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Higher Prices Ahead?
The Future of Trade Credit
From Surplus to Shortage

Federal Reserve Bank of Philadelphia

H ig h e r P r ic e s

A h e a d

by David P. Eastburn

Predictions of a strong pickup in the economy have raised
new fears of inflation. This is natural in view of the price
increases that took place during 1966. The easy assumption is
that a revival of rapid economic activity will bring the same
conditions prevailing then. A somewhat longer view of busi
ness expansions in the 1950’s and so far in the 1960’s, how
ever, points to developments in the second half of this year
different from those many seem to expect.
This view is provided in Charts 1 and 2. The charts are
based on the theory that one important-source of price pres
sure is the force of high rates of production on capacity to
produce.* When manufacturers operate close to their pre
ferred percentage of capacity, a number of things are likely
to be going on typical of an inflationary environment. Pro
ducers place advance orders for scarce materials frequently
at higher prices, bid more for labor, pay overtime, put up
with less efficient workers and machinery, and so on.
The statistics bear this out. As Chart 1 indicates, not much
happens to prices in the early stages of business expansion as
manufacturers operate far under capacity. As operations
move up, prices rise somewhat. Then, at about 90 per cent of
capacity, prices begin to rise rapidly. In most expansion
periods during the past decade and a half, prices have stabi
lized when manufacturers again operated at somewhat lower
rates. The main exception was in 1956-57, when many came
to believe the economy was subject to ( Continued,

on Page 8)

*M u ch depends, o f course, on which prices one is talking about.
H ere the focus is on manufacturers’ wholesale prices because these
respond m ore sensitively to pressures in the short run. Consumer
prices react later and also are su bject to special influences in such
areas as food and services.

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.
Requests for additional copies should be addressed to Bank and Public Relations, Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania 19101.

Businessmen are acting as though they expect credit to tighten later this year. One source of credit,
particularly to small business, is credit extended by business firms to each other— trade credit. Experi
ence during the 1960’s raises some questions about . . .

THE FUTURE OF
TRADE CREDIT
by Hugh Chairnoff
Corporate manufacturers had almost $69 billion

One simply has been because of increases in sales.

of accounts receivable on their books at the end of

The other has been because more credit has been

1966.1Taking into account trade credit they them
selves received (their accounts payable), these

extended per dollar of sales (an increase in the
“ credit rate” ) .4 An increase in the credit rate can

manufacturers were owed about $36 billion by

occur as manufacturers liberalize credit terms,

other businesses.* In comparison, all commercial
2
1

extend credit to a larger proportion of their cus

banks had outstanding loans to business (only

tomers, increase credit limits to customers, or
relax collection policies.

some of which were manufacturers) of $79 billion.
Underlying these very large figures are changes

During most of the 1960’s, receivables have not

in the growth and character of trade credit that
may be an omen of things to come. For during the

grown so fast as in the 1950’s. Chart 1 shows that
receivables were growing faster than sales during

1960’s the growth of trade credit has slowed
down.3 As their liquidity has declined, corporate
manufacturers have been taking a harder look at
their credit function.
HOW TRADE CREDIT HAS GROWN

Trade credit has grown primarily for two reasons.
1Throughout this article trade credit exten ded only by
corporate manufacturers is considered. Besides being the
m ost important providers o f trade credit, only manufac
turers provide current data in sufficient detail for analysis.
2These and other data in this article are based on
F .T .C .-S .E .C . Quarterly R eports of Manufacturing Cor
porations. The data have been spliced to adjust for
sample changes and sm oothed to rem ove a definite sea
sonal pattern. O ne disadvantage o f this source is that not
all industries have size distributions similar to the dis
tribution o f the entire manufacturing sector. Thus, the
conclusions o f this article may not apply to every industry.
*This article exam ines the growth of accounts receiv
able only. H ow ever, the growth of net receivables
( accounts receivable less accounts payable) closely par
allels the growth of accounts receivable as Chart 3 points
out.

the 1950’s but that the two have kept pace with
one another during most of the 1960’s. The bottom
line of the chart confirms that the growth of re
ceivables relative to sales levelled off in the 1960’s
following a persistent rise in the 1950’s.
The principal reason for the slower growth of
trade credit has been a slower increase in the
credit rate. In the 1954-57 business expansion and
again in the 1958-60 expansion, increases in sales
accounted for about 65 per cent of the increase in
receivables (see Table 1 ). Increases in the credit
*There is a third factor known as “ interaction.” It
reflects the change in trade credit arising out o f a com
bination o f a change in sales and a change in the credit
rate. Usually, interaction is the least important of the
three factors. Sym bolically,
Change in R eceivables ( A R ) =
( 1 ) Change due to Sales Change — A S ( R 0/ S 0)
(2 ) Change due to Credit Rate Change — S« (R ffS i)
(3 ) Change due to Interaction — A S ( R i /S i — Ro/So)
where, R = R eceivables, S = Sales, R 0 S 0 — ratio of
/
receivables to sales, beginning o f period, RiSi = ratio of
receivables to sales, end o f period.

b u sin e ss re v ie w

CHART 1

TABLE 2

RECEIVABLES AND SALES OF
MANUFACTURING CORPORATIONS

RANKING OF CORPORATE
MANUFACTURERS BY CREDIT RATE*
Size
(in m illio n s )

Less than $1
$1- $5
$5- $10
$10- $50
$50-$100
O ver$100

1954 1957 1958 I9 6 0 1961 1965 1966
in
II
II
II '
IV
IV

4
3

5
3

5
4

3
5

5
3

*T h e R o m a n n u m e ra ls a re c a le n d a r q ua rte rs. T h e ra n k
in g s are a s of the end of the c a le n d a r quarter.

credit during the 1960’s. As Table 2 indicates, the
credit rate during the 1954-57 period of business
rate accounted for about 30 per cent. In those two
expansions, the credit rate increased by an aver
age of 4 per cent and 3.75 per cent annually.
From 1961 through 1965, however. 89 per cent
of the increase in receivables was attributable to
increases in sales; only 7 per cent was accounted
for by an increase in the credit rate. In fact, the
credit rate increased only an average of 0.7 per
cent annually during this period, a substantially
smaller increase relative to previous expansions.

expansion was highest for middle-sized manufac
turers. That is, manufacturers in the $5 million to
$50 million size group extended more trade credit
per dollar of sales than did other size groups.
Manufacturers with assets less than $5 million
had the next highest credit rate, and the largest
manufacturers had the smallest credit rate. But by
the 1958-60 period, larger manufacturers began
to become more important and smaller manufac
turers less important. Then, during the 1960’s this
process continued so that by the end of 1965,
manufacturers in the three largest size groups,

Large and sm all m anufacturers

Larger manufacturers have become relatively
more important in the extension of total trade

those with assets of $10 million or more, ranked
first, second, and fourth in terms of the amount of
credit extended to customers per dollar of sales
(the credit rate).

TABLE 1

Bear in mind, however, that all this is rela

CAUSES OF GROWTH OF RECEIVABLES

P eriod

P er C ent
Due to
Sales

P er C ent
Due to
C re d it Rate

1954-1957
1958-1960
1961-1965
1966

65%
64
89
81

28%
31
7
17

tive.

