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The Delaware Valley and the Big East Coast Ports Class of '65: Have Diploma, W ill. . . ? Capital Spending: Onward and Upward BUSINESS REVIEW is produced in the Department of Research. Bertram W. Zumeta was primarily responsible for the article "The Delaware Valley and the Big East Coast Ports,” D. Russell Connor for "Class of '65: Have Diploma, W ill. . . ?” and Evelyn E. Major and Bertram W. Zumeta for “Capital Spending: Onward and Upward.” 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. THE DELAWARE VALLEY AND THE BIG EAST ...Who’s getting the trade? Philadelphia grew up where William Penn landed. Penn came ashore at that point because it was a fine place to land— a good port. Hence, no port, no Philadelphia. taken is the creation of the Philadelphia Port Corporation. Action to do something about the ports can go a long way to invigorate all of the economies Poor logic? Undoubtedly. But the conclusion of which they are a part; it can enlarge the is probably true. Philadelphia’s excellent port total pie of port business. But to a considerable helps account not only for its beginning but extent it represents efforts to get a larger slice also for its existence as we know it today. In of the port pie. In this competitive atmosphere fact, the entire Delaware Valley, from Trenton each port area will be keeping an eagle-eye on to below Wilmington, earns a good deal of its living by providing port services and from in who’s getting the trade. As they compete with other ports, Philadelphia dustries which are there because the Delaware and the Delaware River ports will be building River ports are there. Large ports also are vital underpinnings for the economies of Boston, New York and Balti more; and the port complex called Hampton Roads forms a substantial part of the economies of Norfolk and Newport News, Virginia. In addition to being important to their re gions, these five ports have something else in common— problems. Rapid changes in trans portation methods and the technology of goodshandling, obsolete facilities, space limitations, financing difficulties are some of the many things that contribute to port headaches. Because of the significance of their ports to their economies, concerned citizens in each of the major port areas of the East Coast are tak ing action to overcome these problems. In Phila delphia, the most recent form this action has SUMMARY OF FINDINGS The Delaware River ports generally increased their share of East Coast port business in the last decade. Their performance in foreign com merce was especially striking between 1959 and 1963. In the very last part of this period, how ever, they lost ground somewhat. These rather surprising conclusions are based on: 1. Comparisons of gross tonnage handled. By this measure the Delaware River ports gained faster than all ports except Hampton Roads between 1953 and 1963. But a tonnage measure only gives a general idea of performance because it doesn't distinguish between bulk cargo and general cargo. Comparisons that in part minimize this shortcom ing show that: 2. In foreign commerce (exports to plus imports from foreign countries) the Delaware River ports increased their share of the business more than any of the other big East Coast ports. Their per formance between 1959 and 1963 was excep tional. More recently this good performance has tailed off. 3. In coastwise commerce, however, the Delaware River ports lost out to the other East Coast ports. 3 business re v ie w on a record in the recent past that offers promise ports. That is the gist of this article. for the future. Although it is not generally real ized, and although it can’t be drawn in black- Shares of the trade— an over-all view and-white clarity, the picture for the past decade looks generally good for the Delaware River One way to find out who’s getting the trade is THE COMMERCE OF THE LARGE EAST COAST PORTS A ll scales represent percentages o f the five-port total. CHART 1 TOTAL PORT COMMERCE PERCENTAGE DISTRIBUTION CHART 2 FOREIGN COMMERCE PERCENTAGE DISTRIBUTION CHART 4 COASTWISE TRADE PERCENTAGE DISTRIBUTION CHART 3 EXPORTS TO FOREIGN COUNTRIES PERCENTAGE DISTRIBUTION 4 business review to look at each port’s share of total tonnage to be desired, because in making these com going through all five ports combined. This is parisons we are counting a ton of coal as equal shown in the accompanying charts. to a ton of packaged manufactures.1 Since 1953 the Delaware River ports made the second biggest gains of all the ports in total Changing shares by commodity groups commerce (Chart 1 ). Their gains were especially A more meaningful way to find out which ports striking in that part of the business representing are getting the trade is to investigate separately trade (exports plus imports) with foreign coun the traffic in each important class of commodity. tries (Chart 2 ). And although a relatively small Has