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A review by the Federal Reserve Bank of Chicago Business Conditions 1965 June Seventh District economic growth 2 Contents Federal Reserve Bank of Chicago Seventh District economic growth Illinois, Indiana, Iowa, Michigan and Wis TL American economy has turned in a consin—was among the most rapidly grow remarkable performance over the years. The quantity, variety and quality of production have enabled consumption to rise to levels that would have astounded the early settlers of this nation and even today are incompre hensible to much of the world. During the last 100 years, national income in constant dollars has doubled almost every 20 years. Population has increased as well but not so fast as production, hence the rising levels of living. Since 1929, for example, disposable income per capita (valued in 1954 dollars) has risen about $800, or 70 per cent. Beginning about 1958 there was wide spread discussion that economic growth was slowing, nevertheless, expansion has con tinued at an impressive rate. Total output in constant dollars between 1946 and 1957 in creased at a compounded annual rate of 3.5 per cent and since 1957 at only a slightly lower rate of 3.4 per cent. Total employ ment rose about 9.8 million between 1946 and 1957 and has increased 5.3 million since 1957. Disposable income per capita in con stant dollars has also continued to rise; dur ing the 12 years 1946-57, the rise was $254 and in the 7 years 1957-64, $208. For many years economic activity in the Seventh Federal Reserve District states— ing in the nation. Since the mid-Fifties, how ever, the growth in these states, as measured by employment, has not matched that of the United States. Data on total employment for most states are not available. However, a measure of total employment can be estimated from Bureau of Labor Statistics reports on employTotal e m p lo y m e n t* 1957 Increase 1964 Amount Per cent (thousands) 3,822 1,645 950 2,677 1,458 3,873 1,717 985 2 ,6 6 6 1,514 51 72 35 — 11 56 1.3 4.4 3.7 — 0.4 3.8 Total 10,552 10,755 203 2.0 U nited States 6 0 ,4 9 4 64,2 9 7 3,803 6.3 Illinois Indiana Iowa M ichigan W isconsin *Figures are estimated from Bureau of Labor Statistics data on employment in nonagricultural establishments and Department of Agriculture data on farm employment. United States total differs from the Department of Labor household survey estimate by about 4.5 million in 1957 and 6 mil lion in 1964. BUSINESS CONDITIONS is published monthly by the Federal Reserve Bank of Chicago, Charles L. Choguill and Karl A. Scheld were primarily responsible for the article "Seventh District Economic Growth." Subscriptions to Business Conditions are available to the public without charge. For information concerning bulk mail ings, address inquiries to the Federal Reserve Bank of Chicago, Chicago, Illinois 60690. 2 Articles m ay be reprinted provided source is credited. Business Conditions, June 1965 ment in nonagricultural establishments and Department of Agriculture data on farm em ployment. (National employment has been estimated on the same basis to permit com parison.) Employment in the District states accord ing to these estimates has grown only 2 per cent since 1957, while nationally it has in creased 6.3 per cent. With the exception of Michigan, all of the District states experi enced increases although none kept pace with the overall rise in national employment. The relatively small increase for the District states is primarily accounted for by the decline in Michigan employment and the small increase in Illinois. While the District has had relatively slow growth on the basis of employment, in terms Per c a p ita p erso n al incom e 1957 Increase 1964 Amount Per cent (dollars) Illinois Indiana Iowa M ichigan W isconsin 2 ,505 2 ,0 2 9 1,864 2,245 1,969 3,003 2 ,529 2 ,3 7 0 2,733 2 ,4 9 2 498 500 506 488 523 20 25 27 22 27 U nited States 2,048 2 ,5 5 0 502 25 of per capita personal income the perform ance has been substantially better. Between 1957 and 1964 the increases in per capita personal income in Indiana, Iowa and Wis consin exceeded that of the United States; Illinois and Michigan had smaller gains. M easuring re la tiv e grow th Growth of the economy necessarily implies change: rapid expansion of some industries, occupations and areas, but slow growth or even decline of others. The forces at work are complex and interrelated in their effects. Technology, natural resource availability, population, size and skills of labor force, con sumer demands and governmental policies all have important influences upon individual areas. Furthermore, a region is not isolated from other regions but is connected with them through flows of goods, services, financial re sources and population. Forces affecting a region, therefore, originate from both within and without. S h ift-s h a re analysis All of these forces are affected by, and in turn have the effects upon, decisions of busi nessmen on location and production. Conse