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wmMm A U G U S T 1967 IN THIS I SSUE Trends in Prices, Production, and Inventories.................. 2 An Economic Profile of D a y t o n .................. 9 FEDERAL RESERVE BANK OF CLEVELAND E C O N O M IC REVIEW TRENDS IN PRICES, PRODUCTION, AND INVENTORIES The nation's econom ic activity in the first BACKGROUND half of 1967 failed to advance as rapidly as in recent years. In the first quarter of 1967, An overview of pertinent econom ic series real econom ic activity (real Gross National is presented in Chari l . 1 As shown in the Product) deteriorated slightly; in the second bottom panel of the chart, increases in indus quarter, real activity increased only modest trial prices began to accelerate during the ly. After hesitating in late 1966, industrial fourth quarter of 1965. At that time, the production declined in the first quarter of growth of both industrial production and 1967, and continued to decline during the business sales w as reinforced by the highest second quarter, although at only half the rate sustained rate of inventory accum ulation of the first quarter. since the Korean W ar. By the second quarter At this juncture, there is widespread senti of 1966, prices were rising at the fastest rate ment that economic activity is in the process in a decade — generally the result of excess of gaining momentum, and will begin to surge demand impinging on the limitations of sup- by the fourth quarter. This m ay indeed be the ply. case. If so, the p ace and tone of econom ic Industrial production continued to increase activity at the present time (the third quarter) though mid-1966. The p ace of business sales, will provide the foundation for the surge that however, began to slacken during the second is widely anticipated to lie ahead. Since the 1 The series in ihe top panel of Chart 1 are on an index behavior of industrial production, industrial basis for the purpose of comparison. Total business sales prices, and inventory-sales relationships is a m ajor influence on economic activity, it seem s and total business inventories (book value) are measured in current dollars, while the Federal Reserve Board's in dex of industrial production is measured in physical terms. particularly relevant to review these area s Both the business inventories and sales series include the at this time. manufacturing, wholesale, and retail sectors. AUGUST 1967 C h a r t 1. PRODUCTION, SALES, INVENTORIES, and PRICE CHAN G ES ward momentum of real econom ic activity since the 1960-1961 recession. INDEX 1957-59=100 Against this background, a discussion of the behavior of key industrial series, classi fied by market groupings, rev eals a number of important interrelationships. INDUSTRIAL PRICES The recent behavior of industrial w holesale prices and the m ajor market groupings is presented in Chart 2. As shown in the upper A N N U A L RATE of C H A N G E in INDUSTRIAL W H O L E S A L E PRI CES H ■ upswing in industrial prices during the first Tin nil 1 2 3 4 left panel of the chart, the particularly sharp I H 1 2 3 ■ 4 11 1 _ QUARTERLY 2 3 4 1965 1966 19 67 * From previous quarter. Sources of data: U.S. Departm ent of Commerce; Bureau of Labor Statistics; B oard of G overnors of the Federal Reserve System half of 1966 w as followed by little change betw een July and December. After December, the index of industrial prices moved to a m oderately higher level. quarter; at the sam e time, the rate of inven The nature and extent of price pressures in tory accum ulation w as stepped up. The level the industrial sector can be seen by a sep ara ing of business sales during the second half tion of industrial commodities into m aterials of 1966, together with an even higher rate of and products (see Chart 2).2 G enerally, prices inventory accum ulation (much of which was of industrial m aterials respond more readily involuntary), set the stage for a cresting of in to changes in supply and demand than do dustrial production in the late months of the prices of industrial products. Thus, a s demand year. M eanwhile, as demand pressures eased pressures eased during the latter part of 1966 and supply bottlenecks were alleviated, the and supply conditions improved, prices of rate of price in crease subsided m arkedly. m aterials began to decline. Because the During the first half of 1967, business sales weight of m aterials is greater than products rem ained on a stubborn plateau, the rate of in the total industrial price index (the respec inventory accum ulation slackened, and in tive weights are shown in the parentheses in dustrial production declined. Much of the the chart), declines in prices of m aterials vir decline in output w as due to a sharply re tually offset continued in creases in prices duced rate of inventory building by m anufac of products. turers and to sizable inventory liquidation by w holesalers and retailers. A brief flurry of price in creases occurred during the first quar 2 Industrial materials, which include fuels and power, a re used in the production of both producers' equipment and consumer nonfood goods. Industrial products are ter of 1967, despite the fact that the econom y finished goods for ultimate use as producers' equipment w as experiencing the first setback in the for or as consumer nonfood goods. 3 EC O N O M IC REVIEW The price index for other industrial m ate C h a r t 2. IN DUS TR IA L W HOL E SA L E PRICES rials includes items such as steel mill prod I N D E X 1 9 5 7 - 5 9 = 100 I _ OTHER ucts, glass, concrete, and chem icals, which MATERIALS i-i ; generally involve more fabrication than do _______ I ___ sensitive m aterials. For almost four years SENSITIVE MATERIALS,.. prior to 1965, prices of nonsensitive industrial m aterials were virtually stable, while prices of sensitive industrial m aterials underwent 115 alternating periods of strength and w eakness. 110 -PRODU EQUIP*.^ENT . / c c NSUMER |12.97 , NO NFOODS J .. 128.1 : : r > 1 P R O D L CTS (41.0 Vo) 105 / -------- \A T E R IA L S (59.0%) .