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The Enigmatic Consumer An important key to business and prices in 1968 »»«.«.» Chart 1 is whether American consumers will return to their “ familiar” spending habits. Following an unexpectedly restrained performance during 1967, they have built up a sizable backlog of spending power. Chart 1 shows how the gap be tween their income and spending widened in 1967. The slowdown in spending caused savings to soar upward to nearly one-third above the 1966 level. As a consequence, the saving rate (the ratio of personal savings to disposable personal in come) rose from 5.9 per cent in 1966 to over 7 per cent in 1967. Since a change of one percent cent versus 5 per cent in 1966. This kind of age point in the saving rate is roughly equivalent restraint was not uniform, however. While spend to $5.5 billion in spending, a decline in the rate to ing for nondurable goods followed the same pat tern as the total, spending for services rose about earlier levels would seriously aggravate inflation ary pressures already plaguing the economy. the same in 1967 as it had in 1966— roughly 4 per cent. In spending for durable goods, however, WHAT HAPPENED LAST YEAR? consumer restraint clearly hit hardest. After a Although consumer spending was restrained dur ing 1967, a noteworthy shift in behavior had occurred in the fourth quarter of 1966 when the saving rate rose by nearly one full percentage point (see Chart 2 ). In fact, it was this pro nounced weakening in consumer spending which contributed simultaneously to the spectacular inventory buildup during that same quarter. And, as subsequent events demonstrated, it was this large inventory overhang which depressed the level of economic activity during the first half of 1967. Chart 2 also shows the pattern of spending in current dollars. After adjustment for price changes total expenditures for 1967 rose by 3 per BUSINESS REVIEW is produced in the Department of Research. Evan B. Alderfer is Editorial Consultant; Donald R. Hulmes prepared the layout and artwork. The authors will be glad to receive comments on their articles. for additional copies should be addressed to Bank and Public Relations, Federal Reserve Bank of Philadelphia, Digitized Requests for FRASER Philadelphia, Pennsylvania 19101. business re v ie w 7.5 per cent increase in 1966, spending in 1967 rose by little more than 1 per cent. The sluggish behavior of spending on autos and parts was most responsible for reduced con sumer buying. During the first quarter of last year this was a key factor in the sharp rise in saving rate. Similarly, the second-quarter recovery of spending on autos partially reversed the earlier rise in the saving rate. Spending for other dur ables meanwhile continued to advance. The financial status of consumers in 1967 tended to reflect these developments in the nonfinancial sector. The slow-down in spending for autos showed up not only as a reduction in the growth of consumer installment credit, but also as increased payoffs on existing debt. (See Chart 3; also pp. 8 and 9 ). Mortgage debt, although substantially recovering late in the year, nonethe less advanced less rapidly than in earlier periods. During 1966, as monetary conditions progres sively tightened, households increasingly became direct suppliers of funds to the financial market, circumventing such traditional financial inter mediaries as commercial banks and savings insti tutions. By increasing their holdings of bonds they slowed the growth of other more liquid assets such as time and savings deposits. In 1967, how ever, consumers rebuilt their liquidity, a move which reflected the change in monetary policy toward greater ease. Consumer liquidity was these developments and dramatically pointed the spotlight on the stimulative potential abuilding in the consumer sector.1 WAS IT UNUSUAL? It would be highly unreasonable to point out that consumers saved 25 per cent of their incomes in 1944, and conclude that last year’s 7.1 per cent rate was “ low.” At the same time, when the 1967 saving rate is described as “ high,” it is meaning ful only in the context of some “ normal” rate of saving. The problem arises in defining what is normal. As Chart 4 shows, the saving record en compasses a period in which there was a major economic-depression, a half-dozen economic re cessions, World War II, the Korean War, and the war in Vietnam. An average annual rate of saving enhanced in part by a shift in portfolios from less liquid securities to more liquid time and savings deposits. Although this did not itself produce a change in rate of saving, the reduced rate of con sumer spending caused larger increments of in come to be saved. Thus, liquidity was additionally strengthened by stepped-up deposits in commer cial banks and thrift institutions. As debt expan sion moderated in 1967 and liquidity was restored and expanded, the rise in saving rate mirrored 1 A somewhat autonomous factor related to consumer behavior in 1967 is cited in the 1968 Economic Report of the President. The Council of Economic Advisers