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AUGUST 1969 IN THIS ISSUE ECONOMIC TRENDS AND FLUCTUATIO NS IN A H EA VY IN DUSTRY A R E A THE CASE OF C LEVELAND FEDERAL RESERVE BANK OF CLEVELAND Additional copies of the ECONOMIC REVIEW may be obtained from the Research Department, Federal Reserve Bank of Cleveland, P. O. Box 6387, Cleve land, Ohio 44101. Permission is granted to reproduce any material in this publication providing credit is given. AUGUST 1969 E C ONOMI C TRE NDS A N D F L U C T UA T I O N S IN A H E A V Y INDUSTRY A R E A THE CASE OF C L E V E L A N D Economic activity in the Cleveland m etropoli the United States th at reveal similarities or tan area is heavily dependent upon durable goods differences in levels, trends, amplitudes, turning production, particularly “ heavy industry" output. points in the business cycle, and seasonal patterns. Historically, activity in durable goods industries— Evidence is presented to suggest that (1) the in Cleveland and in the nation—has tended to be behavior of "th e business cycle" in Cleveland is, in more volatile than in nondurable goods industries. tim ing and duration, similar to th at in the nation, The durable goods industries have been more but d ifferen t in terms o f am plitude; and (2) that vulnerable to economic depressions and recessions economic Cleveland has undergone and, in many instances, have participated more structural changes th at tend to make the area than expansions. relatively the Therefore, it seems logical to assume th at cyclical economic fluctuations w ould evidence seems to support the argument th at each proportionately in tend business to be greater in the Cleveland area than in the nation as a whole. The analysis determine in this article activity in more vulnerable fluctuations. than More nation to specifically, the business recession since the end of W orld War I has attem pts to had a more adverse impact on Cleveland than on the nature of the business cycle in the nation. Conversely, from 1921 to 1953, the Cleveland and the United States by comparing the expansion in activity during each business recovery behavior of certain was stronger indicators of the Cleveland in Cleveland than in the United economy w ith similar indicators fo r the nation as a States; as a result, the Cleveland area kept pace whole. Although a w ide range of business cycle w ith the nation in long-run trends. indicators has been developed for the nation's economy, comparable inform ation often During the 1950's, however, structural changes is not began to occur in the pattern o f economic activity available for a local area. Consequently, this article in Cleveland. Recessions became relatively worse, is lim ited and recoveries either fell short o f national to an analysis of em ploym ent and related labor m arket indicators fo r Cleveland and re bounds, or were not strong enough to enable the 3 ECONOMIC REVIEW BUSINESS CYCLES AND BUSINESS CYCLE INDICATO RS Because this article is concerned w ith tim e Business Cycle Reference Dates series analysis, some comments on business cycles, Expansion in general, and economic series, in particular, may be helpful. According to Burns and M itchell: Business cycles are a type o f fluctua tion found in the aggregate economic activity o f nations th at organize their w ork m ainly in business enterprises; a cycle consists o f expansions occurring at the same tim e in many economic activities, followed by similarly general C ontraction Trough Trough Peak March 1919 July 1921 July 19 24 November 1927 March 1933 June 1 9 38 October 1 9 45 October 19 49 August 1 9 54 April 19 58 February 1961 January 1 9 20 May 1 9 23 October 1 9 26 August 1929 May 1937 February 19 45 November 1948 July 1953 July 1957 May 1 9 60 July 1921 July 19 24 November 1927 March 19 33 June 1938 October 1945 October 1949 August 19 54 A pril 1958 February 1961 recessions, contractions, and revivals which merge into the expansion phase Source: National Bureau o f Econom ic Research, Inc. o f the next cycle; this sequence of specific cycle, and the months when the turning changes is recurrent but not periodic; points of m any economic series tend to cluster are in duration business cycles vary from chosen as the peaks or troughs o f the reference more than one year to ten or twelve cycle. years; into determine the turning points of a business cycle. shorter cycles of similar character w ith The performance of many economic indicators is am plitudes approxim ately their o w n .1 examined to determine the (somewhat artificial) they The National are n ot Bureau of divisible No single economic series is used to Economic Research mid-month point in which an economic expansion (N B E R ), the semi-official "scorekeeper" of busi has ended and a recession has started, or vice versa. ness cycle activity, has designated the periods of There is disagreement among economists about expansion and contraction that have occurred in the United States since 1854. M o nth ly turning the precise m onthly dating o f business cycle peaks o and troughs. However, there seems to be at least points in general business activity since 1919 are one shown in the accompanying table. The entire period from prerequisite fo r a recession: encompassed trough to peak to consecutive by declines quarters in fo r "re a l" Every period tw o Gross or more National trough is known as a reference cycle, which is the Product (GNP measured in constant dollars) since basic fram ew ork used to analyze separate eco the end o f W orld War II has been designated by nomic activities. the NB ER as a general business recession. Each economic series traces a See, fo r exam ple, George W. Cloos, " H o w Good are the 1 A. F. Burns and W. C. M itchell, Measuring Business- Cycles (N ew Y o rk: National Research, 1 9 4 6 ), p. 3. 4 Bureau of Economic National Bureau’s Reference Dates7" Journal o f Business, January 1963, and "M o re on Reference Dates and Leading Indicators," Journal o f Business, July 1963. AUGUST 1969 Un fo rtun ately, there is no series fo r "Gross area to regain its form er standing in the nation. In Cleveland Product"; therefore, other data must be general, Cleveland has not shared proportionately used to evaluate the overall economic performance in the growth of the economy in recent years. of the area. The N B E R , in determining turning A comparison of economic activity in Cleveland points in the national reference cycle, uses a wide w ith range o f economic indicators, including em ploy lim itations. Nevertheless, fo r practical purposes, th at in ment, income, and various other labor market the performance of the nation as a whole was indicators. The analysis in this article follows the selected as the the United most States has convenient obvious economic traditional NB ER fram ew ork and utilizes data that "yard stick." If relative growth performance were describe economic activity in Cleveland.3 Presum the ably, it can be determined whether or not the appropriate business cycle in Cleveland leads, coincides w ith , mature industrial areas.1 or lags national turning points. An inference can STRUCTURE OF EMPLOYMENT IN CLEVELAND AND THE UN ITE D STATES be drawn from a comparison o f specific cycle peaks and troughs of individual series fo r the Cleveland economy sole consideration, to Cleveland w ith similar series fo r the compare is as be more w ith Cleveland recognized other an production o f basic steel, m otor vehicles and parts, economic and to machinery and industrial register peaks and troughs before those o f the shown in Table general em ploym ent sector in both business cycle. Coincident indicators such that specializes indicators tend industry, area nation. The NB ER classifies many economic series Leading heavy would as leading, coincident, or lagging indicators of activity. in it as the equipm ent.2 As I, manufacturing is the largest Cleveland and the generally run concurrent w ith aggregate economic nation. More im portantly, changing phases of the activity and, to a large extent, define the reference business cycle have a marked influence on the cycle. Lagging indicators tend to respond belatedly manufacturing to changes in total business activity. construction also tend to be cyclically volatile, This article does n ot include any lagging indicators, although some unclassified series were sector. (Although mining and those sectors are in relative terms less im portant in the overall economy.) examined (together w ith leading and coincident 1See, series) because they help to understand economic Cleveland, Pittsburgh, and Cincinnati, 1 9 5 0 -1 9 6 6 , Part I: trends, fluctuations, and interrelationships in Cleveland. fo r exam ple, "E m p lo ym en t Performances of Comparison w ith the U nited States; Part II: Comparison w ith 13 Cities; and Part III: Updating and Conclusions," Econom ic Review, Federal Reserve Bank of Cleveland, November 1967, January 1968, and March 1968, respectively. 