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JULY 1954 business review \NK NUFACTURING IN THE FEDERAL ERVE DISTRICT OF PHILADELPHIA facturing industries in this District employ more people other major activity. Employment is equally divided ms making durables and nondurables. MOBILE INDUSTRY Production has been outrunning sales for some time now. But list prices are firm, causing dealers to bargain keenly. In this area, merchants report some misfortunes. Yet improvement in the inventory situation is encouraging. CURRENT TRENDS Additional copies of this issue are available upon request to the Department of Research, Federal Reserve Bank of Philadelphia, Philadelphia 1, Pa. MANUFACTURING IN THE FEDERAL RESERVE DISTRICT OF PHILADELPHIA This is a story about 1,328,000 people. Some of them work in shipyards along the Delaware, others are employed in cement plants in the Le high Valley or the steel mills of Johnstown or the NATURE AND EXTENT O F THE PHILADELPHIA FEDERAL RESERVE DISTRICT textile mills of Reading or the apparel factories of Scranton or the canneries of South Jersey or Before looking at the industries let us look at the landscape with the aid of a map to indicate the nature and extent of the district also known as the the cigar factories of York or the furniture fac Third Federal Reserve District. tories of Williamsport. All of these people are The district embraces the eastern two-thirds of gainfully employed in some manufacturing in Pennsylvania, the lower half of New Jersey and dustry and all of them work in the Philadelphia the State of Delaware. It contains an even five Federal Reserve District. dozen counties— 48 of which are in Pennsylvania, One of the best ways to size up the industrial 9 in New Jersey, and 3 in Delaware. It is only structure of an area is to observe how many 37,000 square miles in total area and as such it people its factories employ and the kind of in is the smallest of the country’s twelve Federal dustries that employ them. We have established Reserve districts. While the district accounts for a series on factory employment in the Philadel only 1.2 per cent of the country’s land area, the phia Federal Reserve District. The series gives eight and one-half million people who live within up-to-date information on how many citizens work its borders nevertheless constitute 5.6 per cent of in our manufacturing establishments, the kind of the country’s population. things they make, how many hours a week they Diversification— that is the one best word to work and the amount of money they earn on their describe the district. The district has highlands jobs. Of course, all these things are constantly and lowlands, good soil and poor soil, urban changing and that is precisely the reason why it is areas and rural areas. Some sections are pre desirable to keep informed about what is going on. dominantly industrial, others agricultural or min 3 b usin ess re v ie w eral. The diversification resembles somewhat an of the most heavily industrialized corridors of old-fashioned crazy quilt in geological formation, the country. Philadelphians on their way to the topography, types of soil, climate, and land utili seashore resorts get the misimpression that south zation. Since diversity of physical features makes ern New Jersey is all scrub pine land. The region, for diversity of economic activity it may be help however, has enough good soil devoted to truck ful to observe the major geographic divisions of gardening to have earned for New Jersey the title the district. of “ The Garden State.” Southern Delaware is one of the country’s leading broiler-producing A tlantic C o astal Plain The Coastal Plain is a broad flat belt of marl, areas and poultry products are also a big item of income in the Jersey section of the Coastal Plain. sand, and silt, bounded on the east by good bath Other specialties of the region are cranberries ing, fishing, and yachting, and on the west by one and fisheries, both shellfish and the finny varie- GEOGRAPHIC REGIONS OF THE THIRD FEDERAL RESERVE DISTRICT "B R A D F O R D A LLE G H E N Y O IL REGION N O RTH EA STERN DAIRY REGION A LLE G H E N Y F O R EST REGION ■ B K SU SQ U EH A N N A V A LLE Y ' es -b a rre POCONOS ^LOWLAND^Cblack "DIAMOND COUNTRY. A LLEN TO W N J R EA D IN G ’ R ID G E & V A LLE Y REGION TRENTON1 PIEDM ONT YORK LA N C A STER P H IL A D E L P H IA . W IL M IN G T O N CO ASTAL P L A IN 4 b usin ess re v ie w From the standpoint of employment and Blue Ridge that pushes across the Maryland- income, manufacturing is the most important eco Pennsylvania border just west of the Gettysburg nomic activity by reason of the very heavy con battlegrounds. The northeastern section of the centration of industrial plants on both sides of Blue Ridge is a finger-like extension of the New the Delaware River from Trenton to Wilmington. England Upland locally called the Reading Prong ties. because it pushes its way southwestward deep into Berks County, almost to Reading. While it Piedm ont The Piedmont is sharply differentiated from the Coastal Plain by the Fall Line. By no means a mere figment of the geographer’s imagination, the Fall Line is a line that separates the old hard-rock land structure of the Piedmont from the sands, clays and gravels of the Coastal Plain. It is most clearly marked on the rivers by the presence of falls and rapids. Philadelphia is astride the Fall Line where natural waterfalls of the Schuylkill supplied water power for the city’s early textile, paper, and grist mills. The Piedmont, or foothills of the Appalachians, as the name suggests, is gently rolling country side characterized by crystalline rock and lime stone lowlands. The presence of limestone in the soil, a long growing season, and adequate rainfall make this a generally rich agricultural region. The area takes in the fertile fields of Chester, Lancaster, and York counties, which rank among the best in Pennsylvania. Lancaster, with its white-faced beef cattle, dairy herds, and tobacco, ranks among the leaders of the country’s 3,000 counties. For all of its agricultural wealth, manu facturing, nevertheless, supersedes farming as a source of income in Lancaster. would be an