each port’s share of cargo in each com part of their business, exports to foreign coun modity group increased or decreased?2 tries gained significantly (Chart 3 ). When it Take wood and paper products, for example. came to coastwise trade, however, the ports on Between 1953 and 1963, there was a shift south the Delaware lost out to others during most of ward in foreign commerce in these products. the period (Chart 4 ). These comparisons do not tell the whole story, however. They may mask as much as they re Shares of Boston, New York and Delaware River ports declined. Shares of Baltimore and Hampton Roads increased. veal. Port commerce is counted in short tons. A Table 1 in the appendix shows similar infor short ton is a unit of weight, not a measure of mation for every major group of commodities value or of effort required to load and unload. handled by the East Coast ports, except for The Delaware River ports, for example, have handled greatly increased tonnages of coal in iron ore. recent years, but have lost business in manufac moves through the five ports is imported. Balti tured cotton products to Boston, Baltimore and more and the Delaware River ports in 1963 had Hampton Roads. Coal is loaded and unloaded 98 per cent of this business. These two ports in bulk— a few men run much machinery. Manu serve large steel plants that consume foreign factured cotton goods require more men in the ores. It would have been somewhat misleading handling, and, being diverse, more people to to have included this commodity in the general keep track of what went or came from where, 1 All is not black or white in the coal vs. cotton argument, or indeed in many bulk vs. general cargo comparisons. There are indirect as well as direct effects to be considered. Take an extreme example: suppose that installing facilities to handle a certain type of bulk cargo would hold or bring to the region of a port an industry that requires the bulk item. The jobs generated in directly handling the item might be few, but those in the industry served might be many. Another, point: because general cargo is generally more desirable does not mean that bulk cargo is undesirable. All five of the ports considered in this discussion are predom inately bulk cargo ports, in tonnage at least. None would be happy to lose its bulk traffic in, say, grain or oilseeds or molasses, though the people working at the waterfronts undoubtedly would feel even more keenly losses in general merchandise volume. 2 The findings given here relate to foreign commerce and coastwise commerce. Unfortunately, the information on local traffic and on inter-port commerce that does not cross a portion of the ocean (“ internal” commerce) is compiled in such form that for these types of traffic we have found no valid way to make comparisons by commodity group. In short tons, foreign and coastwise commerce make up about three-quarters of the total commerce through the five ports. The high figure for 1963 was 90 per cent at Boston; the low figure was 68 per cent at New York. and to write insurance and so on. Which is bet ter, to improve a port’s competitive position in the manufactured cotton business or in the coal business? On a per ton basis, and considering only the employment and income directly associated with the handling and bookwork involved, the answer is clear. It is better to handle additional weights of general cargo items such as manufactured cotton than to move more bulk items. The general cargo generates more jobs and income. So the comparisons on the charts do leave much Iron ore is a special case. Practically all that 5 business re v ie w tabulation when two of the five ports almost 1953- 1963 As the following table shows, iron ore move ments are about equal in the two ports. Until 1959, Baltimore had more of the business; since then, the Delaware River ports have had the advantage. The steep climb in earlier years re sulted from the establishment of new mills for making steel from imported ores in the Dela ware Valley. Per Cent of Total Shipments 1963 1962 1961 1960 1959 1958 1957 1956 1955 1954 1953 1961-1963 Gained Lost Gained Lost Boston 4 7 4 7 2 9 New York 3 8 1 10 5 6 Delaware River 9 2 11 0 6 5 Baltimore 6 5 8 3 8 3 Hampton Roads 5 6 6 5 5 6 See appendix Table 1 for details. How much gain and loss? How do these gains and losses add up? Though they show changing shares, they do not show IRON ORE SHIPMENTS THROUGH FIVE LARGEST EAST COAST PORTS Year 1959-1963 Gained Lost monopolize it, so it is treated separately here. Delaware River how much the shares changed. Which port in creased its share most? Which decreased most? These questions can be answered by figuring how much each port fell behind or moved ahead Baltimore of the entire group in adding to its share. For 47 45 46 47 45 50 49 52 56 62 86 example, “ chemicals and miscellaneous” com 51 53 51 49 50 46 47 44 40 35 11 modities look like this for 1959-1963: Boston —11,000 New York -74,000 Delaware River + 2,000 Baltimore +57,000 Hampton Roads +26,000 New York would have needed 74,000 more tons of this kind of commerce to maintain its share. Baltimore got 57,000 tons more than were re In addition to increasing their share of iron ore shipments, the Delaware River ports gained in most classes of commodities. Of eleven types of commodities traded with foreign countries, the local ports increased their share in nine. As the following table shows, their performance was especially striking between 1959 and 1963. In that period the Delaware River ports gained a larger share of trade in all eleven types of commodities. More recently, between 1961 and 1963, the local ports did less well, gaining in six commodities and losing in five. Baltimore was especially strong in this last period. Each number below indicates in how many commodity groups each port increased or de creased its share of the total business of the 5 ports. 6 quired to maintain its share of this trade. With this much information, it is possible to rank the performance of the ports. In the example given above, they rank as follows: 1. Baltimore 2. Hampton Roads 3. Delaware River 4. Boston 5. New York Baltimore did best in adding to its share of the total trade of the five ports in chemicals and miscellaneous products between 1959 and 1963. New York did worst. The Delaware River ports barely squeaked through on the plus side, to attain third ranking.3 s See Appendix for discussion of an alternative ranking scheme. business review Table 2 in the appendix gives the rankings, Their performance from 1959 to 1963 was ex worked out exactly as above, for each port in ceptional. Their ability to increase shares of each commodity class during each of three time various types of trade dropped off slightly dur periods. It also gives the totals of the ranks for ing the last two years for which data are avail each port. able, however, and Baltimore made a marginally There are 11 commodity classes. If a port better showing. increased its share of the trade in each commod ity class more than any other port did, it would Exports to foreign countries rank first in each class. The ranks for that port Imports make up most of the foreign commerce then would total to 11. This is the best any port moving through the Delaware River ports, al could score. It represents a very high degree of though considerable effort has been devoted to competitiveness. The worst a port could do expanding export trade. Table 3 in the Appendix would be always to rank fifth, for a total of 55. shows how the shares of exports of the various Such a port would have decreased its share in ports have changed.4 every commodity group. Here are the scores, with 9 being the best The measure just described is far from a per possible, 45 the worst possible: fect index. It depends considerably on the com modity classifications used; by juggling them judiciously, one could make a port look better or worse. And it would be much more sensitive if more classifications were used. It has an ad vantage, however. It greatly reduces the domi 1953-1963 Boston New York Delaware River Baltimore Hampton Roads 1959-1963 24 35 23 29 24 27 39 24 22 23 nance of bulk cargo tonnage. Petroleum, for ex ample, contributed 85 per cent of the Delaware The Delaware River ports turned in the best River’s foreign commerce tonnage in 1959 (if performance over the whole period, but their we exclude iron ore from consideration). In the position slipped between 1959 and 1963. The ranking scheme, it contributes only one of most noteworthy development was the enhanced position of Baltimore during the more recent eleven ranks. The scores come out like this, with I I the period, and the worsening performances of the ports to the North, including the ports on the best possible, 55 the worst possible: Delaware. 19531963 Boston New York Delaware River Baltimore Hampton Roads 19591963 32 42 23 36 32 37 51 16 27 34 19611963 38 36 28 27 36 See appendix Table 2 for details. During most of the decade, the Delaware River ports scored better than all the other ports. This last fact, compared with the chart of total exports, page 4, which shows faster gains at the Delaware River ports, takes some explain ing. The answer is in the enormous growth of coal and petroleum exports on the Delaware, where they almost quadrupled in the four years 4 Nine commodity classifications now are employed, rather than eleven. Coal and petroleum are combined be cause some ports do not export one or the other. Sugar has been combined with the other vegetable food products. 