It was taking place in a situation in

which the credit rate was accounting for a much
smaller part of the increase in receivables than in
the two previous expansions. On balance, smaller
manufacturers in the 1960’s actually reduced their
receivables relative to sales whereas in previous
expansions changes in the credit rate had been a
very significant factor in the growth in their re

b u sin e ss re v ie w

ceivables (see Table 3 ). Thus, smaller manufac

larger manufacturers (see Table 3 ). They in

turers used trade credit much less as a competitive

creased the amount of credit extended per dollar

weapon in the 1960’s than in the 1950’s. Larger

of sales during this period at a faster rate than

manufacturers also used trade credit much less as

they had during the 1961-65 period. In the case

a competitive weapon in the 1960’s though they

of smaller manufacturers, changes in receivables

did not reduce their reliance on trade credit to

were proportionate to changes in sales. These

the extent that smaller manufacturers did.

manufacturers were less able or willing to pro
vide credit to help fill the credit needs of their

Experience in tig h t money: 1966

customers. Their behavior in 1966 was not differ

If, indeed, tight money conditions are ahead,

ent from their behavior during the 1961-65 period.

businesses needing trade financing will be more
1960-65. Corporate manufacturers did come to the

WHY THE SLOWER GROWTH DURING
THE 1 9 6 0 ’S?

aid of their customers in 1966. They provided

Two hypotheses may be advanced to explain both

interested in what happened in 1966 than in

credit in excess of their growth in sales. Compared

the slowing growth of trade credit and the increas

to the 1961-65 period, growth of receivables rela

ing importance of larger manufacturers in dis

tive to sales was much higher. Changes in the

pensing trade credit. First is that the demand for

credit rate accounted for 17 per cent of the in

trade credit has slackened. Unfortunately, lack of

crease in receivables during 1966 compared to

adequate information on the major receivers of

only 7 per cent in the 1961-65 period (see Table

trade credit makes this approach a speculative

1). Even so, the response was considerably short
of the liberalization of credit rates that took place

one. The lower relative cost of other sources of
financing does not appear to be a strong enough

during the 1950’s when increases in the credit

factor to discourage using trade credit as a source

rate accounted for about 30 per cent of the in
crease in receivables.

of funds.
A second approach looks at the problem from

And the response mostly was confined to the

the supply side. Perhaps corporate manufacturers
were unable or unwilling to extend credit per
dollar of sales as liberally as had been the case in

TABLE 3

the 1950’s. It may be that manufacturers became

PER CENT OF RECEIVABLES ACCOUNTED
FOR BY CHANGES IN THE CREDIT RATE,
BY SIZE OF MANUFACTURER

capital expenditures began to rise at an increasing

-Size
(in m illio n s )

Less than $1
$1- $5
$5- $10
$10- $50
$50-$100
Over $100

19541957

33
25
41
42
31
24

^C red it rate declined.
* * L e s s th a n 1 per cent.

19581960

51
65
15
46
55
26

19611965

more pressed for funds during the 1960’s as their
rate. The long period of almost continual pros
perity since the Second World War has caused

1966

manufacturers to dip, with heavy hands, into their

❖

liquidity in order to meet the demands of a grow

5
❖*

2
*

ing economy. At some point, continually declining

5
22
10

16
78
22

liquidity may be expected to have some impact on
their ability to extend credit to customers on in
creasingly liberal terms.
Chart 2 contrasts the downward trend in manu
facturers’ liquidity to growth of receivables and

busin e ss re v ie w

CHART 2

important factor is that liquidity of larger manu

LIQUIDITY AND TRADE CREDIT OF
MANUFACTURING CORPORATIONS

facturers may have been higher relative to the
level of liquidity they desired than was the case
with smaller manufacturers. As a result, by the end
of 1966, differences in the level of liquidity among
size groups had been substantially eliminated.
Thus, the combination of sharply declining
liquidity and the slower liberalization of credit
extended per dollar of sales implies that manufac
turers have adapted credit policies to current con
ditions. Certainly the increased stress on credit
management during the 1960’s is partly a reflec
tion of a growing problem of profitably allocating
a limited supply of funds over a growing number
of alternatives. The use of trade credit as a com
petitive weapon was bound to suffer. Competition
no longer may be the sole criterion for granting
trade credit on increasingly liberal terms.
THE FUTURE

The full impact of declining liquidity on the
growth of trade credit may not yet have been felt.
Larger manufacturers have carried the ball thus

net receivables relative to sales. Except for peri
ods of recession, corporate liquidity has been
declining fairly consistently. Yet, until the 1960’s
growth of receivables and net receivables had been
growing very rapidly. It may be that some re
action to declining liquidity was felt during the
1960’s. During the postwar period and especially
during the 1960’s, customers’ financing needs
were but one of many competitors for the avail
able funds of manufacturers.
Chart 3 illustrates the experience of manufac
turers of various sizes during the 1960’s. Larger
manufacturers have suffered a more rapid decline
in liquidity. This is partly because they have main
tained growth of receivables to a much greater
extent than the smaller manufacturers. Another

b u sin e ss rev iew

far in the 1960’s. But the sharp decline in their

facturers. Thus, they can continue to finance their

liquidity may be only beginning to have its major

customers without severely constraining their own

impact. Larger manufacturers have been taking
a harder look at their credit function. The rapid

plans for growth. Captive finance companies
seem assured of a more important role in the flow

growth of “ captive” finance companies, especially

of inter-firm credit in the years ahead.

among the larger manufacturers, represents an

Trade credit represents a significant source of

attempt to overcome the pressures of declining

credit for smaller business firms. Developments

liquidity on the financing of customers.5 Via these

will need to be watched carefully for signs of con

captive finance companies, manufacturers can tap

tinued willingness of larger business firms to pro

credit markets for more funds than they might

vide credit to others. Developments during the

prudently acquire under their banner as manu-

1960’s may have signaled the beginning of a new

"The presen ce o f “ captive” finance companies results
in an understatement o f the amount o f credit corporate
manufacturers, particularly large ones, have extended to
other businesses.

era for trade credit. Should another period of
credit restraint materialize in the future, trade
credit will be put to the test again.

BUSINESS REVIEW INDEX
The Library of th is bank has recently published a cum ula
tive index of articles in the Business Review of the Federal
Reserve banks, covering the years 1 950-1966. Libraries
w ishing copies fo r th e ir collections may obtain the index
upon request to the Bank and Public Relations Depart
ment, Federal Reserve Bank of Philadelphia, Philadelphia,
Pennsylvania 19101.

b usin e ss r e v ie w

CHART 1
OPERATING RATE AND PRICES
IN MANUFACTURING
Prices

1st Quarter 1961 to 1st Quarter 1967

( Continued from Page 2 )

chronic inflation; prices kept rising even though
operating rates dropped from 91 per cent of
capacity to below 85 per cent.
Labor costs play an important part in this
whole process (See Chart 2 ). Early in the period
of business expansion, unit labor costs actually
decline as manufacturers begin to operate at
higher rates and benefit from using their most
efficient work force and equipment. As operating
rates reach and exceed about 90 per cent, how
ever, unit labor costs increase sharply. Then, still
later, even though operating rates decline, labor
costs continue to increase.
At the risk of over-simplifying very complex
phenomena, it is possible from this past experi
ence to point out three phases:
P hase 1

Phase 2

Phase 3

Capacity utilization
in manufacturing

Low & Near
Receding
rising
preferred from
operating peak
rate

Manufacturers'
wholesale prices

Rising Rising
slowly sharply

Stabilizing

Unit labor costs in
manufacturing

Declin Rising
sharply
ing

Continuing
to rise

One way of appraising the forces likely to be
at work in the near future is to speculate on which
phase of the expansion the economy is likely to
be in. The difficulty, of course, is that no two
Operating Rate (Seasonally Adjusted)

periods are exactly alike, a difficulty compounded

This chart shows how wholesale prices of manufactured
goods change as producers operate at different levels of

by the fact that the current expansion is the

capacity. Each panel represents a period of business expan
sion between recessions. If prices were to rise steadily as
operating rates approach capacity, each line should move
in a generally northeastwardly direction.
In fact, prices rise slowly in early stages of expansions, then
sharply when operating rates get close to 90 per cent. Later,
operating rates tend to recede and prices stabilize. The major
exception was in 1956-57, a period dominated by a psy
chology of chronic inflation.

longest on record and the U.S. is involved in war.
But it certainly appears that the first phase is far
behind; operating rates are well above levels
characteristic of early post-recession periods.
Symptoms of the second phase were experienced
in 1966, with operating rates at or above 90 per
cent and prices and labor costs rising rapidly.
Signs of the third phase have been present so far

b u sin e ss re v ie w

this year; operating rates have receded to about
85 per cent, wholesale prices have virtually stabi
lized, and unit labor costs have continued upward.
The question now is what lies ahead. In every
case in the 1950’s, the third phase led to recession.

