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Business AN EIGHTH DISTRICT PERSPECTIVE FALL 1988 What Does High-Tech Mean to St. Louis? manufacturing workers nationally. St. Louis’ higher proportion stems from its heavy concentration in the aerospace industry, which includes aircraft, guided missiles and space vehicles. This category alone includes 17.4 percent of the area’s 221.7 thousand manufacturing workers and almost half of the high-tech workers found in St. Louis. Nationally, aerospace accounts for just 6 percent of the 19 million manufacturing workers. McDonnell Douglas Corporation, which employs the vast majority of these workers, primarily produces military aircraft and missiles in its St. Louis plants. Besides aerospace, the table lists St. Louis’ nine largest What is High-Tech? high-tech industries. Notably, computers and office The concept of high-tech industry conjures up images of machinery—which many think of when high-tech is robots building computers and white-coated genetic mentioned—are absent from this list. Although employing engineers peering through microscopes. High-tech must be almost a half a million people nationally, this high-tech more precisely defined, however, to evaluate its size and industry is virtually nonexistent in St. Louis. growth. High-tech industries, according to one definition The importance of biotechnology in St. Louis is reflected developed by the U.S. Bureau of Labor Statistics, are those in the inclusion of industrial organic chemicals, drugs and 26 manufacturing industries with a proportion of technologymedical instruments among the list of the largest high-tech oriented workers (scientists, engineers, computer specialists sectors. Monsanto Corporation, the largest local producer and technicians) greater than the average for all of chemicals, is a leader in biotechnical research. Monsanto manufacturing industries and having an above-average ratio researchers have successfully developed genetically of research and development expenditures to sales. engineered crops designed to withstand certain diseases, insects and pesticides. Biotechnical research in St. Louis’ An Overview of High-Tech in St. Louis universities, although not necessarily reflected in the In 1987, high-tech industries accounted for approximately employment data, represents a major feature of the area’s 84,000 workers or 7.5 percent of the 1.1 m illion high-tech activity and includes a variety of biomedical and nonagricultural workers in the St. Louis area. In comparison, biochemical research. Washington University medical 5.4 percent of the nation’s workers were employed by highresearchers, for example, are refining technology to map tech industries. Thus, despite their wellthe human brain. publicized expansion, high-tech industries Despite differences in composition, St. employ a rather narrow slice of the Louis and national job growth in high-tech employment pie. sectors has been similar (see table). Since 1979, when both St. Louis and national The table on the next page shows that highTHE FEDERAL manufacturing jobs reached a cyclical peak, tech industries employed a substantial portion KISEKM employment in high-tech industries rose at (37.9 percent) of St. Louis’ manufacturing IIANK of ST. IX>1 IS a 0.1 percent annual rate in St. Louis and at workers in 1987. In comparison, high-tech a 0.2 percent annual rate nationally. Although industries employed just 29.2 percent of The success of high-tech industries during the second half of the 1970s and early 1980s in areas such as the Silicon Valley and Boston led many communities to target high-tech industries as their most likely source of growth in a time when many traditional manufacturing jobs were eliminated. As the nation’s economic growth is increasingly fueled by the expansion of manufacturing, the development of hightech activity continues to be an important goal for many states and cities, including St. Louis. This article examines the nature of high-tech activity in the St. Louis metropolitan area. FALL 1988 FEDERAL RESERVE BANK OF ST. LOUIS P e rc e n t o f S t. Louis m a n u fa c tu rin g e m p lo y m e n t 1987 T otal n o n a g ric u ltu ra l e m p lo y m e n t T otal m a n u fa c tu rin g N on -h ig h -te ch m a n u fa c tu rin g H igh-tech m a n u fa c tu rin g S e le c te d h ig h -te c h in d u stries A e ro sp a ce In d u stria l o rg a n ic ch e m ic a ls E n g in e e rin g , s c ie n tific and m is ce lla n e o u s in stru m e n ts C o m m u n ic a tio n e q u ip m e n t Soaps, c le a n e rs and to ile t p re p a ra tio n s D rugs E le ctrica l in d u stria l a p p a ra tu s P e tro le u m re fin in g S u rg ica l, m e d ica l and d e n ta l in stru m e n ts E le ctro n ic c o m p o n e n ts and a cce sso rie s C o m p o u n d e d an nu al g ro w th rate 1 9 7 9 -8 7 S t. L ouis U .S . 