3 See Business Cycle Indicators, V o l. I, "C ontributions to the Analysis o f Current Business C onditions" (Princeton: 2 According to the Census o f M anufacturers, by 19 29, Cleveland was already well established as a major center National Bureau o f Econom ic Research, 1 9 6 1 ). See also for the production o f iron and steel; fo un dry and machine the m onthly publications. Business Conditions Digest, shop U. S. Departm ent o f Commerce, Bureau o f the Census. electrical m achinery, apparatus, and supplies. products; m otor vehicle bodies and parts; and 5 ECONOMIC REVIEW TABLE I adjustment are more severe in Cleveland than in Distribution o f Total Nonagricultural Em ploym ent United States and the Cleveland SM SA the nation. 1968 income fluctuate more in the durable goods sector United States E m ploym ent Category Cleveland SM SA In general, em ploym ent, production, and than in the nondurable goods sector. This reflects the fact th a t during periods of pessimism about Manufacturing Wholesale and retail trade Services and miscellaneous Governm ent Transportation and public utilities Finance, insurance, and real estate Contract construction Mining 29.0% 20 .7 15.4 17.9 37.1% 2 0 .6 14.8 12.4 future business conditions, or during recessions, consumers purchases and of businessmen durable goods, tend to defer such as autos, 6 .4 6 .0 appliances, and machinery and equipm ent, until 4 .9 4 .8 0 .9 4 .7 4 .3 0 .2 there is an im provem ent in business conditions or expectations regarding economic conditions. In contrast, em ploym ent, production, and income in Total nonagricultural em ploym ent 100.0% 100.0% Sources: U. S. D epartm ent o f Labor and Research and Statistics, Ohio E m p loym en t Services Division of Bureau of Manufacturing accounts for a larger share of total nonagricultural em ploym ent in than in the nation. However, a larger share of nondurable goods industries, such as food and T A B L E II Distribution of E m ploym ent in Manufacturing United States and the Cleveland SM SA 1968 U nited States Cleveland S M SA 100.0% 100.0% Durable goods Nonelectrical m achinery Fabricated metals Transportation equipm ent Primary metals Electrical m achinery Furniture and fixtures Other durable goods* 5 8 .7 9 .9 7 .0 10.3 6 .6 9 .9 2 .4 12.6 7 4 .7 16.8 14.1 12.9 12.5 10.6 1.2 6 .6 Nondurable goods Printing and publishing Chemicals and allied products Food and kindred products Apparel Paper and allied products T e x tile m ill products Other nondurable goodst 4 1 .3 5 .4 5 .2 9 .0 7 .2 3 .5 5.0 6 .0 2 5 .3 5 .6 5 .3 4 .2 2 .5 1.8 1.6 4 .3 Cleveland All m anufacturing em ploym ent in manufacturing does not necessarily mean th at a local area is more prone to cyclical fluctuations than the nation. For exam ple, the m anufacturing sector in a local area may be dominated by nondurable goods industries, which are generally more stable than durable goods industries. H ourly wages are higher, the w orkw eek typically longer, w eekly earnings considerably higher, and cyclical fluctuations much greater in the durable sector than in the nondurable goods sector. In Cleveland, the durable goods industries account fo r nearly three-fourths of manufacturing em ploym ent, compared w ith less than 60 percent in the United States (see Table II) . In short, durable goods are Cleveland's "bread and b u tte r" industries; but at the same tim e, they are a predom inant factor in the observed phenomenon that business recessions or periods of economic 6 * Includes ordnance; lum ber and wood products; stone, clay, and glass products; instruments and related products; and miscellaneous m anufacturing, t Includes petroleum and related products; rubber and plastics products; leather and leather products; and tobacco manufactures. Sources: U. S. D epartm ent o f Labor and Research and Statistics, Ohio E m p loym en t Services Division of Bureau of AUGUST 1969 beverages, chemicals, and printing and publishing, tend to be more stable because the demand for products o f these industries is not as sensitive to the business cycle as is the demand fo r durable goods. These stable industries rank high w ithin TA B LE III Contractions and Expansions of M anufacturing Em ploym ent United States and Cleveland 1 9 1 9 -1 9 4 9 Cleveland's nondurable goods sector. On the other hand, some nondurable goods industries (for example, rubber, leather, paper, textiles, apparel, and petroleum products) have pronounced cyclical characteristics, but in terms of em ploym ent, these industries are relatively unim portant w ithin Cleveland's nondurable goods sector (see Table II) . U nited States Contractions 1919-1921 19 23 -1 9 2 4 1 9 26-1 927 19 29 -1 9 3 2 1 9 3 7 -1 9 3 8 1 9 4 3 -1 9 4 6 19 47 -1 9 4 9 Cleveland - 2 3 .7 % - - 6.0 1.6 -3 5 .3 -1 2 .5 -1 6 .5 - 7.1 - 34.5% 9 .9 5.7 4 2 .7 2 4 .0 20.8 12.6 Expansions THE BEHAVIO R OF EMPLOYMENT Chart 1 provides some perspective on long-run trends and cyclical characteristics in Cleveland and the nation. Because annual data on total em ploym ent in the Cleveland area are not available for the tim e span studied, data on manufacturing em ploym ent alternating are used periods of as a proxy to reflect business expansion and contraction.3 The chart clearly reveals the greater cyclical sensitivity o f Cleveland. Each downward phase of manufacturing em ploym ent shown on the chart encompassed a national business recession. 1 9 2 1 -1 9 2 3 1 9 2 4 -1 9 2 6 1 9 27-1 929 19 32 -1 9 3 7 19 38 -1 9 4 3 1 9 46-1 947 + 2 4 .6 ° + 5.0 + 7 .0 + 5 5 .8 + 8 6 .5 + 5.7 + 30.1% + 8.7 + 11.1 + 6 2 .4 + 119.1 + 6 .5 N O T E : Data fo r 19 19-1 921 are based on production w orker em plo ym ent in the U nited States and in the C ity o f Cleveland. Data fo r all other periods are based on total m anufacturing em ploym ent in the U nited States and Cuyahoga C ounty. Sources: U. S. D epartm ent o f Commerce; U. S. D epartm ent o f Labor; Greater Cleveland G row th Association; Division o f Research and Statistics, Ohio Bureau o f E m p loym en t Services (The sharp decline in manufacturing em ploym ent th at occurred between 1943 and 1946 included a was brief recession th at lasted only from February to Particularly notew orthy are the declines th at have October 1945.) occurred during the three most severe national greater in Cleveland than in the nation. Table III shows the am plitude of cyclical swings recessions since W orld War I (as measured by in manufacturing em ploym ent during the 30-year declines in the Federal Reserve Board's index of period ending in 1949. During each contraction, industrial production). In the order o f severity, the relative decline in manufacturing em ploym ent those recessions were 19 29 -193 3, 19 37 -193 8, and 1920 -192 1. On the other hand, as shown in Table If m anufacturing em plo ym ent is adjusted for variations in the w orkw eek and changes in productivity, the cyclical contours w ould Federal virtu ally coincide w ith those of the Reserve Board's index of industrial production, which is among the highly regarded coincident business cycle indicators. I I I , each recovery or expansion was stronger in Cleveland than in the nation. The 1950's and 1960's—A Changing Pattern. Chart 2 and Table IV provide some perspective on trends and economic fluctuations in Cleveland and 7 ECONOMIC REVIEW the United States. Compared w ith data based on and parts, and machinery and equipm ent indus annual averages in Chart I II , the tries th at accounted fo r tw o-thirds of the increase seasonally adjusted m onthly series on manufac 