CHART 2
OPERATING RATE AND UNIT LABOR COSTS
IN MANUFACTURING
(Seasonally adjusted)
Unit Labor Costs
1st Quarter 1961 to 1st Quarter 1967
Index (1957-59=100)

This clearly is not in store for the immediate
future. But it is hard to visualize a rapid return
to conditions of the second phase unless Vietnam
spending escalates much more rapidly than pub
lished reports indicate. Production probably will
pick up in the next six months, but capacity also
will be expanding. In fact, even if production were

2nd Quarter 1958 to 2nd Quarter 1960

to rise in the second half of the year at the healthy
rate it has increased over the whole period of
expansion since the end of 1960, the operating
rate probably would go no higher than 86 per
cent. A less optimistic assumption about produc
tion, such as one based on the possibility of
strikes, would produce a lower figure. The likely
operating rate in manufacturing, therefore, gives
no indication of strong pressures on prices.
Labor costs, on the other hand, promise to rise
further. Wage settlements recently have tended to
be greater than increases in productivity, and a
number of major contracts come up for renewal
in the near future. If there is to be strong pressure
on prices, therefore, it would seem to stem more
from rising unit labor costs than simply produc
tion pressing on capacity. But there is only one
precedent in the past four expansions for a sub
stantial increase in prices when operating rates
are fairly comfortable— even though labor costs

Operating Rate

are rising. The precedent was 1956-57 when the

This chart shoivs how labor unit costs in manufacturing

chronic-inflation thesis was widely accepted. De

change as producers operate at different levels of capacity.

spite talk of inflation, it is doubtful if a com
parable psychology is now at work.
All this does not prove that a major surge in
prices between now and the end of the year is
impossible. But it seems considerably less than a
sure thing.

Each panel represents a period of business expansion between recessions. If labor costs were to rise steadily as
operating rates approach capacity, each line should move
in a generally northeastwardly direction.
In fact, labor costs decline in early stages of expansions,
then rise sharply when operating rates get close to 90 per
cent. Later, operating rates tend to recede but labor costs
continue to rise.

Despite the current adjustment in the economy which has caused slight increases in unemployment,
the employment situation in metropolitan areas of Pennsylvania, New Jersey, and Delaware is impres
sive. While only a few years ago large pockets of persistent unemployment were the norm, the last
couple of years have seen a transition...........

FROM SURPLUS TO
SHORTAGE
by Richard W. Epps
As industrial developers size up the sixties, they

areas quality of the local labor force is a major

have much to congratulate themselves about.
Partly as a result of their efforts, metropolitan

key to future growth. Out-migration generally

areas in Pennsylvania, New Jersey, and Delaware1

drains off the best workers, thus hurting the qual
ity of the area’s labor force.

are riding through 1967 on some of the lowest

Much of the past lag, however, may be coming

unemployment levels they have ever experienced.

to an end. In particular, the drag created by min

And the declines in unemployment leading to

ing is less; that of railroading is drawing to a

these low levels have been much sharper than has

close. Most areas have shown above-average
growth compared to the Northeast region of the

been true in the nation as a whole.
But under the hue of health generated by this

nation.

record are problems requiring solutions. Top on
the developers’ list is the fact that five metro
politan areas still have unemployment rates above
the national average. Since 1958 efforts of local
leaders plus national prosperity have sliced much
of the fat off the rates in these areas— in 1958
they averaged 125 per cent above the national
unemployment rate; this had been cut to 30 per
cent by the end of 1966. But, more slicing is
required.
Second in order, but equal in importance, the
rate of job growth still deserves attention. In sev
eral areas expansion in employment has been
slow, in part causing workers to leave. For most
1This article deals with areas within the Third Federal
R eserve District which includes all o f Delaware, Eastern
Pennsylvania, and Southern N ew Jersey. Thirteen m etro
politan areas lie within this region — A llentow n-Bethlehem -Easton, Altoona, Atlantic C ity, Harrisburg, Johns
town, Lancaster, Philadelphia, Reading, Scranton, Tren
ton, W ilkes-Barre-H azleton, W ilm ington, York.

Then and now

In 1958 the economy in these 13 metropolitan
areas was extremely sluggish, as was the nation’s.
Almost one worker in ten was out of a job. By the
end of 1966 a dramatic change had taken place.
Only one worker in 30 was looking for employ
ment.
Between 1958 and 1966, national unemploy
ment was reduced by 42 per cent. In the 13 metro
politan areas, (see Chart 1) the smallest propor
tionate reduction— Atlantic City’s 52 per cent—
was still 10 percentage points better than the na
tional performance. The best record was Read
ing’s. It cut joblessness by 79 per cent in that
period.
The relative employment position of the 13
metropolitan areas vis-a-vis one another, however,
has changed very little. All made important gains
but the five areas with the highest rates of unem-

b u sin e ss re v ie w

CHART 1
UNEMPLOYMENT IN LOCAL METROPOLITAN AREAS
Unemployment rates, the per cent of workers in the labor market who do not have jobs, have declined sharply in metro
politan areas since 1958. However, there is still a diversity between the rates o f . . .
five high-unempl'oyment areas

. . . and. . .

eight low-unemployment areas.
ALLENTOWNBETHLEHEM-EASTON

15
<31 0

s
.
5

1 1 1 1 1 1 I 1 I
1958 ’60 '62 '64 '66

\V yv

v \V

<31 0

<3 io

15
£

1 1 1 1 1 1 1 1 1
” 1958'60 '62 '64 '66

JOHNSTOWN

£
5

1 1 1 1 1 1 1 1 1
1958'60 '62 '64 '66

SCRANTON

PHILADELPHIA

V v

1 1 1 1 I 1 1
' 1958 '60 '62 '64 '66
READING

5
1 1 1 1 1 1 1 1 1
” 1958 '60 '62 '64 '66
TRENTON

1958 60 '62 '64 '66

ployment in 1958 were still trailing the other

mean that the area is busier than before and

eight at the end of 1966. If anything, they were

hence in better shape, economically. A decrease in

trailing by a slightly greater margin than had

job seekers, on the other hand, means either that

been the case eight years before.

workers have stopped looking for jobs, perhaps
because they’ re discouraged about job prospects,

What happened?

or as is more often the case, that the area has be

Unemployment declines have occurred in two
ways: Most workers have been taking new jobs,
but some have just stopped seeking work.

come less attractive to able-bodied workers who
have therefore gone elsewhere seeking employ
ment.

Obviously, these two developments have differ

Now such out-migration does in fact reduce an

ing effects on an area’s economic health. An in

area’s unemployment rate, all other factors being

crease in jobs is an unqualified boon. It can only

equal. But it also poses special problems to local

b usin e ss re v ie w

CHART 2
WHERE THE UNEMPLOYED WENT
In most areas the unemployed went into new jobs (indicated by the darker areas). However, in some— particularly in the
high unemployment areas on the left— they migrated out of the area (indicated by the lighter sections of the charts).
ALTOONA

ATLANTIC CITY

HARRISBURG

LANCASTER

PHILADELPHIA

1958 60 '62 '64 '66
SCRANTON

JOHNSTOWN

pi I I I ............
1958'60 '62 '64 '66
WILKES-BARRE-HAZLETON

5 -

pl.-l M

i l 11. .1 1-

1958'60 '62 '64 '66

leadership. Those workers who move out are

industries considering moves into new areas and

generally younger, better educated and more pro

seeking both skilled labor and a growing poten

ductive than those who stay behind. And so,
although unemployment may be reduced through

tial market.
Chart 2 shows the play of these two factors—

a drop in the number of job seekers, the smaller

increase in jobs, decrease in job seekers-—on the

work force is proportionately older and less skill

13 metropolitan areas.

ed, making the development job more difficult. In

In the cases of eight— Atlantic City, Harris

fact, this kind of movement can set off a cycle,

burg, Lancaster, Reading, Philadelphia, Trenton,

with selective migration of the best workers and

Wilmington, York— the problems brought on by

decline of the market area leading to slower em

out-migration are absent— there was no labor

ployment growth, more surplus labor and more

force shrinkage between 1958 and 1966. For each

out-migration. This is hardly an inducement for

of them the decline in joblessness has been due,

b usin e ss re v ie w

purely and simply, to an increase in jobs. In the
cases of the other five— Allentown-BethlehemEaston, Altoona, Johnstown, Scranton, WilkesBarre-Hazleton— there was, in the eight-year pe
riod, both a reduction in labor force and an in
crease in jobs. However, in Altoona and Allen-

CHART 3
ONE PRODUCT OF THE OUT-MIGRATION OF
‘ WORKERS IS AN AGING POPULATION
Areas to the left had a net in-migration of population be
tween 1950 and 1960. Those to the right had out-migration.
There is a clear tendency for the median age of the popula
tion to increase as out-migration increases.

