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IN THIS ISSUE Perspective on Regional Employment Patterns.................. 2 Recent Trends in the W ood-U sing Industries FEDERAL RESERVE BANK OF 15 CLEVELAND ECONOMIC REVIEW PERSPECTIVE ON REGIONAL EMPLOYMENT PATTERNS Reflecting the country's high rate of eco nomic activity, utilization of the nation's man power resources improved noticeably in 1964. For one thing, the nation's labor force expanded by a larger amount than during any previous year in this decade, and thus for the first time matched the amount of average annual growth projected for the I9 6 0's. In addition, and perhaps more importantly, an even larger gain occurred in employment to from the national average—have followed or deviated from the broad national pattern, particularly as to the amount of growth in employment and shrinkage in unemployment from the peak levels of 1960. The article focuses on the ten largest metro politan areas in the Fourth Federal Reserve District. Of the ten centers, eight are located in Ohio and two in Pennsylvania. Selection of the ten centers from almost twice that allow the complete absorption of the large growth in the labor supply as well as a small reduction in the amount of unemployment. number of Standard Metropolitan Statistical Areas in the Fourth District was determined The resulting drop in the unemployment rate by size—a civilian labor force numbering at least 100,000 persons —and by availability of marked a movement off the high postrecession continuous and relevant data. As a group the plateau from which the rate could not be ten areas share a degree of concentration of employment in the manufacturing industries, especially in durable goods, that exceeds the national average, while individually they show sufficiently broad variation in their industrial composition to account for different dislodged for several years. Against the background of national man power developments over the past few years, this article examines whether manpower de velopments on a subnational level—whose economic structure may differ significantly 2 patterns of change. MAY 1965 MARKED DECLINE IN UNEMPLOYMENT less than one-fourth from 1961 to 1964 (from 6.7 percent in 1961 to 5.2 percent in 1964), the rates in all of the ten areas of the District were reduced by a larger proportion and were cut in half in six areas. A sharp drop in unemployment during the recovery phase, following a sharp rise during the downturn of the economy, is not unusual, as a wide cy clical swing in the unemployment rate is characteristic of labor markets with a high concentration of employment in durable Chart 1 shows unemployment rates for each of the ten areas and for the U. S. in annual averages, for 1960, 1961 and 1964. The years chosen represent the latest prerecession peak, the trough of the recession, and the peak of the recovery thus far. As one might expect, the rates for 1964 in all ten areas and in the U. S. were well below the high levels of unemployment in 1961. However, while the national rate declined by goods manufacturing. l. A N N U A L RATES of UN EM PLO YM EN T in S e l e c t e d Fourth D istrict A r e a s and U.S., 1 9 6 0 , 1 96 1 and 1964 P e rc e n t of C iv ilia n L a b o r Force 5% 10% 15% 1960 E R IE P IT T S B U R G H 196 1 19 64 Y O U N G S T O W N -W A R REN CANTON TO LEDO CLEVELAN D •U.S. R A T E 1 9 6 0 AKRON -U .S . R A T E 1 9 6 1 C IN C IN N A T I CO LU M BU S -U.S. RATE 19 64 DAYTON 10 A R E A S C O M B IN E D (Weighted A v era ge ) 0 5% 10% P e rc e n t of C iv ilia n L a b o r F o rce 15% S o u r c e s o f d a t a : D i v i s i o n o f R e s e a r c h a n d Statistics, O h i o B u r e a u of U n e m p l o y m e n t C o m p e n s a t i o n ; P e n n s y l v a n i a St at e E m p l o y m e n t S e r v i c e ; U.S. D e p a r t m e n t of L a b o r 3 ECONOMIC REVIEW More surprising, perhaps, is the relative change in the rates as measured over the entire cycle, from 1960 to 1964. While the national unemployment rate between the two years declined by less than one-tenth, or from 5.6 percent to 5.2 percent of the labor force, the drop in area rates ranged up to almost one-half, with the steel centers scoring the largest reductions.1 As a result, the weighted average of the area rates in 1964, 4.1 percent, was conspicuously below the national rate; in contrast, at 6.3 percent in 1960, it had been above the national rate. While six areas in 1960 had a lower rate of unemployment than the country as a whole, the number in creased to eight in 1964. There can be little doubt that last year's rise in activity in the steel industry favorably affected the level of unemployment in the steel centers and that the general improve ment in the economic climate helped to bring down unemployment in other areas. However, before accepting last year's low area rates as conclusive evidence that a "full employment" level of unemployment has been achieved in Fourth District areas but not in the nation, it DECLINE IN UNEMPLOYMENT DESPITE LITTLE EMPLOYMENT GROWTH Usually one can assume that a decline in unemployment means that jobless people have found work and the number of employed persons has increased correspondingly. Such was the case with the decline in the national rate: fewer people were unemployed in 1964 than in 1960 as more had found employment over the same period. That, however, was not the pattern in most of the ten areas in the District. Although the unemployment rate declined in all areas, overall growth in employment occurred in only five of them, including two with almost negligible gains. In the remaining areas, including the steel centers, a drop in the unemployment rate was accompanied by a net employment loss ranging from 0.4 percent to 4.4 percent over the four-year period (see Table I). TABLE I Percent Changes in Employment and Civilian Labor Force 1 9 6 0 -6 4 for Selected Fourth District A reas and U. S. might be instructive to look behind some of Em ployment L a b o r Force + 7 .5 % the figures as well as at concurrent employ Colum bus + 8 .6 % ment and labor force developments. Erie + 5 .5 + 1.0 D a yto n + 5 .0 + 3 .7 A kron + 0 .7 — 0.8 C le ve la n d + 0 .6 — 1.3 Toledo — 0.4 — 2.1 C anton — 1.3 — 3.5 Pittsburgh — 1.5 — 5 .6 1 In the steel centers —Pittsburgh, Canton, and Youngs town-Warren—where primary metals employment con tributes from one-sixth to one-fourth of total employment in nonfarm industries, the average rate for 1960 had been comparatively high due to the onset of employ ment curtailments in steel and other metalworking industries several months prior to the general downturn of the economy in May of that year. 4 Cincinnati — 3 .0 — 3.6 Y o u n g sto w n -W a rre n — 4.4 — 8.2 U. S. + 5 .5 + 5 .1 Sources: Division o f Research a n d Statistics, O h io Bureau o f U nem ploym ent C om pensation; Pennsylvania State Em ploym ent Service; U. S. Departm ent o f L a b o r MAY 1965 These developments imply a shrinkage in the labor force also, since the latter by defi nition is the sum of its "employed” and "un employed" components, and any change in the size of the components must balance with changes in the total. The data in Table I indicate a labor force decline in seven of the areas, by amounts ranging from almost one percent to more than eight percent over the four years, while an expansion of the labor force occurred only in the three areas that showed a significant gain in employment. Mathematically, this combination of declining numbers for both employment and unem ployment, and thus for the labor force, is readily understandable. In economic terms, however, the developments in the areas under review contrast so markedly with national developments and general expectations that they call for further examination. SHRINKAGE OF LABOR FORCE Decline in the unemployment rate may not mean only that unemployed people are find ing jobs; it may also mean just the opposite, namely, that they are failing to find jobs and for that reason quit actively looking for work, which disqualifies them as unemployed and removes them from the labor force. As the "discouraged worker" theory asserts, jobless workers, particularly those with only loose appears hopeless.2 However, a situation where employment, unemployment, and the labor force go down at the same time, can arise only if all the people who lose their jobs, in addition to some who are already jobless, become discouraged and withdraw from the local labor force either by no longer looking for work or by moving to another area. This appears to have happened in some of the areas during the early part of the four-year period, as Chart 2 reveals. The three areas in the right-hand portion of the chart show em ployment, unemployment, and the labor force moving in a "normal" or "healthy" relation to each other, a relation that is similar to their movement in the U. S. as a whole, which is plotted in the lower portion of the chart. In the areas in the left-hand portion of the chart, concurrent changes in the three categories lead to the conclusion that an exodus of dis couraged workers from the labor force must have taken place. This may have been in the form of withdrawal from labor force participa tion or of outmigration, the latter being in effect a different type of withdrawal, that is, from the labor force of one area to that of another. Direct statistical evidence of out migration for the period in question is not 2 This has been confirmed by such recent studies as Thomas Dernburg and Kenneth Strand's "Cyclical Variation in Civilian Labor Force Participation" in attachment to the labor force, such as young Review of Economics and Statistics, Harvard Uni versity Press, November 1964; or Alfred Tella's "The Relation of Labor Force to Employment" in Industrial people and some married women, tend to withdraw from labor force participation at times when jobs are scarce and job hunting and Labor Relations Review, Cornell University, April 1964, and "Labor Force Sensitivity to Employment by Age, Sex" in Industrial Relations, University of California (Berkeley), February 1965. 5 CIVILIAN LABO R FORCE, EM PLOYM ENT and RATE of U N E M PLO YM E N T Selected F o u rth District A r e a s a n d '60 10% '61 '62 U.S., A n n u a l A v e r a g e s 1 9 6 0 - 1 9 6 4 '63 '64 '65 '60 '61 ’62 '63 '64 '65 '60 '61 '60 ’61 '62 '63 ’64 '65 10% U NEM P LO YM CANTON NT TOLEDO R ATE ♦ X 5% Ul l E M P l l O Y M I N T COLUMBUS RITE 5% /* I A B 0 R FOR CE INDEX 1960=100 INDEX 1960=100 \ ♦ \ \ L A I O R F<) R C E 95 EM I L O Y I I E N T E M P L O Y M ENT '/ .> 10% 107. — TOWN- s. I N EM P LO YM ENT AKRON 1 ATE DAYTON R ATE ♦ S7< WARREN INDEX 1960=100 1 NEM I L O Y H ENT YOUNGS 5% . '/ V X' INDEX 1960=100 INDEX 1960=100 \ \ \ 1 L A B )R F 0 R C E \ L A B O R F( RCE V * ’" 95 INDEX 1960=1 EM ' L O Y I IEN T / EMP LO YM ENl 10% Ul EM PL 0 Y M E IT PITTSBURGH CLEVELAND Ri T E W 10% U IEM P O Y M NT ERIE R/ T E ► 5% /V INDEX 1960=100 INDEX 1960=100 s J H PLO Y MENT ..•*L L A B )R F O R C E EM I'L O Y D ENT L A I0R F O R C E 10% INDEX 1960=100 UNI M PL( YMEN T CINCINNATI '60 '61 '62 '63 '64 '65 RA E 5% '62 X' INDEX 1960=100 LAI OR F ORCE' 10% UNITED STATES - E M I LOYM ENT 5% UN M PL( Y M EI T RAT E '60 ’61 '62 '63 '64 '65 /, 110 .ABOI FOR 105 1^ ’i - ........ e ----- M.P L O INDEX 1960=100 '60 S o u rce s of d a ta : D i v i s i o n o f R e s e a r c h a n d St atist ic s, O h i o B u r e a u of U n e m p lo y m e n t C o m p e n s a t io n ; P e n n s y l v a n ia State Em ploym ent Service; U. S. D e p a r t m e n t o f L a b o r '61 '62 ’63 'M E N ’64 ' '65 '63 '64 '65 MAY 1965 generally available. For the Pittsburgh metro politan area a special census study of the nation's largest metropolitan areas showed a 1.6 percent reduction in population between April 1960 and mid-1963, which certainly was not due to natural causes but points to heavy outmigration. During the latter part of the period from 1960 to 1964, with more encouraging em ployment prospects, the further decline in area unemployment rates—at a faster pace than in the nation as a whole —undoubtedly reflected primarily rising employment levels rather than outmigration and labor force withdrawal. To some extent it might also have been the result of the different methods by which national and subnational labor force data are obtained,3 methods which are capa ble of producing different estimates.4 For example, the U. S. Bureau of Employment Security regularly publishes labor force data for 150 major labor market areas in the country, covering about two-thirds of the 3 Nationwide estimates originate from a monthly survey conducted by the Bureau of the Census by means of a carefully selected sample of households across the nation. State and local area estimates, on the other hand, are prepared by state agencies following a uniform procedure of building up estimates of employment and of unemployment from components that are partly known and partly estimated. 