in cludes the Medicare program as one of the elements which may have influenced the saving rate last year. Introduced in mid-1966, it bolstered disposable income in 1967 by $4 billion. To the extent that part of the cost of covering health care could be met without having to draiv down personal savings, it served to keep the saving rate at a higher level than might otherwise have been the case. Recognizing, however, the high propensity to consume generally attributed to those who receive M edi care benefits, this program should not be overly stressed in attempting to explain last year’s high saving rate. 3 business re v ie w 1955 and 1959. On the other hand, during the 1960’s, the rate was higher than the postwar average only in 1967. During these seven years the average was 5.7 per cent. Taken within the frame of reference of the current decade, there fore, consumer behavior during 1967 clearly was off the norm. Compared with the 1950’s, however, one might argue that the behavior of consumers from 1960 through 1966 was abnormal, and that 1967 represented a return to normal. This sug gests that a closer look at the behavior of savings during these two time periods may be helpful both in judging the extent to which behavior of con sumers last year was unusual and in gauging developments in 1968. The 1 9 5 0 ’s The most obvious single factor influencing con sumer behavior during the early 1950’s was the for the period, therefore, is not very useful. The outbreak of the Korean War, in June, 1950. The period of the Great Depression as well as World war introduced an element of uncertainty which War II clearly are not typical. However, it does induced a measure of natural restraint on the part seem worthwhile to look at the postwar period, of consumers. Selective credit controls also prob and particularly at the decade of the 1960’s, to ably lowered the volume of spending on consumer see whether the very recent behavior of the saving durables and raised the saving rate from where rate is unusual. This period, although marked by periodic economic slack and military involvement Chart 4. Consumers increased their rate of saving of less than all-out nature, seems closer to normal. sharply in 1951 and subsequently maintained it In the postwar period, consumers have saved, at an average of about 7.5 per cent from 1951- it otherwise would have been. This can be seen in on the average, 6.2 per cent of their incomes. 1953, Although saving moderated significantly in Nearly half the time their actual saving rate has 1954, consumers still retained to some degree the exceeded this average, reaching 7 per cent or saving habits of the preceding three years. In higher in eight years, including 1967. The 9.5 per 1955, however, they went on a buying splurge for cent rate for 1946— the highest for the period— durable goods, mainly autos. This followed a major relaxation in the terms of auto installment probably was the consequence of restricted avail ability of consumer goods following the end of credit and produced a further decline in the sav World War II, as well as some degree of carry ing rate. In 1956-1958 the saving rate moved up again. over of the forced saving habits of the earlier war years. Consumer enthusiasm for durable goods, especial In the 1950’s, the saving rate fell below the average of the postwar period in only two years— ly autos, was lacking perhaps partly because Digitized for 4 FRASER prices were rising sharply. (See Chart 5.) Con- business re v ie w Chart 5 CONSUMER PRICE INDICES from the relative price stability which had pre vailed through most of the first half of the 1960’s. And perhaps an added fillip to consumer restraint in late 1966 and 1967 was the growing uncertainty about fiscal action to prevent the economy from expanding too rapidly. All of these elements helped to nudge the American consumer toward greater restraint last year. SOME ADDED CONSIDERATIONS There is some reason to suspect, therefore, that high saving rates are associated with reduced levels of consumer durable sales and rising prices. sumer prices rose following nearly five years of But why is a higher saving rate seemingly mani fested in a reduced rate of spending on durables virtual stability— a period in which prices for rather than on other types of purchases? Why consumer durables actually had been declining. would high saving rates be related to rising Price increases moderated in 1959. This, plus a prices, since one would think that consumers sharp rise in personal income, coincided with a would purchase more goods before the value of resurgence of consumer spending for durables and the saving rate fell dramatically to the lowest level of the 1950’s. the dollar declined further? Finally, what is the role of interest rates in influencing consumer behavior? The 1 9 6 0 ’s The role of durables Begining in February, 1961, the American eco nomy moved out of the trough of a very shallow Unlike spending for nondurables or services which are not so amenable to postponement, the recession and embarked on the longest sustained economic expansion