7 business re v ie w following 1959. At Baltimore, coal and petro back. Best possible score is 9; worst possible, 45. leum exports doubled. The table of ranks offsets the extreme effect of this bulk tonnage; the chart does not (a good reason for being careful in judging performance by tonnage alone). Boston New York Delaware River Baltimore Hampton Roads 1959-1963 30 18 35 29 23 Changing shares of coastwise commerce See appendix Table 4 for details. The table below shows what has happened in coastwise commerce. These results are available The Delaware River ports clearly had the worst performance of all the ports. New York, which only for 1959-1963, because data in this category lagged generally in foreign trade, improved its were not available for every port for years further position in coastwise trade substantially. Source of data Basis of rankings All data used in the analyses described above The rankings used in the analyses by commodity came from Waterborne Commerce of the United classes are based on absolute deviations, in short States; Part 1, Waterways and Harbors, Atlantic tons, of each port’s performance from the change Coast, published annually by the U. S. Depart required for it just to maintain its share of the ment of the Army, Corps of Engineers, New business in each commodity group. Another pos York City. sible basis of ranking would be to use differences in percentage changes. A port which usually did Commodity classifications Animal products Grains and feeds iSugar 10ther vegetable food products Inedible vegetable products Wood and paper Coal and coke Petroleum products Other nonmetallic minerals 2Metals and machinery Chemicals and miscellaneous products little business in a particular commodity then Corps of Engineers Codes 005-098 100-110 180 120-199 200-390 400-475 501-504 505-522 523-556 601-796 800-999 1 In analyzing data on exports and coastwise commerce, sugar was combined with the other vegetable food products. 2 Iron ore was always excluded. 8 might attain first rank in a certain time period because, for example, it had a high percentage increase. Yet, this increase, applied to a small tonnage base, would result in quite a small in crease in that port’s share in tons. The plus and minus signs will be the same no matter which ranking scheme is used. The sys tem that was actually employed, based on abso lute deviations, may sometimes have given the large ports very high or very low ranks com pared with somewhat less extreme ranks under the other system. TABLE 1 Gains (+ ) and Losses (—) in Shares of Foreign Commerce* (Iron ore movements excluded) l 953-1963 Commodity Classification Animal products Grains and feeds Sugar Other vegetable food products Inedible vegetable prod ucts including fibers Wood and paper Coal and coke Petroleum products Other nonmetallic minerals Metals and machinery, ex cept iron ore Chemicals and miscellaneous products Boston New York + — + + + + + — — + + — — + + — + — + — — Baltimore Hampton Roads Boston — + — — — — + + + + — — + — — + + — + + New York Delaware River 1961-1963 Baltimore Hampton Roads Boston New York Delaware River Baltimore Hampton Roads — + + + — — — + + — — — + — + — — + + — — — + + — — + + — + — + + — — + — — + + + — + + + + — — + — — — — + + + + + — + — + + + — + + _ + _ + + — — — — — — — + + + — — — + — + + + + + + _ _ _ _ + + + — — — + + + _ + + — — + + — — Imports from and exports to foreign countries. 1959-1963 Delaware River — + + business review o Rankings of Gains and Losses in Shares of Foreign Commerce (Low numbers indicate gains; large numbers indicate losses) 1953-1963 Commodity Classification Animal products Grains and feeds Sugar Other vegetable food products Inedible vege table prod ucts, includ ing fibers Wood and paper Coal Petroleum products Other nonmetal lie minerals Metals and machinery, ex cept iron ore Chemicals and miscellaneous products Totals (competitive ness index) Minimum (best) possible score: 11 Maximum (worst) possible score: 55 1961-1963 1959-1963 Boston New York Dela ware River 1 5 4 2 3 4 4 5 2 1 2 4 1 4 4 2 2 5 3 4 Balti Hampton more Boston Roads New York Dela ware River Balti Hampton more Roads Boston New York Dela ware River Balti Hampton more Roads 3 4 5 2 1 3 4 5 3 1 2 5 1 5 5 2 1 4 5 2 3 2 3 5 1 3 3 4 1 2 3 1 2 4 5 3 2 5 1 3 4 3 1 4 5 2 5 3 1 3 1 1 2 5 4 5 4 2 1 4 3 4 3 2 1 5 3 4 3 5 1 2 4 1 2 3 5 4 5 1 32 42 23 5 1 2 1 5 3 3 1 5 1 4 3 5 3 4 4 1 2 2 2 5 5 1 3 2 5 1 2 3 4 3 4 1 2 5 3 4 2 1 5 4 3 4 1 2 5 3 4 2 1 5 2 3 4 5 3 1 2 3 4 5 2 1 36 32 37 51 16 27 34 38 36 28 27 36 2 TABLE 3 Rankings of Gains (+) and Losses (—) in Shares of Export Commerce 1 9 5 3 -1 9 6 3 Com m odity C lassification A n im a l p r o d u c ts G r a in s a n d f e e d s O t h e r v e g e t a b le fo o d p r o d u c ts I n e d ib le v e g e t a b le p r o d u c ts , in c lu d in g fib e r s W ood an d p ap er C o a l a n d p e tr o le u m O t h e r n o n m e t a llic m in e r a ls M e t a ls a n d m a c h in e r y C h e m ic a ls a n d m is c e lla n e o u s p r o d u c ts 1 9 5 9 -1 9 6 3 Boston New York D ela w are River + + 1 3 - 4 4 + 5 2 + - 2 5 + + 3 1 + - + 3 + 1 + 2 - 4 - 5 + + 3 3 2 + - 1 5 5 + - 2 4 5 1 4 2 3 - + + - + - - 4 + 1 - 5 5 + + 3 2 + + 2 4 - 4 - 5 + 2 + 3 24 T o t a ls ( c o m p e t itiv e n e s s in d e x ) M in im u m (b e s t) p o s