exaggeration to call the Blue Ridge a mountain range it is, however, a prominent and unique upland corridor separating the Piedmont to the southeast from the Great Valley to the northwest. Apple and cherry orchards flourish on the slopes of South Mountain, which offer ideal frost protection for fruit growing. G re a t V a lle y The Great Valley is a depression— topographic, not economic. It is almost uniformly good farm ing country that might well be called “ Prosperity Valley.” The Great Valley really stretches for almost a thousand miles, all the way from the St. Lawrence Valley in Canada to central Alabama. The Pennsylvania section of the Great Valley goes by local names such as the Lehigh Valley, the Lebanon Valley and the Cumberland Valley. It is a natural lowland, not really a valley in the ordinary sense of the term, for it is not served by a single stream but by several— the Delaware, Lehigh, Schuylkill, Susquehanna, and Potomac rivers. Prominent and prospering cities through out the valley are Allentown, Easton, Bethlehem, Lebanon, Reading, Harrisburg, Chambersburg, and Carlisle. In addition to all these cities the valley also has a lot of cows, chickens, colleges, Blue Ridge and cement. The first major westward barrier to transporta tion is the Blue Ridge, a more or less continuous Ridge and V a lle y Region upland of varying width and altitude. The high As the name implies, the Ridge and Valley Region est altitude of almost 2,000 feet above sea level is rough country consisting of parallel ridges of is attained in the South Mountain section of the hard sandstone separated by valleys of softer lime 5 business r e v ie w stone and shale. It looks like the kind of a country Black Diam ond Country Paul Bunyan might have made by riding rough The Black Diamond Country, from Carbondale in shod over the territory with his big bulldozer. the northeast to Shamokin and Minersville in the Although the region has a few fertile valleys such southwest, is not what it used to be. Scranton, as Nittany Valley, Kishacoquillas, and Morrison’s Wilkes-Barre, Hazleton, and Pottsville were thriv Cove, generally the contour is too rough, the lime ing cities when long trains hauled a total of over stone too scarce, and the frost-free days too few 90 million tons of hard coal ojut of the region in for much in the way of agriculture. The chief mineral deposit of the region is ganister rock its best years. With markets reduced by more than half, these cities are in a period of transition. used in the manufacture of refractories. The area Textiles and apparel manufacturing have long has one big rayon plant, one large zinc smelting been complementary industries to anthracite min establishment, a state university, the state’s larg est aggregation of railway car shops, in Altoona, ing in the hard-coal country. As oil and gas capture more of the anthracite markets, other and the only narrow-gauge railway east of the industries like cigar, shoe, and metal manufactur Mississippi. This little railroad brings bitumi ing have been taking hold. Nevertheless, the nous coal from the Broadtop mine down to the transition is slow and the adjustment process is main line of the Pennsylvania Railroad where difficult. the coal is transferred to standard equipment for a Class I haul to market. Too bad they discon tinued passenger service on the East Broad Top; the round trip from Mt. Union to Robertsdale Pocono R esort Region East of the Black Diamond Country is another highland section with no minerals, few farms, and was a memorable experience. still fewer manufacturing enterprises. Hunting and fishing are good, however, because the Ice Susquehanna V a lle y Low land In sharp contrast to the Ridge and Valley Region is the Susquehanna Valley Lowland. It extends along the main body of the Susquehanna River and for some distance up the North and West branches. This is a natural route for railroads and highways. Coming into this region from any direction, the motorist is impressed with its es Age carved out numerous lakes and endowed the region with clear, cold water and beautiful water falls. Moreover, the section has just enough ele vation to provide cool summer climate and enough snowfall in winter to assure both summer and winter sports, so that the region has become a great vacation land. sentially lowland character. There are beautiful farms and the yields are best in sections close to N o rtheast D a iry Region the river where alluvial soils predominate. The The northeastern corner of the district is a pre region also has a surprising amount of manu dominantly rural area. It is a land of rolling, facturing in such centers as Williamsport, Lock glaciated hills, green pastures, and red barns— Haven, Danville. and almost every barn has a silo. The region Among the leading manufactured products are does not grow much grain but it has an unusually such diverse items as aircraft, aircraft engines, high percentage of crop land in hay. Dairying is carpets, railway rolling stock, and potato chips. the best form of land utilization because of natu Berwick, 6 Bloomsburg, and b u sin ess re v ie w ral conditions of the soil, climate, and topography. and tanning, except for a large radio plant in Moreover, the area is favored by its proximity Emporium. to New York which affords a big market for milk and related dairy products. Manufacturing is A lle g h e n y Coal M ining Region notably absent in this territory but milk-cooling Just west of the Ridge and Valley Region and stations and milk-processing plants are almost as south of the Allegheny oil country is the principal natural to the local landscape as the cows and soft-coal belt of the district. The bituminous coal the silos. mined in this area is low volatile coal. A sub stantial part of the output from the mines of the A lle g h e n y O il Region region moves eastward to seaport cities where The city of Bradford in the northwest corner of the coal is in demand by reason of its smokeless the district is the headquarters of Pennsylvania character. Bituminous, like anthracite, is encoun petroleum. Here, where oil has been produced tering increasing competition from competitive for over three-quarters