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Business
AN EIGHTH DISTRICT PERSPECTIVE
FALL 1986

Eighth District Manufacturing: Beyond
Employment Trends
There is a general view that manufacturing is an ailing
industry. This perception of manufacturing performance is
based largely on reductions in manufacturing employment
and the industry’s declining share of total employment. These
downward trends have been cited as evidence of the
“deindustrialization” of the United States and have led to
the call for trade barriers to protect domestic manufacturing
industries.
Employment, however, is only one measure of the
economic performance of a specific industry. If a reduction
in the level of labor input is accomplished while maintaining
a given output level, greater productivity per worker is
achieved, indicating positive industry performance rather
than weakness. Therefore, in order to evaluate manufacturing
performance, it is necessary to consider the changes in
manufacturing output as well as changes in the number of
workers employed. In this article, estimates of District output
are compared with employment trends in evaluating the
manufacturing performance of the region.

Employment Trends

Chart 1
MANUFACTURING EMPLOYMENT AS A PERCENT
OF NONFARM EMPLOYMENT

in the labor force. A relative decline, however, may occur at
the same time an industry is expanding (only at a slower rate
than other sectors). Therefore, an economy may readjust to
an industry’s smaller share of total employment by devoting
fewer resources to it in future years. An absolute decline in
the number of manufacturing workers is likely to entail a more
difficult shift of workers to other sectors of the economy
because the size of the industry’s work force actually is shrink­
ing. In both the District and the nation, manufacturing employ­
ment has fallen from 1979 levels (chart 2).

Employment and output data provide divergent views of
the District manufacturing sector.1 Because manufacturing
employment, both in the District as well as in the nation,
has grown more slowly than employment in the overall
economy since the early 1970s, manufacturing employment
as a proportion of total nonagricultural employment has
Output Trends
declined. Chart 1 shows that manufacturing’s share of
Recognizing that employment as an indicator of economic
nonfarm employment has been higher in the District than
performance is limited by its inability to measure labor
in the nation and that both shares have declined at similar
rates. In 1972, D istrict m anufacturing
productivity leads one naturally to seek a
accounted for 29.3 percent of the work force.
m easure of output for m anufacturing.
By 1985, the manufacturing share declined
Unfortunately, output measures by sector are
to 23.3 percent in the District.
not readily available on a regional basis.
M a n u fa c tu rin g ’s declining share of
Because of this, estimates of District gross
THE
employment reduces its relative importance
output
were computed. These estimates were
FEDERAL
RESERVE
calculated by multiplying the District’s share
BANK of
of national earnings in various industries by
ST. lXMJIS
'Data from Arkansas, Kentucky, Missouri and Tennessee are
GNP originating in those industries. The
used to represent the Eighth District.
accuracy of these preliminary estimates rests



FALL 1986

FEDERAL RESERVE BANK OF ST. LOUIS

Chart 3
REAL MANUFACTURING OUTPUT

Chart 2
MANUFACTURING EMPLOYMENT

1972

73

74

75

76

77

78

79

80

81

82

83

1984

Chart 4
REAL MANUFACTURING OUTPUT AS A
PERCENT OF NONFARM GROSS PRODUCT
1972

73

74

75

76

77

78

79

80

81

82

83

84

1985

on the assumption that the ratio of output to earnings in each
sector is the same in the District and the nation. To correct
for deviations from this assumption for manufacturing
sectors, preliminary estimates were modified using state and
national value-added data and payroll data from the U.S.
Commerce Department’s Census o f Manufacturing and