1 and Table in Cleveland's manufacturing em ploym ent. Signifi turing em ploym ent permits a closer exam ination cant em ploym ent gains in ordnance as well as the of timing relationships and a sharper measurement metal-producing and fabricating industries added of amplitudes in the specific cycles. further stimulus to economic activity in the area Chart 2 shows th at the differences in turning during the Korean War. between As in previous recessions, the dow nturn after Cleveland and the nation are insignificant. A t three the end of the Korean War affected manufacturing cycle troughs—1954, 1958, and 19 6 1 —Cleveland em ploym ent more adversely in the Cleveland area lagged the United States by one month (see Table than in the nation. However, instead o f a stronger IV ). Trough months in Cleveland and in the nation rebound in Cleveland than the nation, as had been coincided in 1949 and 1967.4 In 1957 and 1966, the manufacturing m anufacturing points in manufacturing em ploym ent em ploym ent peaked one m onth historical pattern, recovery em ploym ent in the fell short area's of the earlier in Cleveland than in the nation, and in 1953 national experience between late 1954 and early and 1960, the peak months in Cleveland and the 1957. During th at period, the nationwide boom in nation coincided. Nevertheless, during the 1950's plant and equipm ent spending supported only a and partial 1960's, Cleveland continued to be more recovery vulnerable to business recessions than the nation; m etalworking and began significantly, recoveries were weaker in em ploym ent industries. in Cleveland's Moreover, Cleveland lose ground in comparison w ith the nation in the durable goods sector, particularly in Cleveland. A fte r the and to in 1 9 4 8 -194 9 recession, the recovery subsequent expansion of the ordnance and aircraft and parts industries. manufacturing Recoveries are conventionally measured from em ploym ent was extrem ely vigorous in Cleveland. trough to peak, or from trough to most recent Directly and indirectly, the Korean War induced a date, major boom in Cleveland. During that conflict, increases measured in this way as evidence of there was an increase of more than 50 percent in economic growth (a common practice) creates a em ploym ent in the area's motor vehicle, aircraft misleading as shown in Table impression IV . of However, citing underlying growth trends. It is more meaningful to evaluate economic 4 The slowdown in national economic activity during the progress, or the lack thereof, by measuring changes first half o f 1 9 67, including one quarterly decline in real from peak to peak and by considering the tim e lag G NP, was not designated by the NB ER as an official before a series attains its previous high. recession. T h at manufacturing slowdown sector and was was concentrated largely the in result the From the Korean War peak in July 1953 to the of production cutbacks to correct for excessive inventories. subsequent peak in early 1957, there was a n et loss Hence, the distinct in terruption in the long expansionary of 7.8 percent in m anufacturing em ploym ent in phase in Table IV m anufacturing as a pause. em ploym ent is designated in A lthough recovery from the inventory adjustm ent was underway by August 1 9 67, a Cleveland, compared w ith a loss o f 2.2 percent in the United States. As shown in Chart 2, strike in the m otor vehicle industry subsequently impeded manufacturing em ploym ent in Cleveland has not the recovery. regained Digitized8 FRASER for its post-World War II peak, which AUGUST 1969 T A B L E IV Specific Cycles in Manufacturing E m p loym ent* United States and the Cleveland SMSA October 1 9 4 9 —July 1967 U nited States Recovery Recession Recovery Recession Recovery Recession Recovery Pause Cleveland SM SA October 1 9 49 — July 1 9 53 July 1 9 5 3 — August 19 54 August 1 9 54 — March 1957 March 1957 - May 1958 May 1 9 58 — February 1 9 60 February 1 9 60 — February 1961 February 1961 — January 1967 January 1 9 67 — July 1967 October 1949 — July 1953 July 1953 — Septem ber 1954 September 1 9 54 — February 1957 February 1957 — June 1958 June 1 9 58 — February 19 60 February 1 9 6 0 — March 1961 March 1961 — December 1966 December 1 9 66 — July 1967 + 27.6% -1 0 .0 + 8.7 - 1 0 .1 + 9 .6 - 6.3 +22.1 - 1.7 +44.7% -1 3 .3 + 7.4 - 1 9 .1 + 1 4 .6 -1 3 .9 + 2 3 .0 - 4.7 * Percent changes com puted fro m seasonally adjusted data. Sources: U. S. D epartm ent o f Labor; Division o f Research and Statistics, Ohio Bureau o f E m p loym en t Services; Federal Reserve Bank o f Cleveland occurred in m id -1953. On the other hand, manufacturing em ploym ent in the United States in the nation during the 19 60 recession was recouped by early 1964. In contrast, the recovery in Cleveland began from a more depressed level, surpassed the Korean W ar peak in 1965. The tw o succeeding recessions were worse in and m anufacturing em ploym ent did not return to Cleveland than in the United States, and recoveries its previous cyclical peak (February 1960) until in the area were not strong enough to prevent early 1966. In other words, the Cleveland area further took five years to relative deterioration. During the recover the manufacturing recession, fo r example, the percent em ploym ent th a t it had lost in one recession year. decline in m anufacturing em ploym ent was almost The effect of the inventory adjustment in 1967 on 19 57 -195 8 twice as large in Cleveland as in the nation. The manufacturing em ploym ent in Cleveland was more subsequent recovery was interrupted during the than twice as severe as in the nation. As a result, latter half o f 1959 because of the prolonged strike the gap in manufacturing em ploym ent between in the steel industry. Shortly after steel inventories the United States and Cleveland became wider. were rebuilt in early 1960, the nation's economy turned down again. Although the 1960-1961 Reasons fo r the Relative Decline. The data in recession in the nation was moderate by most Charts 3 and 4 break down total manufacturing standards, the relative decline in manufacturing em ploym ent into durable and nondurable goods em ploym ent was more than twice as great in From 1961 to early industries and help to explain the performance of Cleveland as compared w ith the nation. Over the Cleveland as in the nation. 1967, manufacturing business cycle, em ploym ent in the nondurable in goods sector is more stable than in the durable Cleveland th at was similar to the national pattern. goods sector. A t the same tim e, the nondurable The loss in manufacturing em ploym ent sustained goods sector has a slower long-run growth trend. em ploym ent follow ed a path of recovery 9 ECONOMIC REVIEW The dominance o f em ploym ent in the durable goods industries in Cleveland only partially years and was concentrated in the m etalworking industries. Except fo r rebounds after recessions, explains the severity of cyclical downturns in the the only other phase of expansion area. During the past three recessions and during goods the pause o f 1967, percent declines in durable 1960's. Since 1964, when em ploym ent began to em ploym ent occurred during in durable the mid- goods em ploym ent were greater in Cleveland than break away from its stubborn plateau in Cleveland in the nation. The relative size as well as the and in the nation composition of Cleveland's durable goods indus em ploym ent gain tries account fo r the area's cyclical vulnerability. sector Specifically, Cleveland has larger shares of has nonelectrical (see Chart 2 ), most o f the in Cleveland's durable goods occurred in machinery the electrical and industries. The nation em ploym ent than the nation in cyclically volatile wide boom in plant and equipm ent spending was industries, such as m otor vehicles and equipm ent, largely responsible for the stimulus to Cleveland's metal stampings, screw machine products, m etal machinery industries during the m id-1960's, since working machinery, and basic steel. On the other consumer-type machinery products play a rela hand, Cleveland has relatively low em ploym ent tively small role in the area's economic activity. shares in less cyclically volatile (and more rapidly Em ploym ent growing) m etalworking durable communications