4 Discussion of the differences may be found, for example, in Chapter VII of Measuring Employment and Unem ployment (Report of the President's Committee to Appraise Employment and Unemployment Statistics, 1962) or in Joseph C. Ullman's article "How Accurate nation's labor force and including the ten areas discussed in this article. The average rate of unemployment in those 150 areas from 1960 to 1964, while closely following the ups and downs in the national (household survey) rate, was consistently lower than the national rate. In 1960 and 1961 the difference aver aged about two-tenths of one percentage point. In 1963 and 1964 the gap had widened to five-tenths of one point, which suggests that the two estimating techniques are not equally sensitive to some change that may have occurred in the composition of the unemployed. INEXPERIENCED UNEMPLOYED UNDERESTIMATED? An occupational breakdown of the unem ployment totals from the household survey shows that in 1964 an average of 16 percent of the unemployed were persons without previous work experience —predominantly young people —as against only 11 percent in 1960. It seems plausible that the growing proportion of inexperienced jobseekers is not fully reflected in the area unemployment estimates since those estimates are based upon the number of "insured'' unemployed, which excludes persons without previous employment. Likewise, persons reentering the labor force without employment would be excluded from the insured unemployment are Estimates of State and Local Unemployment?" in In count and might not be fully estimated. The possibility that current area estimates some dustrial and Labor Relations Review, Cornell Uni versity, April 1963, where BES unemployment estimates for April 1960 are compared with data from the 1960 Census of Population. what understate the degree of unemployment by national standards should, therefore, be kept in mind when national and local unem 7 ECONOMIC REVIEW ployment rates are under comparison.5 An underestimated unemployment figure would, of course, also understate the size of the labor force. The numbers involved, how ever, are too small in proportion to the total labor force size to explain why the labor force in seven of the areas in the Fourth District failed to show any growth between 1960 and 1964, even though the national labor force expanded by 5 percent and the population over 14 years of age by 7 percent during the same period.6 The explanation, rather, must be looked for in the amount of growth that occurred, or failed to occur, in employment. Estimates of total employment in the areas are obtained by adding estimates of the selfemployed, unpaid family helpers, domestic service workers, and farm workers to the number of wage and salary employees in non farm industries. The latter is by far the largest among the several components of total area employment and also the one most easily 5 Recent changes in the ratio between the national rates of total unemployment and of insured unemployment lend support to the view that the method of estimating total unemployment based upon insured unemployment may result in underestimating. That ratio, derived from annual averages of the two rates, has fluctuated between 1.11 and 1.29 over the period from 1954 to 1962. In 1963 and 1964 it stood at 1.33 and 1.39, respectively. A high ratio signifies a large proportion of unemployed persons who are not, or no longer, covered by unem ployment compensation. obtainable and most likely to be reliable, as well as comparable to its national counterpart. Changes in the size of nonfarm wage and salary employment will explain a large por tion of the changes in total employment and the labor force of the areas.7 STRUCTURAL CAUSES OF DEFICIENT GROWTH From Chart 3 it is evident that between 1960 and 1964 the growth of nonfarm pay roll employment in only three of the ten areas —Columbus, Dayton and Erie—kept pace with the national growth.8 In three other areas virtually no net change in employment occurred, while in the remaining four, includ ing the three major steel centers, the number of nonfarm jobs in 1964 was lower than in 1960. One might suspect that differences in the industrial structure of the areas as compared with that of the country as a whole account for 7 The proportion of nonfarm wage and salary employ ment in the total employment estimate ranges from 85 to 90 percent in the areas as compared with about 80 per cent in the national figure. These percentages have been growing larger during the last four years, both in the national figure and in most of the area data. The wage and salary employment estimates are subject to annual benchmark revisions while new census data are required to check the estimates of the self-employed and other components. 8 A recent census estimate pegs the Ohio population 18 years and older for mid-1964 at 6,333,000, or 2.2 8 Despite the high employment gain, the Erie area had percent above the count of 6,198,000 in April 1960. The average labor force for 1964 as estimated by the Division of Research and Statistics of the Ohio Bureau of Unemployment Compensation, however, was 1.1 percent below the estimate for 1960. A ten-year labor force projection had shown an anticipated average growth of 2.3 percent per year from 1960 to 1970. during most of the period in question. This apparent contradiction stems from rather large employment losses in the late 1950's, including the transfer of a large plant manufacturing electrical equipment to another area, which resulted in a high level of unemployment and a relatively low base for measuring the rise in employ ment from 1960 to 1964. 