quently, an analysis of regional industry changes can provide some insight into the economic growth of a region. A technique known as shift-share analysis can be used for this purpose. It consists of comparing the direction, rates and types of change for individual areas with the direction, rates and types of change at the national level. The changes for the nation are used as a “norm,” thereby providing a basis for assess ing the relative magnitudes of regional changes and giving some indications of pos sible causes of the differences. Since individual regions in a highly de veloped economy—such as the United States — are effected strongly by forces originating throughout the nation, there is a strong tend ency for the region, during any period of several years or more, to change at about the same rate as the nation. In the shift-share framework, this is known as the nationalchange effect. Usually, however, the actual 3 Federal Reserve Bank of Chicago 4 change in an area differs from the national change. What accounts for this difference? Obviously, the differences between the regional and national rates of change arise from differences in the characteristics of regions. The mix of industries varies and all industries do not grow at the same rate nationally; for example, finance and service industries have been growing more rapidly than agriculture, mining or transportation. Economic activity in a region with a large proportion of the more rapidly growing in dustries would be expected to expand at an above average rate and the region would be expected to increase its share of the national totals of employment, production and in come. This industry-mix effect is a measure of expected change based on the difference between the individual industry growth rate and the average (all-industry) growth rate. The regional growth rate may also differ from the nation because certain industries in the region are expanding more or less rapidly than the same industries nationally. This regional-share effect reflects the competitive position of industries in the region. If an in dustry is expanding faster in a region than in the nation, it adds to the region’s relative growth even though, nationally, the industry may have a below-average growth rate. The total change in a region’s employment, production or income can be attributed to these three sources—national-change, indus try-mix and regional-share effects. If employ ment in Illinois, as an example, had increased at the national rate between 1957 and 1964, there would have been a gain of 240,000. Because a large proportion of Illinois em ployment in 1957 was in the more rapidly growing industries, the industry-mix effects would have raised this number by 41,000, for a total expected increase of 281,000. The actual increase of employment in Illinois be- Employment increases in the District states did not match "expected" gains change, 1957-64 (thousands) -2 0 0 “ I -100 ' I 0 ' Illinois +100 ' I +200 T r expected employment increase actual employment increase industry—mix — regional—share Indiana 1 Iowa % Michigan tween 1957 and 1964 was only 51,000. The difference between the actual and the ex pected increase (230,000) represents the regional-share effect; that is, Illinois indus- Business Conditions, June 1965 tries did not increase employment as fast as the same industries nationally. The decline in the state’s share of total national employ ment, thus, is due to the relatively weak per formance of industries in the state and not to the types of industries located there. Using the shift-share technique, changes in employment and personal income for recent years are analyzed in the following pages for each of the states in the Seventh District. Em ploym ent and personal income E m ploym en t shifts In the District states employment increased less between 1957 and 1964 than in the na tion; that is, each of the District states experi enced a decline in its share of total national employment. In order to maintain the same share of national employment, Illinois would have had to increase employment by an additional 189,000 workers, Indiana by 29,000, Iowa by 25,000, Michigan by 181,000 and Wisconsin by 34,000. Illinois was the only District state to ex perience an increase in the relative share of expected employment as a result of industrymix. Larger proportions of employment in the more rapidly growing industries—trade, finance, services and government—resulted in positive industry-mix effects (larger ex pected employment). Michigan had no net industry-mix effects; its 1957 employment distribution was such that expected increases in the slower growing industries offset those in the more rapidly growing industries. The reason for the decline in relative posi tion in total employment in Illinois and Michigan was the failure of industries in these states to expand as rapidly as the same industries nationally. On the basis of regional share effects, Illinois and Michigan had 230,000 and 181,000 fewer employes, respec