Defense-related employment and spending, 1996-2006

Monthly Labor Review,  July, 1998  by Allison Thomson

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Defense-related employment in the public sector, including the Armed Forces, fell 30.3 percent between 1987 and 1996. The greatest reduction occurred among members of the military, as troop strength fell by 703,000. Excluding the buildups associated with the Korean and Vietnam Wars, overall troop strength remained relatively constant from World War II up until the end of the Cold War in 1988. The 1987-96 period is the first time reductions in defense expenditures had a direct impact on the size of the Armed Forces. Further reductions among the Armed Forces and civilian Government employees will be tempered by our Nation's need to maintain a functional level of readiness, ongoing research and development, and weapon modernization programs. Defense-related private sector employment was pared by 40.1 percent between 1987 and 1996. This sector is expected to face an additional reduction of 727,000 jobs through 2006. The primary contraction is expected to transpire in indirect defense-related employment. This differs from the 1987-96 period, during which the greatest reduction occured in direct defense-related employment.

Industries

The impact of defense spending cutbacks on employment in the major industrial sectors is illustrated in table 2. Excluding the Federal Government, the areas of the economy that are expected to absorb the continued reduction in defense-related employment between 1996 and 2006 are manufacturing (-385,000 jobs), services (-149,000 jobs), and retail and wholesale trade (-103,600 jobs). These industries also experienced large defense-related employment losses during the 1987-96 period. Estimates of defense-related employment by detailed industry are provided in table 3. Over the 1996-2006 period, sizable job reductions are projected for many industries with substantial concentrations of defense-related employment, including the aerospace, search and navigation equipment, shipbuilding, electronic components, research and testing, and engineering and architectural services industries. (See table 4.) Correspondingly, further employment reductions are anticipated in the industries, responsible for supplying goods and services to these industries, such as wholesale trade, construction, computer and office equipment, and trucking and warehousing industries.

Table 2. Defense-related employment by major sector, 1977, 1987, 1996, and projected 2002 and 2006