8 been classified as an area of substantial unemployment MAY 1965 the slow growth, or lack of growth, in the areas. Except for Columbus, all areas have more than 30 percent—the national average —of their nonfarm wage and salary jobs in manufacturing industries. Nationwide em ployment in the manufacturing sector ex panded by only 3 percent between 1960 and 1964 in contrast to the 9-percent growth in nonmanufacturing industries, which reflects the increasing demand for services as well as the effects of technical advancement upon manpower needs in the production of goods. Consequently, areas with a large proportion of employment in the slow-growing manu facturing sector, such as most of the areas in the Fourth District, could be expected to show less than average growth in total nonfarm employment, while areas like Columbus would benefit from a high proportion of faster-growing nonmanufacturing industries. As shown in Chart 3, the manufacturing in dustries held back the growth of all-industry employment in some of the areas. This was due not only to their greater weight but also 3. PERCENT C H A N G E S in N O N F A R M W A G E and S A L A R Y EM P LO Y M E N T Selected Fourth D istrict A r e a s , 1 9 6 0 - 1 9 6 4 -1 0 % -5 % 0 +5% -1 0 % -5 % 0 +5% +10% +10% +15% + 15 % S o u r c e s of d a t a : D i v i s i o n of R e s e a r c h a n d Stati stics, O h i o B u r e a u of U n e m p l o y m e n t C o m p e n s a t i o n : P e n n s y l v a n i a S t a t e E m p l o y m e n t S e r vi c e ; U.S. D e p a r t m e n t o f L a b o r 9 ECONOMIC REVIEW to the failure to match even the modest 3 percent nationwide gain. In fact, seven areas suffered a loss in manufacturing employment over the four years, which acted as a further tries —primary metals, fabricated metal prod ucts, machinery, electrical equipment, trans portation equipment —contribute rather heav ily to total employment in all of the areas except Akron. Their combined share of non farm wage and salary employment ranges from 16 percent to 40 percent in the other nine areas, in contrast to a nationwide share of only 13 percent (see Table II). On the basis of national performance, three of the five industries —machinery, fabricated metal prod ucts, and electrical equipment —can be con sidered as “ growth” industries; primary metals, on the other hand, has been an indus try with declining manpower needs, at least prior to its recent and probably unsustainable spurt of activity. Yet the four-year perform This conclusion is confirmed by the data in Table IV, where the total amount of change in the combined areas is broken down for each important industry by the causes to which the change can be attributed: overall nationwide growth, industry mix, or differ ence between the national and the local rate of change for individual industries.9 While column 3 shows the actual change that did occur over the four years, column 4 states the potential amount of change that would have resulted if the overall national growth rate had prevailed locally in all industries. The difference between the potential and the actual change appears in column 7 while the remaining two columns (5 and 6) indicate how much of the difference was due to favor able or unfavorable industry mix or to faster or slower industry growth in the areas as compared with the nation. For example, instead of achieving a potential gain of 88,800 jobs in manufacturing, the ten areas fell short by 127,900, that is, they actually suffered a loss of 39,100 jobs. Two-fifths (52,400) of the shortfall was due to unfavor able industry mix and three-fifths (75,500) resulted from industries in the areas failing to duplicate the national growth rates. The uniformly negative values in column 6 con ance of the three "growth" industries in the firm the observation that area growth rates ten areas, as Table III shows, does not on balance match the national record. Where gains did occur, they were for the most were below national rates in all major indus part of smaller proportions than the national average, except in the machinery industry, while losses in the primary metals industry clusions previously suggested by visual in spection of the data. exceeded the nationwide percentage. For 9 A description of the method used is found in Lowell the ten areas combined, the changes in each D. Ashby's article "The Geographical Redistribution of Employment: An Examination of the Elements of drag on the overall employment situation in those areas. Here, too, one might suspect that differ ences in industry mix within the manufactur ing sector were accountable for the lagging growth in the areas as compared with the whole country. Such differences do exist. For example, the five major metalworking indus of the industries compared unfavorably with the national average. 10 tries. Similar tables for individual areas, which are not shown here, point to the con Change", Survey of Current Business, U. S. Depart ment of Commerce, October 1964. MAY 1965 TABLE II Employment in 5 M ajor Metalworking Industries as Percent of Nonfarm W age and Salary Employment— 1960 Selected Fourth District Areas and U. S. Prim ary Fab ricated M e tals M e tals 0 .4 % 7 .1 % A kron Canton 17 .0 Electrical Transportation Total, 5 M a c h in e ry Equipment Equipment Industries 3 .1 % 0 .2 % 0 .1 % 1 0 .9 % 2.2 0.4 3 7 .0 7.1 10.3 Cincinnati 1.5 3.2 4 .9 2.4 6.5 18.5 C le ve la n d 5.9 5.9 6.3 3.6 5.8 2 7 .5 Colum bus 1.0 3.4 3 .7 3.8 4 .0 1 5 .9 D a yto n 0.9 1.0 11 .0 10.2 3.2 2 6 .3 2 0 .7 T oledo Y o u n gsto w n -W a rre n 2.8 3 .7 4.2 1.7 8.3 2 7 .3 4.4 2.9 2.5 2.4 3 9 .5 5.3 6.1 1 1 .7 5 .7 * 2 8 .8 16.8 3 .7 2.4 3.8 0.9 2 7 .6 2.3 2.1 2.7 2 .7 2 .9 1 2 .7 Erie Pittsburgh U. S. "‘Included with M achinery. Sources: Division o f Research an d Statistics, O h io Bureau o f U nem ploym ent Com pensation; Pennsylvania State Em ploym ent Service; U. S. D ep artm ent o f L a b o r TABLE III Percent Changes in Nonfarm W age and Salary Employment 1 9 6 0 - 6 4 * for Selected Industries in Selected Fourth District Areas and U. S. 5 M a jo r M e talw orkin g Industries TransPrim ary Fabricated M e tals M e tals portation All M a n u N on m an u All N onfarm Equipment Equipment facturing facturing Industries a a -3 .7 % + 6 .2 % + 1 .6 % 8 .3 % a — 2.9 + 2.9 + 4 0 .0 % a + 2 .9 % — 2 1 .5 — 7.0c - — 1 2 .7 — 6.2 — 3.5 — 1 6 .7 -1 2 .3 % — 7 .9 + 1.3 — 2.2 — 3.0 — — 4 .0 + 1.0 A kron Canton - Cincinnati C le ve la n d 2 .4 % M ac h in e ry Electrical 0 7.2 + 2.9 — 9.0 — 3.4 + Colum bus