The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FRBSF WEEKLY LETTER Number 92-20, May 15, 1992 Agricultural Production's Share 01 the western tconomy I' ... • .. . . . .. Agriculture has always been singled out as one of the major industries in the western states. While no one doubts that agriculture is a highly visible industry-and one that commands significant political power~there is considerable disagreement on how to quantify the industry's importance to the economy. According to some analysts, agriculture is the largest industry in the West, generating as much as a quarter of all employment. Other analysts, though, argue that the agricultural sector accounts for only 2 percent of the West's employment. In large part this disparity results from different definitions of agricultural employment. Broad measures count all employment in industries that in some way use or depend on agricultural products, including retail sales of food and clothing. The narrowest measures count only employment on the farm. In this Letter, we calculate a measure of agriculture's contribution to employment in the nine states of the Twelfth Federal Reserve District by looking at employment in industries that are directly linked to the process of growing crops, raising livestock, and the initial processing of those products. This measure addresses the question of how important it is to have agricultural production physically located in a state to that state's total employment. Our findings suggest that about 3.8 percent of total employment in the West is directly the result of the presence of agriculture in the region. USDA employment shares Determining the importance of any particular industry to the economy is inevitably difficult because of the interrelationships that exist among most industries. Nearly all industries use products from other industries or produce outputs that are used by other industries. One way to meas- ure this importance is with input-output models that track the flow of inputs and outputs between firms. Using these models, it is possible to construct multipliers that indicate how much additional income and employment are generated by an increase in activity by one type of industry. Two problems make multiplier analysis difficult to use. First, multipliers provide only a snapshot. They cannot predict the long-run impact of changes in a given industry, because they cannot predict how other industries will respond. For example, a decline in an industry frees up resources that can be used by other industries in ways not anticipated by the input-output model. Second, compounding this problem, multipliers often are significantly out of date. For example, the latest input-output model created by the State of California relies on relationships as they were in 1976, even though the economy has changed radically since that time. Because of these problems, alternative measures of an industry's importance are often created using more current employment data at the detailed industry level. By summing up the employment of all industries that are linked to agricultural production, a measure of agriculture's importance can be derived. u.s. Majchrowicz (1992) of the Department of Agriculture (USDA) has derived one such measure, combining the employment of all the industries that are strongly linked to the production and sale of food and fiber. Using detailed industry data, he summed up employment in all industries that (according to national input-output models) had a least 1/50 percent of their national workforce employed in providing goods and services necessary to satisfy domestic final demand for agriculture production:' The USDA's measures are shown as the white bars in the Chart using THE WESTERn ECOnOmy The Western Economy is a quarterly review of economic conditions in the Twelfth Federal Reserve District. It is published in the Weekly Letter on the third Friday of February, May, August and November. FRBSF Share of Employment Related to Agriculture % of Total Employment 30 25 forestry services, apparel manufacturing, printing and publishing, and paper product manufacturing. Included in this measure are farm production, non-landscaping agricultural services, fisheries, agricultural input industries (excluding commodity brokers), food processing (except bakeries), and textile and leather raw processing (but not manufacturing). The narrower definition further reduces the estimated size of the farm-related sector to 3.8 percent, as shown by the black bars in the chart. 