— •— M ONTHLY 100 196 5 '6 6 ’6 7 1965 '6 6 '6 7 Prices of nonsensitive m aterials firmed mod erately during 1965, gained momentum in the latter part of the year, and then a cceler ated in 1966. As in the past, the acceleration of nonsensitive m aterials prices during 1966 characterized a situation in which output w as W eights in parentheses. Sources of data • Bureau of Labor Statistics and B oa rd of G overnors of the Federal Reserve System pressing against capacity, gains in labor productivity were slowing, and costs gener ally were rising. In that type of economic As shown in Ihe upper right panel of Chart clim ate, it is not surprising that inflationary 2, the reversal of the advance in m aterials pressures on prices of finished goods also prices in the second half of 1966 w as entirely the result of a steep decline in the sensitive intensified. Price increases for producers' equipment m aterials group. The group is composed of also accelerated during 1966 as outlays for m aterials such as hides and skins, textiles producers' goods rose at a rapid rate. His and fibers, lumber, and nonferrous m etals. torically, ihe price index for producers' equip These primarily ment has behaved in a ratchet-like m anner — because of their price responsiveness to rising when investment demand is strong, changes in m arket conditions. Given the rela but at best only leveling off when capital tively inflexible supply characteristics of spending is w eak and prices of m aterials m ay sensitive m aterials during the short-run, m ar be declining. Thus, the reduction in capital ket shortages quickly elicit higher prices, spending since the fourth quarter of 1966 only which in turn induce expansion of supplies served to m oderate the price rise in this group. that eventually relieve price pressures. Rapid It appears that as demand pressures eased or prolonged increases in prices of sensitive in 1967, cost-push influences cam e to the fore. industrial m aterials tend to reflect increasing In addition, increases in w holesale prices pressures on cap acity to produce other m a of consumer nonfoods accelerated during m aterials are included terials. Conversely, weakening in prices of 1966, despite the sluggish p ace of retail sales sensitive industrial m aterials tends to reflect beginning in the spring. The price rise in this declining rates of capacity utilization. group appears to have resulted more from Digitized for4 FRASER AUGUST 1967 Ihe influence of cost-push than demand-pull factors, since there w as little demand pres drugs, and toiletries continued to rise in 1967. sure through much of 1966. Thus far in 1967, There is some indication that the production there has been little abatem ent of ihe rise in index for consumer goods is poised for an prices of consumer nonfoods, in contrast to upturn, as a number of previously declining the price moderation that has occurred in categories appear to have leveled off. In ad m aterials and in producers' equipment. staples such as food, beverages, tobacco, dition, auto assem blies are currently provid ing a boost to consumer goods output, with INDUSTRIAL PRODUCTION The market groupings of industrial produc tion in Chart 3 are roughly com parable to ihe market groupings of industrial w holesale auto com panies building new models earlier than usual, and at a rapid pace, in anticipa tion of a possible strike this fall. Production of m aterials peaked in October prices shown in Chart 2 .3 Output of consumer 1966, and the decline through June was large goods w as on a plateau for most of 1966, re ly due to the behavior of durable goods m ate flecting the sluggish p ace of retail trade. The rials (roughly half of total m aterials). Output increase in consumer goods output in the of nondurable m aterials, which includes busi fourth quarter w as m ainly the result of a ness fuels and power, eased only slightly af larger volume of auto assem blies, which was ter January. Within the durable goods portion, followed by a sharp cutback in production in there were divergent and partially offsetting the first quarter of 1967 to reduce excessive trends. dealers' stocks. An improvement in auto pro peaked as early as March 1966 and then de duction during ihe second quarter helped to clined until Decem ber; a moderate recovery limit ihe net decline in consumer goods out put betw een Decem ber and June. Production of home goods and apparel, which began to Output of construction m aterials Chart 3. IN D U S TR IA L PRO DUCTION Market Groupings I N D E X 1 9 5 7 - 5 9 = 100 w eaken in the summer of 1966, underwent further cutbacks in 1967 as inventories were adjusted. M eanwhile, output of consumer 3 The series on defense products is not comparable since there is no special price index, nor is consumer goods output, which includes processed foods. The defense group in industrial production covers only the output of military aircraft, ordnance plants, and navy shipyards. The other market categories include much additional out put that is directly or indirectly related to military require ments. The behavior of the index for defense products, therefore, is only an approximate measure of the rise in defense production during recent years. The remaining market groups of materials, business equipment, and con sumer goods each contributed to the decline in non defense industrial production during the first half of 1967. W eights in parentheses. Source of data: Board of G overnors of the Federal Reserve System 5 E C O N O M IC REVIEW in the first quarter of this year was followed excessive inventories appear to be concen by weakening again in the second quarter. trated. The market groupings of inventories Output of m aterials for equipment continued are broadly com parable to those of industrial to rise until November 1966, and then declined production shown in Chari 3. Each market in line with the cutbacks in production of grouping includes inventories at all stages business equipment. Meanwhile, production of fabrication — that is, m aterials and sup of m aterials for consumer durables peaked in plies, work-in-process, and finished goods. October 1966, while output of other m etal Because inventories can be considered a s m aterials peaked in June 1966. high or low only in relation to sales, inven- Output of business equipment (including tory-shipments ratios, on a quarterly basis, com m ercial and industrial, freight and pas are provided in the accom panying table. senger, and farm equipment) closely followed (The ratios taken alone reveal nothing about the contour of expenditures for producers' the course