tively, than if their industries had grown at the national rates. Only agriculture and min ing in Illinois and agriculture and services in Michigan performed favorably compared with the national industry changes. While employment in agriculture and mining de clined both in the United States and in Illinois and Michigan, the declines were less rapid in these two District states than in the nation. In contrast, regional-share effects were positive for Indiana, Iowa and Wisconsin. In Indiana, employment grew more rapidly in mining, manufacturing, finance, services and government than in the same industries na tionally. Employment in Iowa advanced at a higher rate in manufacturing and finance and declined less rapidly in agriculture and min ing than in the United States. Manufacturing, finance and government employment in Wis consin also had a greater rise than in the nation. The regional-share effects in these states were not, however, large enough to offset the negative effects of the industry-mix. These states had relatively larger proportions of slower growing industries than the nation as a whole. The major negative industry-mix effect came from agriculture in which em ployment nationally had declined almost 20 per cent between 1957 and 1964. Since agri culture is more important in Indiana, Iowa and Wisconsin than it is nationally, slower growth would have been expected in these states. On the basis of the shift-share analysis, the District states that were closest to matching 5 Federal Reserve Bank of Chicago the national change in employment—Indiana, Iowa and Wisconsin—had higher rates of in crease in employment on balance in their ma jor industry sectors than the corresponding national rates. Because of location or other relative advantages, or possibly, the specific plants or firms within the broad industry groups, these states were able to compete effectively with other regions in the nation. This advantage was offset, however, by the drag resulting from an industrial composition weighted more heavily by the slower growing industries—primarily agriculture. Illinois, on the other hand, where employment increased only slightly, had a favorable combination of rapid and slow growing industries relative to the United States. Industry-mix effects in Illinois were offset, however, because the state did not compete as effectively as a location for employment increases as had other areas of the nation. P ersonal incom e shifts 6 Another aspect of recent economic growth in the Seventh District is evident in the per sonal income statistics. In addition to wages and salaries, personal income includes other labor income, proprietors income, income from property and transfer payments (the latter consists of payments not associated with current productive effort, such as unem ployment compensation and social security benefits). Personal income is commonly used as a measure of consumer income and pur chasing power. For an analysis of structural changes with in and among regions, personal income is deficient since it includes two items—prop erty income and transfer payments—that are not necessarily the result of participation in the current production of the region. For pur poses of analyzing industry changes using shift-share analysis, participation income— wages and salaries, other labor income and proprietors income—is a better measure. Participation income by industry for 1964 is available only for the nonagricultural sec tor. Consequently, the results of the shift- O n ly Iow a exceeded "expected" growth in nonagricultural participation income Business Conditions, June 1965 share analysis are somewhat different than they would be if agricultural income were in cluded. Income in agriculture has been de clining and because of this a negative indus try-mix effect would be expected for the District states. Even with agriculture ex cluded, useful indications of the nature of relative changes of income in the District states can be obtained. N o n a g ric u ltu ra l p a rtic ip a tio n incom e 1957 Increase 1964 Per cent Amount (million dollars) Illinois Indiana Iowa M ichigan W isconsin 19,123 7,398 3,109 13,920 5 ,6 8 4 2 4 ,5 2 4 9,835 4 ,3 3 0 17,871 7 ,7 6 8 5,401 2 ,437 1,221 3,951 2 ,084 28 33 39 28 37 Total 49 ,2 3 4 64,3 2 8 15,094 31 2 6 5 ,9 6 2 3 6 5 ,2 1 9 9 9 ,2 5 7 37 U nited States Nonagricultural participation income (NPI) increased more than 37 per cent be tween 1957 and 1964 for the United States. In Illinois, Indiana and Michigan the rate of increase was less than that nationally. NPI in Iowa, in contrast, expanded more rapidly than it did in the nation and the gain in Wis consin almost matched the national rate. The larger increase in NPI than in total personal income for Iowa reflects the drag on income created by the agricultural sector as well as the slower expansion of income from transfer payments and property income. Only Iowa among the District states ex perienced positive income effects from both industry-mix and regional-share influences. The