20 . 15 E_ 10 5 AK o USDA Al. CA HI ID NV OR Iilll Without Trade • Alternative UT WA 12th District o data for 1988. As shown by those statistics, agriculture is a very important industry in the western states, ranging from 11.9 percent of total employment in Nevada to 25.7 percent in Idaho. Using any measure, Idaho, Oregon, and Washington are the District states with the largest shares of total employment related to agriculture. Based on the narrow measure, employment related to agricultural production accounts for 13.4, 6.2, and 5.4 percent, respectively, of total employment in these three states. The level of agriculture-related employment in California is by far the highest of any District state, but when measured as a share of total employment, California ranks sixth out of the nine District states. According to the narrow measure, agricultural production accounts for 3.3 percentaf total employment in California, slightly lower than the District average and well below the national average of5.2 percent. Conclusions Alternative measures To isolate the importance of the presence of agricultural production in a state to its economy, we narrowed the list of industries in the USDA's measures substantially. First, we removed a group of industries in the wholesale and retail trade sector, including grocery stores, eating and drinking establishments, and clothing stores. This sector is the largest component of the USDA's measures for many states, and it shows the most rapid growth. We drop this sector because these activities occur in areas even with no food or fiber production, and do not depend for the most part on being located near such production. In fact, in Nevada, that measure includes casino workers, since they work in establishments that serve food and beverage. As shown by the grey bars in the chart, removing the trade industries has a large effect, causing the Twelfth District's share of total employment attributed to the farmrelated sector to fall to 6.8 percent from 16.7 percent. These trade industries, therefore, account for 59 percent of the USDA's farm-related employment measure. Finally, we removed a number of other industries that are linked to food and fiber inputs in general, but not necessarilyto the agricultural production of the state in which they are located. These included landscaping and gardening services, This article has compared three measures of employment shares, one created by the USDA to measure all employment related to the production of food and fiber, and two alternatives that successively focus only on employment which depends on being linked closely to agricultural production activities. Using this narrow definition, agricultural production is shown to have an important influence on employment in the western states, although significantly less than is indicated by the measure that includes retail and other industries that are more remotely connected to agricultural production. Our analysis suggests that employment related to agricultural production accounts for 3.8 percent of total employment in the Twelfth Federal Reserve District, ranging from 1.3 percent in Nevada to 13.4 percent in Idaho. Ronald H. Schmidt Senior Economist Stephen O. Dean Senior Research Associate Reference Majchrowicz, T. Alexander. 1992. "The Importance of Farm and Farm-Related Industries in the West:' Paper presented at the Western Regional Science Association Meeting, February 23-27, 1992. u.s. District Indicators (Seasonally Adjusted) 9201 9104 9103 9102 9101 9004 9003 9002 AGRICULTURE U.S. CROP PRICES,1965=100 109.7 110.7 114.7 1t6.4 113.4 114.3 115.6 117.3 DISTRICT CROP PRICES, 1965=100 114.2 107.2 120.2 130.6 107.3 111.9 112.5 110.7 FARM CASH RECEIPTS, MILLION $ 2631.9 2224.2 2694.2 2529.5 2696.3 2529 2629.7 2630.7 CATTLE ON FEED, 1965=100 66.5 60.2 64.1 92.6 92.4 66.7 68.5 68.7 CATTLE PRICES, CALIFORNIA, $/CWT. 59.9 62.1 62.6 66.4 64.5 63.9 85.9 56.5 FORESTRY LUMBER PRODUCTION, MILLIONS BOARD FEET 1430.6 1433.5 1531.7 1516.9 1406.1 1360.5 1528.7 1649.1 NORTHWEST LUMBER INVENTORY, MIL. BOARD FT. 2153.3 2296.6 2423.2 2324.4 2368.2 2334.4 2473.7 2624.1 157.1 137.2 131.2 136.3 113.8 120.6 129.6 131.6 U.S. LUMBER