of inventories or the course of durable goods. Output of business equipment sales.) declined steadily in each month during the Producers of defense products have expe first half of 1967, with the decline about twice rienced the sharpest rise in inventories — as severe as the reduction in total industrial both in absolute terms and relative to ship production. Near-term production prospects ments. But, b ecau se defense production is for business equipment are mixed. Favorable "to order,” only 4 percent of those inventories aspects include the restoration of the 7 per are finished goods; the rem ainder is neces cent investment tax credit, recent monthly sary to sustain rising defense output. gains in m anufacturers' new orders for m a Inventories held by producers of business chinery and equipment, and the latest Com- equipment, however, seem to pose a prob merce-SEC survey indicating a moderate rise lem, inasm uch as shipments declined sharply in plant and equipment outlays during the after D ecem ber while stocks continued to rise. third and fourth quarters of 1967. On the Eventually, other hand, there are some factors creating ratio in this market category will have to be an unfavorable clim ate for capital spending, reduced — either by inventory liquidation the high inventory-shipments including an enlarged amount of excess plant (or at least a further slowdown of accum ula capacity and the recent w eakness in corpo tion), a sustained rise in shipments, or some rate profits. com bination of the two. Inventories held by producers of m aterials MANUFACTURERS' INVENTORIES also appear to be high, at least relative to the Inventory investment (or liquidation) by level of shipments during 1965 and 1966. manufacturers is influenced by the course Shipments of m aterials were relatively un of capital spending, and by the sales per changed in the second half of 1966, and then form ance of the trade sector. Chart 4 provides receded somewhat in the first half of 1967. some perspective on inventory-sales rela Since inventory accum ulation in m aterials tionships in the manufacturing sector, where continued, it appears that some adjustment Digitized for 6 FRASER AUGUST 19 67 C h a r t 4. of the invenlory-shipmenls ratio is also likely, m anufacturers' inventories w as due to sales whether in the form of increased shipments falling short of anticipations. The lop panel or adjustment of inventories. shows guarierly changes in actual and antic Inventory accum ulation by producers of ipated m anufacturers' sales. The anticipa consumer goods continued throughout 1966 tions data are based on surveys of the U. S. and the early months of 1967, while ship Department of Commerce taken about six ments were w eak for most of that period. Al w eeks before the beginning of each quarter. though adjustm ents were made in the output During 1965 and in the first quarter of 1966, of consumer goods during much of 1966 and sales consistently rose more than anticipated. the first half of 1967, the stock-sales ratio in Beginning in the second quarter of 1966, how this category during the first guarter of 1967 ever, sales consistently fell short of antici was still high by prior standards. During the pated gains. The spread betw een anticipa second guarter, the stock-sales ratio began to tions and realizations becam e progressively decline, as inventory accum ulation ceased larger through the first quarter of 1967, when and shipments began to strengthen. Some sales actually declined. In the second quarter, further inventory adjustment by producers of sales rose once again, although not as much consumer goods m ay yet occur. as m anufacturers had anticipated in the Feb ruary survey. The M ay 1967 survey revealed MANUFACTURERS 1 SALES AND INVENTORIES - ANTICIPATIONS vs. REALIZATIONS As shown in Chart 5, part of the rise in that m anufacturers were extrem ely opti mistic with regard to sales volume in the third quarter. An indication of the extrem e opti mism is found in the fact that not since the 7 E C O N O M IC REVIEW second half of 1966 were accom panied by un C h a rt 5. M A N U F A C T U R E R S ' S AL E S and INVEN TOR IE S An ticip at ed and Ac tu al C h a n g e s B i ll io n s of do llars planned inventory accum ulation. Such invol untary inventory additions resulted in pro duction cutbacks and reduced rates of inven tory investment during the first and second quarter of 1967. The relatively moderate amount of inven tory accum ulation expected by m anufac turers during the third quarter is associated with an anticipated sharp gain in sales. If production schedules are geared to the opti mistic sales projection of the third quarter, and if the latter does not fully materialize, 1 2 3 4 1 1965 2 3 4 1966 Q U A R T E R L Y -S E A S O N A L L Y ADJU STED Source of data: there could be another round of involuntary inventory accumulation. That, of course, U.S. Departm ent of Commerce would only aggravate the problem of excess m anufacturers' inventories, as indicated by booming first quarter of 1966 has there been the relatively high slock-sales ratios previous an actual sales increase as large as the $3.9 ly discussed and as considered by m anufac billion gain anticipated for the third quarter turers them selves. With respect to the latter 1967. As illustrated in the bottom panel of Chart point, in the M ay 1967 survey the percentage 5, inventory accum ulation by m anufacturers high w as the largest in almost a decade. The of m anufacturers' inventories classified as ran considerably above anticipations during crucial element, therefore, is the behavior of the second half of 1965 and throughout 1966. sales in the third quarter, at least insofar as Much of the sales disappointments during the inventory developments are concerned. Digitized for 8 FRASER AUGUST 19 67 AN ECONOMIC PROFILE OF DAYTON Dayton is the fourth largest metropolitan ment, Dayton is situated on the banks of the area (SMSA) in Ohio and 39th largest in the Miami River where the Stillw ater and Mad n ation.1 Dayton is known as the birthplace Rivers join the m ainstream . Dayton's original of aviation and, perhaps more importantly, population of 20 pioneers grew to 228,600 in at least in a current context, is also recog 1900, to 727,100 in 1960, and to 776,000 in 1965. nized as a m ajor production