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MONTHLY SuoimMf<&/iew IN -F E D E R A L RESERVE BANK of CLEVELAND — THIS ISSUE A Decade of Manufacturing in Western Pennsylvania.................................................. ? Steel Capacity.................................................... .5 t9 5 9 Notes on Federal Reserve Publications.. . .6 Around the Fourth District.............................. .7 Trends In Manufacturing Employment I N D E X 1 9 4 7 = TOO MERCER LAW RENCE * --PITTSBURGH \ * M ETRO PO LITA N l AREA H _ $ A Decade of Manufacturing in Western Pennsylvania r e c e n tly published results of the ness recession of 1957-1958 got under way 1957 Industrial Census of Pennsylvania late in 1957, so that the year was less affected make it possible to trace trends in manufacby recessionary influences than was 1954, turing industry in western Pennsylvania over when recovery from recession did not come the ten-year span from 1947 to 1957. For until the end of the year. purposes of this article, western Pennsylvania is defined as the 19 counties in Pennsylvania Decline in Employment from 1947 to 1957 which are included in the Fourth Federal One important difference between trends Reserve District. in manufacturing industry in western Penn A ten-year comparison gives a more bal sylvania in the 1947-54 and 1947-1957 periods anced picture of postwar trends than that is in employment. Factory workforces in the produced by a comparison of the results of area fell about 9 percent from 1947 to 1954, the 1947 and 1954 United States Censuses of while the decline over the whole ten-year Manufactures, which have been the princi period was only 4 percent. (See the cover pal source of detailed information such as that chart.) The sharper drop in the earlier period presented, for example, in the series of arti was apparently due primarily to the effects of cles entitled “ Cross Sections of the Fourth the recession on employment in 1954, while Federal Reserve District,” published in this the revival of business activity from 1954 to Review.(1) 1957 produced a 6 percent increase in factory The findings of the 1954 Census of Manu workforces. factures were much affected by the business This experience differs somewhat from that recession of that year. Census data for that of the state of Pennsylvania as well as from year, unless carefully interpreted, can lead national trends. Manufacturing employment to an underestimate of postwar industrial in Pennsylvania was 2 percent greater in growth in western Pennsylvania, because of 1957 than in 1947, while nationally it in the latter’s concentration of heavy industries; creased 10 percent over the ten-year period. these industries were particularly hard hit by Manufacturing employment in the Pitts the recession.(2) burgh (four-county) area accounted for more The year 1957, while not the peak year of than two-thirds of all factory employment in the recent boom, provides a much better basis western Pennsylvania in 1957, and the em for comparison with 1947 than does 1954, if ployment picture in Pittsburgh in the post general postwar trends are sought. The busi war period, as the cover chart shows, has therefore been very similar to that in western (1) See M onthly B u sin ess R eview , issues of March. 1 9 5 7 and M ay 1 957 . Pennsylvania as a whole. Manufacturing (2) This suggests that the results of the 19 5 8 United States employment in two of the other large indus Census of M anufactures, when they become available, should be interpreted in their “ growth” aspects with fully as much, trial areas shown on the cover chart, the Erie or even more, caution than is merited for the 1 9 5 4 Census data. The durable goods industries were even more depressed Metropolitan Area (identical with Erie during the 1 9 5 7 -5 8 recession than during the 1 9 5 3 -5 4 slump. h e T 2 County) and Lawrence County, in which New Castle is the largest city, was also smaller in 1957 than in 1947. Not all of western Pennsylvania followed the same pattern, however. There were about one-fifth more factory employees in Mercer County (part of the Youngstown Metropoli tan Area) in 1957 than in 1947. Several of the other twelve counties, whose boundaries are shown on the cover chart, also registered sharp gains in factory employment in the period from 1947 to 1957. The twelve counties which are not named on the cover chart include such industrial centers as Butler, Warren, Franklin, Meadville, Oil City, Indiana, and Uniontown. As a group, the twelve counties accounted for about 20 percent of factory employment in western Pennsylvania in 1957. the metropolitan areas and counties in west ern Pennsylvania, Butler County ranked highest in this comparison, with a per-worker figure of $1,558. Capital expenditures, it should be remembered, show considerable year-to-year fluctuation; in Butler County such outlays in 1957 were six times the 1954 total. No other county showed as large a pro portionate increase. Butler County’s steel in dustry accounted for about 75 percent of all capital expenditures in 1957. The accompanying Table 1 shows the distri bution of 1957 capital expenditures in west ern Pennsylvania by industry. The predomi nant role of the iron and steel industry in capital spending is shown by the proportion of capital investment accounted for by the primary metals group, in which the steel in dustry is the largest single subgroup. Steel