in United States history. Un purchase of a durable good can be postponed. like the 1950’s, the first half of the 1960’s was marred neither by significantly rising prices nor goods consumers have, the more likely they will by a significant expansion in defense outlays. In an atmosphere of relatively stable prices and income become less favorable or if prices for dur ables are rising. But the growth of ownership of steadily growing income, consumer confidence durable goods contributes to growth of expendi was reflected in relatively low saving rates. For the economy as a whole, the more durable defer replacement if their expectations of future tures for nondurables and services as well. Thus, From mid-1965 through 1966, however, the it would be difficult to draw any conclusions as dimensions of the American military effort in to the nature of the overall relationship between Vietnam grew larger. With growing inflationary the stock of durable goods and the level of con overtones, consumers, as noted earlier, shifted sumer expenditures at any given time. However, late in 1966 toward moderation. In addition to the war factor common to the 1951-1953 period, in an economy such as ours, characterized by a 1966-1967 also was marked by a clear departure devoted to the purchase of durable goods, the sizable proportion of disposable personal income 5 business re v ie w saving rate will show greater variability than in Chart 6 circumstances where durables purchases are less important. Similarly, the larger the stock of dur ables consumers have, the greater the variability of saving and spending behavior. The role of prices On first inspection, it would seem that in a period of rising prices consumers might be expected to step up their purchase of goods in order to offset the loss in purchasing power of their income. In this connection, the role of price expectations may 4 and 6.) Saving rates have declined, risen, or be of more significance to consumers than current price developments. For example, if they felt as remained unchanged when interest rates have risen. The same holds true when interest rates though future prices would be lower, they un doubtedly would postpone current spending; if they expected higher prices, one would expect have fallen. That savings show little predictable response to interest-rate changes suggests that if the level of savings should rise substantially dur them to spend a larger fraction of their income ing a short period of time, the predominant rea on current consumption. Clearly, the outlook son may likely be other than the favorable yield throughout 1967 was for intensified inflationary paid for saving. It is true, as the experience of pressures; but instead of spending an increasing 1966 and 1967 demonstrated, that if individuals share of income, consumers increased their rate decide to save they will tend to seek out the of saving. One probable explanation may be that highest rate of return. This is different from say rising prices forced consumers to reassess their capabilities for servicing fixed commitments. This ing that rising interest rates induce them to save more out of their incomes.3 Rate competition be concern on the part of consumers that income gains may lag behind price increases has been tween commercial banks and savings institutions may only serve to reallocate the existing pool of borne out by various consumer surveys, and sug savings without adding significantly to that pool. gests that the negative impact of rising prices on discretionary income may tend to outweigh the advantage in moving from money into goods.2 Interest rates Although interest rates are also prices, it is diffi cult to make any generalizations about the re lationship between them and saving. (See Charts 2 Although recent evidence appears to confirm this view, it should not be assumed as invariable. The hyperinflationary experience of Germany during the 1920’s, for example, provides clear evidence that there is a rate of price increase which would alter the above pattern of consumer behavior. 6 FRASER Digitized for CONCLUSIONS It is difficult to establish a norm against which to measure the behavior of consumers in 1967. When viewed against the backdrop of the early 1960’s, however, last year’s performance was restrained. Uncertainty over the cost and impact of the war in southeast Asia, the threat of a tax increase, and a continuation of rising prices were all contributors to consumer restraint. As it has 3 This is a matter which remains the subject of ex tensive debate among professional economists despite an already lengthy and impressive record of past debate and analysis. business re v ie w been in the past, the rise in the saving rate was associated with a softening in spending for con With recent improvement in the prospects for peace in Southeast Asia, consumers may be sumer durables. Although interest rates may not moved to spend more freely, saving relatively less have affected the level of consumer saving signi out of their current income. Although consumer ficantly, rising interest rates