s ib le s c o re : 9 M a x im u m : 4 5 35 B altim ore 23 New York Dela ware River B a ltim ore 1 3 + - 4 5 + 5 2 + - 3 4 + + 2 1 + 4 - 5 + 2 + 3 + 1 - 3 4 3 + - 1 5 4 + - 2 3 1 5 2 2 4 + + + - 1 4 + - 1 5 + + 1 3 + 3 2 - 5 5 + - 2 4 + + 1 1 - 4 + 3 + 1 - 4 - 5 - 3 + 1 + 2 H am pton Roads 24 29 T A B L IE Boston 27 39 24 H am p to n Roads 22 23 A Rankings of Gains (+ ) and Losses (—) in Shares of Coastwise Commerce 1959-1963 Total Commerce (Receipts and Shipments) Commodity Classification Totals (competitiveness index) Minimum (best) possible score: 9 Maximum: 45 New York Delaware River Baltimore Hampton Roads - 4 - 3 + 3 + 1 + 1 + 1 + 2 - 4 - 5 - 5 5 4 + 3 + 2 + 2 - 3 4 3 4 3 + + + - + - 5 5 5 3 4 + + + + 4 1 2 2 1 + + - 2 3 4 1 2 - 3 + 1 18 + 2 - 5 - 4 30 1 2 1 5 5 35 29 23 business review Animal products Grains and feeds Other vegetable food products Inedible vegetable products, including fibers Wood and paper Coal and petroleum Other nonmetallic minerals Metals and machinery Chemicals and miscellaneous products Boston What has been called the “ anatomical explo total civilian work force than they were in 1960. sion” of post-World War II will produce the While teenagers throughout the United States, biggest boom in high school graduates this June high school graduates and nongraduates alike, that the United States has ever witnessed. More are but nine per cent of the labor force, they than accounted for 26-plus per cent of all unemploy 2 1 /2 million teenagers will be graduated from the Nation’s public and nonpublic second ment in April. ary schools in 1965. This will be an increase of Interviews with educators and officials of state % million over last year, l 1 million over that /^ labor and industry departments, together with of 10 years ago. the experiences of past graduating classes, offer Pennsylvania, New Jersey, and Delaware will, some clues as to the future of 1965’s high school of course, contribute to the swelling rosters of graduates from the Third Federal Reserve Dis high school graduates.* Public and nonpublic trict. secondary schools in these three states will graduate an estimated 278,000 teenagers this Post-high school education increasing year. This will be 13 per cent more than in Public high school graduates in Pennsylvania, 1964, almost 40 per cent more than in 1960, New Jersey, and Delaware since 1960 have in just five years ago. creasingly sought additional education, as the How well— indeed, how— will the economy absorb this massive vanguard of the “ war first chart indicates.* This trend is expected to continue in 1965 because of growing exhortation babies?” Their future is of mounting concern on the need for post-high school education, gen to government officials, educators, and sociolo eral affluence of gists. They are a growing component of the levels of government support and subsidy pro labor force— high school graduates in Pennsyl grams. the economy, and various vania, New Jersey, and Delaware this year will Approximately 34 per cent of the 1964 public be one-third more of a factor in the three states’ high school graduates in the three states en tered 4-year colleges and universities. One in- * The Third (Philadelphia) Federal Reserve District is comprised of the eastern 48 counties of Pennsylvania, the southern nine counties of New Jersey, and the State of Delaware. 12 * Data on post-high school education for all nonpublic schools were not available. However, fragmentary data indi cate that nonpublic secondary school graduates at least equal the “further education” experience of public school graduates. business review hibiting factor to an increase in this percentage CHART 1 PUBLIC HIGH SCHOOL GRADUATES ENTERING POST-GRADUATE SCHOOLS, 1960-1964 for 1965 is that the well-known colleges and universities are under-campused and overcan vassed. Offsetting this condition is the fact that PENNSYLVANIA today guidance counsellors know more about the PER CENT OF GRADUATING CLASS less-prominent colleges, and persuading students— and are their successfully parents— that matriculation in these colleges is desirable. Schools other than degree-granting institu tions— junior colleges, nursing, business, tech 20- nical and trade schools, and others requiring high school diplomas for admission— will also 10u attract a greater number of this year’s high I960 1961 1962 1963 1964 NEW JERSEY PER CENT OF GRADUATING CLASS school graduates. It is a fairly certain predic tion that more than half the total 278,000 sec ondary school graduates in the three states in 1965 will enroll in either 4-year institutions or in other kinds of schools. “ Found W ork” experience For those graduates not going on into further education— those, in effect, who were “ avail able” for work— the experience of recent years is encouraging.