of a century, petroleum fuels. Coal is the basis for steel manufacturing is still the principal source of income and pumps which dominates the industrial scene at Johns are found almost everywhere. In this region it town, the largest city of the region. is almost impossible to lay out a baseball diamond This completes an armchair Cook’s tour through without having an oil pump either in the infield the Federal Reserve District of Philadelphia. It or the outfield. By means of controlled water flood is apparent that the district is a region of parts— ing, begun in 1926, the region’s flow of petroleum no less than twelve major geographic areas. The was rejuvenated and in some sections the annual types of economic activity prevailing in each re yield is as high as 10,000 barrels an acre. Penn gion are determined by basic geographic factors sylvania petroleum produces a high-grade lubri such as land formation, elevation, quality of soil, cating oil, which is the reason why this crude oil mountain barriers, presence or absence of min commands a higher price than other crude oils. erals, watercourses and natural harbors, location, and accessibility to markets. A lle g h e n y Forest Region South and east of the oil country is the Allegheny M AN UFACTURING IN Forest Region that stretches long fingers into the THE THIRD DISTRICT ECON O M Y northeast dairy territory. The Allegheny forest Manufacturing plays an unusually prominent role region is a large area sparsely populated but well in the economy of the Third District. Observe covered with a mixed stand of hard woods. Years in the accompanying table the substantially ago this was a great lumbering and sawmill re greater importance of manufacturing as a source gion. The pines and hemlocks which formed a of employment in the local economy than in the large part of the virgin timber are now in the national economy. In this district, according to minority. As you might suppose, most of the the latest census, 35 per cent of all gainfully em Pennsylvania State forests are located in this sec ployed workers had jobs in manufacturing in tion. The region is primarily a hunter’s paradise. contrast with 26 per cent for the United States. What little manufacturing is found in the area is Agriculture, as a source of employment, plays related to wood products such as papermaking only a relatively minor role in this district. Farm- 7 b usin ess r e v ie w ing accounts for only 4.8 per cent of the employed of Philadelphia, Camden, and other cities crowd workers, which is in sharp contrast with 12.5 per ing the industrial Delaware. Canals in former cent nationally. days and _ network of railroads and superhigh a By virtue of our hard and soft coal, petroleum, ways in our day afford the transportation facili and limestone resources, mining, as a source of ties for bringing in raw materials to supplement employment, occupies a relatively more prominent those indigenous to the region. For developing place in this district than nationally. In this dis an iron and steel industry, basic to our industrial trict, mining accounts for 3.5 per cent of the civilization, the district has been fortunate in hav employed workers, whereas in the United States, ing within its borders the three essential require mining employs only 1.7 per cent of all such ments, namely, iron ore, coal, and limestone. Today the district itself constitutes a large mar workers. ket. and local industries are favorably situated to cater to the vast and growing needs of the whole densely populated northeastern section of the PERCENTAGE DISTRIBUTION OF EMPLOYED WORKERS Major Industry Group Third District United States Manufacturing ....................... Agriculture ............................. M in in g ..................................... C onstructio n ........................... Distribution ........................... Transportation ....................... Utilities ................................... Finance, Insurance, Real Estate S e r v ic e ..................................... Government ........................... Miscellaneous ......................... 35.0 4.8 3.5 25.9 12.5 1.7 6.0 6.1 17.5 5.6 2.4 3.1 16.5 4.1 1.5 18.8 5.2 2.5 3.4 18.0 4.4 L5_ T o t a l................................. Source: 1950 Census 100.0 United States. The heavily industrialized nature of the district 100.0 is reflected even in its pattern of agriculture. With only 47 per cent of its land area in farms con trasted with 61 per cent for the United States, the district makes more intensive utilization of its arable land. This is revealed in the accompany ing table. SOURCES OF FARM INCOME The industrial employment pattern of the district Items departs most radically from that of the United Field C r o p s ........................... Vegetables ........................... Fruits and nuts....................... Horticultural specialties . . . . Dairy p ro d u c ts..................... Poultry and products.............. Other livestock and livestock products ........................... Forest products ................... States in manufacturing, agriculture, and mining. With respect to construction and the various serv ice industries, the district employment pattern is substantially the same as that of the country. Manufacturing is peculiarly favored in the Third District by reason of certain natural ad Percentage Distribution Third District United States 12.5 6.1 3.3 5.3 28.1 31.2 36.2 2.8 3.6 1.8 14.0 8.3 13.1 0.4 32.7 0.6 Total ............................. 