Annual Survey o f Manufacturing.
Output data present a substantially different picture of
District manufacturing performance. W hile District
employment in manufacturing has not grown, the value of
District manufacturing output, when corrected for inflation,
has increased substantially since 1972 (chart 3) and grew
slightly faster than the average nonfarm industry. As the chart
shows, the District’s manufacturing sector grew at a similar
rate as the nation’s. The District produced between 6.6 and
6.9 percent of the nation’s manufacturing output each year.
The proportion of the District’s nonagricultural real gross
product contributed by manufacturing since 1972 is displayed
in chart 4. Unlike the trends in manufacturing’s share of total
employment, no steady decline is apparent. Rather, the
manufacturing output share shows long-run stability,
fluctuating around the mean of 26.5 percent. This trend
mirrors a national trend: manufacturing’s share of real GNP
has exhibited long-run stability since the 1940s.
The ability of manufacturing to produce a constant share
of output with a declining proportion of the work force was
influenced by greater-than-average gains in labor
productivity. This above-average growth of manufacturing
productivity conflicts with the perception of the
manufacturing sector as an inefficient industry.

Summary
In summary, greater-than-average productivity growth in
District manufacturing has allowed the sector to produce
a generally constant share of the region’s total output with
a falling proportion of its work force. The employment and
output trends based on absolute changes in manufacturing
show a similar effect of productivity increases, allowing
increasing output with approximately the same number of
workers. Although some segments of manufacturing have
contracted sharply since 1972, the overall trends point to the
stability and increased efficiency of the manufacturing sector,
not its decline.
—Thomas B. Mandelbaum

Business—An Eighth District Perspective is a quarterly summary of business conditions in the area served by the Federal Reserve
Bank of St. Louis. Single subscriptions are available free of charge by writing: Research and Public Information Department,
Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, Missouri 63166. Views expressed are not necessarily official
positions of the Federal Reserve System.
2



FALL 1986

FEDERAL RESERVE BANK OF ST. LOUIS

EIGHTH DISTRICT BUSINESS DATA
Rates of Change1
Current Quarter
G en e ra l B usiness In d e x e s 2
A rka n sa s
K e n tu cky
M isso u ri
T e n n e sse e

P ayro ll E m p lo y m e n t
U n ite d S ta te s
D is tric t
A rka n sa s
L ittle R ock
K e n tu c k y
L o u isville
M isso u ri
St. Louis
T e n n e sse e
M e m p h is
M a n u fa c tu rin g E m p lo y m e n t
U n ite d S tates
D istrict
A rka n sa s
K e n tu cky
M isso u ri
T e n n e sse e
P erso n al In co m e
U n ite d S ta te s
D is tric t
A rka n sa s
K e n tu cky
M isso u ri
T e n n e sse e
R etail S a le s 3
U n ite d S tates
A rka n sa s
K e n tu c k y
M isso u ri
T e n n e sse e

1985

-1 .5 %
7.7
-3 .7
6.9

0 .8 %
1.4
2.5
2.6

2 .6 %
4.4
4.4
5.1

1 1 .8 %
4.7
9.7
4.6

2 .9 %
2.3
1.3
1.3
3.1
2.9
1.6
1.4
3.1
2.5

4 .5 %
3.8
4.5
3.6
4.0
4.1
3.3
4.3
3.8
4 .6

3 .5 %
3.3
5.5
17.6
1.2
6.8
3.0
3.6
4.2
4.3

-1 .2 %
-2 .1
-1 .7
-2 .0
-1 .3
-3 .0

3 .2 %
2.9
3.2
4 .7
3.0
1.8

4 .4 %
6.4
8.4
5.8
5.1
7.0

5 .2 %
4.1
2.7
2.3
5.0
5.1

9 .8 %
10.0
11.5
10.2
9.5
9.8

7 .7 %
7.0
6.9
4.8
7.9
7.5

5 .6 %
2.2
12.6
1.9
7.8

7 .3 %
2.4
0.2
9.1
10.9

1 1 .4 %
11.2
8.3
9.8
14.2

11/1986
1.8 %
0.8
-0 .8
-0 .9
-0 .2
2.8
1.8
-1 .3
0.9
-2 .0
11/1986
- 2 .7 %
-3 .4
-1 .4
-3 .2
-6 .0
-2 .2
1/1986
4 .5 %
6.4
8.9
5.8
5.6
6.5
11/1986
4 .8 %
4.8
13.6
-4 .4
16.5