large proportion of more rapidly grow ing industries—finance, services and govern ment—resulted in an expected increase in NPI from industry-mix. The favorable re gional-share effect was primarily in manufac turing income which increased 40 per cent in Iowa compared with 28 per cent nationally. Wisconsin increased its share of NPI in construction, manufacturing, transportation, communications and public utilities and gov ernment. These increases more than offset losses in other sectors. The positive regionalshare effect, nevertheless, was not sufficient to overcome negative influence on income growth from industry-mix. The declining share of NPI in Illinois, Indiana and Michigan was associated with both an industrial composition heavily weighted by industries that are growing more slowly nationally—a negative industry-mix effect—and slower rates of income expansion in the local industries than in the nation— a negative regional-share effect. In Illinois and Michigan the regional-share effects were more important than the industry-mix effects in accounting for the relative decline in the total share of the states NPI; the reverse was true in Indiana where the unfavorable indus try-mix effect was an important factor ac counting for the decline. Industry and a re a trends Economic growth in the United States, as in most nations, has been based largely upon the utilization of natural resources. In the language of the regional economist, the nat ural resource industries— agriculture, fores try, mining and fishing— are considered “primary” industries. The “secondary” indus tries—manufacturing—developed initially to 7 Federal Reserve Bank of Chicago serve the needs of the primary industries and to process the products of these indus tries. Trade, finance, service and government —“tertiary” industries — accompanied in some form the development of the natural resource and processing industries and ex panded in variety and complexity as the economy grew and incomes rose. P rim a ry in d u s trie s -n a tu ra l resources Of the many factors contributing to the economic growth of the Seventh District states, none has been as important through out the years as the natural resource advan tage.1 The current industrial structure of these states still reflects this influence in its agricultural production, wholesaling and processing of foodstuffs, furniture manufac turing, transportation networks and other re lated processing, trade and service activities. Agriculture is the most important “pri mary” industry in the District. Although em ployment in this sector has been declining both in the United States and the District, it still accounts for 27 per cent of Iowa’s total work force, 16 per cent of Wisconsin’s and almost 11 per cent of Indiana’s. More than 18 per cent of the nation’s agricultural work ers were in the District states in 1964. With abundant land suitable for cultiva tion, the District was an obvious location for agricultural development. Prior to the mid1800s the District already had a sizable share of total agricultural activity. With the devel opment of transportation, regional eco nomic interdependence and the growth of foreign and domestic markets, activity de veloped even more rapidly in the District 8 'Material for the discussion on primary, second ary and tertiary industries was largely drawn from Harvey S. Perloff and Others, Regions, Resources and Economic Growth (Baltimore, Johns Hopkins Press, 1960). than in the nation. By 1870 almost 21 per cent of all agricultural workers were in the District. The share of agricultural employment in the District began to decline after 1870 as activity expanded faster in other regions. Wheat had been an important crop in the District up to this time. Illinois, Indiana, Iowa and Wisconsin, in 1870, accounted for al most 40 per cent of all wheat threshed. Poor yields, price fluctuations, an increased de mand for livestock products and increased competition from the West—arising from im proved railroad transportation—resulted in a shift to livestock and milk production in the following years. The decline in agricultural employment both absolutely since early 1900 and as a share of total employment since about 1870 is explained by several factors. With increased specialization, activities previously carried on in the agricultural sector have been taken over by the manufacturing, trade and service industries. As a result of technological change, the productivity of agricultural em ployes has increased and there has been strong competition from synthetic fibers. Finally, demand for farm products is rela tively unresponsive to income changes and consequently, as incomes rise, agriculture’s share of total demand declines. Trends in mining employment among the District states tend to be much more erratic than those in agriculture. Mining develops rapidly as new deposits are found or when changes in market sites or the structure of demand make it profitable to exploit lower grade deposits. But mining can also decline