town-Bethlehem-Easton, the labor force shrinkage
was temporary. By the end of last year, both had

CHANGE IN MEDIAN AGE, 1950-1960
Years Change

labor forces at least as large as in 1958. And in
the other three— Johnstown, Scranton, the WilkesBarre area— job gains have begun to cut jobless
ness. Indeed, in Wilkes-Barre, these gains started
in 1962. This upturn is all the more dramatic
when one considers how difficult it is to stem the
downward spiral set off by out-migration.
In Chart 3 one can see very clearly the prob
lem in out-migration. As a general rule, the more
workers an area loses the older its remaining work
force becomes; the more workers it gains the

Why such differences? There are two prime

younger its work force grows. In Wilmington,

factors: the area’s industrial “ mix” and local

which had the greatest in-migration of workers
between 1950-60, there was a decline of more

factors encouraging or inhibiting growth. In the
short run, at least, there isn’t much an area can do

than one and one-half years in the median age of

about its industrial mix. It either rides it to

its labor force. Wilkes-Barre, which had the big
gest out-migration, also had the biggest increase
in median age of labor force.

growth if fortunate or faces economic headaches
if unfortunate. For example, Wilkes-Barre’s econ

Differences in growth

By the end of 1966, therefore, employment growth
was a factor in reducing joblessness in all 13
metropolitan areas.
Even in those with the most serious problems, it

omy has grown relatively slowly because of its
reliance on sluggish industries like mining and
apparel manufacturing— an unfavorable indus
trial mix. Trenton, on the other hand, has enjoyed
above-average growth partly because of its com
plex of typically fast-growing businesses like
government.
Thus, in comparing growth rates, it’s necessary

wasn’t labor force shrinkage alone that was im

to take into account— and make allowances for—

proving the picture.
However, the differences in growth have been

each area’s industrial mix. If one knows the indus
tries represented in a given area and the number

sharp. The slowest-growing area, Johnstown, has

of workers in each, one can calculate what the

been expanding at only one-ninth the rate of the

area’s economic record should have been for it to

fastest-growing area, Wilmington. And the five

have kept pace with the region generally. This is

high-unemployment areas have measured only

done by comparing the area’s record— industry

one-half the rate of growth of the other eight.

by industry— with the record in the entire North

b u sin e ss re v ie w

eastern United States.2 This shows whether em
ployment in a given industry in Philadelphia, for

only three areas would be trailing the region in
growth instead of the seven that are actually be

example, has been expanding— or shrinking— at

hind. Overall, then, the industrial mix has been

a rate greater than, equal to, or less than the

adverse.

regional rate. It also shows how an area’s total

As developers look to the future the industry

employment picture compares with the regional

mix should cast less of a shadow on their plans.

experience.

For one thing, mining, which has damaged the

Thus, the Allentown-Bethlehem-Easton area
would have added 2,000 employes between 1958

employment picture in Scranton and WilkesBarre-Hazleton, has almost dried up. This means
that it won’t be hurting their economies so much

and 1966 if each of its industries had grown at
exactly the rate of the Northeastern U.S. That was
the “ expected” growth of the area, given its indus
trial mix. In fact, however, it added 2,600
workers. Its actual growth was 600 workers
greater than its expected growth. This difference

in the future as it has in the past. Only Johnstown,
with 7 per cent of its employment in mining, will
continue to be seriously affected by the decline in
that industry.

is the “ local area” effect. It represents differences

Second, the employment shrinkage in railroads
and public utilities will cause less future disloca

resulting from local conditions which encourage

tion. Both have been slipping for several years

or inhibit growth, and which to some extent may

and are no longer so important to economic health

he altered by local initiative.

in these areas as they once were.
On the other hand, textiles and apparel manu

The industrial mix

facturing— both lagging industries— have been

In all areas but Trenton the industrial mix acted

growing in importance over the years. Their in

as a drag on economic growth. In Scranton,
Wilkes-Barre-Hazleton, Altoona and Johnstown,

creased shadow may offset some of the encourag

the over-sized concentrations of coal mining— all

public utilities.

ing notes found in mining, transportation, and

in rapid decline— were a major cause of lag. All

In sum, an adverse industrial mix has held

areas were held back by stagnation in railroad

back local metropolitan areas. And the adverse

employment and technological change in utilities

mix has resulted from specialization in four in

which led to employment cuts. Altoona was par
ticularly hard hit because of its reliance on rail

dustries:

textiles and apparel manufacturing,

mining, transportation and public utilities.

roads. Concentrations in nondurables manufac
turing— particularly

textiles,

apparel,

tobacco

and leather— slowed growth in many areas.
If the industrial mix in this district were iden
tical to that of the Northeast region generally,

Local-area effects

In all but three areas this has been a positive
factor in growth. In six of the nine areas where
the local-area effect has been positive, the effect
has been strong enough to make up for the drag

2The Northeastern United, States has been defined as
including the States of Ohio, N e w York, Connecticut,
R hode Island, and Massachusetts. For all areas except
Philadelphia the comparisons w ere made against this
five state region with the large cities — Cleveland, Boston,
and N ew York — deleted. These cities were included in
the Philadelphia comparison.

of the industrial mix.
Areas with mining employment have had large
local lags, worse than the Northeast in this indus
try. Growth in nondurables manufacturing has

b usin e ss re v ie w

been a bright spot in local-area effects, with every

grow. In short, an area’s long-term strengths are

area doing better than the Northeast. Beyond

found in its location and local endowments of

these two factors each area is unique. Industrial

factors attractive to firms. Thus, the local-area

developers and others interested in the record of

effect is a reflection of the quality of these items.

particular areas will find the detailed information

Much of the chance element, for example, the

in the appendix to this article.

chance that found Scranton near coal, is accounted

What does the local-area effect mean? Gener

for by the industry mix. What is left is an evalu

ally. we may interpret it as an indication of the

ation of what area developers have to work with

underlying strength of an economy. Areas grow

and what they need to work on.

by drawing firms into their hounds, and by grow

The conclusion is unmistakable that local econ

ing their own firms locally. In either case the

omies within the Third District are generally

location is the thing. If an area is in a good loca

strong since their contributions to growth are con

tion with respect to markets and materials, and

siderable. This optimistic sign, combined with

if factors that the firm must use locally are attrac

newly achieved low rates of joblessness, suggest

tive, such as quality labor, low taxes, or good

that most of the local metropolitan areas are near

transportation, with any luck at all the area will

ing the peak of economic health.

Appendix starts on next page

b usin e ss re v ie w

AP PEN D IX
Employment Record by Area
Both the size and the roots of employment growtli

of this industry would have suggested. This

in metropolitan areas have been diverse. The

additional lag is the local-area effect in this

main elements of this record for each of the

industry. Both of these components are listed

Third District metropolitan areas (except Atlan

in the table.

tic City) are sketched out in this appendix. The
four areas of high unemployment are treated
first, in order of decreasing growth. These are

In interpreting the figures it is well to remem
ber that the mix effect and the local-area effect
add up to the actual lag or lead. The mix effect

followed by the eight areas of low unemploy

is the amount of lag or lead that would have

ment, also by order of growth. The discussion

been expected if the local industries had grown

of each area is accompanied by a chart and a

at their Northeast rate. The local-area effect is

table. In both, the employment growth is broken
into components by mix and local-area effect.

the difference between each industry’s local
growth and its Northeast growth. In every case,

The table also gives an industrial breakdown

industries showing the more important effects

of the components.

have been highlighted in the tables.

