars of year 2000) to
$94 billion in 1999—a rise of 47 percent. The rise in
output without increased employment reflected the
high rate of technological progress in manufactur-
ing. About three-fourths of all workers were em-
ployed in the service sectors (including govern-
ment). Service output grew about 26 percent from
1990 to 1999, largely from a 22 percent rise in service
employment. These numbers suggest a relatively low
rate of technological improvement in service activi-
ties. However, measuring the quantity of service out-
put is very difficult. Both output and productivity
may have grown more than these figures suggest.
Labor productivity, measured by output per
person-hour, rose about 18 percent between 1990
and 1999. Major contributors to higher labor pro-134 Business and the economy in the United States The Nineties in America