PRICES, 1966=100 ENERGY SPOT PRICE OF OIL, $/BARREL U.S. RIG COUNT 16.9 21.6 21.6 20.8 22.1 32.1 26.2 17.8 650.9 769.1 602.6 924.3 951.1 1096.3 1003.5 1050.8 DISTRICT RIG COUNT 55.6 60.9 73.3 63.8 73.2 74.5 75.1 73.7 FUEL MINING EMPLOYMENT, 1965=100 69.6 69.9 72.7 73.6 74.6 73.9 74.1 74.1 U.S. SEISMIC CREW COUNT 78.9 69.7 96.4 110.2 117.9 120.3 122.7 126 MINING MINERAL PRICES, 1966=100 105.3 103.2 105.6 109.2 106.2 112.2 129 127.4 METAL MINING EMPLOYMENT, 1965=100 160.9 160.7 164.1 185.9 193.1 197.1 197.3 199.7 CONSTRUCTiON NONRESIDENTIAL AWARDS, 1965=100 RESIDENTIAL PERMITS WESTE;RN HOUSING STARTS, THOUSANDS CONSTRUCTION EMPLOYMENT, THOUSANDS 115 103.7 93.4 103.1 106.3 101.1 111.6 111.4 19760 19496 16524 19633 17667 18524 22940 25736 21.7 19.5 24.1 25.5 15.6 16.6 29.1 31.2 906.2 912.1 929.3 936.6 957.7 1001.8 1034.7 1056.3 MANUFACTURING WAGES, CALIFORNIA, $/HOUR 12.1 12 11.9 11.6 11.7 11.7 11.5 11.4 2947.2 2956.4 2962.4 3005.6 3050.3 3102.4 3135.2 3155.5 DURABLES, 1965=100 93.7 94.4 95.6 96.6 96.3 99.6 101.3 102.4 CONSTRUCTION DURABLES, 1965=100 97.9 97.1 96.6 99.2 101.5 104.6 106.1 110.5 102.6 104.7 106.1 108.3 110.7 113.1 115.5 117.8 EMPLOYMENT, THOUSANDS AEROSPACE,1965=100 ELECTRONICS, 1965=100 SEMICONDUCTOR ORDERS, MILLIONS $, NOT SA 67.6 68.3 69.9 91.4 92 92.3 92.6 93.2 1472.3 1391.6 1263.5 1294.2 1217.9 1207.1 1236.6 1235.5 WHLS/RETAIL TRADE EMPLOYMENT, THOUSANDS 4704.9 4693 4713:4 4725.7 4725.7 4792.1 4812.6 4605.6 RETAIL SALES, PACIFIC DISTRICT, MIL. $ 25636 24726 25096 24942 24542 25101 25123 24977 SERVICES EMPLOYMENT, THOUSANDS 5496.5 5488.5 5471.9 5445 5404.5 5440 5417.4 5369.9 HEALTHCARE,1965=100 132.1 131.5 130.1 129.1 126.2 127.1 125.6 124.2 BUSINESS SERVICES, 1965=100 119.8 116.1 116.2 119.3 116.4 116.3 116 116 HOTEL,1965=100 136.6 137.4 135 135.1 134.9 135.7 133.6 132.6 RECREATION,1965=100 142.6 142 140.4 141.5 141.6 140.6 136.4 136.4 1243.9 1242.3 1245 1247.2 1247.9 1259 1259.4 1262.6 FINANCE,INSUR. AND REAL ESTATE EMPLOYMENT GOVERNMENT EMPLOYMENT, THOUSANDS FEDERAL GOVERNMENT STATE AND LOCAL 609.9 611.5 614.1 610.7 614.5 616.8 632.6 655.6 2699.9 2663.8 2666.9 2663.2 2651 2642.2 2632.3 2761.7 Data are weighted aggregates of available 12th District data constructed by FRBSF staff from public and industry sources. Opinions expressed in this newsletter do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco, or of the Board of Governors of the Federal Reserve System. Editorial comments may be addressed to the editor or to the author.... Free copies of Federal Reserve publications can be obtained from the Public Information Department, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco 94120. Phone (415) 974-2246, Fax (415) 974-3341. Printed on recycled paper with soybean inks. @~ OlLt'6 VJ 'o:>spueJJ ueS WLL x09 "O"d O)SI)UOJ~ JO UOS ~U08 aAJaSa~ IOJapa~ Twelfth District Business Sentiment"" PERSONAL INCOME ANNUALIZED PERCENT GROWTH RATES GDP Percent 9104 ALASKA ARIZONA CALIFORNIA HAWAII IDAHO NEVADA OREGON UTAH WASHINGTON 12TH DISTRICT U.S. 9103 9102 9101 9004 7.8 3.0 0.9 5.2 14.4 5.8 5.2 5.0 6.7 4.9 -0.3 2.8 5.3 3.4 4.9 5.5 5.8 5.4 -1.6 5.1 4.6 3.3 9.3 4.8 4.5 5.9 4.9 6.8 5.5 -1.5 5.0 -8.4 3.9 1.6 5.0 3.5 6.2 3.4 4.4 a,9 14.9 3.9 5.6 6.2 8.4 2.5 3.8 3.1 2.9 4.6 4.3 0.0 0.4 5.2 3.6 100 80 o Recession 60 I'i!9 Growth less than 2.5% 1m 2.5% to 3% growth 40 • 20 00 00 ~ Q1 1991 m ~ 00 Q1 1992 • Expectations for GOP growth during the next four quarters based on a sUIVey ofapproximately 75 businass leaders [n lhe 12th Federal Reserve Distri cI UNEMPLOYMENT RATES NON-AGRICULTURAL EMPLOYMENT ANNUALIZED PERCENT GROWTH RATE AVERAGE QUARTERLY DATA 9201 . ALASKA ARIZONA CALIFORNIA HAWAII IDAHO NEVADA OREGON UTAH WASHINGTON 12TH DISTRICT U.S. *Vear-to-date 9104 9103 9102 9101 9201 9104 9103 9102 9101 3.4 0.6 1.3 5.8 4.2 3.3 3.0 1.8 7.3 -0.2 ·3.4 1.4 5.9 4.2 1.5 2.0 2.9 0.6 2.8 -1.1 2.6 3.1 2.2 1.2 3.4 1.6 -1.8 -0.1 -0.8 -0.6 2.2 0.7 0.9 1.1 2.3 0.0 -6.5 0.7 3.7 -1.0 -2.4 2.7 -1.5 ALASKA ARIZONA CALIFORNIA HAWAII IDAHO NEVADA OREGON UTAH WASHINGTON 9.1 8.7 8.4 3.5 6.4 6.6 8.1 4.7 7.3 9.8 7.3 7.6 3.0 6.2 5.7 6.5 5.2 6.8 8.8 5.6 7.5 2.7 5.6 5.7 5.9 5.3 6.3 8.0 4.9 7.8 2.5 6.3 5.9 5.8 4.6 6.3 7.7 4.8 7.4 2.5 6.4 5.6 5.8 4.3 5.9 0.6 -0.3 -1.3 -0.1 0.1 0.5 -0.4 -1.2 -4.2 -2.3 12TH DISTRICT U.S. 8.0 7.2 7.2 7.0 6.9 6.8 6.9 6.8 6.6 6.5 ~O.5 -0.5 * Year·to-date m Growlh above 3%
@FedFRASER