100.0 Source: Census of Agriculture 1950 100.0 vantages. Philadelphia, the industrial and com mercial center of the district, owes much of its For the country as a whole, field crops and “ other growth and prominence as a manufacturing city livestock and livestock products” (chiefly beef to its strategic inland location on an arm of the and pork) account for 69 per cent of the cash sea. Raw materials from other parts of the coun farm income but in the Third District these items try and from all over the world form a steady accounted for only 25 per cent of the farmers’ stream of traffic on the Delaware to the factories money income. The two principal sources of farm 8 b u sin ess re v ie w income in the district are dairy products and poul subject to greater irregularity in employment try products. Together they account for 59 per cent of Third District farm income. For years Nondurables, by their very nature, offer steadier from one phase of the business cycle to another. dairy products ranked first but subsequent to employment by reason of the greater constancy 1939 the chicken jumped over the cow. Vegeta of demand. Since this district has a 50-50 blend bles and horticultural specialties are also rela of durables and nondurables, the industrial struc tively more important in the local scene. In a ture is better balanced than that of the United heavily industrialized area such as ours, farmers States, for in 1953 manufacturing employment can make more profitable use of their land and throughout the country was divided 59 per cent in labor by specializing in the production of perish durables and 41 per cent in nondurables. able products with big yields to the acre to supply The table entitled 1953 Percentage Distribution of Manufacturing Employment reveals at a glance the large markets nearby. wherein the industrial structure of the Third District conforms with or differs from that of the A w e ll-b a la n c e d in d u stria l structure Manufacturing in the Third District is nicely bal anced on the basis of employment. The 1,328,000 factory workers in 1953 were distributed 50-50. between industries making durable and nondur able goods. The faster growing industries are usually among the durables which, however, are Third District Major Industry Groups 100% 6.8 1.4 9.8 13.5 2.9 3.9 6.1 apparel industries. In the Third District 13.5 per cent of all factory workers are employed in the apparel industry in contrast with only 7.1 per cent in the United States. Factory employ ment in this district is also somewhat heavier, proportionately, in eight other industries— namely tobacco, textiles, chemicals, petroleum and 1953 PERCENTAGE DISTRIBUTION OF MANUFACTURING EMPLOYMENT All manufacturing .............. Food ............................... Tobacco ........................... Textiles ........................... A p p a r e l........................... P a p e r ............................... Printing and publishing.. Chemicals ....................... Petroleum and coal products ..................... Rubber ........................... Leather ........................... United States. The greatest difference is in the coal products, leather, the stone, clay, and glass United States 100% 9.0 0.6 6.9 7.1 3.1 4.6 4.7 group, primary metals, and electrical machinery. Manufacturing industries of the Third District in which employment is somewhat light relative to the distribution of the United States are food processing, lumber and furniture, and trans portation equipment. Differences in the other industries are too small to be of any significance. 1.9 1.2 2.8 1.5 1.6 2.2 .. 50.3 41.3 Lumber and furniture. .. . Stone, clay and glass. . . . Primary metals ................ Fabricated metal products Machinery (except electrical) ................... Electrical machinery . . . . Transportation equipment Instruments ..................... Miscellaneous .................. Total durables ........ 2.7 4.0 9.8 6.2 6.7 3.2 7.7 6.6 8.0 7.9 6.9 1.6 2.6 49.7 9.9 7.1 11.3 1.9 4.3 centers employ 81 per cent of all factory workers 58.7 ( Continued on page 12) Total nondurables M anufacturing a re a s of the district Third District manufacturing is distributed in ten major areas. From the standpoint of employ ment, the areas range in size from 31,000 in Scranton to well over a half-million in the Phila delphia area. Together, the ten manufacturing in the district. 9 b usin ess re v ie w b u sin ess re v ie w AUTOMOBILES: what is happening in the industry M IL L IO N S A U T O M O B IL E S ’ M IL L IO N S (A N N U A L R A T E S.) TH O U SA N D S M ILLIO NS 1000- 700 — I...J .1 1...L I .. 1929 1946 1948 1950 1952 FEB. MAR APR. During most of the post-war period, production of automobiles has been above or near the pre-war record. M IL LIO N S 3. 1953 MAY SOURCE: A.M.A. SOURCE: A.M.A. I. JA N . SOURCE: AUTOMOTIVE NEWS ^BEGINNING OF MONTH Domestic factory sales so far this year seem to indicate that production esti mates may have been pessimistic. M IL L IO N S 5. 1954 CH RYSLER (S E A S O N A L L Y A D JU S T E D ) IN D EX FORD G.M. O THER T O T AL SOURCE: AUTOMOTIVE NEWS 9. The decline in new car sales has not affected all producers. P E R C EN T 1947-49=100 ^N E W SA LES □ I I 7. And the sales lag has caused employ ment in the industry to be reduced. mam FACTORY ■ ■ 1 I I SOURCE: B.L.S. Consequently, the average number of cars held by dealers has climbed to post-war peaks. B IL L IO N S $ I R E G IS T R A T IO N S 4 — — no — USED 1953 1954* SOURCE: A.M.A. *E S T 2. For 1954, a drop of 15 per cent from last year's output was the most popu lar forecast. 10 1952 SOURCE: COMMERCE 1953 4 M ONTHS 1954 However, domestic factory sales have been running ahead of retail sales (registrations). \ W v l J ___ I___ I___I___ I------ 1 ------1 J F M A SOURCE: ER.B. 6. 1 9 0 — 1954 M. J J A S -I— O 1 N D 1 Slow sales have.also resulted in a drop in automobile instalment credit ex tended l — 1 1 1 1 1 1 1 1 1 1 1 ~ l„ 1954' 1953 SOURCE: ER.B. 8. List prices of new cars have remained steady, but used car prices have dropped. CH RYSLER FO RD G.M SOURCE: AUTOMOTIVE NEW S 10. A s a result, the proportion of the mar ket held by various companies shifted. 11 b u sin ess r e v ie w MAJOR MANUFACTURING AREAS 1953 Employment Area Philadelphia ......... Lehigh V a lle y ........ Delaware ............. Reading ............... York ..................... Lancaster ............. Trenton ................. Wilkes-Barre ........ Harrisburg ........... Scranton ............... 