and reduced credit behavior can shift rapidly, nonetheless, circum availability may prompt consumers to shift the stances still favor a high saving rate in the composition of their asset portfolio back to less months ahead relative to the standard of most of liquid, higher-yielding financial assets, raising the 1960’s. Given the outlook for continued up anew the possibility of some degree of financial ward pressure on prices in 1968, this view tends disintermediation. to be reinforced. Given the continued presence of many of the same elements in 1968 which motivated consumer behavior in 1967, the performance of the con sumer in the months ahead is not likely to depart dramatically from that of last year. Any signifi cant decline in the saving rate will rest, in large part, on a step-up in spending by consumers for durable goods. Evidence available for the early months of 1968 does indicate that consumer spending, especially for durables, has picked up. N ote: For those readers who would care to pursue this subject in more detail, including such important consid erations as the long-run or secular relationship between consumption and income, the relationship between the stock of financial assets and spending habits, and the impact of changing income distribution on spending, several excellent reference sources are offered. See Robert Ferber, “ Research on Household Behavior,” American Economic Review, March, 1962, pp. 19-63; Edward Shapiro, Macroeconomic Analysis, Harcourt, Brace & World, Inc., New York, 1966, Chapters 10 and 1 1 ; James S. Duesenberry, Income, Saving and the Theory of Con sumer Behavior, Harvard University Press, Cambridge, Massachusetts, 1959. 7 > T ■r '' y Consum e Credit by Kathryn Kalmbach Responsible for the slackening was a slowdown in installment credit . . . Consumer credit outstanding continued to rise in 1967. < •' i ' \ ' CONSUMER CREDIT OUTSTANDING ' y A drop in automobile sales in 1967 resulted in a dip in credit extended, while ■ repayments continued to rise. Billions of Dollars Billions of Dollars Recently, monthly gains in credit outstanding have grown larger . . . MONTHLY CHANGE IN CONSUMER CREDIT OUTSTANDING ANNUAL CHANGE IN CONSUMER CREDIT OUTSTANDING Millions of Dollars 1967 1968 However, for the second straight year the rate of growth declined. 4 »On the non installment credit side, all major categories contributed to the increase in its growth. ANNUAL CHANGE IN CONSUMER CREDIT OUTSTANDING Billions of Dollars_______ credit.' tUm’ primarily re,lected a reduction in the erowth of automobile f } ANNUAL CHANGE IN NONINSTALLMENT CONSUMER CREDIT Millions of Dollars CHANGE IN INSTALLMENT CREDIT OUTSTANDING * • * RATIO OF REPAYMENTS TO DISPOSABLE PERSONAL INCOME Billions of Dollars 1961 1962 1963 1964 1965 1966 Per Cent 1967 Single-Payment Loans Automobile and the ratioof repayments todisposable personal income has fallen. Together these may be indicating a change in trend for 1968. Other Consumer Goods Home Repair and Modernization Personal * y 1Vf t i r Charge Accounts Service Credit Angling for Industry by Evan B. Alderfer The best single prescription for regional health is industries there just had to be some success. national prosperity. Or so it seems, because a Moreover, they are all continuing to angle, each period of expanding business activity marked by in his own way— as we shall see. receding unemployment permeates all areas. But The state governments play prominent roles in regional infirmities, momentarily obscured by promoting industrial development. In New Jersey national prosperity, may reappear when a reces the arm of government most directly concerned sion sets in unless something is done in the mean is the Department of Conservation and Economic time to fortify regional health. Much has been Development. In Delaware it is the State Develop done to improve the industrial scene throughout ment Department. In Pennsylvania it is the the Philadelphia Federal Reserve District. Anyone now getting around the region, after the Department of Commerce. Indirect contribu Bureau of Industrial Development, a division of an absence of five or ten years, would be sur tions are made by the state governments in their prised to see the large number of modern indus expenditures— for construction and maintenance trial plants. And what a contrast to the old multi of- highways, schools, hospitals, and other public story, mill-type structures are the new factories — neat and low, tidily tucked into their land services. scaped settings! They are to be seen throughout enterprise. What has come to be known as the Pennsylvania assists in the financing of new the coastal plains of Southern New Jersey and “ Pennsylvania Plan” was the creation, in 1956, of Delaware, in the valleys of the Schuylkill, the the Pennsylvania Industrial Development Author Lehigh, the Susquehanna, the Juniata, and as far ity to lend second mortgage money at interest as away as Johnstown on the western slopes of the low as 2 per cent to assist in the establishment of Appalachian plateau. industrial plants in high unemployment