* As Chart 2 shows, there was a significant increase in 1964 of the percentage of “ available” graduates who secured employ ment. General prosperity in this District last PER CENT OF GRADUATING CLASS year is considered in the main to have been responsible for this advance. These charts do not measure teenage employ ment and unemployment, for they are based on public secondary school graduates only. Thus, they do not include those who have left high school prior to graduation, the so-called “ drop outs.” This factor is sizable: in Pennsylvania, 20 per cent of the ninth-graders who began ’ Data for Wilmington public high schools for 1962 were unavailable. Data for the other years indicate a lesser percentage of public secondary school graduates in Wilmington enroll in post-graduate schools than do graduates of secondary public schools outside Wilmington. * This concept of “availability” is valid only for a given instant in tim e, i.e., while graduates are in post-graduate schools only, and not simultaneously employed. (For exam ple, it is estimated that one-fourth of all college students remain in the labor force.) Data used herein are census data enumerated as of a single date. 13 business review CHART 2 ‘‘FOUND WORK” EXPERIENCE OF PUBLIC HIGH SCHOOL GRADUATES W HO DID NOT CONTINUE EDUCATION, 1960-1964 with the 1964 graduating classes of all state public high schools failed to graduate in 1964. College “ dropouts” also influence teenage em ployment and unemployment; some studies sug gest that as many as 50 per cent of those who enter 4-year colleges fail to obtain a degree. Prospects for 1965 Increased international tensions could, of course, mean more graduates going into military serv ice, and fewer taking civilian jobs or entering non-military schools. But because this is diffi cult to forecast, the following observations are based on anticipation of nothing more than a minor acceleration in draft calls and enlistments. Some authorities believe that a number of job opportunities for teenagers have been auto mated out of existence, have been eliminated through changes in processes and procedures, or now require skills— specialized skills— beyond those taught in high schools. Their recommenda tion is that education be continued after high school graduation. This would serve two pur poses: it would qualify more teenagers for the kinds of jobs available today, and for some period of time it would retard their entry into the lists of job-seekers. Overall opportunities for post-high school edu cation are increasing, many with governmental support. Various work-and-study programs stem ming from the Economic Opportunity Act of 1964 (the “ Anti-Poverty” bill) will provide edu cation and gainful occupation simultaneously. Efforts in Distributive Education (teaching grad uates, and some undergraduates, while concur rently employing them in the fields of merchan dising, transportation, and related occupations) are on the rise in local school districts. States 'Excluding Wilmington. Partial data for public high schools in Wilmington indi cate that a higher percentage of their graduates obtains employment than do graduates of secondary public schools outside Wilmington. Digitized for14 FRASER and communities are planning and building new junior colleges. For 1965, these several endeav business review ors should increase job opportunities for teen They would prefer that more effort be made to agers generally, as well as make it possible for induce youths to take “ entry” jobs of whatever some to go to school, and so stay out of the kind available, rather than to sit around wish labor force. ing for ideal white-collar positions. Educators On the other hand, some authorities see many and employment counsellors holding these views new job opportunities for young people today, assert that implementation of their beliefs is particularly in growing service industries, that more difficult than those who advocate extended do not require extensive education. They are education: They must cope with an intangible, convinced that one very important determinant a state of mind; and ironically, they must do so of teenage employment is the general state of in an affluent society where it is easily possible the economy; and that another is the state of for teenagers to live comfortably without having mind of the teenager. to work. Adherents to this latter point of view think Most authorities agree that despite the great that success in finding jobs is more a matter of number of high school graduates this year in the general supply of, and demand for, labor, Pennsylvania, New Jersey, and Delaware, job than a structural defect of youth employment. opportunities open to them are relatively better They reason that intensive efforts to employ now than they have been for some years. One youngsters in a depressed economy will not be group would lead graduates by the hand; the realized; and as a corollary, that such efforts are other would point the way, then perhaps shove not necessary in today’s prosperous economy. a bit. Both believe jobs are there. 