61 1,600 104,200 62,100 52,850 47,450 44,400 43,900 39,650 36,250 31,300 Percent in Durables Nondurables 50.6 59.7 30.4 47.3 55.8 46.2 75.9 18.7 49.5 30.4 49.4 40.3 69.6 52.7 44.2 53.8 24.1 81.3 50.5 69.6 region is somewhat heavy on the durable side for geographic reasons. A long, rich streak of lime stone runs through this section of the Great Val ley which accounts for the production of about one-sixth of the country’s entire output of cement. The presence of limestone is one reason why Beth lehem is a steel town; limestone, used as a fluxing agent, is an indispensable raw material in iron and steel making processes. The Delaware manufacturing area includes the The Philadelphia area embraces eight counties. whole State, which is not very big. Most of the In addition to Philadelphia County it includes manufacturing is concentrated in Wilmington and Bucks, Chester, Delaware, and Montgomery coun nearby communities like Claymont and Newark. ties in Pennsylvania; and Burlington, Camden, The predominance of chemicals explains why and Gloucester counties on the New Jersey side over two-thirds of the manufacturing employment of the Delaware River. This is generally known is in the nondurable category. Delaware also has as the Philadelphia Metropolitan Area and it is a steel mill, which is the very first industrial es one of the country’s most highly industrialized tablishment that you see as you enter Delaware regions. The 612,000 workers in this great in dustrial beehive account for 46 per cent of all from the north. The Reading area takes in all of Berks County, factory employment in the Philadelphia Federal where manufacturing is about equally divided Reserve District. Manufacturing in the Philadel between durables and nondurables— and where phia Metropolitan Area is well balanced and well conversation is about evenly divided between Eng diversified. Every major industry is represented lish and Pennsylvania Dutch. Textiles account here and, as the table shows, the region has for over half of the workers in the nondurable practically an even distribution between indus category, and a large proportion of the textile tries making durables and nondurables. Trans workers are engaged in the production of hosiery, portation equipment, apparel, electrical machin especially women’s hosiery. ery, and textiles are the largest industries of the duces most of the country’s full-fashioned hosiery Philadelphia region but none of these employs in knitting machinery. excess of 10 per cent of the total. Reading also pro As manufacturing regions, York and Lancaster The Lehigh Valley ranks second in size among counties are complementary in the sense that the industrial regions of the district. It is fre York has a preponderance of manufacturing em quently thought of as the Allentown-Bethlehem ployment in durables, and Lancaster in nondur area but actually it includes all of Lehigh and ables. York is a great metal town and specializes Northampton counties in addition to Warren in the manufacture of machinery and the parts County on the other side of the river in New that go into machinery to make it tick. Its fac Jersey. Easton and Phillipsburg on opposite tories turn out a great variety of products such shores of the Delaware are a part of the Lehigh as agricultural implements, chains, cables, wire Valley labor market area. Manufacturing in this products, air conditioners, elevators, metal furni 12 b usin ess re v ie w ture, and all manner of hardware specialties. creased 22 per cent. It is not surprising nor dis Lancaster has just as great variety of industrial appointing to find a somewhat slower growth in establishments as York but by reason of a huge this district. plant specializing in the production of floor cover down the older a region becomes. Rates of growth inevitably slow ings, along with apparel manufacturing of con siderable importance, employment in Lancaster tips the scale on the nondurable side. In the Trenton area, which includes all of Mer cer County, industrial employment is heavily weighted on the side of industries making durable goods. Industries making fabricated metal prod ucts of various kinds employ more workers than any other group. Trenton is also an important center for the manufacture of clay products, con sisting of both sanitary ware and tableware. Wilkes-Barre has the most unbalanced indus trial employment between durables and nondur ables, with the latter accounting for 81 per cent of the total factory employment. In Scranton the situation is somewhat similar, although the dis parity is not quite so great. In both of these cities the apparel industries account for the largest share of the industrial employment. The manu facture of clothing in the anthracite region long PERCENTAGE CHANGES IN MANUFACTURING EMPLOYMENT — 1949-1953 Industry Third District U nited States Food .................................................. Tobacco ............................................. Textiles .............................................. Apparel ............................................. Paper ................................................ Printing ............................................ Chemicals ......................................... Petroleum and c o a l ........................... Rubber .............................................. Leather ............................................ — 1 .1 — 13.7 — 16.3 + 7.9 + 11.0 + 4.0 + 15.3 + 4.1 + 16.5 — 4.4 + 2.6 — 5.0 - 2.8 + 6.6 + 16.4 + 8.6 +21.5 + 8.5 + 21.0 0 Total n ondurabies..................... + 0.7 + Lumber and fu rn itu re ....................... Stone, clay, and g la s s ....................... Primary m e ta ls............... '................... Fabricated m e ta ls ............................. Machinery (except e le c t r ic a l).......... Electrical m a ch in ery......................... Transportation e q u ip m e n t............... Instruments ....................................... Miscellaneous ................................... + 13.2 + 7.7 + 29.1 + 22.3 +29.8 + 58.4 + 53.2 +29.4 + 38.4 + 8.5 + 12.7 +22.1 + 31.3 + 30.4 + 59.9 + 61.6 +40.4 +65.1 Total d u ra b le s ........................... + 32.4 + 35.5 All m anufacturing............................. + 14.3 +21.7 6.4 ago attained substantial proportions because coal Recent changes in manufacturing employment mining is a man’s industry and the clothing fac of the district differed most from those of the tories afforded opportunities for employing the United States in the industries making non durables. Between 1949 and 1953, employment