1.1% -1 .9 -3 .0 0.1 1.6% -1 .2 -1 .8 0.2 17.4 3.8 2.2 -2 .5 1.8 -1 .6 2.2 1.9 1.3 1.3 1.2 1.1 1.1 1.1 -0 .8 5.2 -0 .6 0.2 3.7 -2 .6 7.0 -0 .2 -1 .7 1.9 1.2 1.4 -3 .9 -3 .3 3.3 2.2 — 1 0 0 .0 % 62.1 37.9 Note: Percentages and growth rates are based on data from the Missouri Division of Employment Security. Data are adjusted for changes in industrial categories. modest, this performance is quite strong relative to the decline of the rest of the manufacturing sector: non-hightech manufacturing declined at a 3 percent rate in St. Louis; 1.8 percent rate nationally. During manufacturing’s last major cyclical downturn, between 1979 and 1983, the stability of high-tech employment contrasted sharply with the decline in the rest of the manufacturing sector. St. Louis’ high-tech employment declined at a mild 0.3 percent rate during the period, while jobs in non-high-tech manufacturing plummeted 6.8 percent per year. A similar contrast is evident in the national figures: employment in high-tech industries declined at a 0.6 percent rate while non-high-tech manufacturing jobs fell at a 4.2 percent rate. During manufacturing’s upturn since 1983, however, there has been little difference between growth in high-tech and non-high-tech manufacturing either in St. Louis or the nation. High-tech’s stability in St. Louis has stemmed from specialization in aerospace. M cDonnell Douglas Corporation, which employs the vast majority of these workers in the research and production of defense-related goods, benefited from the rapid defense build-up of the 1980s. While employment in high-tech industries outpaced the rest of the manufacturing sector, the table shows that nonmanufacturing sectors have been the main source of St. Louis’ job growth. Looking Ahead The recent establishment of two institutions in St. Louis attest to the area’s commitment to high-tech development. The St. Louis Technology Center, supported by Missouri assists new high-tech firms by providing managerial support, developing strategic plans, obtaining financing and generally lowering operating costs. The center has helped form 16 new firms, with 170 employees, since its start three years ago. The Missouri Research Park, sponsored by Missouri and the University of Missouri, is currently under construction. It will offer research-intensive firms a campus-like environment for their operations and access to University resources. Ideally, the park will attract governmental and private enterprises from outside the region as well as hightech activities of indigenous firms. The feasibility of establishing a research institute in the Research park, affiliated with the region’s universities, is currently being investigated. While the early successes of the Technology Center and the establishment of the Research Park are encouraging, it is still too early to know whether these institutions will be successful in facilitating widespread hightech growth in the St. Louis area. —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 FEDERAL RESERVE BANK OF ST. LOUIS FALL 1988 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 tates D istrict A rka n sa s L ittle R ock K e n tu cky L o u isville M issouri 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 R etail S a le s 3 1986 2 .3 % -1 .8 1.6 1.3 4 .4 % 3.0 3.0 4.0 -0 .2 % 2.7 2.4 4.8 1 .5 % 0 .7 3.0 3.5 3 .3 % 3.4 3.6 2.6 3.6 4.4 2.1 1.8 4.4 5.2 2 .0 % 2.5 2.2 1.1 1.8 2.7 2.4 2.7 3.3 3.6 2 .7 % 2.4 1.6 2.9 2.2 2.3 2.1 2.2 3.2 3.1 2 .1 % 2.3 5.5 3.5 0.3 2.2 - 1 .2 % -0 .2 2.1 0.2 -2 .3 0.4 - 1 .8 % -1 .7 -1 .8 -2 .1 -1 .4 -1 .7 4 .2 % 3.8 3.5 4.0 8.5 5 .9 % 2.0 -2 .2 2.1 6.2 6 .2 % 2.1 12.9 3.3 9 .2 7 .4 % 7.2 4.3 7.8 6.5 8.8 5 .6 % 5.5 5.4 4.4 5.3 6.5 6 .9 % 6.1 6.4 4 .3 6.3 7.1 11/1988 3 .6 % -1 .1 -0 .4 1.2 -1 .2 0.5 -0 .7 -0 .3 -1 .7 -2 .5 11/1988 2 .3 % -2 .7 -2 .3 1.3 -3 .9 -4 .1 11/1988 7 .1 % -1 3 .3 -1 6 .3 -1 3 .0 2.0 P erso nal In co m e 1/1988 3 .1 % 3.6 4.4 4.0 1.8 5.1 District Employment1 K ey In d u s trie s F a b ric a te d M etal P ro d u cts E le c tric a 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 a nd 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 1985 11/1988 U nited S tates A rka n sa s K e n tu cky M isso u ri T e n n e sse e U nited 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 1987 Prices1 C urrent Quarter Current Year C urrent Q uarter Current Year 11/1988 11/1987 - 11/1988 11/1988 11/1987 - 11/1988 3 .7 % 2.1 6.4 3.9 2.4 -4 .4 2.7 3.9 39.2 2 .9 % 2.5 3.3 -2 .1 1.1 0.7 1.3 1.3 4.3 1 1 .7 % 2.1 2.9 1.8 9.9 3.8 3.4 10.4 3.9 9 .0 % 2.0 2.5 1.0 3.2 4.3 4.9 7.9 6.2 3 EIGHTH DISTRICT BUSINESS DATA U n e m p lo y m e n t R ate U n ite d S ta te s D istrict A rk a n s a s L ittle R ock K e n tu c k y L o u is v ille M isso u ri St. Louis Tennessee 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 of d o lla rs) Current Quarter Previous Quarter Average 1987 Average 1986 11/1988 1/1988 5 .4 % 6.3 7.9 6.5 8.3 6.1 5.0 5.9 5.4 4.7 5 .7 % 6.5 7.6 6.8 8.3 6.2 5.4 6.3 5.9 5.0 6 .2 % 7.2 8.1 7.1 8.8 6.9 6.3 7.0 6.6 5.7 7 .0 % 7.8 8.8 6.9 9.3 7.1 6.1 7.0 8.0 6.8 Current Quarter Previous Quarter Same Period 1987 Same Period 1986 11/1988 1/1988 11/1987 11/1986 $502.1 47.0 102.1 153.0 199.9 $ 512.8 38.5 113.7 185.9 174.8 $ 5 3 3 .2 53.8 113.9 165.2 200.3 $4 9 6 .0 56.1 105.2 148.8 185.9 $381.9 31.5 75.3 124.1 151.0 $ 385.3 42.6 83.2 125.6 133.8 $ 4 5 7 .2 56.8 102.1 156.2 142.1 $333.1 35.1 70.8 109.8 117.4 R e s id e n tia l C o n s tru c tio n D istrict 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 1985 through 1987 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.