goods industries, equipm ent, electronic such as com po In brief, the lag in durable goods em ploym ent relative Cleveland's three other industries—transportation prim ary metals, and fabricated major equip metal products—has shown little net growth since 1964; nents, and instruments. as well as the ment, in deepening o f recessions in Cleveland reflects the area's failure to benefit those three industries also bore the brunt of the em ploym ent decline in Cleveland during 1967. E m ploym ent patterns in the nondurable goods from industries th at have displayed strong growth industries stand in sharp contrast to those in the trends in other areas. As shown in Chart 3, the durable goods industries. Although some nondur spread able goods industries are highly cyclical, aggregate between the indexes fo r durable goods em ploym ent in the United States and Cleveland that began to narrow after the Korean War em ploym ent in the nondurable goods sector undergoes relatively mild cyclical changes. H ow widened during the late 1950's and early 1960's, ever, due largely to in both Cleveland and the nation, the Cleveland's unfavorable em ploy dampened cycle in nondurable goods em ploym ent ment performance in the machinery industries, has been accompanied by very little net growth particularly electrical machinery. Cleveland's rela since 1950. Charts 3 and 4 also show th at the gap tive standing also deteriorated during th at period in the indexes of em ploym ent is less pronounced because of poor em ploym ent performances in the in the nondurable goods industries than in the fabricated the durable goods industries; th at is, Cleveland has transportation equipm ent industry, particularly in lagged the nation more in the durable goods sector those segments other than than in the nondurable goods sector. metal products industry and m otor vehicles and parts. The area's weak em ploym ent performance in The major surge in Cleveland's manufacturing em ploym ent occurred 10 during the Korean War the food and kindred products and textiles and apparel industries has accounted fo r the moderate AUGUST 1969 relative decline in Cleveland's nondurable goods sector during the past decade. The reaction in the series for Cleveland during moderate recessions or periods of sluggish business condi growth (in absolute terms) of nondurable goods tions, due chiefly to the area's larger share of em ploym ent in Cleveland during the past decade durable stems largely from the chemicals and printing and example, nonagricultural em ploym ent in Cleveland publishing industries. peaked in 1960 at a low er level than in 1957. The As shown in Chart 5, Cleveland has also lagged 1957 goods manufacturing em ploym ent. peak was not surpassed until 1965 For in the nation in nonmanufacturing em ploym ent since Cleveland. the 19 57 -195 8 recession. Most o f the gap in the ment in the nation peaked in 1960 at a higher level em ploym ent indexes developed during the late than 1950's relatively sharp sustained in the United States during the 1960 most recent recessions on recession was recouped by the end of 1 9 6 1 —tw o and early impact o f the Cleveland's 1960's. tw o manufacturing The em ploym ent and in come also appears to have had an adverse effect on in In contrast, nonagricultural em ploy 1957. Moreover, the em ploym ent loss full years before Cleveland recovered its em ploy ment loss. the area's nonmanufacturing sector. Specifically, between 1958 and 1963, em ploym ent in contract HOURS AND EARNINGS construction declined in Cleveland, but increased An exam ination o f the w orkw eek and average in the nation. Em ploym ent in retail trade showed earnings in manufacturing, as well as aggregate virtually no net improvement in Cleveland, but income in the com m odity-producing industries, rose considerably in the nation; and em ploym ent provides another perspective on economic trends growth and in the service industries was slower in fluctuations in Cleveland and the nation. Cleveland. Recently, however, the spread in the These series, shown in Charts 7 through 10, tend indexes to of nonmanufacturing em ploym ent has shown little change. Cleveland has more or less support the major points o f this study of economic activity in Cleveland. The turning points kept pace w ith the nation in em ploym ent in each of the business cycle are essentially the same in of the major nonmanufacturing categories in the Cleveland area. relatively Total nonagricultural payroll em ploym ent, shown in Chart 6, reflects the behavior of both manufacturing nonmanufacturing in deeper the in nation; recessions Cleveland; and growth are in Cleveland has not kept pace w ith growth in the nation since the m id-1950's. em ploy The average w orkw eek of production workers m ent.5 As expected, there is a more pronounced in manufacturing (shown in Chart 7) is considered 5 and and to be one o f the more sensitive leading indicators Nonagricultural payroll em ploym ent has been rated by of economic activity.5 Months before turning tw o authorities on business cycles as the nation's best coincident economic indicator, based on the criteria of economic significance, statistical adequacy, tim ing and points in the general business cycle, manufacturers begin changing the w orkw eek of their employees co nfo rm ity to the business cycle, and smoothness and currency o f data. See G eoffrey H. Moore and Julius Shiskin, Indicators o f Business Expansions and Contrac See Gerhard Bry, The Average W orkweek As A n tions (N ew Y o rk: National Bureau o f Econom ic Research, Econom ic Indicator, Occasional Paper 6 9 , (N ew Y ork: 1 9 6 7 ). National Bureau o f Economic Research, 1 9 59). 11 ECONOMIC REVIEW in response to changes in new orders. In itially , the register a longer lead at business cycle peaks than w orkweek is lengthened or shortened to adjust at troughs.8 However, the average w orkw eek tends production rates; some tim e later, em ploym ent to fluctuate more in Cleveland's manufacturing begins to change direction. As a peak in the sector than in th at of the United States, and the business cycle approaches, labor m arket conditions area's w orkw eek tend workw eek to be tight. Firms that are experiencing in is usually longer because the durable goods industries, which reduce the predominate in Cleveland, tends to be longer and workw eek rather than lay o ff workers who may be more cyclically volatile than in nondurable goods hard to replace should new orders recover.7 Firms industries. th at continue to have increases in new orders, and During cutbacks in new orders generally 1966, when labor m arket conditions are probably operating at expensive overtime rates, were tigh t, the average w orkw eek in the nation's are likely to be adding employees to their payrolls manufacturing as the business cycle approaches a crest. As a longest in industries the was post-World 4 1 .3 War II hours, the period. In result, the w orkw eek customarily declines during Cleveland, however, the manufacturing workw eek the late stages of an expansion, w hile manufac was 43.1 hours during 1966, or 1.8 hours above turing em ploym ent is still rising. the national average. In 1966, almost all of the major manufacturing industries in Cleveland had a As shown in Charts 2 and 7, a decisive longer w orkw eek than did the same industries in downward swing in the manufacturing w orkw eek the is eventually suggest th at there was more intensive utilization of followed manufacturing by a turning em ploym ent. point For example, in the workw eek reached a peak in Cleveland and the nation. (O ther economic indicators also human resources in Cleveland than in the United States during 1966.) nation early in 1966; manufacturing em ploym ent Irregular fluctuations in Cleveland's w orkw eek peaked some tim e later. Conversely, the upturn in are due in part to actual or anticipated local and the w orkw eek early in 1967 foreshadowed the national labor-management disputes. In Cleveland, subsequent relatively large short-run swings in the o utp ut of recovery in manufacturing em ploy ment, at least in the United States. tw o major industries—steel and transportation equipm ent—account fo r many intracycle dips and For practical forecasting purposes, however, the relationship between the workweek and em ploy ment, or is Average h ou rly earnings o f production workers imprecise. Generally, the manufacturing workw eek in manufacturing show little cyclical fluctuation. in both business conditions in general, rebounds in the w orkw eek, as well as in other series discussed in this article.9 Cleveland and in the nation tends to O Lead times o f the average w orkw eek and other selected series are summarized in Table V I. ^A lthough workers, some th ey employers w ill are reluctant to adjust the w orkw eek to lay o ff maintain em ployee morale and a favorable "experience rating” (thereby holding down the firm 's assessed rate contributions to state unem ploym ent compensation). 