a — 4 .7 — 12.6 + 2 3 .2 + 3 7 .0 + 3 .0 + 11.9 + 9 .4 D a yto n a a + 6.2 — — + 3 .8 + + 6 .2 8.8 1.0 4 .7 1.3 T oledo + 6 .7 + 3.3 + Y o u n g sto w n -W a rre n — 4 .9 — 6.8 + 2 5 .0 Erie — 4.1 + 4.3 + 1 0 .0 + 18.2 Pittsburgh — 5.3 — 11.8 + 11.5 — 0 .7 — 10.3 — 4 .7 A v e r a g e — 1 0 a re a s — 5.3 - 3.8 + 3.9 — 0 .7 - 4 .7 — 3.2 U. S. — 0.3 + 5.4 + 8.9 + 5.6 + 2.3 + 3 .0 8.1 — 5 0 .0 c + 18.8 — 0.3 + 1.1 + 0 .5 — 1 1 .9 + 12.8 — 4.4 — 2.0 — 3.3 + 8 .4 + 3.2 + 5 .6 0 — 1.8 + 3.0 + 0 .5 + 9.3 + 7 .3 b * D a ta adjusted fo r m ajor w ork sto p p ag e s, a Em ploym ent insignificant, b Included with M achinery, c Estimated. Sources: Division o f Research an d Statistics, O h io Bureau o f U nem ploym ent Com pensation; Pennsylvania State Em ployment Service; U. S. Departm ent o f L a b o r 11 ECONOMIC REVIEW TABLE IV Components of Change in Nonfarm W age and Salary Employment 1 9 6 0 -6 4 Combined Totals for Ten Selected Fourth District Areas (Thousands of persons) A ctu a | Change Em ployment C h a n g e due to N et N atio nal Industry A re a Difference 1960 1964 1 9 6 0 -6 4 G row th M ix Sh a re (1) (2) (3) (4) (5) (6) All N on farm Industries 3 ,0 7 3 .2 3 ,0 8 8 .9 + 1 5 .7 + 2 2 4 .4 0 — 2 0 8 .7 — 2 0 8 .7 N onm anufacturing 1,857.1 1 ,9 1 1 .9 + 5 4 .8 + 1 3 5 .6 + 3 7 .1 — 1 1 7 .9 — M an ufacturin g — 1 2 7 .9 (7) 8 0 .8 1,216.1 1 ,1 7 7 .0 — 39.1 + 8 8 .8 — 5 2 .4 - 7 5 .5 Prim ary M e ta ls 2 5 1 .3 2 3 8 .0 — 13.3 + 18.3 — 19.0 — 12.6 — 3 1 .6 F ab ricate d M e tals 1 3 0 .4 1 2 5 .5 — 4 .9 + 9.5 — 2.4 — 12.0 — 14.4 M a c h in e ry 1 4 5 .6 1 5 1 .3 + 5 .7 + 10.6 + 2.3 — 7.2 - 4 .9 Electrical Equipment 1 1 0 .5 1 0 9 .7 — 0.8 + 8.1 + 0.2 — 9.1 — 8.9 9 8 .9 9 4 .2 — 4 .7 + 7.2 - 4.9 — 7 .0 — 1 1 .9 T ransportation Equipment Sources: Division o f Research and Statistics, O h io Bureau o f Unem ploym ent Com pensation; Pennsylvania State Em ployment Service; U. S. D epartm ent o f L a b or A closer look at more narrowly defined product groups within each of the five metal working industries might yet uncover the reason for the below-average performance in the areas of low growth. For example, the nationwide employment decline of 0.3 per cent between 1960 and 1964 in the primary metals industry (SIC 3 3 )—see Table III — covers both a loss of 4.1 percent in basic steel electrical equipment industry (SIC 36) a similar analysis of employment gains and losses—as far as available data permit — suggests that some of the areas may contain a larger share of the lagging components and a smaller proportion of the expanding com ponents of that industry than the nation as a whole, but again these differences alone do not account for the industry's deficient em (SIC 331) and offsetting gains in the foundries and in the nonferrous sectors of the industry group. Basic steel contributes just over 50 percent to total primary metals employment glance present a brighter picture of employ ment growth in the areas than does the manu in the nation, as compared with, for example, over 80 percent in Youngstown-Warren and facturing sector due to the fact that employ ment losses during the recession were mini 65 percent in Canton. While this helps ex plain the heavier-than-average loss in primary mized and gains during the recovery were stimulated by the shift in production from metals employment in those two areas, it leaves unexplained the fact that in basic steel alone, employment again declined more heavily in the areas than in the nation. In the goods to services. As Chart 3 shows, all except two of the areas advanced beyond the level of nonmanufacturing employment that prevailed in 1960. Yet even here the gain in 12 ployment growth in the areas. The nonmanufacturing industries at first MAY 1965 4 . PERCENT C H A N G ES in W A G E and SA LA R Y EM PLO YM EN T Se le cte d States and U.S., 1 9 6 0 - 1 9 6 4 N o n a g r i c u lt u r a l In d u s t r ie s M a n u f a c t u r i n g In d u s t r i e s -1 0 % -5 % 0 +5% +10% +15% +10% +15% +10% +15% C A L IF O R N IA F L O R ID A TEXAS N E W JER SEY M IC H IG A N IL L IN O IS M A SSA C H U SETTS NEW YORK O H IO P E N N S Y L V A N IA +5% S o u r c e of d a t a : U.S . D e p a r t m e n t of L a b o r six of the areas was below the national rate of gain.10 GEOGRAPHIC SHIFTS IN EMPLOYMENT In view of the slender gains in employment in the major areas in the Fourth District, the conclusion seems inescapable that the bulk of the reported nationwide increase during the past several years has occurred elsewhere. From census reports it is known that a geo graphical shift in the population toward the western and southern regions of the country has been in progress for over a decade. It appears that a similar shift in employment has accompanied, or perhaps precipitated, that movement of people, and has brought about a rather disproportionate sharing of 10 The pace of employment rise, in both the manufac turing and the nonmanufacturing sectors, has quickened during the second half of 1964 in most of the areas to recent national gains in employment as well as in population among the states. For ex ample, California, Texas and Florida, with a combined population of 17 percent of the total U. S. population in 1960, absorbed 36 percent of the increase in the country's total population 18 years and older between April 1960 and July 1964, according to the most recent Census Bureau estimates. In contrast, Ohio and Pennsylvania, which contributed not quite 12 percent to the U. S. population in 1960, received 2.4 percent of the four-year growth. Of the nation's four-year gain in non farm wage and salary jobs, the three growth states claimed 27 percent, or almost twice their proportionate share based on 1960 employment. Ohio and Pennsylvania took 1.5 percent of the gain despite a 12.7 percent share in the country's employment total in cause employment levels in some of the lagging areas 1960. And finally, while Ohio and Pennsyl vania had a net loss in manufacturing jobs to come closer to, or even exceed, the levels of 1960. from 1960 to 1964, the three states in the 13 ECONOMIC REVIEW TABLE V Employment and Population in Selected States as Percent of U. S. Totals, 1950, 1960 and 1964° W a g e an d S a la r y Em ployment N onfarm Industries Population M an ufacturin g Industries 