center of house Population in the Dayton SM SA more than hold, office, and automotive equipment. In tripled from 1900 to 1965, increasing at an view of the strong perform ance of these prod average annual rate of 1.5 percent, or by the uct lines, it should not be surprising that sam e rate as the eight m ajor SM SA 's in Ohio Dayton has com bined2 (see Table I). From 1960 to 1965, experienced substantial eco nomic growth in recent years. Dayton's recent favorable econom ic record population in the Dayton SM SA increased nearly 7 percent, the third largest gain among is a carry-through of its earlier perform ance, Ohio's m ajor SM SA's. During both periods, and is due in large part to the rather unique population econom ic mix of the area. Compared with growth in the Slate of Ohio, and from 1900 to other m ajor SM SA 's in Ohio, Dayton has rela 1965 it grew faster than in the United States. growth in Dayton exceeded tively high proportions of both m anufactur Part of Dayton's substantial population ing and government activity. The significance gain resulted from migration to the area. Of of the foregoing is perhaps found in the fact the total 1960 population, 18 percent moved that m anufacturing activity in Dayton, par to the Dayton SM SA after 1955; nearly one- ticularly the production of automobile equip half of that group migrated from other parts ment and appliances, provided much of the of Ohio while the rem ainder previously re stimulus for growth from 1960 to 1966, while sided out of sta te.3 It is likely that heavy mi government activity acted as a buffer when gration continued in the 1960-1965 period, ever econom ic activity moderated, such as 2 Major Standard Metropolitan Statistical A reas in Ohio during the 1960-1961 recession. are those having more than 40,000 employed in manufac turing or population of 500,000 or more. BACKGROUND A N D POPULATION GROWTH Founded in the late 1790's when a ccess by w ater w as a prime consideration for setile- 3 For comparison, the proportions of the population mi grating into the other major SMSA's during the 19551960 period were: Akron, 12 percent; Canton, 10 percent; Cincinnati, 12 percent; Cleveland, 11 percent; Columbus, 18 percent; Toledo, 9 percent; and Youngstown-Warren, 1 The Dayton Standard Metropolitan Statistical A rea in 11 percent. Data for the 1960-1965 period are not yet cludes Montgomery, Miami, Greene, and Preble Counties. available. 9 E C O N O M IC REVIEW TAB LE I P o p u la tio n D a y to n S M S A , O th e r Selected S M S A 's in O h io , State of O h io , a n d U nited States 1900-1965 A ve rage Population (thousands of persons) --------------------------------------------------------1900 1960 1965 * nnual ° e °, Growth 1900-1965 Percent Increase ----------------------------------------1960-1965 1900-1965 United S t a t e s ..................... . . . 76,212.2 179,323.2 193,795.0 1 5 4 .3 % 8 .1 % 0 .7 % O h i o ................................... . . . 4,157.5 9,706.4 10,241.0 146.3 5.5 0.6 Total 8 S M S A ’s ..................... . . . 2,112.1 6,745.4 7,061.5 234.3 4.7 1.5 101.0 605.4 634.0 528.0 4.7 3.1 A k r o n ............................ . . . C a n t o n ............................ . . . 94.7 340.3 365.5 285.8 7.4 1.9 C in c in n a ti......................... . . . 617.9 1,268.5 1,329.0 115.1 4.8 0.2 1.9 C le v e la n d ......................... . . . 497.5 1,909.5 1,971.0 296.2 3.2 C o lu m b u s ......................... . . . 217.9 754.9 828.0 280.0 9.7 1.9 D a y t o n ............................ . . . 228.6 727.1 776.0 229.5 6.7 1.5 T o l e d o ............................ . . . 237.9 630.6 647.0 172.0 2.6 0.9 116.7 509.0 511.0 337.8 0.4 2.2 Youngstown-Warren . . . . . . . Sources: U. S. Department of Commerce and Department of Health, State of Ohio and played a m ajor role in the growth of Dayton's population. m ajor SM SA 's in Ohio, a s w ell as those in the United States as a whole. The percent in- The relatively rapid migration of people crease in w holesale and retail trade employ- to the Dayton area probably reflects expand- ment in Dayton during 1960-1966 w as the ing job opportunities. In the 1960-1966 pe- second largest among the m ajor SM SA 's in riod, for exam ple, total nonagriculiural w age Ohio, and the percent increase in services and salary employment in the Dayton SM SA w as the fourth largest; gains in both cate- increased gories were slightly below those in the nation. 17 percent. Among the m ajor SM SA 's in Ohio, only Columbus, with an Government employment gain of 20 percent, recorded a SM SA recorded the sm allest percent increase larger increase during the period. NONAGRICULTURAL EMPLOYMENT employment in the Dayton from 1960 to 1966 among the m ajor SM SA 's in Ohio, as well as the sm allest increase of a n ihe m ajor groups in Dayton. This w as due G ro w th. Nonagricultural w age and salary largely to the fact that the number of people employment in the Dayton SM SA totaled employed by the Federal Government in the 295,000 persons in 1966, fourth am ong Ohio's area changed little during the period under m ajor SM SA 's (see Table II). From 1960 to review. 1966, am ong the m ajor employment groups, C o m p o sitio n . By far, m anufacturing is ihe relative gains in manufacturing, contract con- most important source of employment in the struction, transportation and public utilities, Dayton and finance, insurance, and real estate in the w holesale and retail trade, services, and con- Dayton SM SA were larger than in the other struction (see T ables II and III). With 42.3 Digitized for10 FRASER SM SA, followed by government, AUGUST 19 67 percent of total nonagricultural employment ment sw ells public employment, had a higher in manufacturing in 1966, Dayton ranked proportion of government employment than fourth am ong Ohio's eight largest SM SA's. Dayton. The SM SA also had a slightly larger propor From 1960 to 1966, government em ploy tion of m anufacturing employment than Ohio ment in the Dayton SM SA increased only (39.5 percent) and w as substantially above 11 percent (see Table II). Employment in the United States as a whole (29.9 percent). local government agencies, including public Government, including Federal and state schools, increased by 30 percent in the Day and local agencies, is the second largest ton SM SA, about