Prices1

District Employment1
K ey In d u s trie s
F a b rica te d M etal P ro d u cts
E le ctrica l and E le c tro n ic E q u ip m e n t
N o n e le c tric a l M a c h in e ry
T ra n s p o rta tio n E q u ip m e n t
Food and K in d re d P ro d u cts
T e x tile and A p p a re l
P rin tin g and P u b lis h in g
C h e m ic a ls and A llie d P ro d u cts
C o n s tru c tio n




1983

1984

11/1986

Current Quarter

Current Year

C urrent Q uarter

Current Year

11/1986

11/1985 - 11/1986

11/1986

11/1985 - 11/1986

- 0 .4 %
-6 .5
-0 .2
4.9
4.5
-4 .9
2.5
-3 .3
16.3

0 .1 %
1.3
1.6
3.2
0.6
0.3
2.0
-7 .0
2.8

0 .2 %
1.3
1.5
2.5
0.9
0.3
3 .7
-1 .5
-0 .3

5 .2 %
-9 .2
4.7
3.8
11.4
-0 .2
-1 .2
-1 .4
55.6

3

EIGHTH DISTRICT BUSINESS DATA

U n e m p lo y m e n t R ate
U n ite d S tates
D is tric t
A rka n sa s
L ittle R ock
K e n tu cky
L o u isville
M isso u ri
St. Louis
T e n n e sse e
M e m p h is

C o n s tru c tio n C o n tra c ts 4
(m illio n s o f d o lla rs )

Current
Quarter

Previous
Quarter

Average
1985

Average
1984

11/1986

1/1986

7 .2 %
7.6
8.7
6.6
9.6
7.3
5.7
6.5
7.8
6.6

7 .1 %
7.9
8.3
6.2
10.6
8.1
5.8
6.7
7.9
6.8

7 .2 %
7.9
8.6
6.5
9.0
7.9
6.7
7.4
8.0
6.5

7 .5 %
8.4
8.9
7.1
9.5
8.6
7.2
8.1
8.5
7.2

Current
Quarter

Previous
Quarter

Same Period
1985

Same Period
1984

11/1986

1/1986

11/1985

11/1984

$482.1
54.1
105.8
145.5
176.7

$526.1
72.3
107.7
176.2
169.9

$4 5 5 .0
64.1
98 .0
115.4
177.5

$5 6 1 .5
80 .2
110.4
107.5
2 0 0 .4

$350.8
31.9
69.5
124.3
125.1

$350.1
37 .3
72 .2
143.9
9 6 .7

$3 4 6 .8
37.9
8 6 .7
123.8
9 8 .4

$ 3 4 6 .3
43.0
71.2
114.2
117.9

R e s id e n tia l C o n s tru c tio n
D is tric t
A rka n sa s
K e n tu cky
M isso u ri
T e n n e sse e
N o n re s id e n tia l C o n s tru c tio n
D is tric t
A rka n sa s
K e n tu cky
M isso u ri
T e n n e sse e

NOTE: With the exception of employment and prices in key industries, all data are seasonally adjusted. Data for Arkansas,
Kentucky, Missouri and Tennessee are used to represent the District.
1 All growth rates are compounded annual rates of change. The 1983, 1984 and 1985 growth rates compare the fourth quarter of the
year listed with the fourth quarter of the previous year.
2Although each index is a comprehensive measure of economic activity, the Arkansas and Missouri indexes, computed by Southwestern
Bell, are not strictly comparable to the Kentucky and Tennessee indexes, which are computed by South Central Bell.
3Sources: Arkansas from Southwestern Bell, Kentucky from the Kentucky Revenue Department, Missouri and Tennessee from the U.S.
Department of Commerce.
4Excludes nonbuilding construction. Source: F. W. Dodge Construction Potentials, proprietary data provided by special permission.




Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102