precipitously as deposits are depleted. Coal and copper have been the major min eral deposits exploited in the five Seventh District states. Prior to the mid-1800s, this area of the Midwest had only a small amount Business Conditions, June 1965 of mining activity. From the 1870s to 1910, mining employment rose steadily as indus try’s need for materials and fuels increased. In Michigan, extraction of iron and copper Illinois experienced positive industry-mix effects in tertiary industries Illin o is thousand employes 1957-64 r e g io n a l- s h a r e thousand em ployes *Tran sp ortation includes tran sp ortation, communica tions and public utilities. Finance includes finance, insur ance and real estate. ores between the 1870s and 1880s resulted in employment increases at a more rapid rate than the national growth in mining employ ment. Coal production also expanded mar kedly, especially in Illinois but also in Indiana and Iowa. The increases were not sustained, how ever. By the end of the nineteenth century, copper mining in Michigan had declined sharply. As industry consumed more oil as a fuel, coal mining in Illinois, Indiana and Iowa declined compared with the nation. Mining employment had begun to decline absolutely in Iowa and Michigan by 1910 and in Illinois and Indiana by 1920. As in agriculture, gains in productivity re sulting from changes in technology contri buted to the relative and absolute decline of mining employment nationally. The increas ing use of substitutes such as plastic and rubber was also a factor accounting for the decline in mining employment. The growth in mining that has occurred has been largely in oil and gas. Since these sectors contribute relatively less employment than other mining for the same output, both absolute employ ment and the share of total employment in mining have declined. Forestry is now only a minor activity in the Seventh District.2 Current statistics are not readily available but the proportion of the District states’ employment in forestry and logging is probably even below the national proportion of less than 1 per cent of total employment. Although presently unimpor tant, the forestry and logging industry was sizable in the 1800s and spawned a number of related manufacturing activities. Most of the forestry activity was centered in Michigan and Wisconsin. Although lum•For a further discussion of forestry in the Mid west see “Depressed Areas— Some Lessons from the Past,” Business Conditions, June 1961. Federal Reserve Bank of Chicago bering operations had their start prior to the mid-1800s, it was not until after the Civil War that activity spurted. The region’s employ ment growth in forestry surpassed the na tional rate by the mid-1870s and continued to do so until the 1890s when the peak was reached. By that time Michigan had one of the largest proportions of forestry workers to total employment of any state in the nation and Wisconsin also ranked very high. In Wisconsin, employment in forestry de clined between 1890 and 1910 and then in creased to a new high between 1910 and 1920 as hardwood production offset the ex haustion of the white pine forests. But the Industry-m ix effects in Indiana generally outweigh regional-share effects in employment In d ian a 1957-64 thousand employes regional-share thousand employes ♦ 20 ~resr ‘ Transportation 10 includes tran sp ortation, communica tions and public utilities. Finance includes finance, insurance and real estate. increase was short-lived and by 1930 em ployment had declined significantly. Michi gan forestry employment also spurted in the early 1900s but did not reach the highs of the 1890s. Exhaustion of forests, improvements in transportation and the expansion of domes tic pulpwood requirements all led to the de cline. S eco n d ary industries— m an ufactu rin g Manufacturing activity in the Seventh District in the mid-1800s was oriented to the primary industries—agriculture, mining and forestry. Machine shops arose to serve the lumber camps and saw mills. Wagons, tools and other farm machinery were produced for the agricultural sector and processing indus tries such as flour milling, meat packing and dairy and lumber products began operations, usually at junctions in natural transportation routes and close to raw materials. In Illinois and Wisconsin, meat packing and dairy product processing contributed substantially to manufacturing employment growth, and these states were among the leaders in paper products manufacturing and printing and publishing. Furniture manufac turing based on the lumber industry was on its way to a boom in Illinois and Michigan. Iron and steel manufacturing and, in turn, steel-using industries began developing in Illinois, Indiana and Wisconsin. Manufacturing workers in the United States increased more than 4.5 million or 172 per cent from 1870 to 1900. Among the Dis trict states, only Iowa with a 161 per cent increase failed to exceed the national rate. Illinois and Wisconsin led the District with increases in manufacturing