12 for g See "Dim ension of Subcyclical Fluctuations in Steel and A uto O u tp u t," Econom ic Review, Federal Reserve Bank of Cleveland, March 19 66, fo r a national perspective. AUGUST 1969 but show varying rates of increase over tim e (see average weekly earnings have more pronounced Chart 8 ). For exam ple, m id -1959, average hourly from m id-1952 to cyclical swings in Cleveland than in the nation. earnings rose at an Furtherm ore, because both the average workw eek annual rate of 4 .9 percent in Cleveland and 4 .5 and percent in the United States. During the early Cleveland, average w eekly earnings o f production 1960's, there was a significant reduction in the workers rate o f increase, and, as might be expected, gains tend to be about 2 0 percent above the national average in hourly the earnings are higher in area's manufacturing industries in average hourly earnings were more moderate in average. During Cleveland than in the nation. Between m id-1959 sluggish manufacturing and m id -1965, the annual rate o f increase subsided Cleveland's differential over the national average is to 2.7 percent in Cleveland and 2.8 percent in the narrowed by 3 or 4 percentage points. years or activity, periods of such as 1967, Wage and salary income in mining, manufac United States. Since m id -1965, when inflationary pressures began to accumulate, the annual rate of recession turing, and construction (the com m odity- increase in average hourly earnings has risen to producing industries) is one of the most sensitive about 5 percent in both Cleveland and the nation. components of personal income and sheds Over the long run, average hourly earnings for additional light on the characteristics of Cleve production workers have been roughly 16 percent land's economy (see Chart 10). In 1967, wages and in the United States. salaries in Cleveland's com m odity-producing indus More than half of th at differential reflects the tries amounted to more than $ 3 billion, or 40 higher in Cleveland than industrial m ix o f Cleveland, while the remainder is percent o f total personal income in the m etropoli due to If production tan area. In the United States, wages and salaries in w orker manhours in each o f Cleveland's manufac the com m odity-producing industries account for turing industries were compensated at the national only 3 0 percent of total personal income. higher local wage rates. rate fo r those industries, average hourly earnings in As a m onthly coincident indicator, labor Cleveland w ould still be about 7 percent higher income in the com m odity-producing industries has than in the n ation .10 a higher rating than industrial production and is Average weekly earnings of production workers in manufacturing w orkw eek times (the second only to nonagricultural payroll em ploy product o f the average m ent.11 In both Cleveland and the United States, average hourly earnings) have turning points in the labor income series generally cyclical characteristics (see Chart 9 ). However, the have coincided closely w ith reference cycle turning irregular tim ing points. Thus, the behavior of this series (together o f this series w ith respect to reference cycle peaks and troughs has precluded its classification as an "o ffic ia l" indicator. Because 11 the Reserve Board's index o f industrial production m ainly w orkw eek fluctuates more in Cleveland, The series received a higher rating than the Federal because o f better tim in g w ith respect to reference cycle peaks and troughs. See M oore and Shiskin, op. cit., and Business Conditions 10See " In te r-C ity V ariation in Average H ourly Earnings," Cleveland Econom ic quarters, the Com m entary, Qeveland, May 1 8 , 1968. Federal Reserve Bank of Digest. m etropolitan national area series Because are in data available C hart 10 for the only by is charted quarterly to m aintain strict com parability. 13 ECONOMIC REVIEW w ith others previously discussed) seems to indicate section o f leading newspapers, is a highly rated that the tim ing and duration of the business cycle m onthly are approxim ately the same in Cleveland and the sensitive to changes in national business conditions United States. The labor income series indicates, and reflects the demand fo r labor. As might be however, th at the adverse impact o f recessions on expected, the amplitudes of cyclical swings in Cleveland's economy is somewhat greater than help-wanted advertising are greater in Cleveland might suggested be em ploym ent earnings by alone. in percent Because manufacturing em ploym ent tend to be declines indicator. The index is in than in the nation. A t the regional level, however, w eekly the index may include advertising by out-of-tow n manufacturing employers in local newspapers. Thus, a rise in average and coincident depressed more in help-wanted advertising in Cleveland may reflect, Cleveland during recessions, cyclical downswings in part, attem pts to lure workers and managers to in the labor income series are more severe in jobs in other cities. Supply conditions also Cleveland. By inference, short-run changes in total influence the volume of help-wanted advertising. personal According to the National Industrial Conference income are also more volatile in the Cleveland area. The long-run behavior of wage and Board, more advertising is usually needed to fill a salary income in the comm odity-producing indus given job vacancy when unem ploym ent rates are tries of low than when unem ploym ent rates are high.12 Cleveland's economy during the early 1950's and Despite the fact th at the index o f help-wanted the advertising is rated as a coincident indicator, in corroborates area's loss the of faster relative growth position rate since the m id-1950's. recent decades the index has tended to turn down SUPPLY AND DEMAND CONDITIONS IN THE LABOR M ARKET activity and has been more or less coincident on Additional tim e series on labor several months before a peak in general business m arket conditions com plem ent this analysis of compara tive economic Cleveland trends and area. claims fo r in upturn in both Cleveland and the United States (see Chart 11). The behavior of average weekly in itial claims the initial for state unem ploym ent insurance, the insured unem ploym ent insurance, and unem ploym ent rate, and the to tal unem ploym ent Help-wanted state fluctuations the advertising, rates display rate also reflect supply and demand factors in the little long-run trend (see Charts 11, 12, 13, 14); labor m arket.13 In itia l claims are notices filed by however, their cyclical properties are associated workers covered by state unem ploym ent insurance insured and total unem ploym ent w ith the behavior of other im portant economic variables. In the Cleveland area, for example, a 12 decline Advertising, in help-wanted advertising is usually accompanied by a decline in the average workw eek See The Conference Board's N ew In dex o f H elp-w anted Technical Paper Sixteen (N ew Y o rk: National Industrial Conference Board, 1 9 6 4 ). and, w ith in a few months, is followed by a rise in unem ploym ent rates and slowdowns or outright declines in em ploym ent and incomes. T he index o f help-w anted advertising, based on the number of help-wanted ads in the classified 14 13 Because these three indicators move inversely w ith general business conditions, each is charted on an inverted scale. Thus, downward swings o f these series in Charts 12, 13, and 14 signify increasing levels—bu t deteriorating economic conditions. AUGUST 1969 