Numbers in the tables refer to each area’s
employment lag or lead over the Northeast. For

Growth in areas of high unem ploym ent

example, in the table for Altoona the mix effect

All four areas (Altoona, Johnstown, Scranton,

resulted in a lag of 2,200 employees, while the

and Wilkes-Barre-Hazleton)

lagged the North

local-area effect added up to a lead of 1,300

east in employment growth. However, Wilkes-

employees. Combined, these two figures give

Barre-Hazleton and Altoona did substantially

the actual employment lag of Altoona during

better than did Scranton and Johnstown. This

the 1958-1966 period— 900.
The contributions of each industry to these

matches the reductions in unemployment noted

two components of growth are given. In Altoona

earlier, where the former areas reduced unem
ployment substantially through job increases.

the figures show that transportation and public

The roots of these increases are given on the

utilities were the major root of the lag. Accord

next four pages.

ing to the growth rate of this sector in the
Northeast, the concentration in Altoona of em

The record of low-unem ploym ent areas

ployment in transportation and public utilities

Of the areas of low unemployment Wilmington

should have meant a lag of 1,900 employees (the

grew the fastest, expanding better than 25 per

mix component). However, in Altoona the in

cent. Harrisburg, the slowest area, grew by only

dustry declined more. Thus, it had an employ

12 per cent, less than half that of Wilmington.

ment lag resulting from factors peculiar to the

Of the eight areas, three lagged the Northeast in

area, giving a lag of 1,200 employees in addi

growth:

tion to the 1,900 lag that the Northeast growth

burg, and Philadelphia.

Allentown-Bethlehem-Easton,

Harris

b u sin e ss re v ie w

EMPLOYMENT GROWTH IN ALTOONA.__'■"■‘
J 1958-1966
^ IN D USTRY

GROWTH RATE
FOR NORTHEAST
(P er C ent)

Fabricated metals, non elec, machinery mfg.
Other durable goods, mfg.
Food mfg.
Textile & apparel mfg.
Paper mfg.
Tobacco & leather mfg.
Other nondurable goods mfg.
C onstruction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & m ining
Government
Total

19.26
20.22
- 3.17
-1 1 .7 5
8.65
-2 0 .5 1
14.26
7.61
- 3.37
16.16
16.58
3 4.17
23.37
16.33

GROWTH RATE
FOR AREA
(P er C en t)

IN D US TRY
M IX
EFFECT
(H u n d re d s )

66.67
72.73
12.50
6 8 .7 5
9.52
18.75
0.00
25 .0 0
-1 5 .6 3
- 2.53
0.00
2 7.45
3 7 .5 0
13.92

0
1
- 3
- 4
- 2
- 6
0
- 1
-1 9
0
0
9
3
-2 2

LOCAL AREA
EFFECT
(H u n d re d s )

4
12
3
13
0
6
- 1
2
-1 2
-1 5
- 2
- 3
6
13

ALTOONA

Had it not been for a strongly negative mix
effect this area would have led the Northeast
during the previous eight years. Its negative mix
effect was partly the result of the presence of
slow-growing manufacturers of nondurables like
textiles and apparel, but mostly the result of the

COMPONENTS OF EMPLOYMENT GROWTH
IN ALTOONA, 1958-1966
Thousands of Employees_________________________________________________

8 \-

Local Area Effect

Mix Effect

large share of employment in transportation and
public utilities— railroads, in particular. In 1958,
24 per cent of the area’s employment was in
volved in transportation and public utility serv
ices, while the Northeast averaged only 6 per
cent in these activities. Altoona’s local-area effect
nearly made up for the adverse industrial struc
ture, and would have more than made up for
the difference if there had not been such a large
decline in railroad employment. Major contrib
utors to the positive local area effect were textiles,
apparel, tobacco, and leather goods manufac
turers, as well as the conglomeration of industries
called “ other durable goods manufacturing.” The
local expansion in nondurables may cast a shad
ow on future growth, since these industries grow
slowly.

busin e ss re v ie w

EMPLOYMENT GROWTH IN WILKES-BARRE-HAZLETON, 1958-1966
GROWTH RATE
FOR NORTHEAST
(Per C ent)

IN D USTRY

Fabricated m etals mfg.
Machinery mfg.
Other durable goods mfg.
Food mfg.
Tobacco & leather mfg.
Textiles mfg.
Apparel mfg.
P rinting & publishing
Other nondurable goods mfg.
M ining
Construction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & misc.
Government
Total

14.87
21.98
2 0.22
- 3.17
- 2 0 .5 1
-1 8 .4 2
- 4.35
14.91
12.31
- 7.61
7.61
- 3.37
16.16
16.58
3 5 .7 8
23.37
16.33

GROWTH RATE
FOR AREA
(P er C ent)

2 5.00
22.73
140.00
17.14
29.31
- 2.86
26.53
8.33
8 4.62
-6 2 .3 7
37 .1 4
-1 6 .6 7
2.67
13.33
11.61
14.66
11.73

IN D U S TR Y
M IX
EFFECT
(H u n d re d s )

0
1
2
- 7
-2 1
-1 2
-3 0
0
- 1
-2 2
- 3
-1 4
0
0
22
8
-7 7

LOCAL AREA
EFFECT
(H u n d re d s )

2
0
48
7
29
5
45
1
9
-5 1
10
-1 0
-2 5
- 1
-2 7
-1 0
30

WILKES-BARRE-HAZLETON

Thanks to large shares of employment in mining
and nondurables manufacturing, particularly
textiles and apparel, this metropolis suffered
from a strongly disadvantageous industrial mix.
Better-than-average local

growth

durables

manufacturing, apparel, and tobacco and leather
manufacturing added up to a positive local-area
effect which made up for about one-half of the
adverse mix. The local growth would have been
much stronger had it not been for mining.
Mining is now so small in the area that its
potential future effect is minimal. Other impor
tant negative elements in the local area effect
were wholesale and retail trade, and services.
Combined, these activities accounted for as much
employment lag as did mining. However, trade
and services have a different meaning for the
economic health of the area. They are local
market activities— their growth is a result of
growth in other activities, like mining or manu
facturing.

COMPONENTS OF EMPLOYMENT GROWTH
IN WILKES-BARRE-HAZLETON, 1958-1966
Thousands of Employees

b u sin e ss re v ie w

EMPLOYMENT GROWTH IN SCRANTON, 1958-1966
GROWTH RATE
FOR NORTHEAST
(P e r C ent)

IN D USTRY

14.87
3 8 .4 9
17.21
- 3 .17
-1 8 .4 2
- 4 .35
14.91
5.43
- 7.61
7.61
- 3 .37
16.16
16.58
3 5 .7 8
23.37
16.33

Fabricated metals mfg.
Elec, equipm ent mfg.
Other durable goods mfg.
Food mfg.
Textiles mfg.
Apparel mfg.
P rinting & publishing
Other nondurable goods mfg.
M ining
C onstruction
Transport. & public utilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & misc.
Government
Total

GROWTH RATE
FOR AREA
(P e r C ent)

4 .0 0
4 0 .7 4
4 3 .5 9
- 5.00
-1 8 .1 8
18.95
16.67
2.86
-8 4 .2 1
2 1.05
-2 1 .9 2
8 .3 9
8 .7 0
2 4 .7 4
14.10
6 .5 0

IN D U S TR Y
M IX
EFFECT
(H u n d re d s )

0
6
0
- 4
-1 1
-2 0
0
- 4
- 9
- 2
-1 4
0
0
19
5
-3 4

LOCAL AREA
EFFECT
(H u n d re d s )

3
1
10
0
0
22
0
- 1
-2 9
3
-1 4
-1 1
- 2
-1 1
- 7
-4 2

SCRANTON

With a 6 per cent growth between 1958 and
1966, Scranton ranked next to last among the
district areas. Both industry mix and local-area

COMPONENTS OF EMPLOYMENT GROWTH
IN SCRANTON, 1958-1966

effects combined in the negative direction to
yield this record. The mix was similar to that
of Wilkes-Barre-Hazleton — with mining, trans
portation and public utilities, and nondurables
manufacturing causing the net disadvantage. Its
local area effect, similar to Wilkes-Barre-Hazle
ton, was held
declines

down by

mining

and

greater-than-average
transportation,

and

employment in public utilities. The good local
records in durable and nondurable manufacturing
were not strong enough to make up for the
declines. The future looks brighter for Scranton
since the decline of mining has reached its final
stage— from 1958 to 1966 employment in mining
shrank from 5 per cent to 1 per cent of the labor
force. This final decline of mining employment
marks the end of an era, since the area has suf
fered from the fate of this industry for more than
30 years.

b usin e ss re v ie w

EMPLOYMENT GROWTH IN JOHNSTOWN, 1958-1966
IN D U STR Y

GROWTH RATE
FOR NORTHEAST
(P e r C ent)