1950 1960 1964 1950 1960 1964 1950b 1960b 1964< C a lifornia 7 .1 % 9 .0 % 9 .6 % 5 .0 % 7 .8 % 8 .1 % 7 .3 % 9 .0 % 9 .6 % F lo rida 1.6 2.4 2.6 0 .7 1.2 1.4 1.9 2 .9 3.1 T e xa s 4.2 4 .7 4 .7 2.4 2.9 3.1 5 .0 5.3 5.3 N e w Je rsey 3 .7 3 .7 3.6 5.0 4.8 4.5 3.4 3.5 3.6 M ic h iga n 4.8 4 .3 4.2 7 .0 5.8 5.8 4.2 4.3 4.1 Illinois 7 .0 6.5 6.3 7 .9 7 .2 7.1 6.0 5.8 5 .6 12.3 11.4 10.9 12.6 11.2 1 0.4 10.5 10.0 9.9 M assachusetts 3.9 3.5 3.4 4 .7 4.2 3 .7 3.3 3.0 2.9 O h io 6.1 5.8 5.5 8.0 7 .5 7 .2 5.4 5.4 5.2 Pennsylvania 8.1 6.9 6.4 9 .7 8.6 8.2 7.1 6.6 6.2 N e w Y o rk a Em ploym ent figures b a se d upon annual a v e r a g e s for 1 9 5 0 , 1 9 6 0 a n d 1 9 6 4 . Population figures b a se d upon Census o f Population returns fo r 1 9 5 0 a n d 1 9 6 0 an d upon estimates for July 1, 1 9 6 4 . b 1 4 y e a rs an d over, e 18 y e a rs an d over. Sources: U. S. D epartm ent o f Labor; U. S. D epartm ent o f Com merce West and South took almost 29 percent of the four-year increase in jobs in the manufactur ing industries. The employment gains of states such as California, Texas and Florida have not been solely at the expense of Ohio and Pennsyl vania—as Chart 4 indicates—nor did they occur only during the past several years. Numerous factors have contributed to the movement of people and jobs to the West and South. Among them are the advantages of climate, the shift away from manufacturing and greater emphasis on services—partic ularly recreational activities—the location of the nation's defense industries and space re search centers, or the desire, especially of Comparable percentages of growth during 1950-60, which are not shown in the chart, confirm the conclusion that the leading posi research-oriented industries, to be near ex tion of the traditional manufacturing centers in the eastern and Great Lakes regions has been facing a serious challenge for some time. The gradual shift in employment away from the former leaders shows up clearly in the percent distribution of total U. S. employ ment among major states for 1950, 1960 and Long-range projections by the U. S. Bureau of the Census, indicating that the shift of the population from the Great Lakes and other 1964, as presented in Table V. 14 isting research facilities and sources of research talent. regions toward states in the west and south west of the country will continue during the next two decades, suggest that the movement of employment opportunities in the same direction may likewise be expected to go on. MAY 1965 RECENT TRENDS IN THE WOOD-USING INDUSTRIES The usage of timber in the U. S. has under gone profound changes over the years, a change process that has quickened in the postwar period. These changes are the result of two basic and related factors: first, the long-term decline in the nation's supply of choice timber; and second, the development through extensive research of new products, such as plywood, which are made from wood fibers. In some of its modern forms—flush doors made of plywood, for example—the new timber product is essentially a replacement instance. In other cases—such as rayon — tively narrow range, varying only from a high of 12.5 billion cubic feet in 1956 to a low of 11.2 billion cubic feet in 1958. Consumption in 1964, at 12.4 billion cubic feet, was just short of the long-time high of 1956. The significant developments in timber usage during recent years, therefore, do not involve growth in total volume, but rather, the substantial shifts in product form that have been made possible by innovations and ex tensive refinements in the manufacturing and marketing end of the timber industry as a whole. This is highlighted in Chart 1. Ply w ood and veneer logs and pulpw ood, the two product groups requiring the most ex timber usage has moved into fabrics, an en tirely new market. At the same time, certain tensive processing, are the two groups that have shown the most growth in consumption. historic uses of timber—fuelwood, for exam p le —are well on the way to becoming obso In contrast, the volume of saw logs, which for a former product —panel doors in this lete. Despite these shifts in usage, however, the total consumption of timber products dur ing the past decade has held within a rela involve less processing, has held relatively stable. The fourth product group, a catch-all category called “ oth er tim ber p rod u cts” , is made up mostly of relatively crude items, 15 ECONOMIC REVIEW and the proportion of these products in the total volume of timber consumption has de clined markedly. Highlights of usage trends in each of the four product groups are now discussed in turn. PLYWOOD AND VENEER Construction is the major end use for ply wood and veneer. Estimated plywood and veneer consumption in 1964 was 14.5 billion square feet inch basis), or 11 percent more than in 1963 and 2 l/2 times as much as in 1954.1 Softwood plywood, which accounts for about four-fifths of total plywood output, is highly favored as a construction material because of its relatively low cost and the ease with which it can be used to cover large areas rapidly and effectively. Major fabricated forms of softwood plywood include sheathing material for walls, roofs, and subfloors of residential and commercial buildings. It is also used for partitioning, shelving, concrete forms, and shipping cases. CONSUMPTION of TIMBER PRODUCTS Yea rs Billions o f cubic f e e t 14O T H E R TIM B ER ^ PRODUCTS* 1210- 8 _ P L Y W 0 0 D an d VENEER LOGS 21% 5? - 6 - 4 - 2 - 28% -P U LPW O O D -SAW 29% 23% 51% 51% ’54 ’56 50% 49% 49% 52% ’6 0 ’62 ’64 LOGS 0'5 8 Including fue lwood S o u r c e of d a t a : U.S. D e p a r t m e n t of A g r i c u l t u r e such as rayon and cellophane made from wood pulp. Consumption of pulpwood from domestic sources approximated 49 million cords in 1964, or 6 percent more than in the previous year and about two-thirds more than ten years earlier. Over the past ten years, Hardwood plywood, used extensively in the pulpwood consumption has been increasing furniture industry, is also used in the manu facture of flush doors, which have largely replaced panel doors. Other fabricated forms of hardwood plywood include mobile homes, paneling in homes and offices, and manu factured products such as sporting goods and toys. Consumption