in line with the other m ajor source of nonfarm employment and the SM SA 's in Ohio. Federal Government em largest source of nonmanufaciuring em ploy ployment, however, reflecting a reduction of ment in the Dayton SM SA, due largely to the personnel at W right-Patterson Air Force Base, concentration of Federal Government work w as virtually the sam e in 1966 as six years ers at W right-Patterson Air Force Base. earlier. G o v ern m en t em p lo y m en t in D ay ton W holesale and retail trade is the third most amounted to 52,000 persons in 1966, or 17.5 important source of employment in Dayton, percent of total nonfarm employment, the and services the fourth. Together, trade and second largest proportion among Ohio's eight services in 1966 accounted for about 30 per m ajor SM SA 's, as shown in Table III. In com cent of total nonfarm employment in Dayton. parison, government employment in Ohio The proportion of employment in each cate was 13.8 percent of total w age and salary gory in 1966 w as below the other m ajor employment and in the United States, 17 per SM SA 's in Ohio (except Canton in the case cent. Among Ohio's m ajor SM SA 's, only of services) and the United States. At 50,000 Columbus, where state government em ploy persons, employment in w holesale and retail T A B L E II N o n a g r ic u l t u r a l E m p lo y m e n t S e v e n M a j o r E m p lo y m e n t C a t e g o r ie s D a y t o n S M S A , O t h e r S e le c t e d S M S A 's , Sta te o f O h io , a n d U n it e d S t a t e s 1 9 6 6 A n n u a l A v e ra g e a n d Percent C h a n g e 19 6 0 -1 9 6 6 Total Nonagricultural Employment United States Ohio 1966 (000) Percent Change 1960-66 63,864 + 18% Manufacturing 19 66 (000) Percent Change 1960-66 19,081 + 14% 3,492 +11 1,380 Akron 216 +10 94 Canton 122 + 10 60 Cincinnati Cleveland + 5 + 10 + 20 161 305 Columbus 449 791 324 Dayton Toledo 295 214 + 17 + 11 125 79 YoungstownWarren 181 + 10 85 83 Contract Construction 1966 (000) Percent Change 1960-66 1966 (000) Percent Change 1960-66 3,281 + 14% 4,137 + 9 3 151 + 9 4 + + 1 5 19 31 + + Transportation and Public Utilities 8 208 7 33 — 9 +20 49 14 3% * 1966 (000) Percent Change 1960-66 13,220 + 16% Finance, Insurance, and Real Estate 1966 (000) Percent Change 1960-66 3,086 + 16% Services Government 1966 (000) Percent Change 1960-66 1966 (000) Percent Change 1960-66 9,582 + 29% 10,850 +30% 670 + 8 135 + 12 444 5 40 + 8 6 + 13 27 + — 7 4 22 + 9 4 14 + 19 93 + 4 161 + 4 + 8 + 18 24 37 + 8 + 6 + 13 27 11 60 110 + 14 +22 59 96 + + 19 +23 484 +21 -(-36 + 18 + 25 + 27 20 + 5 68 20 +25 48 + 30 68 +32 7 5 8 7 + 26 + 50 45 + 12 7 12 16 + 12 6 13 9 +27 + + 8 36 31 + 26 +28 52 28 + 11 +27 + 7 9 — 12 10 + 7 32 + 10 5 + 2 24 +28 17 + 18 + 11 +20 16 4 9 5 8 + + — — Wholesale and Retail Trade + + NOTE: 1960 data for Akron, Cincinnati, Cleveland, Columbus, Dayton, and Toledo have been modified by Federal Reserve Bank of Cleveland to be comparable with 1966 data. * Less than 0.5 percent change. Sources: U. S. Department of Labor and Division of Research and Statistics, Ohio Bureau of Unemployment Compensation 11 E C O N O M IC REVIEW trade increased 12 percent from 1960 to 1966, M a n u fa c tu rin g E m p lo y m e n t the second largest gain among the m ajor D a y to n S M S A Ohio SM SA 's (see Table II). Employment in Distribution 1966 Annual A ve rage services totaled 36,000 persons in 1966, 26 per cent more than in 1960, and one of ihe larger gains am ong the m ajor Ohio SM SA's. Although accounting for a relatively sm all amount of nonfarm em p^ym enl in ihe Day ton SM SA (ranking fifth in importance), con struction activity has contributed importantly to the economic growth of the area. The value of residential building contracts awarded during 1966 totaled $103.4 million, 33 percent more than in 1960; nonresidential building contracts totaled $99.8 million in 1966, or 47 percent more than in 1960. In light of ihe sub Durable g o o d s ......................... Machinery, except electrical. Percent Change 1 9 60-1 966 71% . +23% 29% + 34 22 + 7 . . 7 + 6 Stone, clay, and glass products. 2 + 11 + 50 Electrical m a ch in e ry .............. Transportation equipment Other durable goods Nondurable g o o d s .................. Printing and publishing 11 . . . . 29 . . . + 12 9 + 15 5 + 30 Food and kindred products . . 4 — 13 Other nondurable goods . . . 11 + 15 Paper and allied products . . Total m anufacturing.................. 100% +20% *D a ta for 1960 have been modified by the Federal Reserve Bank of Cleveland to be com parable with 1966 data. Source: Division of Research and Statistics, Ohio Bureau of Unemployment Compensation stantial gains in building contract awards, it is not surprising that construction em ploy The nonelectrical m achinery industry is ment in Dayton increased 27 percent from clearly the most important source of manu 1960 to 1966, a more favorable showing than facturing employment in the Dayton SMSA. in an y other m ajor SM SA in Ohio (see Table In 1966, employment in that industry totaled II). 36,700 persons, nearly one-third of total m an ufacturing MANUFACTURING EMPLOYMENT As indicated earlier, manufacturing a c employment. Moreover, from 1960 to 1966, the nonelectrical m achinery in dustry in Dayton recorded an employment counts for nearly half of nonagricultural em gain of 34 percent, by far the largest among ployment in the Dayton SM SA, increasing by the m ajor industrial groupings in the SMSA. 20 percent from 1960 to 1966, com pared with Four of ihe 13 largest plants (employing increases of 9 percent in the Slate and 14 over 1,000 persons) in the Dayton SM SA m an percent in the nation. Although the number ufacture nonelectrical machinery. The largest em ployed in the m anufacture of nondurable company, which employed over 17,000 in goods recorded a substantial gain (12 per 1965, primarily m anufactures computing and cent) from 1960 to 1966, employment in dur accounting m achines, and is known nation able goods manufacturing increased nearly ally as a m anufacturer of cash registers. twice as fast (23 percent). Durable goods m an Other nonelectrical m achinery plants in Day ufacturing in Dayton m ainly involves the ton that employ substantial numbers of per m anufacture of electrical and nonelectrical sons produce refrigeration equipment (except m