employment of 272 and 263 per cent, respectively, while Indiana (175 per cent) and Michigan (181 per cent) were closer to the national rate. Employment growth in manufacturing Business Conditions, June 1965 Perform ance in Iow a agricultural sector affected state employment growth Iow a thousand employes r e g io n a l- s h a re thousand employes ‘ Transportation includes transportation, communica tions and public utilities. Finance includes finance, insur ance and real estate. prior to the twentieth century was facilitated by the availability of resources indigenous to the region but the expansion of demand set the pace of that growth. By the early 1900s manufacturers were serving a national mar ket. Shipping costs had been reduced, levels of income had risen sharply and technology and management techniques had advanced. Production for a readily accessible mass mar ket contributed to the further rapid expan sion of District manufacturing. United States manufacturing employment between 1910 and 1950 increased 35 per cent. Michigan led the nation with an in crease of nearly 170 per cent. Illinois, Indi ana and Wisconsin manufacturing employ ment increased 50, 70 and 47 per cent, respectively, while in Iowa there was a small decline. The rate of increase in manufacturing em ployment has slowed in more recent years. Technological advances and managerial effi ciencies have led to increased productivity. Consequently, manufacturing output has in creased without a corresponding increase (and in some industries a decline) in the number of workers required. Consumers have been spending a growing proportion of their income on services—travel, recreation, medical care and education. In the last several decades the growth rates of industries within the manufacturing sector have shifted. Employment expansion in firms that produce nondurable goods (for example, food and apparel) and that require large inputs of raw materials has declined compared with firms that produce durable goods (automobiles and appliances). Until the early Fifties the District states with sizable durable goods producing facili ties were able to capitalize on the shift in demand. After the Korean war, however, competition from other areas of the nation became stronger. With a shift in defense de mand to missiles and electronic hardware, the lure of climate in the South and Far West and the resulting expansion of these mar kets, District manufacturing employment ex pansion declined relative to the nation. Nevertheless, the Seventh District still re tains a dominant position in manufacturing — more than 20 per cent of national manu facturing employment in 1964. T e r tia ry industries Agriculture, mining, forestry and manu- 11 Federal Reserve Bank of Chicago 12 facturing (primary and secondary industries) account for only about 37 per cent of total employment in the nation. The remainder (more than 40 million workers) are engaged in a variety of activities including construc tion, transportation, communications and public utilities, wholesale and retail trade, finance and insurance, services and govern ment. Analysis of this broad sector is compli cated by the variety of activities. Trends of the components differ and are influenced by many factors; historical data on many of the subgroups are not available. Employment in the transportation, com munications and public utilities trade and finance categories during the last half of the 1800s and the early part of the 1900s was growing more rapidly than total employment. By 1910, transportation and communications employment in the United States was six times its 1870 level and trade and finance employment had increased more than four and a half times. In the early twentieth century, however, with major transportation facilities already completed, the growth of transportation em ployment began to decline relative to other categories. Total tertiary sector employment, however, continued to advance. Employment in this sector between 1910 and 1950 in creased 170 per cent. Employment in the tertiary sector of the Seventh District states has not had the same importance nor the same rate of growth as it has nationally. In the late 1800s construc tion, transportation, wholesale and retail trade and financial employment expanded rapidly. By 1900, 35 per cent of District employment was in this sector—a slightly higher proportion than in the nation (33 per cent). Such employment in the District continued to increase between 1900 and 1950 rising to 57 per cent of total employment; 63 per cent of national employment was in these activities. United States tertiary em ployment grew more rapidly than in the District while the rate of increase in total national employment was slower. There was no change in either the District or United States proportion between 1950 and 1964. In the recent period, 1957-64, the most rapidly growing employment components of N eg ative regional-share effects account for Michigan's less rapid rate of growth M ichigan thousand employes 