As a result of declining birth rates and stabilizing mortality rates, Panama's overall population growth rate fell from an annual average of 2.6 percent between 1965 and 1980 to 2.2 percent between 1980 and 1985 (see table 2, Appendix A). The working-age population (15 years and over) increased from 1,011,700 in 1978 to 1,256,800 in 1985, at a rate of approximately 4 percent a year. From 1970 through 1984, the rate of job creation was less than half the growth rate of GDP. Analysts have estimated that the economy would have to grow indefinitely by 7.5 percent a year to absorb new entrants into the labor market--a level almost impossible to sustain and far above Panama's average annual growth rates in the past.

Panama's experience suggested that a government's ability to improve the employment situation through direct intervention in the labor market is severely limited. In the 1960s, an average of 13,000 new jobs were created each year. During the recession in the 1970s, unemployment rose dramatically. In late 1977, the government sought to reverse the deteriorating employment situation with an emergency jobs program. As a result, 28,000 new jobs were created within a year--20,000 of which were in the public sector. The employment program drained government resources, however, and in 1980 it was terminated. Only 11,000 jobs were created annually between 1979 and 1982.

In 1985 the sectoral distribution of the labor force reflected shifts that had taken place since the 1960s (see table 15, Appendix A). The services sector, led by financial services, continued to grow and accounted for 57.4 percent of the total labor force in 1985. Agriculture (including forestry and fishing) consistently experienced a relative decline, but still furnished 26.5 percent of the jobs. Industry's share of the labor force grew slightly between 1965 and 1980, but dropped to 16.1 percent in 1985.

The public-sector share of total employment rose slightly from 11 percent in 1963 to 13.1 percent in 1970. With the expansion of the public sector in the 1970s under Torrijos and the Emergency Employment Program in 1977, that share peaked at 25.1 percent in 1979. In 1982 the public sector still accounted for 25 percent of total employment.

Data as of December 1987