female labor of the region. In Harrisburg, industrial employment is just declined in both textiles and tobacco in both the about evenly divided between durable and non district and in the country, but the declines were durable industries. Including both Dauphin and greater in this district, as the table shows. Cumberland counties on opposite sides of the Chemicals and rubber, in the district, shared in Susquehanna River, the region turns out products the country-wide gains although employment in as unrelated as steel rails and candy bars. creases here did not come up to the national averages. On the other hand, the growth in Recent em p lo ym en t changes apparel employment of the district was slightly During the five years from 1949 to 1953 inclu greater than the national average. sive, manufacturing employment in the district In the field of durables, recent employment increased 14 per cent. In the same period manu changes of the district compare very favorably facturing employment in the United States in with the national changes. Employment showed 13 b usin ess r e v ie w larger percentage gains in the district than in the country in lumber and furniture and in the manu facture of primary metals. The latter is more significant because primary metal manufacturers employed more than three times as many workers in 1953 as did the lumber and furniture producers. The largest gains in industrial employment of this district occurred in the durable industries. As a group, their employment rose 32 per cent during the four years ending with 1953. Within PERCENTAGE CHANGE IN MANUFACTURING EMPLOYMENT METROPOLITAN AREAS — 1949-1 953 Lehigh ..................................................................... Harrisburg .............................................................. Lancaster ................... ........................................... Philadelphia ............................................................ Reading .................................................................. Scranton ..................... ............................................ Trenton .................................................................... Wilkes-Barre ............................................................ D e la w a re .................................................................. York ......................................................................... +14.7 +18.1 +7. 1 +14.4 — 6.6 +15.1 + 7.3 + 8.5 +29.6 +21.2 .................................................. +14.3 Third District the group, employment rose 58 per cent in the Employment changes in the Lehigh, Philadel electrical-machinery industries and 53 per cent phia, and Scranton areas were in line with the in the transportation-equipment industries. The district pattern. In the Lancaster, Trenton, and smallest gain (8 per cent) took place in the stone, Wilkes-Barre areas, employment increased but at clay, and glass division. No durable goods indus try registered a loss in employment during the Reading was the only area where employment period. Among manufacturers of nondurables, employ textiles. ment just held its own. For the group as a whole there was only a fractional gain of less than 1 per cent. Employment declined in textiles, tobacco, leather, and foods. Textiles, and particularly hosiery (of which there is an abundance in this district) continue to look with favor upon the hospitality of the South. The decline in tobacco has nothing to do with the current tempest in the cigarette industry, for most of the tobacco manu facturers in this district make cigars. Chemicals and rubber, with gains of 15 and 17 per cent respectively, registered the largest increases in employment among the industries in the nondur able group. During the past four years, from 1949 to 1953, manufacturing employment increased signifi cantly faster than the district average in three metropolitan areas— namely, Harrisburg, York, and Delaware. The faster rates of expansion in rates considerably below that of the district. declined, largely because of its predominance of W e e k ly hours of w o rk In 1949, industrial workers averaged 38.8 hours a week. In response to the rising tempo of busi ness caused by the Korean conflict and the ex panded national defense program, average work ing time rose to 40.0 hours in 1950, 40.3 hours in 1951, and 40.4 hours in 1952. In 1953 the work week receded to 40.2 hours. Substantial differences prevail in the length of the work week among the various industries. Last year, when the district average for all manufactur ing was 40.2 hours, rubber workers averaged 43.8 hours, which was almost 7 hours longer than that of apparel workers who averaged only 36.6 hours. Differences in the length of the work week from one industry to another reflect such things as dif ferences in demand for their products, labormanagement agreements, customs, and traditions. these areas may be attributed to the prominence Earnings of in du strial w o rk e rs of primary metals in Harrisburg, machinery in Hourly earnings of industrial workers in the York, and chemicals in Delaware. Third District rose steadily during the past five 14 b usin ess re v ie w years. Earnings increased from an average of A concluding o bservatio n $1.37 an hour in 1949 to $1.74 in 1953, and all The Philadelphia Federal Reserve District still industries participated in the rising trend. has all of the natural advantages which contrib As might be expected, there was considerable uted to its development as a great industrial disparity in the average hourly earnings in the area; however, in order to maintain its industrial various industries. In 1953. hourly earnings position in competition with the newer industrial ranged from a low of $1.19 in tobacco manufac areas of the country in the South and West, this turing to $2.34 in petroleum and coal, which region, like other long-established industrial cen means refining and processing— not the extrac ters, is in constant need of modernizing its tech tion of the minerals. Hourly earnings in printing nology. In every industry the technology of manu and publishing ($2.19 in 1953) were also among facturing is always changing