1957-64 -60 I ‘ Transportation includes tran sp ortation, communica tions and public utilities. Finance includes finance, insur ance and real estate. Business Conditions, June 1965 this broad sector were services, government, finance, insurance and real estate and whole sale and retail trade. The less rapidly grow ing industries included contract construction, transportation, communications and public utilities. A large part of this growth is ex plained by higher incomes and population expansion. However, the increased demand for specialized business services—advertis ing, public relations and management con sultants—increasing urbanization and chang ing views on the use of leisure time, the role of credit, insurance and savings have all contributed significantly to the growth of these activities. Regional-share effect in Wisconsin closely matches national rate of employment growth W isconsin thousand employes 1957-64 Trends in Illinois Of the District states, Illinois has the largest number of employes. Manufacturing and wholesale and retail trade employment account for more than half of the total. With what might be termed a rapid growth indus try-mix, Illinois could have been expected to increase its employment faster than the nation. Only agriculture and mining employment have increased in Illinois relative to the na tion. In both industries, employment declined absolutely between 1957 and 1964 but less in the District than in the nation. Relative strength in employment in the state would be expected in these sectors because of the high productivity of Illinois land and the con tinued use of local coal by the state’s indus tries. The decline in Illinois manufacturing, in part, is accounted for by the changing de mand conditions of the last few years both in types of manufactured goods and market locations. Expansion of Illinois steel manu facturing as currently contemplated and con tinued demand for investment goods may result in an improved competitive position ‘ Transportation includes transportation, communica tions and public utilities. Finance includes finance, insur ance and real estate. for Illinois manufacturing in the future. More rapid population growth outside the Seventh District also tends to explain the rela tive declines in trade, services and govern ment. Areas of more rapid population growth may have a deficiency in these activities and, therefore, a higher rate of increase. G ro w th in In d ia n a Indiana had the highest rate of employ ment growth in the District between 1957 and 1964, but the overall rate of increase (4.4 per cent) did not match the national gain (6.3 per cent). Rates of increase com pared with the nation were especially large 13 Federal Reserve Bank of Chicago for services, government, finance, insurance and real estate, although manufacturing em ployment also increased more rapidly than in the nation and mining declined less in Indi ana. Because of the different rates of growth in Indiana industries, the industrial structure shifted between 1957 and 1964. Consistent with the national trends, the proportions of total employment in the resource and manu facturing industries declined. Service employ ment increased from 7.4 to 9.3 per cent of Indiana employment, trade from 16.4 to 17.4 per cent and transportation, communications and public utilities, finance, insurance and real estate and government increased at a slower rate. Because of Indiana’s industry-mix, it had a net loss in the national share of employ ment. More than 62 per cent of employment in 1957 was in the slower growing industries — agriculture, mining, manufacturing and transportation, communications and public utilities. During the 1957-64 period, then, Indiana experienced significant growth given an in dustrial structure heavily weighted by slower growing industries nationally. Manufactur ing firms have competed effectively in the national and local markets and employment in a number of industries have more than kept pace with national employment gains. A g ricu ltu re— m an u factu rin g in Io w a The two largest sectors of the Iowa econ omy are agriculture and manufacturing with 27 and 18 per cent, respectively, of total em ployment. The importance of agriculture to the Iowa economy is greater than that repre sented by farm workers alone. Nearly onethird of Iowa’s manu facturing workers are T e rtia ry em ploym ent in Illinois in food processing and about 10 per cent are matches United States employed in farm ma tr a d e — anzzzZZZZ^ chinery firms. f in a n c e * The a g ric u ltu re s e r v ic e s manufacturing combi g o vern m en t nation in Iowa results in an industrial struc ture oriented to what are slow growth indus tries nationally. The negative industry-mix effect in Iowa between 1957 and 1964 was larger and more im portant in comparison to total employment than in any of the other District states. During the 1957-64 *Transportation includes tran sp ortation, communications and public utilities. period, Iowa experiFinance includes finance, insurance