of hardwood plywood and at an average annual rate of 5.2 percent. If net imports of paper, paperboard, and wood pulp are included, total pulpwood consump tion in 1964 was equivalent to about 57 million cords. veneer in 1964 was about \y<i times the volume of a decade earlier. PULPWOOD Pulpwood is used in the manufacture of paper, paperboard, and nonpaper products 1 Estimates of total consumption are made by converting various quantity measures into cubic feet. 16 Generally speaking, two developments are mainly responsible for the marked expansion in the use of veneer and plywood, pulpwood, and other products based on wood fiber. The first is the shrinkage in the available supply of high-quality saw timber at prices that are competitive with other materials. Such deple tion has stimulated the search for ways to utilize timber of lower quality. These efforts have been fruitful, and have led to the second MAY 1965 development, namely, the fact that special qualities have been built into wood fiber products that allow them to compete effective ly with lumber under many circumstances. The broadened market for such processed materials has contributed significantly to the stability of operations in the wood-using industries. SAW LOGS Preliminary estimates indicate that 41.3 billion board feet of lumber were consumed in 1964, or approximately the same propor tion of total consumption as ten years earlier. About three-fourths of all lumber produced is used for construction. The remainder is about equally divided between manufactured prod ucts and materials used in shipping. Although a gradual rise in demand for lumber used in construction is anticipated by forest econo mists2 over the next 10 to 15 years, most projections assume some further displace ment of lumber by plywood, building board, and particle board. The latter product, which is made by pressing dried wood chips and flakes with resin under controlled heat, has won wide acceptance in home construction and in the furniture industry. The demand for lumber for manufactured products is also expected to rise, reflecting mainly an expansion in the production of household furniture. Some decline in the con sumption of lumber for wooden containers is anticipated because of competition from con tainer board, but this decline may be more than offset by a significant expansion in the use of pallets and blocking used extensively 2 Demand & Price Situation for Forest Products, 1964 , U. S. Department of Agriculture, Publication 983. in the shipment of industrial products and equipment. OTHER TIMBER PRODUCTS Consumption of "other timber products", also shown in Chart 1, dropped from about one-fifth to one-tenth of the total in the past decade. Products in this category include cooperage logs, poles and piling, fence posts, hewn railroad ties, round mine timbers, box, excelsior and shingle bolts, chemical wood, miscellaneous items, and fuel wood. PRODUCTION OF W OOD-USING INDUSTRIES Industries based on the use of wood con stitute one of the eight major manufacturing groups in the U. S. The relative standing of the wood-using industries can be measured in a number of ways. For one thing, during 1963, the latest year for which figures are available, employment of more than one and a half million persons in the wood-using industry was exceeded only by the food and the transportation equipment industries, as shown in Table I. During the same year, ag gregate value added by manufacture of the wood-using industries was $14.6 billion, for a ranking of sixth among the eight major manufacturing groups. In new capital ex penditures in 1963, the wood-using indus tries were among the top three industry groups —a position which they have occupied during most of the past decade. The major wood-manufacturing industries include the lumber and wood products indus try, the furniture and fixtures industry, and 17 ECONOMIC REVIEW TABLE I A Comparison of W ood-Using Industries with other Manufacturing Groups— 1963 (In Millions) C a p ita l Expenditures Em ploym ent V a lu e A d d e d . . . 1.64 Prim ary M e t a l s .................. . 1.62 Food & K indred Prod. . . . 1 ,2 4 9 . . . . 1 .5 7 W o o d -U sin g Industries . . . 1,141 . . . . . 1.47 Transportation E quip.............. 1 ,0 4 9 . 1.46 M a c h i n e r y ......................... 775 A p p a r e l ............................. . 1 .3 0 Electrical M a c h in e ry 685 1 1 ,8 6 5 Prim ary M e t a l s .................. . 1.12 F ab ricated M e t a l s .............. 7 ,7 9 2 Fab ricated M e t a l s .............. . 1 .1 0 Food & K indred Prod. 2 1 ,3 6 4 Transportation E q u ip .............. 1 6 ,8 9 7 W o o d -U sin g Industries 1 6 ,3 3 3 Electrical M a c h in e ry Prim ary M e t a l s .............. 1 5 ,2 4 9 M a c h i n e r y ......................... W o o d -U s in g Industries 1 4 ,5 9 3 Food & K in d re d Prod. M a c h i n e r y ...................... Electrical M a c h in e ry . . . . . . . Fa b ricated M e ta ls . . . . A p p a r e l ......................... $ 1 ,3 6 2 . . . . T ransportation Equip. . . . . $ 2 2 , 6 2 0 . . . . 608 143 Source: 1 9 6 3 Census o f M anufactures, U. S. Departm ent o f Com merce the paper and allied products industry.3 As shown in the upper panel of Chart 2, the out put of these industries, taken together, has closely paralleled that of total industrial pro duction over the past decade, except in 1957 when lumber consumption dropped sharply in response to a decline in housing starts. Output of the three wood-using industries as a group has increased by about 50 percent over the past decade, a gain similar to that of total industrial production. Among them selves, however, the three wood-using indus tries have displayed different growth patterns, especially in recent years. remained well above that of paper and allied products except during the 1960-61 reces sion. Following the recession, the furniture and fixtures industry (which accounts for about one-fourth of the combined weight of the three industries in the industrial produc tion index) recovered more rapidly and regis tered more growth than either the paper and allied products industry or total industrial production. Marked expansion in production of furni ture and fixtures in recent years reflects con tinued increases in the nation's population, family formation, housing, and disposable FURNITURE AND FIXTURES After furniture and fixture output reacted demand for "contract'' furniture used in guest rooms of hotels and motels. The number to a strong year in housing starts in 1955, production of the three wood-using industries followed similar patterns until 1959. Begin of guest rooms in hotels and motels is reported to have increased by one-third in the past seven years. ning in that year, production of furniture and fixtures again moved up sharply and has LUMBER AND W OOD PRODUCTS personal income. It also reflects a stronger Production of lumber and wood products 3 It should be pointed out that nonwood products of the furniture and fixtures industry account for about 40 percent of value added and 35 percent of the employees of the industry. 