15 CAPITAL SPENDING: ONWARD AND UPWARD Manufacturers in the Philadelphia Metropolitan CHANGES IN CAPITAL SPENDING ESTIMATES Area now plan to spend $526 million on plant Each spring, manufac turers have raised their fall estimates by— and equipment in 1965. This is an upward re vision of nearly 17 per cent since previous esti mates made in October, 1964, and, if realized, will be an increase in capital expenditures of 1965 Philadelphia Metropolitan Area Lehigh Valley, Trenton, Wilmington areas almost 35 per cent over last year’s figures. sights for 1965 by 35 per cent since October, 1963 16% 18% 12% 31% 10% Each year, total spend ing has exceeded the year before by— Manufacturers in three other areas also report increases. Lehigh Valley firms have raised their 1964 12% Philadelphia Metropolitan Area Lehigh Valley, Trenton, Wilmington areas 12% 6% 4% 11% and now project a 38 per cent rise over last year’s spending. Wilmington manufacturers have and, if plans are carried out, their 1965 capital Capital spending plans reflect business expectations expenditures will top 1964 by 48 per cent. In In the nation, spending also has increased stead increased estimates by 4 per cent since last fall, the Trenton area, the outlook is less ebullient, ily since 1962. This is hardly surprising. Capi though better than before. Companies there have tal spending is a lagging economic indicator. It increased their capital spending estimates for reflects what businessmen think about future 1965 by 8 per cent, but still expect that they will business conditions, based necessarily on their be 22 per cent under last year’s figures. evaluation of the current economic environment. This spring’s findings continue an upward The graph shows how, during the postwar pe trend which began in 1962. Since then, Philadel riod, capital spending plans have held firm until phia manufacturers each spring have raised their recessions actually got under way, even when fall estimates, and also have increased the actual drops in corporate profits and new orders were amount spent on plant and equipment each year. signalling possible trouble ahead. Results from the other, smaller areas are more These relationships indicate that, although subject to erratic fluctuations. Nevertheless, they manufacturers’ plans for increased capital spend show similar though less consistent patterns of ing are entirely consistent with an optimistic rising capital expenditures and upward revisions outlook for business in the year ahead, they do of annual plans with each new estimate. not guarantee that business will be good. 16 business review ESTIMATED CAPITAL EXPENDITURES OF MANUFACTURERS IN THE DELAWARE AND LEHIGH VALLEYS, 1964 AND 1965 1965 Estimate As of Change in 1965 Estimate Fall-Spring Fall 1964 Spring 1965 $389.1 156.9 2.1 21.6 30.7 18.4 27.8 25.9 12.2 18.2 $451.0 207.0 5.7 14.1 75.5 16.4 29.1 27.9 17.9 20.4 $525.7 233.6 6.2 16.3 77.8 29.5 32.3 35.6 9.6 26.3 + 1 6 .6 + 1 2 .9 + 9.1 + 1 5 .8 + 3.0 + 7 9 .7 + 1 0 .9 + 2 7 .5 - 4 6 .6 + 2 8 .8 + 35.1 + 48.9 + 195.2 - 24.5 +15 3.4 + 60.3 + 16.2 + 37.5 - 21.3 + 44.5 232.2 53.1 14.1 2.5 34.0 11.8 74.6 41.2 0.9 244.0 62.0 7.3 5.3 39.2 12.2 74.3 42.6 1.1 292.1 86.0 11.5 9.7 47.9 11.0 88.9 35.8 1.3 + 1 9 .7 + 3 8 .7 + 5 6 .9 +83.1 + 22.1 -1 0 .2 + 1 9 .6 -1 5 .9 + 1 6 .3 + 25.8 + 62.0 — 18.4 + 28 8.0 + 40.9 6.8 + 19.2 - 13.1 + 44.4 Lehigh Valley All Manufacturing 63.9 65.5 88.2 + 3 4 .7 + 38.0 Trenton All Manufacturing 35.4 25.6 27.6 + 7.7 — 22.0 Wilmington All Manufacturing 45.0 64.0 66.5 + 3.9 + 47.8 Region and Industry Philadelphia Metropolitan Area All Manufacturing Durables Lumber and furniture Stone, clay, glass Primary metals Fabricated metals Machinery (excl. elec.) Electrical machinery Transportation equipment Instruments and misc. Nondurables Food and tobacco Textiles Apparel Paper Printing and publishing Chemicals Petroleum and coal Rubber and leather Expenditures 1964 Change 1964-1965 What are sufficient conditions for continued each year. Another is strength in governmental good business? One, certainly, is strength in spending. Demand emanating from governments consumer spending. Demand from consumers accounts for about one-fifth of our total output directly brings forth more than three-fifths of each year. this country’s total output of goods and services A third requirement is that there will not be events of the kind that trigger drops in confi In the postwar years, capital spending has held firm until recessions (shaded areas) actually began. “ Lead ing series” such as new orders and corporate profits have tended to turn down earlier. BILLIONS OF DOLLARS dence and spending, with repercussions on in comes that then bring on further drops. Events of this nature might include swings from accu mulating to reducing inventories. They could include situations where consumers or govern ments reach some limit such that their demand for goods and services levels off, so that com fortable expectations of increasing sales