Metals, machinery & transport, equip, mfg.
Lumber & fu rn itu re mfg.
Other durable goods mfg.
Apparel mfg.
Food mfg.
Other nondurable goods mfg.
Mining
Construction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & mi sc.
Government
Total

2 1.68
2.41
16.61
4 .3 5
3 .17
2.58
7.61
7.61
3.37
16.16
16.58
3 5 .7 8
23.37
16.33

GROWTH RATE
FOR AREA
(P e r C ent)

3.66
3 7 .5 0
0.00
29.27
0.00
57.14
-4 5 .1 6
18.18
3 .77
- 9.02
11.76
16.67
37 .5 0
3 .2 9

IN D US TRY
M IX
EFFECT
(H u n d re d s )

9
1
0
- 8
- 3
- 1
-2 2
- 2
-1 0
0
0
18
6
-1 4
-

LOCAL AREA
EFFECT
(H u n d re d s )

-3 0
3
- 1
14
0
4
-3 5
2
4
-3 3
- 1
-1 7
11
-7 9

JOHNSTOWN

Both mix and local-area effects were negative in
this area, with the local area effect being the
larger component by a factor of five. The indus
trial structure is disadvantageous for many of
the same reasons that it is negative in the other
high-unemployment areas — principally a con
centration in mining. Moreover, the poor record
of mining in the area had a large influence on
the local-area effect. Johnstown has a unique
problem— employment in durables manufactur
ing, mainly in the metals and machinery group,
lagged during the 1958-1966 period. Almost a
quarter of the area’s employment is directly
involved in production of metals and machinery;
therefore the area is especially sensitive to fluctu
ations of these industries. Firming up the past
employment picture have been various nondur
able goods manufacturers. Apparel manufacturing
has been the main element. Added up, the poor
record in durable goods manufacturing and the
increasing dependence on slow-growing nondur
able goods manufacturing, both suggest contin
uing problems in Johnstown. This is emphasized
by the area’s 6 per cent 1966 unemployment rate.

COMPONENTS OF EMPLOYMENT GROWTH
IN JOHNSTOWN, 1958-1966

b usin e ss review

EMPLOYMENT GROWTH IN WILMINGTON, 1958-1966
IN D USTRY

Prim ary m etals mfg.
Fabricated m etals mfg.
Other durable goods, mfg.
Food mfg.
Textiles mfg.
Apparel mfg.
P rinting & publishing
Chemicals mfg.
Rubber & plastics mfg.
Other nondurable goods mfg.
C onstruction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & m ining
Government
Total

GROWTH RATE
FOR N O R THEAST
(P e r C ent)

14.29
14.87
21.89
- 3.17
-1 8 .4 2
- 4 .3 5
14.91
13.15
17.63
- 6.01
7.61
- 3.37
16.16
16.58
3 4.17
23.37
16.33

GROWTH RATE
FOR AREA
(P e r C ent)

-2 1 .2 1
- 4 .5 5
3 3 .9 0
-1 7 .2 4
-3 0 .0 0
7.69
15.38
22 .3 8
4 0 .7 4
- 3 .33
2 2 .6 8
5.62
3 8 .5 6
25.93
44.81
4 7 .3 7
2 7.05

IN D U S TR Y
M IX
EFFECT
(H u n d re d s )

1
0
7
- 6
- 7
- 3
0
- 9
0
- 7
- 8
-1 8
0
0
27
11
-1 4

LOCAL AREA
EFFECT
(H u n d re d s )

-1 2
- 4
14
- 4
- 2
2
0
26
6
1
15
8
53
5
16
36
160

WILMINGTON

The roots of Wilmington’s phenomenal expan
sion are well-known— the chemicals complex.
Other industries also have good records in the
area. For one reason, the area is unique in that
employment in transportation and public utilities
has expanded. Second, government employment
has expanded dramatically, making a heavy con
tribution to the local-area effect. These bright
spots are offset slightly by negative industrial
mix which is largely the product of concentration
in transportation and public utilities. Still, added
up, the area’s record is one of success in almost
every industry. The few dark spots that prevail
are limited to relatively small industries. Primary
and fabricated metals manufacturers, command
ing less than three per cent of the labor force,
declined sharply over the last nine years. Also
in decline were food and textiles producers, who
include even less of the area’s employment.

b usin e ss re v ie w

EMPLOYMENT GROWTH IN LANCASTER, 1958-1966
GROWTH RATE
FOR NORTHEAST
(P e r C ent)

IN D U STR Y

Stone, clay, glass mfg.
Primary metals mfg.
Fabricated m etals mfg.
Machinery & transport, equip, mfg.
Other durable goods mfg.
Food mfg.
Tobacco & leather mfg.
Textiles mfg.
Apparel mfg.
P rinting & publishing
Other nondurable goods mfg.
C onstruction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & m ining
Government
Total

11.56
14.29
14.87
25.62
15.22
- 3.17
-2 0 .5 1
-1 8 .4 2
- 4.35
14.91
12.31
7.61
- 3.37
16.16
16.58
3 4.17
23.37
16.33

GROWTH RATE
FOR AREA
(P er C ent)

IN D U S TR Y
M IX
EFFECT
(H u n d re d s )

16.67
78.57
3 6 .3 6
47 .7 3
20.00
9.76
-1 3 .9 5
0 .00
6 .78
35 .2 9
26.67
40.91
4 .2 6
2 1.52
19.05
3 7.63
2 4.64
2 4.18

1
0
- 1
8
- 1
- 8
-1 6
- 7
-1 2
0
1
- 4
- 9
0
0
18
5
-2 9

LOCAL AREA
EFFECT
(H u n d re d s )

1
9
9
19
4
5
3
4
7
3
2
15
4
8
1
3
1

LANCASTER

Although Wilmington lagged in some industries,
principally primary metals, Lancaster exceeded
the record of the Northeast region of the nation
in every industry. Thus, its local-area effect was
based on a strictly positive record. Strong gains
in metals, machinery, and transportation equip
ment manufacturing all added to the positive
local-area effect and, inasmuch

as they are

typically medium- and fast-growing industries,
enhanced the chances for a future positive mix
of industries. During the past eight years the
mix effect was negative, but only of moderate
size. Again, the principal detractors were in
nondurable goods manufacturing— with apparel,
and tobacco and leather standing out. Since even
these industries have experienced higher-thanaverage growth in Lancaster, their depressing
effect on growth through the mix of industries
may be larger in the future. Still, strength in
other

industries

should

detractions.

make

for

these

COMPONENTS OF EMPLOYMENT GROWTH
IN LANCASTER, 1958-1966
Thousands of Employees
Local Area Effect

Mix Effect

b u sin e ss re v ie w

EMPLOYMENT GROWTH IN YORK, 1958-1966
IN D U STR Y

GROWTH RATE
FOR N O R THEAST
(P e r C ent)

Stone, clay, glass mfg.
Metals mfg.
M achinery mfg.
Elec, equipm ent mfg.
Other durable goods mfg.
Food mfg.
Tobacco & leather mfg.
Textiles mfg.
Apparel mfg.
Paper mfg.
P rinting & publishing
Other nondurable goods mfg.
C onstruction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & m ining
Government
Total

YORK

York’s employment expanded at a rate of 22 per
cent, strongly above the 16 per cent rate of the
Northeast. Like Lancaster, York’s employment
lead resulted from a strong local-area effect

11.56
14.56
2 1.98
3 8 .4 9
16.62
- 3 .17
-2 0 .5 1
-1 8 .4 2
- 4 .3 5
8 .65
14.91
13.93
7.61
- 3 .37
16.16
16.58
3 4 .1 7
2 3.37
16.33

GROWTH RATE
FOR AREA
(P e r C en t)

IN D U S TR Y
M IX
EFFECT
(H u n d re d s )

4 2 .8 6
9.43
15.49
175.00
4 1 .2 5
0 .00
-1 0 .0 0
15.15
14.81
17.86
3 3 .3 3
0.00
16.67
5.66
29.03
4 4 .4 4
33 .3 3
3 3 .3 3
2 2 .4 2

1
1
4
2
0
-1 1
-2 2
-1 1
-1 1
- 2
0
0
- 4
-1 0
0
0
17
6
-4 4

LOCAL AREA
EFFECT
(H u n d re d s )