programs as they start a period of unem ploy unem ploym ent, but excluded from insured unem m ent.14 Although classified as a leading indicator, ploym ent, are persons w ho have exhausted their the series on average w eekly initial claims fo r state benefit unem ploym ent insurance has a greater tendency to unemployed lead at peaks in general business activity than at unem ploym ent insurance. rights and new before workers who earning their become rights to The insured unem ploym ent rate generally is at troughs in both Cleveland and the nation. For the both a lower level in Cleveland than in the United States Cleveland and in the nation either coincided w ith , because o f the area's industrial structure. Accord past three recessions, initial claims in or lagged by one m onth, the upturn in overall ing to national data, insured unem ploym ent rates economic activity (see Chart 12). The fact that tend to be lower in durable goods industries than initial claims undergo relatively greater percent in changes recessions. During Cleveland reflects the more volatile layoff and machinery, in hiring rates in the area's durable goods industries. manufacturing during recessions and recoveries in The insured unem ploym ent rate also displays greater cyclical fluctuations in Cleveland than in the nation (see Chart 13). As a m onthly coincident nondurable goods industries, the particular industry), except during 1960's, nonelectrical (Cleveland's has had leading one o f the lowest insured unem ploym ent rates among the nation's major m anufacturing industries. Low levels o f the insured unem ploym ent rate is suggest periods of labor shortages. For example, in superior to the total unem ploym ent rate in several Cleveland the insured unem ploym ent rate averaged im portant total nearly 1 percent during the Korean War years, was unem ploym ent rate, the insured rate is a smoother at the 1.5 percent level during the capital goods series, has a better record of tim ing at reference boom of the m id-1950's, and hovered around 1 indicator, the insured respects. unem ploym ent Compared w ith rate the cycle peaks and troughs, and is available w eekly. percent during 1966, late In Cleveland the addition, historical data on the insured and 1967, and nation, tight 1968. In labor m arket unem ploym ent rate fo r the Cleveland area are conditions during those periods were also reflected available fo r a longer period. in high levels fo r the m anufacturing workw eek and In both Cleveland and the nation, the insured unem ploym ent rate is lower unem ploym ent rate because than total help-wanted advertising and low levels fo r initial unem ploym ent claims. noncovered The to tal unem ploym ent rate during the 1960's portion of the labor force (such as workers in shows th at Cleveland outperform ed the nation in agriculture, domestic service, and firms below a achieving an im portant target of public policy (see m inim um Chart 14). Early in 1961, the Kennedy Adm inis size) unem ploym ent. has a the the higher Moreover, incidence included in of total tration announced as a public policy goal the attainm ent of an interim 4 percent unem ploym ent 14 A claim ant who is unem ployed a full week is then counted in continued claims, which, when divided by average covered em ploym ent, becomes the insured unem ploym ent rate. Initial claims trace a pattern very rate. In Cleveland, the unem ploym ent rate declined from its cyclical high of 8 .6 percent in March 1961 to 4 percent by the latter half of similar to th at of the lay o ff rate in m anufacturing (see 1963. Business Conditions Digest). rate declined from its cyclical high o f 7.1 percent In the United States, the unemploym ent 15 ECONOMIC REVIEW still (a year of sluggish economic ac tivity), and moved undesirable, 5.5 percent by the latter half of 1963. up only slightly in 1963; as a result, the civilian The reduction of Federal income tax rates in labor force experienced a n et loss of 1.2 percent the spring of 1964, coupled w ith various Federal, between 19 6 0 and 1963. In contrast, the civilian state, and local programs designed to improve job labor force in the United States showed a n et gain opportunities, of 3 .2 in M ay 1961 to an improved, although helped to reduce unem ploym ent percent between 19 60 -and 1963. The rates fu rth er in both Cleveland and the nation. In recovery in total em ploym ent after the 1960-1961 1965, direct and indirect demands stemming from recession proceeded at roughly the same pace in the Vietnam conflict were superimposed on a wave both Cleveland and the nation. Therefore, the of capital goods spending that did not begin to marked subside until 1967. Conditions in the labor market ment rate during the early 1960's was due to a net tightened significantly. unem ploym ent rate in Since early 1965, the Cleveland generally has ranged between 2 and 3 percent. In the United improvement reduction in the in Cleveland's unem ploy labor force, n o t to a more favorable economic clim ate for em ploym ent in the m etropolitan area.15 States, the unem ploym ent rate finally declined to Since 1963, the civilian labor force has grown 4 percent at the end o f 1965; since then, it has m oderately faster, w hile total em ploym ent has generally ranged from 3 .5 to 4 percent. grown slightly slower in Cleveland than in the The behavior o f the civilian labor force helps to United States. Thus, the gap in the total explain the performance of the unem ploym ent unem ploym ent rate between Cleveland and the rate. As shown in Table V , the civilian labor force United States has narrowed somewhat in favor of in the the nation. T h at is, although unem ploym ent rates 1960-1961 recession, continued down during 1962 have moved down since 1963 in both Cleveland the Cleveland area declined during and the nation, Cleveland has had less improve ment. TABLE V Civilian Labor Force United States and the Cleveland SMSA 15 1 9 6 0 -1 9 6 8 (Index 1 9 60 = 1 00 ) According to the Bureau 1 9 6 0 and 1 9 65, net outm igration from the Cleveland SM SA totaled 2 9 ,0 0 0 persons. United States 1960 1961 1962 1963 1964 1965 1966 1967 1968 U. S. Departm ent of Commerce, of the Census, between Cleveland SM SA 1 0 0.0 1 0 1.2 1 0 1.4 103.2 1 0 5.0 10 6.9 1 0 8.8 111.1 113.1 10 0 .0 99.1 9 8 .5 9 8 .8 100.1 10 2.9 10 6.2 108.7 11 0.9 Sources: U. S. D epartm ent o f Labor and Research and Statistics, Ohio E m p loym en t Services 16 Division of Bureau of In contrast, between 1950 and 19 6 0 , the Cleveland SM SA experienced net inm igration o f 1 2 1 ,0 0 0 persons. Econom ic See “A Note Com m entary, On Population Federal Reserve M ig ratio n," Bank of Cleveland, December 16, 1 9 67. Census data show th at Cleveland also experienced an adverse swing in population growth between the 1950's and 1960's. From 1 9 5 0 to 1960, resident population increased 2 5 percent in the Cleveland S M S A , compared w ith a gain of 19 percent in the U nited States. From A pril 1 9 6 0 to July 1967 (the latest date fo r which population estimates o f m etrop oli tan areas are available), resident population increased only 7.4 percent in the Cleveland S M S A , compared w ith a gain of 10.3 percent in the United States. AUGUST 1969 CONCLUDING COMMENTS industrial base has always consisted predom inately H opefully, the economic data discussed in this of durable goods industries (mostly metalworking) article and shown in the charts w ill contribute to that historically have been more vulnerable to an understanding o f economic activity in Cleve cyclical recessions than nondurable goods indus land, The various tries. Moreover, Cleveland's durable goods sector is interrelationships among the series discussed in concentrated in the less rapidly growing and more this article should provide some empirical and cyclically sensitive industries. Conversely, until the analytical end o f the Korean War, Cleveland tended to have compared w ith the nation. assistance to those interested in the behavior of regional economic activity, in general, relatively strong recoveries after recessions. and the Cleveland m etropolitan area, in particular. There is no conclusive evidence to suggest th at, in the case o f Cleveland, turning points from prosperity to