areas throughout the Commonwealth. Through 1967, Baiting the lines Many of the new industries have come into the P.I.D.A. has made about 700 loan commitments for a total of almost $150 million which afforded area in direct response to concerted efforts on the an estimated 100,000 new jobs. On the wall of part of numerous agencies, both public and pri vate. Active anglers for new industry are the state the administrator’s office in Harrisburg hangs a map of Pennsylvania with a dot at each place where plants get P.I.D.A. help. The two dottiest areas are the hard coal section in the east and the governments, municipalities, counties, and town ships. Also numerous private agencies such as the electric utilities, railroads, gas and water com soft coal area in the west. panies, telephone companies, industrial parks, chambers of commerce, realtors, commercial banks, and suppliers of building materials. With With financial assistance from the Common such a multitude and variety of anglers for new wealth, 10for FRASER Digitized Industrial development corporations numerous counties in Pennsylvania business re v ie w created industrial development corporations. The times confine assistance to secretarial help. They Philadelphia Industrial Development Corporation all maintain files of available industrial land and may be cited as an example of a large I.D.C. P.I.D.C. is a nonprofit partnership of the City buildings, and have budgets for some form of of Philadelphia and the Chamber of Commerce companies— as York County has obtained with organized in 1958 to help Philadelphia industries notable success— add luster to a county’s indus get more space and to attract new industries to the trial roster. Among those that stress financial aid advertising. Branch plants of nationally known city. With funds contributed by the Chamber of as an inducement, some turn to P.I.D.A. and Commerce, by the state under the Industrial others to the Small Business Administration. It is not to be presumed that there is one best Development Assistance Act, and by the city government, P.I.D.C. assembles and develops in way either as to method of operations or form of dustrial land for new industries seeking sites in organization. In Southern New Jersey, county and the city and for going concerns seeking room for township Industrial Commissions appear to ac expansion. The corporation’s latest annual report complish what industrial development corpora shows over 300 companies so accommodated. Not industrial development corporations in the tions achieve in Pennsylvania. However, the public utilities are also very active promoters of technical sense but with much the same purpose industrial development in New Jersey, as well as are the Pennsylvania Development Credit Corpor in Delaware and Pennsylvania. ation and the Southeastern Pennsylvania E co nomic Development Corporation. SPEDCO, Industrial Parks through its separately incorporated fund, makes An industrial park is a more or less improved loans for equipment or working capital to worthy plot of land hopefully dedicated to occupancy and use by industrial and commercial enterprises. business applicants in the Philadelphia fivecounty area when not otherwise available. SPEDCO also lends on buildings; for example, it joined with P.I.D.C. in acquiring and modern izing a 16-story building close to center city as the first of several planned centers for apparel manu facturers. The same kind of financial assistance is offered in the other Pennsylvania counties of our District by the Pennsylvania Development Credit Corporation. Improvements sometimes include shell buildings for prospective occupants. Financing is usually done by either profit-seeking corporations or community development corporations. Well over 100 industrial parks are to be found throughout the District, with a clustering in the counties near Philadelphia. Bucks County, with 30 parks according to a recent count, is by far the leading county, and Chester County with eighteen ranks second. Montgomery County has The smaller-sized and smaller-staffed industrial fewer but among them are the big Fort Washing development corporations in the less highly indus ton (600 acres) and King of Prussia (over 700 trialized counties outside of Philadelphia differ acres) industrial parks, both well-occupied with from each other less in their statements of pur pose than in the means of attainment. Success in industries. Some industrial parks are still without occu obtaining new industry depends largely on the pants. So it is not the number of parks that experience, initiative, and resourcefulness of the counts. Of greater moment are the number and executive director because limited budgets some kind of industrial occupants, the number of em 11 business re v ie w ployed workers, stability of employment, size of arrivals there were numerous major expansions payrolls, and the buying power generated. The by industries already in operation. Unemploy success of an industrial park turns on many things. Does it have a good location; does it have ment in the region