4
3
5
11
20
2
6
11

10
3
4
- 2
4
5
20
5
- 1
9
103

COMPONENTS OF EMPLOYMENT GROWTH
IN YORK, 1958-1966
Thousands of Employees

Local Area Effect

Mix Effect

which offset an adverse mix of industries. Its
local strength centered on electrical machinery,
textiles, apparel, trade, and government. Its mix
effect—-negative and larger than Lancaster’s—resulted from specialization in nondurable manu
facturing and transportation and public utilities.
Most significant for York, out of the eighteen
industries which include the area’s employment,
only four have lagged the Northeast in growth.
Of these, the record of three was only slightly
different from the Northeast. The fourth, other
nondurable goods manufacturing, is of almost
insignificant size in York. Interpreting this record
as an indication of York’s ability to draw employ
ment, the area’s economy appears strong.

busin e ss r e v ie w

EMPLOYMENT GROWTH IN TRENTON, 195 8 -1 9 6 6
GROWTH RATE
FOR NORTHEAST
(P e r C ent)

IN D USTRY

Stone, clay, glass mfg.
Primary metals mfg.
Fabricated metals mfg.
Machinery mfg.
Elec, equipm ent mfg.
Other durable goods mfg.
Food mfg.
Apparel mfg.
P rinting & publishing
Chemicals mfg.
Rubber & plastics mfg.
Other nondurable goods mfg.
M ining
Construction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & misc.
Government
Total

11.56
14.29
14.87
2 1.98
3 8 .4 9
16.62
- 3 .17
- 4 .3 5
14.91
13.15
17.63
-1 0 .7 4
- 7.61
7.61
- 3.37
16.16
16.58
3 5 .7 8
2 3.37
16.33

GROWTH RATE
FOR AREA
(P er C ent)

-2 0 .0 0
-3 4 .4 8
10.34
10.00
125.71
-1 6 .0 0
0.00
2 2.22
176.92
3 1 .5 8
2.13
-1 5 .3 8
-1 0 0 .0 0
- 2.33
6.56
12.64
18.92
4 8 .5 9
31 .6 4
21.73

IN D U S TR Y
M IX
EFFECT
(H u n d re d s )

2
1
1
2
8
0
- 4
- 4
0
- 1
1
- 7
0
- 4
-1 2
0
0
28
12
15

LOCAL AREA
EFFECT
(H u n d re d s )

-1 3
-1 4
- 3
- 5
31
- 8
1
5
21
4
- 7
- 1
- 1
- 4
6
- 6
1
18
15
40

TRENTON

Trenton is unique in being the only area to have
both a positive mix and local-area effect. The

COMPONENTS OF EMPLOYMENT GROWTH
IN TRENTON, 1958-1966
Thousands of Employees

advantageous mix came mostly from concentra
tions in services and government employment.
Mix Effect

Local growth in both of these industries was
above that of the Northeast; thus they added
to the positive local-area effect as well. The
strongest industries, however, were electrical
equipment

manufacturing,

and

printing

and

publishing. As electrical equipment manufactur
ing is typically a fast-growing industry, its
expansion in Trenton increases prospects for the
area’s future growth. This combined with spe
cialization of employment in fast-growing gov
ernment and services, suggests a bright future.
Offsetting these prospects somewhat, the area’s
record in the metals and machinery manufactur
ing group, which includes 19 per cent of the
employment, has been poor.

Trenton Growth

busin e ss re v ie w

EMPLOYMENT GROWTH IN READING, 1958-1966
IN D USTRY

GROWTH RATE
FOR NORTHEAST
(P e r C ent)

Prim ary metals mfg.
Fabricated m etals mfg.
Nonelec, m achinery and transport, equip. mfg.
Elec, equipm ent mfg.
O ther durable goods mfg.
Food mfg.
Textile mfg.
Apparel mfg.
Paper mfg.
P rinting & publishing
Chemicals mfg.
Other nondurable goods mfg.
C onstruction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & m ining
Government
Total

14.29
14.87
20.47
3 8 .4 9
14.14
- 3.17
-1 8 .4 2
- 4 .3 5
8 .65
14.91
13.15
0.9 9
7.61
- 3.37
16.16
16.58
3 4 .1 7
23.37
16.33

GROWTH RATE
FOR AREA
(P e r C ent)

IN D U S TR Y
M IX
EFFECT
(H u n d re d s )

11.43
-1 6 .6 7
5 2.38
6 7 .5 7
28.13
12.77
- 7.62
6 .52
21.43
11.11
6 6.67
-1 1 .5 4
5.13
3 .2 8
16.99
10.53
23 .2 8
39.51
17.88

1
0
3
8
- 1
- 9
-3 6
-1 0
- 1
0
0
- 4
- 3
-1 2
0
0
21
6
-3 9

LOCAL AREA
EFFECT
(H u n d re d s )

2
8
20
11
4
7
11
5
2
0
6
- 3
- 1
4
1
- 2
-1 3
13
55

READING

Reading’s gain in employment was not so spec
tacular as those of the previous four areas.

COMPONENTS OF EMPLOYMENT GROWTH
IN READING, 1958-1966
Thousands of Employees

Growth was held back by specialization in such
slow-growing industries as apparel, textiles, and

Local Area Effect

Mix Effect

transportation and public utilities. Though the
mix of industries was therefore disadvantageous,
enough gains were made in other types of em
ployment to more than offset the losses. In par
ticular, expansion in nonelectrical machinery,
transportation equipment, electrical machinery,
and government payrolls and a superior record
in textiles employment led to a strongly positive
local effect. In sum, during the 1958-1966 period,
growth of most local industries was superior.
Looking to the future, two signs indicate strength.
First, the reasonably good record of growth in
each industry suggests that the area can draw
new employment. Second, many of the typically
slow-growing nondurable industries have been
shrinking in relative size.

busin e ss re v ie w

EMPLOYMENT GROWTH IN ALLENTOWN-BETHLEHEM-EASTON,l_* ----- -1958-1966
J-L
IN D U STR Y

GROWTH RATE
FOR N O RTHEAST
(P e r C ent)

Stone, clay, glass mfg.
Metals mfg.
Machinery mfg.
Elec, equipm ent mfg.
Transportation equip, mfg.
Other durable goods mfg.
Food mfg.
Textiles mfg.
Apparel mfg.
Paper mfg.
Printing & publishing
Chemicals mfg.
Other nondurable goods mfg.
Mining
Construction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & misc.
Government
Total

ALLENTOWN-BETHLEHEM-EASTON

With a growth rate of 15 per cent, this area

11.56
14.56
21.98
38 .4 9
18.26
15.22
- 3.17
-1 8 .4 2
- 4 .3 5
8 .65
14.91
13.15
0.99
- 7.61
7.61
- 3.37
16.16
16.58
35 .7 8
23.37
16.33

GROWTH RATE
FOR AREA
(P e r C ent)

IN D U S T R Y
M IX
EFFECT
(H u n d re d s )

-2 2 .9 5
6.64
12.50
3 1 .4 3
2 8.57
2 0.00
18.37
0.00
19.55
3 .8 5
4 5 .8 3
15.38
0.00
-4 2 .8 6
12.33
0.00
15.94
27.27
2 2.68
4 1 .3 2
15.24

3
5
5
16
1
0
-1 0
-2 3
-3 7
- 2
0
- 1
- 3
- 2
- 6
-2 1
0
0
38
9
-4 4

industrial mix which resulted from specializa
tions in food, textiles, and apparel manufactur
ing (the nondurables group that has held back
many of the areas), as well as employment in
transportation and public utilities. In total, local
industries did better than those of the Northeast
— enough to add about 2,900 jobs. Apparel,
government, and food and textiles were the
largest local gainers. The good record in the
nondurables group may pose problems in the
future. As well as hurting the future industrial
mix effect, they generally pay lower wages. Thus,
they dampen both prospects for growth, and the
local paychecks.