and as a consequence the highest for all industry groups. Excepting it is the newer industrial areas that are likely to petroleum and coal, printing and publishing, and be equipped with the latest machines and equip rubber, hourly earnings were generally lower in ment, which intensifies the struggle for markets the industries making nondurables than in the on the part of the manufacturers in older areas. durable goods industries. This, no doubt, is an element in the relative de The disparity in average weekly earnings is cline of employment that some industries in the greater than the differences in average hourly Third District have experienced during the past earnings. This is to be expected because average five years. weekly earnings are a function of both time Manufacturers in the Philadelphia Metropoli worked and the hourly rate. In 1953, when earn tan Area have made heavy outlays for plant expan ings averaged $69.91 a week in all manufacturing sion and modernization, as revealed by the annual industries of the district, workers in the tobacco surveys of this Bank. plants averaged only $45.74 in contrast with whether modernization programs have been suf It remains to be seen $95.90, the average for workers in petroleum and ficient to hold our position in years to come when coal. Workers in the industries making durables, the competitive going gets rougher than it has generally, had higher average weekly earnings been during the post-war years of rapid expansion than workers in nondurables. and high levels of business activity. 15 b usin ess r e v ie w A M IDYEAR REPORT FROM NEW -CAR DEALERS The chart story on pages 1 and I I of this Review 0 illustrates some major trends in the automobile industry. Among the most striking developments revealed are: (I) The fact that production has been outrunning retail sales, and (2) list prices of new cars have held steady, while used-car prices have undergone a slump. Both of these factors put considerable pressure on new-car dealers. In an Invento ries — not so burden so m e The one problem that new-car dealers say is pretty much licked has to do with inventories. Only four of the 52 dealers interviewed said that in ventories were now a problem. This is not to say that dealers stock-to-sales ratios are just right. Most dealers are quick to point out that they still effort to determine how successful local dealers have been in coping with their problems, this Bank point seems to be that a better understanding be interviewed 52 new-car merchants in the various tween market areas of the Third Federal Reserve District. reached. have a few too many cars on hand. The important manufacturers and dealers has been For example, in an effort to help dealers move About a year ago the backlog of new-car demand, their stock many manufacturers are offering accumulated during World War II and the period bonuses and other incentive plans. In many cases of restricted production following the Korean out these are flat bonus payments with no quota tar break, was no more. “ Immediate delivery,” once gets involved; so that the plans, which actually a cherished goal of car dealers, suddenly became amount to price cuts from the manufacturer, en a reality— to a few dealers a disturbing reality. The change in environment was brought into sharp focus this past winter. Price cutting, fan tastic trade-ins, and free accessories were the order of the day near the end of the model season. Some dealers were forced out of business. In Philadelphia, for example, the new-car dealers association lists 132 agencies as compared with 165 agencies on December 31, 1952. Over the early part of this year, new-car mer chants had little relief from their troubles. Gen erally, three principal problems able dealers to bargain more persuasively with prospective buyers. But perhaps more important than the special bonus and incentive plans set up, dealers report a better meeting of minds with producers. Until recently, many dealers felt they were expendable; that manufacturers unloaded cars on them with out regard to their needs. Now, however, dealers feel that car manufacturers are fully aware of and sympathetic to their problems. confronted them: (1) slower sales, (2) reduced profits, (3) But sa le s still come hard As we turn into the Frankly, one of the main reasons for this survey second half of the year, a survey of new-car was to see whether we could catch a change in dealers in the Third Federal Reserve District new-car sales as it was developing. It now seems burdensome inventories. shows the box score on these problems to be one that we misjudged; there was nothing there to down and two to go. catch. 16 b usin ess re v ie w Of course, new-car sales did improve some in Profits — honed to the bone late May and June, but more than two-thirds of A first-quarter report of the National Automobile those interviewed said that on a seasonal basis Dealers’ Association revealed profits on opera sales were disappointing. In addition, almost tions at 0.8 per cent of sales. Last year, for the everyone agreed there was nothing about the new- same period, profits stood at 4.4 per cent of sales. car market in the spring buying season that sug In addition to this, our survey revealed only three gested a change for the better in the second half dealers of the 52 questioned who said that their of the year. Generally, the dealers who had a good spring were the same dealers who had en joyed better-than-average demand in the previous profit margin per sale was as high as a year ago. To point up the seriousness in the deterioration in earnings, half of the new-car merchants said months. As a result, only about six of the 50-odd dealers that they would have to cut staffs and effect other surveyed felt that there would be a pick-up in new- economies unless profit margins were improved. car sales in the second half of the year. Most of them said that the first six months looked better Conclusion than what’s ahead. Automobile sales, historically, On balance, this report from car merchants in start falling off after the Fourth of July and keep this area is not an optimistic one. Spring sales dropping until the new models are