Industry Dominates Capital Investment Rapid Growth in Value Added After 1954 The 1957 Pennsylvania Industrial Census also includes data on new capital expendi tures by manufacturing industry. On a perworker basis, the average for western Penn sylvania for the year was more than one-third above the state-wide average of $644. Among Table 1 New Capital Expenditures in Western Pennsylvania — 1957 Amount Million $ Percent Share Primary Metals $268,573 29,248 Stone, Clay, Glass Products Nonelectrical Machinery 20,213 Electrical Machinery 16,366 Fabricated Metal Products 17,777 Food and Similar Products 14,259 Chemicals and Products 10,306 Paper, Pulp and Products 8,056 Transportation Equipment 6,821 Other Industries 15,436 66% 7 5 4 4 4 3 2 1 4 Industry All Industries $407,055 100% Another important measure of change which is included in both the Pennsylvania and United States censuses is “ value added by manufacture.” Value added is defined, briefly, as the difference between the value of manufactured products and the cost of raw materials. It reflects the effects of price changes as well as changes in physical volume. Value added by manufacture in western Pennsylvania in 1957 was about $4.6 billion. This was $2.1 billion, or 87 percent, more than the 1947 total, and also represented a gain of $1.1 billion over the 1954 figure. The increase in the value of industrial output in western Pennsylvania was, therefore, slightly larger in the 1954-57 interval than in the seven-year span from 1947 to 1954, again re flecting the influence of the 1954 recession. Prices of the products of western Pennsyl vania’s manufacturing industries rose sub stantially in the postwar period, so that the gain in real output was perhaps about onequarter of the increase in value added.(3) (3) This estimate was made by deflating the data on “ value added” by an index of average prices of the output of m anu facturing industry in western Pennsylvania, using compon ents of the U . S. B ureau of Labor Statistics Wholesale Price Index, weighted by the relative importance of these industries, as measured by the value added by each in 1 957 . This method gives greater weight to those industries whose products have shown the largest price increases than would be yielded by a method based on 1 9 4 7 weights. 3 The industry composition of value added by manufacture in western Pennsylvania in 1957 is shown in the accompanying Table 2. Durable goods account for about 75 percent of the total. Of the major counties in western Pennsyl vania, Mercer County showed the largest in crease in value added during the 1947-57 period, while Erie County registered the smallest gain. (See the accompanying chart.) The increase in factory output in Erie during this interval was achieved despite the virtual closing o f the city ’s largest plant; the gain was centered in the city ’s electrical machinery and primary metals industries. ADDED BY MANUFACTURE 80% 120% 1-----1---- 1— |— I---- 1— I-----1---- 1-----1---- 1---- 1 Western Pennsylvania Pittsburgh Metropolitan Area Erie County Lawrence County Mercer County 4 Industry Amount Million $ $1,859 Primary Metals 584 Electrical Machinery 429 Nonelectrical Machinery 366 Fabricated Metal Products Stone, Clay, Glass Products 349 268 Food and Similar Products Transportation Equipment 175 Chemicals and Products 127 453 Other Industries $4,610 Percent Share 40% 13 9 8 8 6 4 3 9 100% Productivity Gains 1947-1957 40% Value Added by Manufacture in Western Pennsylvania — 1957 All Industries PERCENT CHANGE IN VALUE O’ Table 2 The estimates of value added, deflated for price changes as described in footnote 3, make possible an approximate measure of productivity change in manufacturing indus try in western Pennsylvania. This figure, which can be termed “ real value added per employee” , showed an in crease of about 25 percent in the period from 1947 to 1957. Such a measure cannot be directly compared with the generally used national data on output per manhour, because it ignores the effects of changes in hours worked, and is also subject to other uncer tainties not present in the national data. Nevertheless, it indicates a substantial im provement in productivity in western Penn sylvania industry in the postwar period. Expansion of basic steel-making facilities in recent years has proceeded more rapidly at mills outside of the Fourth District. . . O T H E R U .S . C A P A C ITY Steel Capacity Fourth District Mills Have 58 V2 Million Tons in 1959 - FO U R T H D IS T R IC T C A P A C IT Y steelmaking capacity was in creased by 6.9 million tons during 1958, boosting total capacity to 147.6 million tons at the beginning of 1959. The 1958 capacity addition, while not a record, was well above the average annual increase of the past decade. About one-fourth of last year’s capacity additions were made at mills located in the Fourth District. These mills enlarged their basic steelmaking capacity by 1.8 million tons, raising their total to 58.5 million tons on January 1, 1959. The 1958 expansion amounted to a capacity boost of about 3 percent for mills in the Fourth District, or just about one-half the rate of expansion at mills in the rest of the country. Consequently, there was a further slight decline in the proportion of the nation’s steel capacity located within the District. Since 1948, the District’s share of the total has shrunk from 45 percent to slightly under 40 percent. Over