achinery, and accounts for nearly three- household), food products machinery, and fourths of total manufacturing employment. printing machinery. In addition, there are a Digitized for12 FRASER AUGUST 19 67 T AB LE III Percent D istrib u tio n of Total N o n a g ric u ltu ra l E m p lo y m e n t Seven M a jo r E m p lo y m e n t C a te g o rie s D a y to n S M S A , O th e r Selected S M S A 's in O h io , State of O h io , a n d U nited States 1966 Annual A verage Manufacturing Canton W holesale and Retail Trade Government 4 9 .1 % Columbus 2 1 .1 % YoungstownW arren 46.7 Akron 43.7 Dayton 42.3 Dayton United States Services United States Columbus 2 0 .9 % Toledo 20.8 United States 20.7 Cincinnati 20.6 Youngstown- 17.5 17.0 Ohio 39.5 Ohio 13.8 Cleveland 20.4 Cleveland 38.6 Cincinnati 13.2 Ohio 19.2 Toledo 36.7 Toledo 12.8 Cincinnati 35.8 Akron 12.5 Akron 18.4 Cleveland 12.1 Canton 18.2 United States 29.9 Youngstown- Columbus 15.0 Toledo 14.5 Cleveland 13.9 Cincinnati 13.4 W arren W arren Columbus Canton 25.8 Youngstown- Columbus Transportation and Utilities 5 .1 % 17.8 13.0 Ohio 12.7 Akron 12.6 Dayton 12.1 Canton 11.6 16.8 Finance, Insurance, Real Estate Toledo 7 .8 % Columbus 6 .2 % Cincinnati 7.3 Cincinnati 5.3 United States 6.5 United States 4.8 Cleveland 4.7 Ohio 3.9 4.7 YoungstownW arren Dayton 8.6 Contract Construction United States W arren 9.5 1 5 .0 % 4.7 Akron 6.4 Ohio 4.3 Cleveland 6.2 Cincinnati 4.3 Ohio 6.0 6.0 Dayton 4.3 Toledo 4.2 Columbus Canton 3.3 Toledo 3.2 Akron 2.8 5.5 Dayton 2.8 Canton 5.3 Youngstown- Dayton 3.9 W arren Cleveland 3.9 Youngstown- Akron 3.5 W arren Canton 3.5 2.5 Sources: U. S. Department of Labor and Division of Research and Statistics, Ohio Bureau of Unemployment Compensation large number of special tool and die shops sons in 1966 or 7 percent more than in 1960. in Daylon. The two largest electrical m achinery plants Production of electrical m achinery, equip are divisions of a m ajor automobile producer. ment, and supplies w as the second largest Together, these two plants employ over source of employment among manufacturing 20,000 persons in the m anufacture of house industries in Dayton, employing 27,200 per hold refrigerators, home and farm freezers, 13 E C O N O M IC REVIEW and elecirical equipment for internal com T A B LE IV bustion engines. The third largest electrical A v e r a g e H o u rly E a rn in g s in M a n u fa c tu rin g m achinery plant, which employs over 1,200 D a y to n S M S A , O th e r Selected S M S A 's in O h io , persons, produces welding equipment. State of O h io , a n d United States 1960 and 1966 Employment in the transportation equip ment industry is dominated by two plants that produce motor vehicle parts and a cces United States 1960 1966 . . . $2.26 $2.71 2.60 3.10 sories. These two plants are also divisions of the automobile com pany that has the two Percent Change 19 60-1 966 + 20% + 19 2.85 3.42 + 20 2.67 3.10 + 16 largest elecirical m achinery plants in Dayton. C in c in n a ti.............. 2.43 2.92 + 20 The printing and publishing industry in C le v e la n d .............. 2.67 3.17 + 19 C o lu m b u s .............. + 20 2.47 2.97 Dayton employed 11,600 persons in 1966, 2.73 3.39 +24 making it the largest em ployer among the 2.71 3.23 + 19 2.93 3.37 + 15 nondurable goods industries. This industry is concerned with printing and publishing Youngstown-Warren Sources: U. S. Department of Labor and Division of Research and Statistics, Ohio Bureau of Unemployment Compensation nationally circulated periodicals, as well as newspapers. A number of com m ercial print ers and lithographers are also located in A number of m easures point to the fact that Dayton. The paper and allied products industry in Dayton recorded the most sizable gain for a single industry in nondurable goods em ploy ment from 1960 to 1966 — 30 percent. The in dustry employed 5,700 persons in 1966 or about one-half the number in the printing and publishing industry. manufacturing activity in the Dayton SM SA has grown rapidly in recent years. This Bank's index of manufacturing activity, which is based on electric power consumption by in dustrial users, increased 59 percent from 1960 to 1966 in Dayton, outperforming the other m ajor Ohio SM SA 's for which the m ea sure is available. In the sam e period, the A verage earnings for all manufacturing industries in the Dayton SM SA amounted to $3.39 per hour in 1966. A verage hourly earn ings in Dayton scored the largest MEASURES OF MANUFACTURING ACTIVITY com parable index for the nation increased 46 percent (see Table V). In 1963,4 Dayton ranked third in value gain added by manufacture among the m ajor among the m ajor SM SA 's in Ohio from 1960 Ohio SM SA's. Total value added was $1.3 to 1966, and were the second highest in the billion, which represented a 45-percent in Slate in 1966, moving ahead of Youngstown- crease betw een 1958 and 1963, the largest W arren (see Table IV). A verage w age levels for any SM SA in Ohio with the exception of in Dayton were substantially above the State Canton (see Table V). In comparison, Ohio and the nation in 1966, and showed larger and the United States had 35-percent and gains from 1960 to 1966 than either Ohio or the United States. Digitized for14 FRASER 4 Latest year for which data are available. AUGUST 19 67 TAB LE V M e a s u r e s of M a n u fa c tu rin g A c tivity D a y to n S M S A , O th e r Selected S M S A 's in O h io , State of O h io , a n d U nited States Value A d de d by Manufacture Manufacturing Activity* 1960 1966 Percent Change 19 60-1 966 United States . . . . 10 9 f 15 9pf +46% (mil. $) 1958 1963 Capital Expenditures (new) Percent Change 1958-1 963 + 36% (mil. $) 1958 1963 Percent Change 1 9 58-1 963 $141,541 $192,103 $9,545 $1 1,371 O h io ..................... n.a. n.a. 1 1,473 15,506 + 35 796 848 + 7 A k r o n .................. n.a. n.a. 809 1,014 + 25 59 63 + 8 C a n t o n .............. Cincinnati . . . . n.a. .112 144 n.a. + 19% 450 667 + 48 27 33 + 25 + 29 1,555 2,057 + 32 107 78 — 27 Cleveland . . . . . 106 149 +41 2,558 3,379 + 32 143 177 + 23 Columbus . . . . .111 167 + 51 680 962 + 41 52 58 + 10 D a y t o n .............. . 107 170 + 59 912 1,318 +45 42 60 +43 T o le d o .................. . 