introduced. were not high enough to signal a turning point, This looks like a year in which this general rule and profit margins remain too thin; yet improve will hold, according to the dealers. ment in the inventory situation is encouraging. CURRENT TR E N D S This is the season for mid-year forecasts. Of those out. Continued strength in some sectors has that have appeared, the major theme seems to be helped to shore-up the depressed areas and sus “ business will be better” — but not much better. tain a generally high level of business activity. A few, however, are skeptical. They think busi Total consumer spending has held up well and is ness may decline further before it improves. supported by a stable level of income after taxes The optimism of the “ optimists” is apparently and a large and growing volume of savings. Con based on recent developments and underlying struction has been running ahead of last year and forces of considerable strength. Consumer de business spending for plant and equipment is mand for some durables is improving; new orders only a little below the all-time record of 1953. received by manufacturers have been increasing; Construction and business spending too are sup industrial output recently turned upward; prog ported by a large volume of purchasing power ress has been made in liquidating inventories; and an ample supply of credit available on favor and the decline in defense spending is flattening able terms. The recent reduction in reserve re- 17 b usin ess r e v ie w quirements, releasing about SI.5 billion of bank mainly those which expanded most rapidly dur reserves, makes available additional credit to meet ing the defense build-up from mid-1950 to mid- both business and Treasury needs during the re 1953. The decline in demand for finished durable mainder of the year. goods embraced consumers, producers, and the The pessimism of the “ pessimists” reflects a defense program; and the effect was magnified by measure of skepticism as to the significance of a shift in inventory policy— from substantial ac recent developments. The favorable tendencies cumulation to liquidation. may largely reflect efforts to hedge against ad There are significant similarities and differ verse developments in Indo-China, concern over ences between the present slump and that of 1949. wage negotiations in the steel industry and other They are similar in that both centered in the man temporary factors. Then too, nonagricultural em ufacture of durable goods; both were accom ployment continued to drift downward, the drop panied by inventory liquidation; and in both total in the adjusted index for May being the seventh consumer spending held about stable. They differ, consecutive month of decline, and there is no however, in that consumer and Federal Govern conclusive evidence that the inventory readjust ment purchases of durables, declined this time in ment has been completed. The present situation, contrast to an increase in 1949. therefore, offers no definite evidence to the pes The recent flattening out of the decline in de simists of new developments of sufficient strength fense purchases, some improvement in consumer to stir business out of the doldrums and initiate a demand for durables and the gradual liquidation sustained recovery. It may be helpful in weighing these views and of inventories, indicate that the major down-pull making our own appraisal of the outlook, to take gether with continued strength in the sustaining forces are weakening. These developments to a look at the nature of the slump which began in forces indicate that on balance business activity mid-1953. Two features are significant. It has should be stable or possibly better in the latter centered in the basic durable goods industries, part of the year. 18 F O R THE R E C O R D . . . INDEX BILLIONS % MEMBER AGO AGO Factory* Third Fe d e ra l Reserve District P e r cent ch a n g e SU M M A RY Un ted States P e r cent ch a n g e Departm ent S to re Check Payments Em ploy ment year ag o 1 * -18* 0 1 +19 -31 5 mos. 1954 from year ag o -15* +15 -20 M ay 1954 from mo. ag o 0 +2 + 5 year ag o - 9 +18 -25 5 mos. 1954 from year ago -11* -12* -1 -11 - 8 4 1 -12 - 5 - -4 +1 - - + 4 + 5 + 4 + 3 + 6 Stocks P e r cent ch a n g e M ay 195 4 from Pe r cent ch a n g e M ay 1954 from P e r cent ch a n g e M ay 195 4 from Pe r cent ch a n g e M ay 195 4 from year ago mo. ag o year ag o —1 - 9 -2 -11 -1 - C H A N G ES Per cent ch a n g e M ay 1954 from mo. ag o year ago -16 -11 - 6 -1 -21 -13 - 9 +3 - 7 - 3 year ago mo. ago mo. ag o year ag o 5 - 1 + 1 S a le s LO C A L - 9 +11 -17 3* - 1 4 * 1* - 1 6 * Payrolls -4 O UTPU T M a n u fac tu rin g p rod uction. . . Construction c o n tr a c ts !........... C o a l m ining............................... - - - La n caste r. . . . 4 4 + 8 -11 -7 + 3 - + P h ila d e lp h ia . . - 3 0 0 3 + + + -175 - 4 5 + 15 + 5 0 1 2 7§ 0 +1 +2 +2 0 -3 1t 0 0 - 9 5 + 5 + 2 + 9 +10 + 6 + 5 + + 5 8 + + 1 1 0 -11 - 7 -10 -1 - 2 -23 R e a d in g .......... + 4 + 3 + 4 + 4 -11 -1 -10 +2 -16 - 4 -15 -2 - S c ra n to n ......... T R A D E ** Departm ent store s a le s ............ - B A N K IN G ( A l l member banks) D ep osits...................................... L o a n s ........................................... Investments................................. U .S . G o v t, se cu ritie s............. O t h e r ........................................ C h e c k paym ents........................ 1954 mo. ago M ay 1954 from mo. ag o EM PLO YM EN T A N D IN C O M E Facto ry em ploym ent................. F R D BANKS 3RD -1 - 4 +4 - 7 - T re n to n ........... -2 -17 -1 -23 -15 W ilk e s - B a r r e . -4 -12 +3 -13 - 6 + - 2 6 - 7 - 8 -2 +12 - 6 - 8 -21 -8 -17 +12 1 -11 -2 -13 - 5 W ilm in g to n .. . - 1 - 8 0 - 5 - 9 - 9 -3 - 7 Y o r k ................ - 4 -2 - 7 - 7 -22 -5 -11 + 1 7 - 4 0 +12 PR IC E S C o n su m e r.................................... Ot + 1t + + + 1 1 *Pe n n sylvan ia tP h ila d e lp h ia §20 C itie s * *A d iu s te d for seasonal v ariatio n . tB a s e d on 3-month moving ave rag e s. -2 - 7 - 2 * N o t restricted to co rp o rate limits of cities but covers a re a s of one or more counties. 19
@FedFRASER