declined from 17 per cent of the labor force in 1958 to less than 4 per cent in electric power, gas, water, sewers? What trans 1967. In fact, there have been complaints of labor portation facilities are available— rail, motor shortages. Incidentally, since 1963 there has been freight, highways, airport? The Labor supply? no net outmigration. The banking facilities? Lack of only one of these essentials may cost the park a good prospect. An active participant in the industrial develop ment of the area is the electric utility which serves a large part of Northeastern Pennsylvania, though "The New Northeast” the company headquarters is in Allentown. The The nine Northeastern counties of Pennsylvania utility’s area development department, established call themselves “ The New Northeast,” and a welldeserved appellation it is, for the region is under going an astonishing industrial transformation. in 1929, now has a professional staff of 22 people, including a forester. The company has a site acquisition program, a shell building program, These nine counties are Lackawanna, Luzerne, and a community planning program. It conducts Schuylkill, Carbon, Monroe, Pike, Wayne, Susque seminars on area development, publishes an area hanna, and Wyoming. Perhaps such leading cities news letter, maintains an active mailing list of as Scranton, Wilkes-Barre, and Hazleton are more 21,000 business executives east of the Rockies, familiar names. People outside the area remember has four industrial development specialists who the area’s quondam anthracite, the loss of mar personally follow up inquiries, and maintains a kets, the ensuing hard luck— thousands of unem $4.5 million fund from which it lends without ployed miners, men staying at home, women interest to local communities for site acquisition working in sewing factories, young people mov purposes. ing out, Government handouts, despondent peo Why the forester? He is in charge of the com ple, disfigured countryside. Old images, never pany’s “ Operation Trees”— a tree-planting pro die, they just ossify. gram to cover and screen the eyesores left by open Lots of things have happened since those evil pits and spoil banks of strip-mining and the man days, 20 years ago and more. Citizens groups made mountains of deep-mine waste. In four throughout the area have raised over $21 million years over a half-million seedlings were planted out of their own none-too-adequate incomes. In on more than 300 sites by groups representing 37 dustrial parks were built and shell buildings were communities. erected to house new industries. Financial as Northeastern Pennsylvania is well-favored with sistance for many of these projects was obtained first-class highways. This is a major asset favor from the Pennsylvania Industrial Development ing the industrialization program because trans Authority. portation is always one of the first elements con For the decade 1958 through 1967, 547 new sidered by a business manager in search of a site. industries have located in Northeast Pennsylvania. Running right through the heart of the region, as They provided 39,814 jobs and $191 million an if expressly planned for it, is Interstate 80— the nually recurring payrolls. In addition to the new Keystone Shortway, an east-west superhighway 12 business re v ie w nearing completion. Interstate Route 81 leads to tive, despite its monstrous image of power, was the South, Route 84 to New England, and the none too efficient and required a lot of round Northeast Extension of the Turnpike to Philadel house nursing. The Diesel is more efficient and phia. Climate and geography work together for yet the repair shop. That’ s what hurt Altoona, because another industry of the region— recreation-tour a high proportion of its work force was employed ism. Glaciers of the Ice Age did just enough scraping and filling in the Pocono and Moosic vania Railroad employment declined from over runs ever so many more miles between trips to in the car shops. In the Altoona area, Pennsyl mountains to make hundreds of lakes and slopes for summer and winter sports. What’s more, this 17,000 in 1950 to slightly over 5,500 in 1966. playland which is already grossing more than merce inaugurated a financing plan known as $90 million annually, is strategically located on Altoona Enterprises, Inc. Money subscribed by the edge of the great Boston to Washington local business firms and individuals was used to megalopolis. As early as 1946 the Altoona Chamber of Com acquire land and to erect industrial buildings. The Economic Development Council of North Additional funds were raised in a subsequent eastern Pennsylvania was created in 1964, a non profit research and service organization. An drive, known as “ Jobs for Joes,” in which em ployees participated— a dollar a month under a “ Overall Economic Development Program” is the payroll deduction plan. More recently, Altoona title of one of the Council’s latest studies, which Enterprises, Inc., has had the assistance of contains a forthright analysis of the area’s P.I.D.A. loans to help finance the establishment