-2 1
-2 1
- 8
- 5
4
1
11
12
43
- 1
7
1
0
- 2
3
4
- 1
5
-2 5
22
29

COMPONENTS OF EMPLOYMENT GROWTH
IN ALLENTOWN-BETHLEHEM-EASTON, 1958-1966
Thousands of Employees

slightly lagged the 16 per cent rate of the North
eastern region. This lag reflected a negative

LOCAL AREA
EFFECT
(H u n d re d s )

Local Area Effect

Mix Effect

b usin e ss rev iew

EMPLOYMENT GROWTH IN PHILADELPHIA. 1958-1966
GROWTH RATE
FOR NORTHEAST
(P e r C ent)

IN D U STR Y

P rim ary metals mfg.
Fabricated metals mfg.
M achinery m fg.
Elec, equipm ent mfg.
T ransportation equip, mfg.
Instrum ents mfg.
Lum ber & fu rn itu re mfg.
Stone, clay, glass mfg.
Misc. mfg. & ord. mfg.
Tobacco & leather mfg.
Coal & petroleum mfg.
Food mfg.
Textiles mfg.
Apparel mfg.
Paper m fg.
P rinting & publishing
Chemicals mfg.
Rubber & plastics mfg.
M ining
C onstruction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Services & misc.
Fed. governm ent
State & local governm ent
Total

12.95
12.05
2 2.35
27.73
15.35
20.97
1.03
8 .97
5.60
-1 5 .8 6
-1 5 .0 2
-1 0 .0 9
-1 0 .7 1
- 9.41
6 .69
8 .69
6.35
17.41
- 5.25
4 .4 9
- 0.90
14.21
12.24
3 2 .6 6
3 .6 9
3 1 .7 2
14.33

PHILADELPHIA

Philadelphia’s growth fell short by 8,100 jobs.
Its

industrial mix alone

explains

a lag

GROWTH RATE
FOR AREA
(P e r C ent)

IN D U S TR Y
M IX
EFFECT
(H u n d re d s )

9 .6 2
6.07
2 5 .4 5
2 5 .7 4
3 1 .3 0
3 8 .8 5
1.77
10.64
1.11
-4 5 .4 5
-2 1 .2 7
- 4 .4 4
-1 9 .0 2
3 .5 8
16.83
3 .2 5
12.95
4 1 .2 8
-2 7 .7 8
8.61
- 3 .4 5
13.67
10.65
2 9 .7 0
13.32
38.61
13.80

5
10
35
77
3
9
- 15
8
8
- 33
- 65
-1 2 6
- 87
-1 3 2
- 15
- 21
- 29
3
4
- 71
-1 7 2
4
- 16
363
- 82
175
-2 3 8

LOCAL AREA
EFFECT
(H u n d re d s )

-1 1
-2 6
14
-1 1
39
25
1
2
- 4
-3 3
-1 4
29
-2 9
72
20
-2 0
24
26
- 4
30
-2 9
-1 6
-1 2
-5 9
74
69
157

COMPONENTS OF EMPLOYMENT GROWTH
IN PHILADELPHIA, 1958-1966
Thousands of Employees____________________________________________ ____
Local Area Effect

Mix Effect

23,800 jobs because of its concentration in
declining and slow-growing industries— partic
ularly transportation and public utilities, food,
and apparel. On the other hand, many Phila
delphia industries out-performed those in the
Northeast so that a net of 15,700 jobs were
created to offset much of the mix effect. Govern
ment, apparel, paper, construction, chemicals,
rubber, instruments, and transportation equip
ment increased their payrolls faster in Philadel
phia than in the Northeast.

b u sin e ss r e v ie w

EMPLOYMENT GROWTH IN HARRISBURG, 1958-1966
GROWTH RATE
FOR NORTHEAST
(P e r C ent)

IN D USTRY

Primary metals mfg.
Fabricated metals mfg.
Nonelec, m achinery and transport, equip, mfg
Elec, equipm ent mfg.
Other durable goods mfg.
Food mfg.
Apparel mfg.
P rinting & publishing
Other nondurable goods mfg.
Construction
Transport. & public u tilitie s
Wholesale & retail trade
Finance, ins. & real estate
Service & m ining
Government
Total

14.29
14.87
20.47
3 8 .4 9
14.14
- 3.17
- 4 .3 5
14.91
0 .0 2
-

7.61
3.37
16.16
16.58
3 4 .1 7
2 3.37
16.33

GROWTH RATE
FOR AREA
(P e r C ent)

IN D U S TR Y
M IX
EFFECT
(H u n d re d s )

6.78
7.41
22.22
112.50

LO C AL AREA
EFFECT
(H u n d re d s )

-1 2

1 0 .0 0

14.08

-1 4

0 .0 0

-1 0

6.67
2 5.45
6.33
-1 2 .9 5
18.55
11.29
2 6.59
11.34
12.16

9
7
-2 7

2
-

14
-1 1

-1 3

- 3
-1 3
-4 7
-5 4

31
27
- 4

HARRISBURG

Harrisburg’s slow growth, unlike the other areas,
resulted mainly from a negative local area effect.
Among the industries which lagged behind the
Northeast, government, primary metals, services
and mining, transportation and public utilities,
and

construction

were

prominent.

The

mix

effect was small. The relatively slow growth of
government formed the single largest lag. In part,
its record had an impact on the several local
market industries of Harrisburg, holding back
their growth. The lags in construction and serv
ices are both explained by such a reaction. Not
so, however, for the basic manufacturing indus
tries— primary metals, and fabricated metals.
Their decline, combined with the fairly mediocre
employment growth record of other local manu
facturing industries is indicative of fairly serious
problems in attracting new employment to the
area. The major bright spot appears to be in the
electrical equipment industry, in which the area
has a number of medium-sized firms with good
growth records.

COMPONENTS OF EMPLOYMENT GROWTH
IN HARRISBURG, 1958-1966
Thousands of Employees___________
NE Growth

Local Area Effect

FOR THE R EC O RD

• • •

INDEX

Third Federal
Reserve District

United States

Per cent change

May 1967
from

SUM M ARY

mo.
ago

year
ago

5
mos.
1967
from
year
ago

May 1967
from
mo.
ago

year
ago

Manufacturing

5
mos.
1967
from
year
ago

MANUFACTURING
Production ................
Electric power consumed
Man-hours, total* ......
Employment, total .......
Wage income* .........
CONSTRUCTION** ........
COAL PRODUCTION .......

+
—
—
+
—

5
1
1
1
10
3

+ 2
- 4
0
0
+ 3
- 4

+
+
+
—
+

3
2
2
2
4
2

Total
Deposits***

Per cent
change
May 1967
from

mo.
ago

year
ago

mo.
ago

year
ago

mo.
ago

year
ago

mo.
ago

+ 2

+ 1

+ 2

+ 5

Wilmington ...

+ 6

+ 8

+ 13

Atlantic City ....
- 1
+ 3

- 9
+ 9

Trenton .......

Altoona ........

— 1

Harrisburg ....

+ 16
— 4

ago
year

+ 3

+ 2

+41

+49

— 2

+ 7

+18

+ 2

+ 11

+ 9

+10

+ 1

+13

Johnstown ....
+ 2
0
+ 1
- 1
+ 3
- It

+
+
+
—
+
+

10
9
6
3
17
8f

+
+
+
+
+

7
10
3
5
13
8f

+ 1
0
+ 1
0
+ 1
- 3

+
+
+
+
+
+

8
5
10
6
15
7

+
+
+
+
+
+

6
6
6
1
12
11

— 3

+ 1

+ 2

+ 3

Lancaster ......

— 1

— 3

+ 2

+ 7

+ 11

+ 2

+1 4
-3 8

Lehigh Valley ..

— 1

•Production workers only
••Value of contracts
'••Adjusted for seasonal variation

+ 3t

+ 3*

0
0

0
+ 3

tl5 SMSA’s
^Philadelphia

Philadelphia...

Reading _____

— 1

+ 1

Scranton .......

+ 1

+ 2

Wilkes-Barre ....

PRICES
Wholesale.................
Consumer .................

Check
Payments**

Per cent
change
May 1967
from

CHANGES

Payrolls

+ 2

BANKING
(All member banks)
Deposits ...................
Loans .....................
Investments...............
U.S. Govt, securities ....
Other .....................
Check payments*** ......

Employment

LO CAL

Metropolitan
Statistical
Areas*

Banking

— 1

+ 5

York ...........

+ 2

+ 7

+ 6

+ 2

+ 8

+ 3

+10

+ 2

+10

+ 12

+ 2

+ 10

+ 15

+ 5

•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.

Full text of Business Review (Federal Reserve Bank of Philadelphia) : July 1967

FRASER