108 158 +46 716 91 1 + 27 58 43 — 26 729 902 + 24 53 57 + Youngstown-Warren n.a. n.a. n.a. 8 p — Preliminary. * (19 5 7 -1 9 5 9 = 100) Based mainly on electric power consumption by manufacturers, f Manufacturing component of U. S. Index of Industrial Production. Sources: U. S. Department of Commerce; Board of Governors of the Federal Reserve System; Federal Reserve Bank of Cleveland 36-percent gains, respectively, in the period As a case in point, total nonagriculiural em- from 1958 to 1963. C apital spending in Day- ployment in Dayton declined only 1.6 percent ion scored the largest gain among the m ajor from 1960 to 1961, a perform ance bettered SM SA 's in Ohio during the 1958-1963 period, only by Columbus among in fact substantially more than in either the State of Ohio or the United States. Ohio's m ajor SM SA's. The stabilizing effect of government em IM P O R T A N C E OF EMPLOYMENT M IX ployment during the 1960-1961 recession was reinforced by the relatively mild slowing of The rather unique employment mix in the manufacturing activity in Dayton compared Dayton SM SA — high proportions of both with other m ajor SM SA 's in Ohio. Manufac- manufacturing and government employment luring employment in Dayton declined only — h as been primarily responsible for the 4.1 percent in 1960-1961, far less than in relatively cy clical A kron, C anton , Y ou n g sto w n -W arren , or swings in business activity as well as for the Cleveland, which have com parable propor- m oderate reaction to favorable growth record since 1960. In par- lions of nonfarm employment engaged in ticular, government employment in Dayton, m anufacturing (see Tables VI and II). Simi- which exhibited m oderate but steady growth larly, the decline in value added by manufac- during the 1960-1966 period, acted as a buffer lure was far less than in any other SM SA during the 1960-1961 recession, helping the except Akron, and capital expenditures in area to minimize the impact of the downturn. Dayton actually increased from 1960 to 1961, 15 E C O N O M IC REVIEW TAB LE V I Selected M e a s u re s of M a n u fa c tu rin g A c tivity D a y to n S M S A , O th e r Selected S M S A 's in O h io , State of O h io , a n d U nited States 1960-1961 Percent Change 1960-1961 Manufacturing Employment as Percent of Total Nonagricultural Employment Total Nonagricultural Manufacturing Employment Value A d de d by Manufacture Capital Spending United States . . . . ,. . 30% — 0 .4 % — 2 .8 % + 0 .2 % — 3 .2 % O h io ......................... . . 40 — 3.3 — 6.5 — 3.8 — 6.7 A k r o n ..................... . . 44 — 4.2 — 8.1 — 0.1 — 19.8 C a n t o n .................. . . 49 — 4.8 — 8.0 — 7.2 — 16.6 C i n c i n n a t i ......................... . . 36 — 2.9 — 5.5 — 2.1 — 13.1 C l e v e l a n d .............. . . 39 — 3.7 — 7.8 — 7.9 — 1.7 . . D a y t o n .................. . . T o le d o ..................... . . 26 + 1.0 — 2.3 — 4.9 — 6.4 42 — 1.6 — 4.1 — 0.7 + 15.9 37 — 4.9 — 9.3 — 8.2 — Youngstown-Warren 47 — 5.5 — 9.6 — 7.7 — 34.8 C o l u m b u s .............. . . . 1.6 Sources: U. S. Department of Commerce; U. S. Department of Labor; Division of Research and Statistics, Ohio Bureau o f Unemployment Compensation the only such ca se am ong the m ajor SM SA 's the area. Nevertheless, each of these series in Ohio. registered gains from 1960 to 1966, reflecting Against this background, it should not be the strong growth record of that period. surprising that the rate of unemployment in Dayton ranked sixth in bank debits volume Dayton in 1960 w as the lowest am ong m ajor among the m ajor centers in Ohio in 1966, and SM SA 's in Ohio and in 1961, the second low showed an in crease of 70 percent during 1960- est. During the entire period 1960-1966, Day 1966, the third largest gain in the State, fol ton had the lowest rate of unemployment lowing Columbus and Akron. Sim ilarly, while among m ajor SM SA 's in Ohio in four years savings deposits of individuals at commer and second lowest in three years (see Table cial banks in Dayton represented the sixth VII). In 1966, the rate of unemployment in largest volume in Ohio, the gain from 1960 to Dayton averaged 2.7 percent, the sam e as in 1966 (142 percent) w as the second largest Columbus. among the m ajor centers (see Table VIII). The volume of loans outstanding at Dayton FINANCIAL ACTIVITY banks increased 66 percent from 1960 to 1966, M easures of financial activity during 1960- the fifth largest gain among the m ajor cities 1966 point out a number of sim ilarities and in Ohio (see Table VIII). At year-end 1966, differences betw een Dayton and the other total loans outstanding at Dayton banks to m ajor SM SA 's in Ohio. Overall, the volume taled $511 million, placing the area fifth of financial activity in Dayton (as m easured among the SM SA 's in Ohio. The volume of by bank debits, savings deposits, and bank com m ercial and industrial loans outstanding loans) m ay be somewhat less than expected at Dayton banks w as $141 million at year-end in view of the nature of economic activity in 1966, or 23 percent more than six years earlier. Digitized for16 FRASER AUGUST 19 67 T A B LE V II Rate of U n e m p lo y m e n t A m o n g a ll C iv ilia n W o rk e rs 14 Y e a rs of A g e a n d O v e r D a y to n S M S A , O th e r Selected S M S A 's in O h io, State of O h io , a n d Uni ted States 1960-1966 1960 1961 1962 1963 1964 1965 United S t a t e s ....................................... . . 5 .6 % 6 .7 % 5 .6 % 5 .7 % 5 .2 % 4 .6 % 3 .9 % O h i o ..................................................... . . 5.3 7.3 5.7 5.1 4.2 3.5 3.1 A k r o n ................................................. . . 4.6 7.4 4.9 4.7 4.2 3.2 2.9 C a n t o n ................................................. . . 5.9 8.9 7.0 6.3 4.4 3.5 3.2 C in c in n a ti.............................................. . . 4.0 5.5 4.4 4.2 4.8 4.0 3.3 C le v e la n d .............................................. . . 4.8 7.0 5.2 4.4 3.6 3.1 2.8 C o lu m b u s .............................................. . . 3.8 4.3 3.3 3.3 3.3 2.8 2.7 5.1 3.9 3.7 3.0 2.8 2.7 D a y t o n ................................... ... . . . . . 3.6 1966 T o l e d o ................................................. . . 5.0 8.4 6.2 5.1 4.4 3.7 3.4 Youngstow n-W arren................................ . . 