strengths and weaknesses. Plans are afoot for of new industries. greater diversification of the industrial mix, for In the Wall Street Journal last November 3 ap for creating peared an ad by the General Public Utilities more vocational-technical schools, for expanding Corporation telling how Pittsburgh Plate Glass the tourism-vacation industry, for making the chose to build a new plant just a few miles north area a more attractive location as a place to live. of Altoona. The utility’s site-service specialists, improving managerial practices, working with the company’s Altoona subsidiary, The Altoona story Pennsylvania Electric Company, and Altoona En Going around the Horseshoe Curve, just a few terprises, Inc., the industrial development organi miles west of Altoona, the railroad passenger on a zation, helped the glass company find the right day train sees a big black steam locomotive fenced location close to their own raw glass sources. in as a permanent outdoor exhibit. That old “ Iron Through its industrial development efforts, the Horse” retired in 1955 after almost 2 % million Altoona area has made noteworthy progress from miles was presented to Altoona by the Pennsyl almost complete dependence on railroad employ vania Railroad Company. That was a nice gesture, ment to a healthier state of diversification. Manu for the Pennsy made Altoona; but, alas, the facturing industries in 1950 employed only one- Penn-Central superseded the Pennsy and the eighth as many as the railroad; now they employ Diesel superseded steam. considerably more than the railroad. Moreover, The shift from steam to Diesel locomotives was the manufacturing mix isn’t too bad. The mixture destined to be fast and sure. The steam locom o includes apparel, food, textiles, leather, electrical 13 business re v ie w machinery, nonelectrical machinery, and paper manufacturing. Lines, Public Service Electric and Gas, the Read ing, South Jersey Gas, Southern New Jersey Devel Altoona Enterprises, Inc., is fully aware of the opment Council, and at least 16 additional area’s handicaps. To improve higher educational organizations— all of which are members of the facilities, the Pennsylvania State University was New Jersey Industrial Development Association. invited to establish a local campus. Efforts are also being made to promote construction of an Furthermore, the nine counties have 23 industrial Appalachian Throughway which would give the city a halfway position between the Keystone parks and a large number of real-estate offices active in seeking new industries. The electric utility, with headquarters in Atlan Shortway and the Pennsylvania Turnpike. Mean while, still more industries are being sought be cause metropolitan Altoona’s unemployment rate, tic City, has an area development department which is a mine of up-to-date regional informa though much improved, is still too high. prospect might want to know. For example, the tion on any conceivable subject an industrial department has prepared a handbook of com Southern New Jersey munity profiles which contains for each of 120 The nine counties, here designated as Southern New Jersey, taken together form a kind of penin communities in the region information such as population, housing, government services, taxes, sula— for they all have water frontage, either utilities, labor, transportation, banks, medical riparian or oceanic. The counties of Mercer, Bur facilities, lington, Camden, Gloucester, Salem, and Cumber churches, schools, recreational activities, cultural land front on the Delaware River; Atlantic and facilities, and industries. The utility’s role in pro newspapers, radio and television, Ocean counties front on the Atlantic Ocean, and moting Bayside— a vast industrial tract on the Cape May on both. Cumberland County shore of Delaware Bay— and Its peninsularity once shielded all but a small in fostering site improvements at the Lindenwold part of this region from industrialization. But no terminal of the Southern New Jersey Rapid longer. Industries favor the Delaware for its navi Transit Line are typical of the area development gability and ocean shipping, and upstream the activities. High priority is given to higher education in river is bridgeable. All this area needed to make it a part of mega Southern New Jersey. Two-year colleges have lopolis was transportation. Transportation it now been or are being established in Atlantic, Cum has— the New Jersey Turnpike, the Garden State berland, Gloucester, and Camden counties. Salem Parkway, the Atlantic City Expressway, and con County now has a vocational technical school, necting cross-stream another is being built in Cape May County, and links— the bridges with which the Delaware is already spanned and new Glassboro State College is in the midst of a large ones planned, Chester-Bridgeport and Brides- expansion program. burg-Delair. Southern New Jersey is vibrant with industrial Down Delaware way development and with organizations promoting it. Delaware’s three counties are likely to be thought Among them are Atlantic City Electric, Delaware of as