rather suddenly disappear. Finally, generalized shocks to confidence can hurt business. These could include a sharp tight ening of the international tensions that charac terize today’s world, or increased difficulties in Source: United States Department of Commerce. the financing of international transactions, with 17 business review consequent unsettling effects on exchange mar by any means. Business has been good; high kets and businessmen’s calculations. sales have taken some goods that might have gone into inventory. As a result, inventories of The current outlook steel and other durable goods for the most part At the moment, most of the conditions for good are at manageable levels. Given a continuance business this year are present. Consumers are of these reasonably favorable trends, the indi spending confidently. Total government spend cated swing in inventories would be supportable; ing is still increasing. Americans have become used to international tensions and, if a little the economy could take it in stride. puzzled by international finance, as yet have not Most industries plan to spend more let balance-of-payments difficulties impair their In the Philadelphia area, the total projected in confidence in domestic prosperity. crease in capital spending represents quite well The labor-relations situation in the nation’s the situation in individual industries. Only 3 of steel industry poses the clearest threat to the the 20 manufacturing industries failed to in economy in 1965, even in view of the recent crease their original estimates of plant and contract extension. Inventories of metals and equipment expenditures for 1965. Makers of other durable goods are building up in the ex nondurable goods now plan to spend almost 20 pectation that steel supplies may be cut off later per cent more than they did last fall. Apparel in the year. At times in the past, just such a situ manufacturers especially have sharply increased ation has suddenly led to a decline in production spending plans. In durable goods industries, es when a new labor contract was signed. Produc timates have been increased 13 per cent, with tion for inventory slackened; instead, inventories exceptionally large increases by the fabricated were liquidated. This affected demand as workers metals industry. lost overtime pay or were laid off. Consequent If current plans are realized, durable goods curtailed sales expectations of businesses con industries will spend 49 per cent more on capi tributed to cumulative downturns in output. tal projects this year than in 1964, and makers Conditions have not yet reached such a pass, 18 of nondurables will spend 26 per cent more. F O R T HE R E C O R D . . . BILLIONS $ 2 YEARS YEAR MAR. AGO AGO MEMBER BANKS, 3RD F.R.D. 1965 Third Federal Reserve District United States Factory* Employ ment Payrolls Department Store Sales+ Check Payments* Per cent change March 1965 from Per cent change March 1965 from Per cent change March 1965 from Per cent change March 1965 from mo, ago year ago mo. ago mo. ago mo. ago Per cent change Per cent change SUMM ARY Mar. 1965 from 3 mos. 1965 Mar. 1965 from 3 mos. 1965 mo. ago year ago mo. ago year ago year ago year ago LO C A L CH A N G ES MANUFACTURING 1 + 10 +31 0 - 2 0 + 9 + 6 + Electric power consumed. . . . Man-hours, to ta l* .................... Employment, to ta l...................... W age Income*.......................... + n + 2 + 1 + 2 + 13 + 8 + 4 + 11 + + + + CONSTRUCTION**.................... +82 +35 +12 COAL PRODUCTION................. - + 12 + TRADE*** Department store sales............. BANKING (All member banks) Deposits...................................... loans........................................... Investments................................. U.S. Govt, securities............... O th e r........................................ Check payments......................... - 1 7 + 2 + 2 3 0 - | + 1 + St 9 9 4 11 Lehigh V a lle y .. . 1 + + + + 3 2 1 3 2 3 + 10 + 14 + 1 - 6 + 13 +13 + + + + + 9 14 2 4 13 11 + 2 + 9 + 3 + 18 - 3 + 14 + 1 + 1 0 + 10 + 2 + 14 Lancaster. . . . . . + 1 + 5 + 2 + 10 -1 5 + 2 - 1 + 15 + 1 + 2 + 2 + 9 - + .1 + 7 + 15 0 + 4 + 2 + 10 -1 0 - 2 - 7 +10 1 + 7 - 3 + 4 - 8 + 9 0 + 4 - 3 + 8 - 7 +20 •Production workers only. ••Value of contracts. •••Adjusted fo r seasonal variation. Scranton............ 3 ot + ' l't + 1+ 0 0 + + 1 1 + + t20 Cities ^Philadelphia 1 1 1 + 2 0 + 3 1 + 3 + 4 + 4 -1 0 - 2 + 1 + 15 W ilmington. . . . PRICES Consumer.................................... year ago Philadelphia. . . . 6 + 9 + 3 + 12 + 12 + 2 + 2 - 5 - 4 + 13 + 13 + 2 0 t + 14+ year ago + 9 Reading............. + + year ago 0 + ^ + 1 + 15 -1 1 + 8 + 2 +66 York................... 0 + 0 + 12 - + 12 + 12 +23 + Trenton.............. Wilkes-Barre. . . + 7 + 9 • N o t restricted to corporate limits of cities but covers areas of one or more counties. tAdjusted fo r seasonal variation.
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