7.4 9.9 8.3 6.5 4.2 3.9 3.8 Sources: U. S. Department o f Labor and Division of Research and Statistics, Ohio Bureau o f Unemployment Compensation TABLE V III B a n k Debits, S a v in g s D ep osits of In d iv id u a ls, a n d Lo a ns O u tsta n d in g D a y to n a n d O th e r Selected Cities in O h io 1966 Bank Debits (annual totals) . C a n t o n .................. (mil. $) 1966 318 + 99% $ 135 + 96 (mil. $) 1966 $12,365 + 77% $ 3,852 + 57 Commercial and Industrial Total Percent Change 1960-66 Percent Change 1960-66 (mil. $) 1966 A k r o n .................. o f Individuals (annual average) Percent Change 1960-66 (mil. $) 1966 514 + 78% $ 236 + 52 62 + 50 42 8 * + 60 144 Percent Change 1960-66 +129% C in c in n a ti.............. . 32,085 + 50 361 + 84 1,136* + 51 C le v e la n d .............. . 73,515 + 58 1,852 + 56 3,473 + 76 1,175 C o lu m b u s .............. . 28,445 + 112 331 +210 844 + 129 237 + D a y t o n .................. . 10,704 + 70 152 + 142 511 + 66 141 + 23 T o l e d o .................. . 12,253 + 42 279 + 85 436f + 71 121 f + 58 6,374 + 50 132$ + 39$ 341 + 58 70 + 71 Youngstown-Warren . + 102 87 * Does not include Dearborn County, Indiana. f Does not include Monroe County, Michigan. I Youngstown only. NOTE: Bank debits and savings deposits d ata are for reporting banks (member and nonmember) in selected centers, which are reported monthly to the Federal Reserve Bank of Cleveland. Savings deposits at reporting banks (member and nonmember) represent chiefly savings deposits o f individuals and eleemosynary organizations, Christmas savings and similar thrift accounts, and time certificates of deposit o f individuals. Loan data are from call reports of all insured commercial banks in the SM SA 's. Source: Federal Reserve Bank o f Cleveland 17 E C O N O M IC REVIEW Com m ercial and industrial loan activity in m ercial and industrial loans to service indus the Dayton a rea reveals a pattern somewhat tries, Dayton far outranked the other cities different from Cincinnati, Cleveland, Colum for which com parable data are av ailab le. bus, or Toledo (see Table IX). For exam ple, The pattern of com m ercial and industrial loan a s of June 28, 1967, despite the im portance of activity in the Dayton area, with concentra manufacturing activity in Dayton, only 30 tion in the services industry and w holesale percent of com m ercial and industrial loans and retail trade, probably reflects the fact outstanding w as to borrowers engaged in that Dayton is the location of m any branches manufacturing, com pared with 41 percent in and plants of m anufacturing firms headquar Cincinnati, 43 percent in Toledo, and 50 per tered elsew here, and which borrow in other cent in Cleveland. Loans to com panies in locations. m achinery manufacturing accounted for 13 CONCLUDING COMMENTS percent of total com m ercial and industrial loans, about the sam e as in Cleveland and The Dayton SM SA achieved rapid gains in Toledo. economic activity during 1960-1966 due in Following m anufacturing, the largest pro large part to the composition of the area 's portion of com m ercial and industrial loans at economic activity. Large facilities for produc Dayton banks w as to trade firms, with loans ing automotive equipment enabled the area to personal and business service com panies to take advantage of the high level of auto fairly close behind. With 21 percent of com- mobile sales, particularly during the last T A B LE IX Percent D istrib u tio n of C o m m e rcia l a n d In d u stria l L o a n s O u t st a n d in g b y In d u stry D a y to n a n d O th e r Selected Cities in O h io June 28, 1967 Cleveland Columbus Dayton Toledo .............. 4 1 .4 % 4 9 .5 % 2 0 .8 % 3 0 .3 % 4 3 .3 % .............. 25.8 28.0 Cincinnati M a n u fa c t u r in g .............................................. Durable g o o d s .......................................... 32.9 13.6 22.4 Primary m e t a ls ....................................... .............. 2.8 3.6 0.1 1.0 1.9 M a c h in e r y .............................................. .............. 8.8 13.6 5.2 13.1 11.0 Transportation equipm ent......................... .............. 2.3 4.7 1.8 1.6 2.1 Other fabricated metal products.............. .............. 5.9 7.8 2.5 5.7 7.4 Other durable g o o d s ............................ .............. 6.0 3.1 4.0 1.0 5.6 Nondurable g o o d s ................................... .............. 15.6 16.6 7.2 7.9 15.3 55.8 38.0 62.7 54.1 C o n stru ctio n .......................................... .............. 7.7 4.0 11.7 8.6 3.6 Transportation and public utilities.............. .............. 6.5 12.7 11.2 2.1 6.8 .............. 19.6 Nonmanufacturing ....................................... .............. 43.9 12.2 27.3 22.4 32.4 Se rvice s................................................. .............. 10.1 9.1 12.5 21.0 13.0 O t h e r * ........................................................ .............. 14.7 12.5 16.5 15.6 0.9 * Includes loans not otherwise classified, foreign loans, loans to mining companies, and bankers' acceptances. NOTE: Data are for weekly reporting banks. Source: Federal Reserve Bank o f Cleveland Digitized for 18 FRASER AUGUST 1967 three years of the period. In addition, m anu facturing activity in Dayton benefited from of the year, this Bank's index of manufactur ing activity in Dayton increased 3 percent, the "com puter boom ." Government em ploy while the com parable United States index ment, on the other hand, contributed to em declined 2 percent. The only other area in the ployment stability in the area even though State where the index of m anufacturing a c actual gains during 1960-1966 were com par tivity performed more favorably during the atively sm all. first half of 1967 w as Toledo, which showed Thus far in 1967, economic activity in Day an exceptionally large gain. Finally, at 3.0 ton has continued to advance despite the percent in M ay, the unemployment rate in sluggish perform ance of the national econ Dayton w as lower than in an y of Ohio's omy in general. During the first six months eight m ajor SM SA 's. Additional copies of the E C O N O M IC REVIEW may be obtained from the Research Department, Federal Reserve Bank of Cleveland, P.O. Box 6387, Cleveland, Ohio 44101. Permission is granted to reproduce any material in this publication. 19 Fourth Federal Reserve District
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