industrial New Castle in the north, political Valley Council, Pennsylvania-Reading Seashore Kent in the middle, and agricultural Sussex in 14 business re v ie w the south. With the passage of time the image activity there is a tendency to accept with open changes. arms any and all comers. That is likely to lead to Wilmington’s industrial expansion is filling up lopsided industrialization with a preponderance New Castle and spilling into the lower counties. of low-wage-paying industry largely dependent Illustrative of the continuing southward trend are upon employing female workers. For example, Kent’s new advanced circuitry plant and a big apparel and textile plants accounted for 49 per office machinery manufacturing installation in cent of all the manufacturing employment in 1960 in the Wilkes-Barre-Hazleton area, which was in lower Sussex. Delaware is advantageously located for indus marked contrast with the 16 per cent for the try, has deep-water sites, and attractive incorpor Philadelphia metropolitan area. Since that time, ation laws. However, the scarcity or infrequency dependence upon those two industries in the up of vacant industrial buildings is a drawback to state region has been reduced, and continued the area’s industrialization. efforts are being made to attain still greater in dustrial diversification. In conclusion Another aspect of industrial development that Industrial development activities differ from is gaining wider appreciation is the need to make one section to another, but perhaps the differences the community an attractive place to live. Attrac are more one of degree than of kind. Some tiveness has many facets, such as physical ap stress advertising more than others. Some devote pearance, cleanliness, educational facilities in practically all their efforts to getting in new industries, whereas others divide their efforts between getting new firms and helping established concerns to expand. There are also different prac cluding higher education, hospitals, police and fire protection, cultural and recreational activ ities. tices with respect to giving financial assistance. To a certain extent, the regional growth and development is tied to that of the national econ Some offer little or no such help and others do all they can to get a newcomer established. The more financial assistance you offer, said one industrial omy, but to a certain extent only. Regional development is also a matter of internal influences development official, the more likely you are to ment in productive and cultural facilities. In final attract marginal firms with little staying power. analysis, much depends upon the caliber of com In the early stages of industrial development — managerial talent, initiative, education, invest munity leadership. 15 FOR THE R E C O R D . . . INDEX SUMMARY BILLIONS $ Third Federal Reserve District United States Per cent change Per cent change Feb. 1968 from mo. ago MANUFACTURING Production ......................... Electric power consumed — 2 Man-hours, total* ......... + 1 0 Employment, total ........... + 1 CONSTRUCTION**............... + 3 COAL PRODUCTION ........... + 7 BANKING (All member banks) Deposits ............................. — 1 0 Loans ................................... Investments ....................... 0 U.S. Govt, securities .... — 1 Other ................................. 0 Check payments*** ......... + 2f PRICES Wholesale ........................... Consumer ........................... year ago 2 mos. 1968 from year ago mo. ago year ago 2 mos. 1968 from year ago Manufacturing LOCAL CHANGES Metropolitan Areas* + 2 +12 + 4 + 2 + 9 + 14 -12 +10 + 1 + 2 + 6 + 17 -1 3 + 3 Banking Employment Payrolls Check Payments** Total Deposits*** Per cent change Feb. 1968 from Per cent change Feb. 1968 from Per cent change Feb. 1S68 from Per cent change Feb. 1968 from mo. ago year ago mo. ago year ago - + 1 + 8 Wilmington ..... - 2 1 Atlantic City .... 0 + 6 + 12 - 1 + + + - 1 0 1 2 1 1 + 1 0 + 11 + 8 + 17 +12 +22 + 15 + 2 + 4 mo. ago year ago mo. ago year ago + 2 +21 - 4 + 12 + 8 + 18 + 12 +24 + 15 + 1 + 4 tl5 SMSA’s ^Philadelphia + 12 +13 - 7 + 8 + 3 +20 - 1 - +34 +41 0 + 12 + 1 0 + 14 1 Trenton ........... - 1 - 1 - 5 Altoona ............. + 2 + 2 + 7 + 16 4" 5 +12 Harrisburg ....... - 1 0 0 + 10 + 8 + 7 1 - 4 + 4 —8 + 9 0 + 10 + 5 —5 + 9 0 + 9 Johnstown ....... + 11 + 12 + 9 + 8 +20 +21 +12 + 14 +29 +30 +121 + llt ot + 41 + 41 ‘ Production workers only “ Value of contracts ‘ “ Adjusted for seasonal variation Feb. 1968 from MEMBER BANKS. 3RD. F.R.B. + 1 Lancaster ......... - + 4 + 11 + 1 Lehigh Valley .. 0 — 1 0 + 2 + 7 —6 + 6 0 + 11 Philadelphia..... 0 0 + 1 + 8 —2 + 11 — 1 + 12 Reading ........... + 1 + 1 + 3 + 12 0 + 19 + 1 —5 Scranton______ 0 - 1 + 3 + 6 + 5 + 11 + 2 + 14 Wilkes-Barre .... + 1 0 + 6 + 10 -1 1 + 2 0 + 14 York ................. - 2 - 2 0 + 6 - 3 + 8 + 1 + 6 + 1 ‘ Not restricted to corporate limits of cities but covers areas of one or more counties. “ All commercial banks. Adjusted for seasonal variation. ‘ “ Member banks only. Last Wednesday of the month.
@FedFRASER