recession, or from recession to The key to understanding Cleveland's economic performance lies in the behavior o f the durable goods industries, w hich largely determ ine the recovery, consistently lead or lag nationwide peaks area's overall pace of activity. For example, during and the 1960-1961 recession, durable goods em ploy troughs in general business conditions. In general, business cycles in Cleveland coincide w ith m ent—about one-third o f total nonfarm em ploy business m ent-accou nted fo r three-fourths o f the decline cycles recognized in the leading nation. nationally coincident and The economic in Cleveland's total nonfarm em ploym ent. On the indicators discussed in this article usually move at other the same tim e sharply, the same durable goods industries tend to and in the same direction in hand, when the business conditions improve Cleveland and the United States—except th at the provide amplitudes tend to be greater in Cleveland. Table expansion in the local area. major impetus to recovery and V I summarizes the months of lead or lag in three Based on experience, Cleveland is likely to be selected economic series. A t every turning point in national economic activity, the series fo r Cleveland prosperous when the have leads and lags similar to those fo r the United ebullient and when business expenditures for new m otor vehicle industry is States.16 plant and equipm ent are strong. When production of machinery and transportation equipm ent is at Every business recession since 1919 has had high levels, the area's steel industry is also likely to more of an adverse impact in the Cleveland area be booming—all o f which favorably than in the nation as a w hole, because Cleveland's em ploym ent, income, and spending in supporting industries, such as wholesale 16 and influence retail trade, finance, services, construction, transportation and The one major exception unem ploym ent rate fo r the is th at the insured United States reached its utilities, and local government. inverted peak in November 1 9 5 5 , or 2 0 months before the reference cycle peak in July 1957. In Cleveland, the insured unem ploym ent rate also reached an inverted peak in November 1 9 5 5 , bu t the subsequent decline was later The evidence is clear th at economic growth was considerably recouped and the series peaked again in A pril 1 9 57, or 3 United months before the reference cycle peak in July 1957. Thereafter, greater States during in Cleveland the Korean Cleveland began to than War in the years. lose ground to 17 ECONOMIC REVIEW TABLE VI Tim ing Characteristics of Selected Economic Indicators at Business Cycle Turning Points* United States and the Cleveland SM SA Lead (—) Lag (+) Peak Lead (—) Lag (+) Trough (mos.) (mos.) Average W orkw eek, Production Workers in Manufacturing U nited States Cleveland SM SA March 1 9 53 March 1 9 53 - A pril 1 9 54 Septem ber 1 9 54 U nited States Cleveland S M SA November 1 9 5 5 October 1 9 55 -2 0 -2 1 May 1958 March 1958 United States Cleveland SM SA April 19 59 May 1 9 59 -1 3 December 1960 February 1961 4 4 -1 2 - 4 + 1 + 1 - 1 - 2 0 E m ploym ent in Durable Goods Industries 0 U nited States Cleveland SM SA July 1953 June 1 9 5 3 - 1 Septem ber 1954 Septem ber 1954 United States Cleveland SM SA February 1957 February 1957 - 5 5 May 1958 June 1958 + 1 + 2 United States Cleveland SM SA February 1 9 60 February 19 60 - 3 3 February 1961 March 1961 0 + 1 1 October 1954 Septem ber 1954 Average W eekly Insured U nem ploym ent Rate U nited States Cleveland S M SA June 1953 August 1953 - U nited States Cleveland SM SA November 19 55 A pril 1957 -2 0 U nited States Cleveland SM SA June 1959 June 1959 -1 1 + 1 - A pril 1958 June 19 58 3 March 1961 A pril 1961 -11 * Peaks and troughs o f specific cycles based on seasonally adjusted data. Months o f lead or lag refer to tim ing o f specific cycles w ith respect to national reference cycle dates. Sources: U. S. D epartm ent o f Labor; Division o f Research and Statistics, Ohio Bureau o f E m p loym en t Services; Federal Reserve Bank o f Cleveland other parts 1 9 57 -195 8 land's o f the and slowdown nation. 1960-1961 compared The recessions of accentuated w ith the Cleve nation. have elsewhere. Therefore, Cleveland's economic growth has lagged, and recent recessions or periods of adjustment, as in 1967, have become During the past decade, the growth industries have progressively worse in Cleveland relative to the not located in Cleveland to the extent th at they United States. 18 C h a r t 1. EMPLOYMENT in M A N U F A C T U R I N G 60 ------ 1 ------ 1 ------ --------------------------- ------ ------ ------ ------------- ------ ------------- ------ ------ -------------------- ------ ------ ------ ------------- ------ ------ ------ 1 ----1921 '2 3 ’25 ’ 27 '2 9 '31 '33 '3 5 '3 7 '3 9 '41 '43 '4 5 '4 7 '4 9 C h a r t 2. EMPLOYMENT in M ANUFACTURING INDUSTRIES INDEX 1957-59=100 Chart 3. EMPLOYMENT in DURABLE G O O D S INDUSTRIES I N D E X 1 9 5 7 - 5 9 = 100 C h a rt 4. EMPLOYMENT in NONDURABLE GOOD S INDUSTRIES INDEX 1 9 5 7 - 5 9 =1 0 0 Chart 5. EMPLOYMENT in NO NM ANUFACTURING INDUSTRIES I NDEX 1 9 5 7 - 5 9 = 1 0 0 C h a rt 6. E M P L O Y M E N T in ALL I NDUSTRI ES Chart 7. AVERAG E W O RK W EEK of PRODUCTION W ORKERS in MANUFACTURING 1950 ' 52 ’5 4 ' 56 ' 58 ’6 0 ' 62 ' 64 ' 66 ' 68 C h a r t 8. A V ERA G E HOURLY EA RN IN G S of PRODUCTION WORKERS in M ANUFACTURING Chart 9. AVERAGE WEEKLY EARNINGS of PRODUCTION WORKERS in MANUFACTURING Digitized for 9FRASER 1 50 ' 52 ' 54 ’5 6 ' 58 ' 60 ’6 2 ' 64 ' 66 ' 68 W A G E and SALARY IN C O M E in M IN IN G , MANUFACTURING, and CONSTRUCTION I NDEX 1 9 5 7 - 5 9 = 1 0 0 HELP-WANTED AD V E R T I S I N G AVERAGE WEEKLY INITIAL CLAIMS for STATE UNEMPLOYMENT INSURANCE T h o u s a n d s o f cl a i ms 50 N u m b e r o f c l a i ms 500 1,000 1. 500 2,000 2.500 3.000 3.500 4.000 4.500 5.000 INVERTED RATIO SC ALE 1,000 1950 M ON THLY— SEA SO N A LLY ADJUSTED 10,000 C hart 13. AVERAGE WEEKLY INSURED UNEM PLOYM ENT RATE Chart 14. TOTAL UNEM PLOYM ENT RATE Chart 15. SEASONAL PATTERNS Average Workweek Cleveland and of P r o d u c t i o n Workers in M a n u f a c t u r i n g and Selected Employment Groupings United States M o n t h l y a v e r a g e = 100 Jan. Feb. Mar. Apr. May June July 1967 Aug. Sept. Oct. Nov. De c . ECONOMIC REVIEW N O T E S A N D SO URC ES CHART 5 N O T E : M inor adjustments in published data on the labor force and em ploym ent in the Cleveland m etropolitan area were made by the Federal Reserve Bank o f Cleveland to maintain strict com parability. The Cleveland Statistical Area Standard Em ploym ent in Nonm anufacturing Industries, 1 9 5 7 -1 9 6 9 Definition of Cleveland: Cleveland SMSA Sources: U. S. Departm ent of Labor and Division of Research and Statistics, Ohio Bureau of Em ploym ent Services M etropolitan consists o f Cuyahoga, CHART 6 Lake, Geauga, and Medina counties. CHART 1 Em ploym ent in All Industries, 19 5 7 -1 9 6 9 Manufacturing Em ploym ent, 19 2 1 -1 9 4 9 Sources: U. S. Departm ent o f Labor and Division D efinition of Cleveland: Cleveland SM SA N O T E : Data in Chart 1 and other selected charts are plotted on ratio (or semi-logarithmic) of Research and Statistics, Ohio Bureau of Em ploym ent Services scales, on which equal vertical distances measure equal percent changes. For exam ple, a movement from 75 to 100 CHART 7 would Average W orkweek o f Production Workers in have the same am plitude as a change from 120 to 160. D efinition o f Cleveland: Cuyahoga County Sources: U. S. Departm ent o f Commerce; U. S. Manufacturing, 19 5 2 -1 9 6 9 D efinition of and Cleveland: 1 9 52 -196 3, Lake counties; Cuyahoga 1 9 64 -196 8, Cuya Departm ent o f Labor; Greater Cleveland hoga, Lake, Geauga, and Medina counties G row th Association; Division of Research Sources: U. S. Departm ent o f Labor and Division and Statistics, Ohio Bureau o f Em ploy o f Research and Statistics, Ohio Bureau ment Services CHART 2 o f Em ploym ent Services Em ploym ent in Manufacturing Industries, 1 9 5 0 -1 9 6 9 D efinition o f Cleveland: Cleveland SMSA Sources: U. S. Departm ent of Labor and Division o f Research and Statistics, Ohio Bureau of Em ploym ent Services CHART 3 Em ploym ent in Durable Goods Industries, 1 9 5 0 -1 