and real estate. Business Conditions, June 1965 growth industries in the nation. Finance, insurance tr a d e and real estate was the only m ajor rapid growth industry group in which Iowa employ ment growth exceeded Iowa th a t in the U nited States. The lower rates of growth as compared w ith the natio n in wholesale and retail tra d e , services and government, in part, can be explained by the slower growth in Iowa population. In addition, the transition and public utilities. in Iowa from a rural to a more urbanized so ciety has led to the consolidation of activities—school districts, medical and trade facilities—which, in turn, might have provided for the increased de mands of businesses and individuals in Iowa with a smaller increase in employment. M anufacturing and agriculture account for nearly half of employment in Indiana and Iowa a g ric u ltu r e m in in g c o n t r a c t c o n s tr u c t io n m a n u fa c t u r in g tr a n s p o r ta t io n * Indiana 1964 per cent of total ‘ Transportation includes transportation, communications Finance includes finance, insurance and real estate. Hess than 0.5 per cent. enced significant employment expansion but the increase was not sufficient to offset the industry-mix influence, therefore, the share of total employment declined. The largest increase in share of national employment occurred in agriculture even though actual employment declined. As in Illinois, the rate of decline in Iowa was less than in the nation because of the relatively favorable agricultural conditions. Iowa also had a substantial gain in manu facturing employment. The bulk of the in crease was in the fabricated metals, non electrical and electrical machinery and mis cellaneous manufacturing (pens, pencils, advertising signs and displays) firms. The increases in fabricated metals and nonelectri cal machinery employment are indicative of Iowa’s competitive strength for some types of manufacturing since both are among the slow A ctiv ity in M ichigan Employment in Michigan between 1957 and 1964 decreased both absolutely and as a share of total national employment. With a combination of fast and slow growing indus tries such that the industry-mix effects were zero, the state’s declining share of total na tional employment was entirely accounted for by the regional-share effects. Agricultural employment in Michigan de clined less rapidly than in the nation and service employment increased only slightly faster; in all other industries the share of national employment declined from 1957 to 15 Federal Reserve Bank of Chicago 1964. The largest rela M anufacturing em ploym ent is predominant tive declines occurred in Michigan and Wisconsin in m an u factu rin g , agriculture tra d e — wholesale and retail mining f in a n c e * trade and government. co ntract construction s e r v ic e s The major propor m anufacturing g o vern m en t tion of manufacturing tra n s p o rta tio n * activity in Michigan is Wisconsin Michigan oriented to automobile and truck production. 1964 In ad d itio n to the transportation equip ment firms, the fabri cated metals and non electrical and electri cal machinery firms also produce parts for motor vehicles. Even per cent of total though autom obile p ro d u ctio n has in transportation includes transportation, communications and public utilities. creased significantly in Finance includes finance, insurance and real estate. +Less than 0.5 per cent. the last few years, em ployment in Michigan manufacturing has not regained the 1957 petitive position of the Wisconsin economy. The primary reason for Wisconsin’s de level. cline in share of total employment between Population has not increased as rapidly in 1957 and 1964 was the state’s industrial Michigan as it has elsewhere in the nation and this, in part, accounts for the slower ex composition. More than 62 per cent of Wis pansion in government and trade employ consin’s 1957 employment was in the slower growing industries and the industry-mix ment. In addition, trade employment in effect, consequently, was negative. creases also may have been influenced by the In the 1957-64 period the industrial slower rate of growth of income in Michigan. composition of Wisconsin employment has Wisconsin com parisons changed. The proportion of Wisconsin em The most interesting result of the shiftployment in agriculture, mining, manufac share analysis in the District was the rather turing and transportation, communications unique regional-share effect in Wisconsin. and public utilities has declined while other With the exception of the government sector, industries have increased. If industries na the rates of employment increase approxi tionally retain their same positions as slow mated the rates of increase in the same indus and fast growing, the industry-mix effect tries nationally. This regional-share effect should have less influence on the Wisconsin may be viewed as an indication of the com economy in the coming years. 16
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