one-half of the 1958 capacity addi tions in the nation were made by mills located in the Chicago producing area and in the western states. Within the Fourth District, the bulk of the 1958 increase — 1.1 million tons, or three-fifths of the net addition in the District — was added in the Pittsburgh area, principally at mills in Braddock, Duquesne, Aliquippa, Munhall and Monessen. The balance of the District additions were made largely at mills in Cleveland, Youngs town, Warren, Lorain, Middletown, and Ash land. h e n a t i o n ’s T . . . reducing the concentration of steel capacity in the District . . . . .from45% in 1948 . . . . . . to 40% in 1959. Within the Fourth District, steel-making furnaces are concentrated in the Cleveland • Youngstown • Pittsburgh industrial complex and along the Ohio River. CLEV ELA N D L O R A IN ' Y O U N G S T O W N :' CANTOR, W EIRTON i STEUBENVILLE ' MIDDLETOW N PORTSMOUTH Each ASHLAN D ' dot 100,000 <» equals Lons of steel-making c a p a c i t y o n J a n . 1, 1 9 5 9 5 NOTES ON FEDERAL RESERVE PUBLICATIONS Among the articles recently published in monthly business reviews of other Federal Reserve banks are: “ A Broader Horizon for Field Warehousing” , Federal Reserve Bank of Chicago, February 1959. “ The Prospects for Beryllium Metal” , Federal Reserve Bank of Boston, January 1959. “ Discount Rate and the Discount P olicy” , Federal Reserve Bank of Phila delphia, January 1959. “ Magnitude of the Federal Debt” , Federal Reserve Bank of St. Louis, January 1959. ( Copies may be obtained by writing to the Federal Reserve Bank named in each case.) * # * Recent statements on Federal Reserve policy and related matters include: “ A Year of Recession and Recovery” , by William McC. Martin, Jr., Chair man, Board of Governors of the Federal Reserve System. (Statement before the Joint Economic Committee, Washington, D. C., February 6, 1959.) “ The Environment of Monetary Policy” , by Karl R. Bopp, President, Fed eral Reserve Bank of Philadelphia. (Address before the National Credit Confer ence of the American Bankers Association, Chicago, Illinois, January 23, 1959.) “ Cooperation of Monetary Policy in a Growing Economy” , by Alfred Hayes, President, Federal Reserve Bank of New York. (Remarks before Annual Midwinter Meeting of the New York State Bankers Association, New York City, January 26, 1959.) “ The Public Interest in Agriculture” , by Charles N. Shepardson, Member, Board o f Governors of the Federal Reserve System. (Remarks at the Annual Farm and Home Week Program, University of Kentucky, Lexington, Kentucky, January 28, 1959.) (Copies of these papers are available at the Board of Governors of the Fed eral Reserve System, Washington 25, D. C.) 6 tUe fyauktlt ^biltsiict -Department Store Sates in January, and Year 1958 % change from January 1959 Year 1958 % change year ago from 1957 Lexington ..................................... Erie ............................................... Springfield ................................... Canton ........................................... Wheeling-Steubenville ............... Cincinnati ..................................... Columbus ..................................... Pittsburgh ..................................... Cleveland ..................................... Youngstown ................................. Portsmouth ................................... FOURTH D ISTRICT TOTAL # * +13% + 8 + 7 + 5 + 5 + 2 + 1 - 2 - 3 - 7 -1 0 - 1 -0 -% + + - 5 6 6 3 1 2 2 3 -1 0 - 7 2 # During December and January, bank debits at reporting banks in 32 Fourth District centers reflected the recovery in business activity. January debits total ing $13,856 million were seasonally below the record high posted in December, but were about 1 percent above the year-ago month. In Dayton and Akron, which are among the ten largest reporting centers, the January year-to-year increases in bank debits amounted to 6% and 5%, respectively. Among the twenty-two smaller centers, the largest gains, amounting to about 12%, were posted by banks in Lorain and Springfield. Building permit volume in Cleveland during the first two months of the year approximated $5.8 million, close to the year-ago figure of $5.9 million. Kesidential building has accounted for 35% of 1959 dollar volume thus far, up somewhat from the corresponding 20% a year earlier. An analysis of department store credit at Fourth District department stores shows that instalment sales in January exceeded those of the year-ago month by 2%. The ratio o f instalment sales to the month’s total also rose during Janu ary to an all-time high of 18.9% as against 16.0% in December and 13.8% in January of 1958. Charge-account sales and cash sales were below a year ago by 5% and 1%, respectively. Charge-account sales amounted to 47.1% of the Janu ary total while cash sales accounted for 34.0%. Steel production in the Cleveland-Lorain district hit a long-time toward the end of February with a weekly output of nearly 135,000 tons. exceeded the 1958 peak of 121,000 tons as well as the 1957 high of 129,000 but failed to match the all-time weekly record of 139,000 tons, which achieved more than once during the year 1956. high This tons was (T h e above items are based on various series of District or local data, which are assem bled by this bank and distributed upon request in the form of mimeographed releases.) 7
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