9 6 9 Definition of Cleveland: Cleveland SMSA CHART 8 Average Hourly Earnings of Production Workers in Manufacturing, 1 9 5 2 -1 9 6 9 Definition of and Cleveland: 19 5 2 -1 9 6 3 , Lake counties; Cuyahoga 1 9 64 -196 8, Cuya hoga, Lake, Geauga, and Medina counties Sources: U. S. Departm ent of Labor and Division of Research and Statistics, Ohio Bureau of Em ploym ent Services Sources: U. S. Departm ent of Labor and Division o f Research and Statistics, Ohio Bureau CHART 9 o f Em ploym ent Services CHART 4 Average W eekly Earnings of Production Workers in Em ploym ent in Nondurable Goods Industries, Definition 1 9 5 0 -1 9 6 9 Definition of Cleveland: Cleveland SMSA Manufacturing, 1 9 5 2 -1 9 6 9 of and Cleveland: 1 9 52 -196 3, Lake counties; Cuyahoga 1 9 64 -196 8, Cuya hoga, Lake, Geauga, and Medina counties Sources: U. S. Departm ent of Labor and Division Sources: U. S. Departm ent of Labor and Division o f Research and Statistics, Ohio Bureau o f Research and Statistics, Ohio Bureau of E m ploym ent Services o f E m ploym ent Services 28 AUGUST 1969 A P P E N D IX C H A R T 10 Wage and Salary Income in Mining, Manufacturing, S E A S O N A L F L U C T U A T IO N S and Construction, 19 5 0 -1 9 6 9 D efinition o f Cleveland: Cleveland SMSA Sources: U. S. Departm ent of Commerce Seasonal and Division of Research and Statistics, Ohio fluctuations recur regularly during certain months o f the year in m any economic activities. Chart 15 contrasts the seasonal patterns Bureau o f Em ploym ent Services in the average w orkw eek and selected em ploym ent C H A R T 11 groupings Help-Wanted Advertising, 19 51 -196 9 States. Definition of Cleveland: Service area o f newspaper Source: National Industrial Conference Board between The Cleveland and follow ing exam ple the U nited illustrates the interpretation o f seasonal patterns. On the basis o f past experience, the average C H A R T 12 workweek in Cleveland's m anufacturing industries Average W eekly Initial Claims fo r State is expected to rise 1.8 percent (about 0 .7 hour) Unem ploym ent Insurance, 19 50 -196 9 Definition of Cleveland: Cuyahoga, Lake, and increase is less than that, the seasonally adjusted Geauga counties Sources: U. S. between m id-Novem ber an d mid-December. I f the Departm ent of Labor (seasonal adjustment by Bureau of the Census) and Division o f Research and Statistics, Ohio Bureau of Em ploym ent Services workweek w ould show a decline. O f course, i f the workweek increase actually declines is customary, when a seasonal the seasonally adjusted decline w ould be accentuated. Conversely, from C H A R T 13 mid-June Average W eekly Insured Unem ploym ent Rate, decline in Cleveland's m anufacturing w orkw eek is 1 9 5 0 -196 9 Definition to m id-July, the expected seasonal 1.3 percent. A decline less than that w ould be of Cleveland: Cuyahoga, Lake, and equivalent to a seasonally adjusted increase. Geauga counties Sources: U. S. Departm ent of Labor and Division As shown in Chart 15, the average workweek in of Research and Statistics, Ohio Bureau manufacturing is subject to m ore pronounced of Em ploym ent Services seasonal influences in Cleveland than in the U nited C H A R T 14 States. Total U nem ploym ent Rate, 19 60 -196 9 prim ary m etal industries and m odel changeovers in Definition of and Cleveland: 1960 -196 3, Lake counties; Cuyahoga 19 64-1968, Cuya hoga, Lake, Geauga, and Medina counties Sources: U. S. Departm ent o f Commerce; U. S. Departm ent of search and Labor; Division of Re Statistics, Ohio Bureau of Em ploym ent Services C H A R T 15 Seasonal Adjustm ent Factors, Average W orkweek o f Production Workers in M anufacturing and Selected Em ploym ent Groupings, 1967 Sources: U. S. Departm ent o f Labor and Federal Reserve Bank o f Cleveland Plant shutdowns fo r vacations in the the m o to r vehicle industry help to explain the relatively sharp decline in Cleveland's m anufac turing workweek in Ju ly and August. Sim ilarly, the greater rise in Cleveland's m anufacturing workweek in December is p a rtly attributable to stepped up activity in industries associated with m o to r vehicle production. Although the m anufacturing workweek is more seasonal in Cleveland than in the U nited States, such is n o t the case fo r m anufacturing em ploy ment. For exam ple, between Septem ber and 29 ECONOMIC REVIEW January, the norm al seasonal decline in m anufac Seasonal swings in nonm anufacturing em ploy turing em ploym ent is 2 .8 percent in the United m ent, in contrast, are greater in Cleveland than in States, b u t o nly 0 .9 percent in Cleveland. Seasonal the U nited States. F o r exam ple, from Decem ber to em ploym ent variations in both the durable goods February (the seasonally high and lo w months o f industries and the nondurable goods industries are the less pronounced in Cleveland than in the U nited nonm anufacturing em ploym ent is 3 .9 percent in States goods the U nited States and 5 .8 percent in Cleveland. industries, such as miscellaneous manufacturing; These declines m ain ly reflect post-holiday c u t because highly seasonal durable year), the norm al seasonal decline in lum ber and wood products; and stone, d a y , and backs in retail trade and post o ffice em ploym ent, glass products, are relatively unim portant in the as w ell as an Cleveland area. E xcept fo r July and August, the activity. Between February and June, as em ploy five m ajor m etalw orking industries, which predom m ent in retail is easing in trade, on o utdoor construction services, the upswing, and the contract inate in Cleveland, have little seasonal variation in construction em ploym ent. S im ilarly, highly seasonal nondur seasonal increase in nonm anufacturing em ploy norm al able goods industries, such as tobacco m anufac m ent is 3 .2 percent in the U n ited States and 4 .5 tures, fo od and kindred products, petroleum and percent in Cleveland. related products, and leather and leather products, are less im p o rtan t in Cleveland than in the nation. On the other chemicals, and hand, printing paper, which Compared with national patterns, Cleveland's an d publishing, are among the greater seasonal stability in m anufacturing em ploy industries th at experience the least seasonality in m ent helps to offset the area's less seasonally em ploym ent, account fo r one-half o f nondurable stable nonm anufacturing em ploym ent. goods only ance, the seasonal variation in total nonagricultural o ne-third o f nondurable goods em ploym ent in the em ploym ent is o nly slightly m ore pronounced in nation. Cleveland than in the nation. em ploym ent in Cleveland, but S P E C IA L A N N O U N C E M E N T A limited number of copies are available of the article "Characteristics of Merging Banks" which was published as a Staff Economic Study by the Board of Governors of the Federal Reserve System in July 1969 and summarized in the July 1969 Federal Reserve Bulletin. The article is based on a paper presented by David L. Sm ith, Senior Economist, Federal Reserve Bank of Cleveland, at the F ifth Annual Meeting o f the Appalachian Finance Association held at Syracuse, New Y o rk , April 2 5 -26 , 1969. Requests fo r copies should be directed to the Research Departm ent, Federal Cleveland, P. 0 . Box 6 3 8 7 , Cleveland, Ohio 4 4 I0 I. 30 Reserve Bank of On b al AUGUST 1969 R E C E N T L Y PUBLISHED E C O N O M I C C O M M E N T A R I E S OF THE F E DERAL RESERVE B A N K O F C L E V E L A N D "Recent Developments in Housing" July 7, 1969 "Origins and Growth of the Community College" July 14, 1969 "Agency Issues—Old and New" July 21, 1969 "Perspective on Automobile Prices" July 28, 1969 "Recent Developments in the U. S. Balance of Payments" August 4, 1969 "A Note on Some Sources of Nondeposit Bank Funds" August 11, 1969 "Personal Income in the United States and Ohio" August 18, 1969 "Mergers Among Trade Unions" August 25, 1969 Economic Com m entary is published w eekly and is available w ith o u t charge. Requests to be added to the mailing list or for additional copies o f any issue should be sent to the Research Departm ent, Federal Reserve Bank of Cleveland, P. 0 . Box 63 8 7 , Cleveland, Ohio 4 4 1 0 1 . 31 Fourth Federal Reserve District
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