18 pretty much kept pace with the other woodusing industries through 1959. Since that time, however, in contrast to the growth MAY 1965 OUTPUT of THREE WOOD>USING INDUSTRIES and INDUSTRIAL PRODUCTION IN D EX 19 5 7-5 9 =10 0 160 Q u a rte rly, SE A SO N A L LY AC TOTAL W 0 0 D -U S IN & ___ P R O D U C T I O N J j i INDUSTRIAL P R O DU CTIO N L U M B E R and W O O D P R O D U C T S L U M B E R an d A L L I E D P R 0 ^ ( 1 ! 60 ’ 54 So u rce of d ata: ’ 55 ’ 56 ’57 B o a r d o f G o v e r n o r s o f th e F e d e r a l ’ 58 ’ 59 ’60 ’ 61 ’ 62 ’ 63 ’64 ’ 65 R e s e rv e System quired per unit than when single-family units represented a larger proportion of the hous ing starts. Starts of single-family units stabi lized in 1960 and remained virtually un changed thereafter. registered by the other groups, production of lumber and wood products (which also ac counts for about one-fourth of the combined weight of the three wood-using industries) has recovered more slowly. In fact, it has experi enced relatively little further expansion since regaining the pre-1960-61 recession level. The limited recovery of the lumber and wood products industry reflects the influence of a number of developments. Lumber con sumption is closely related to housing starts, particularly single-family dwellings. Thus, a sharp drop in residential construction pulled lumber consumption down from 40 billion Nevertheless, the increase in domestic lumber production still did not keep up with the moderate rise in consumption. While lumber consumption increased 15 percent from 1960 to 1964, domestic production rose only 12 percent. Imports, principally soft woods from Canada, filled the gap. Net im ports, which had averaged less than 3 million board feet in most years prior to 1960, regis board feet in 1959 to 35 billion in 1961 (see Chart 3). The recovery in total housing starts tered a 50-percent increase from 1960 to 1964, as shown in Chart 4. In the latter year, after 1961 stimulated lumber consumption somewhat, but the impact was blunted be cause the housing-start increase represented net imports were equal to 11 percent of do mestic consumption, up from 8 percent in 1960. mainly an expansion of multiple-family units, as shown in the chart. Since brick and cement PAPER AND ALLIED PRODUCTS are more commonly used in the construction of multiple-family units, less lumber was re The paper and allied products industry is the largest of the three wood-using industries, 19 ECONOMIC REVIEW accounting for slightly over half of the com bined weight of all three. Production in the paper group has grown at a pace close to that of industrial production throughout the past decade, reflecting the fact that paper and paper products are widely used in all sectors of the economy. In terms of cyclical behavior, the paper and allied products industry is the least volatile of the three wood-using indus 4 . LUMBER PRODUCTION, NET IMPORTS and CONSUMPTION Bi lli on s o f b o a r d f e e t 60- ■ ■ , 50 NE T IMPORTS 40 ■I I 30 tries. COMBINED EMPLOYMENT RELATIVELY STABLE The combined employment of the three major wood-using industries has held within a relatively narrow range around 1.6 million persons throughout the postwar period, as shown in Chart 5. Moderate increases in employment by furniture and fixtures manu facturers, together with significant gains in employment at paper and allied products plants, has offset reductions in the lumber and wood products industry. Employment of 3. LUMBER CONSUMPTION and HOUSING STARTS Ls m b e r Consum ption (B il l io n s o f b o a r d f e e t ) H o is in g Starts (M il li o n s of a i i t s PRODUC TION 20 10- 1954-59 avg. So u rce of d a ta : ’60 ’61 ’62 ’63 ’64 U. S. D e p a r t m e n t of A g r i c u l t u r e lumber and wood products manufacturers in 1963 represented 37 percent of total employ ment in the wood-using industries, as shown in the chart, down from 51 percent in 1947. Meanwhile, the number employed by paper and allied products industries rose from 28 percent to 39 percent of the total, while em ployment in furniture and fixtures increased from 20 percent to 24 percent. Recent changes in employment and output among the three wood-using industries reveal contrasting patterns. (See Table II.) While output in the lumber and wood products industry rose 9 percent from 1957-59 to 1963, employment declined about 9 percent, sug gesting a marked increase in productivity for that industry. Output increased in the furni 20 " M U LTIPLE F A M IL Y £ So u r c e s of d ata: U.S . D e p a r t m e n t of A g r i c u l t u r e a n d U.S . D e p a r t m e n t of C o m m e r c e 20 ture and fixtures and paper and allied prod ucts industries even more strongly. Since employment increased only moderately, this suggests that gains in productivity also oc curred in those industries. MAY 1965 5 . EMPLOYMENT in WOOD-USING INDUSTRIES S e ltc ttd Years M il li o n s of p e r s o n 1.6 - 2 1% 22 % 21% 22% 23% 24% 24% 21% 1.2 24% <| F U R N IT U R E a id FIXTUR ES <| PA P ER a id ALLIED PRO DU CTS <| LUM BER aid - 30% 2«% 32% 30% 33% 36% 36% 39% 39% 0 .8 0.4 49% 51% 46% 45% '4 7 So u rce of d a ta : 49% '4 9 ’51 '5 3 ’55 41% 40% '57 ’59 37% ’61 '6 3 U.S . D e p a r t m e n t o f C o m m e r c e TABLE II Changes in Employment and Output 1 9 5 7 -5 9 to 1 9 6 3 Em ploym ent O utp ut Lum ber & W o o d Products . . . — 8 .8 % + Furniture & F ix t u r e s .................. + 4 .4 + 3 3 .1 P a p e r & A llied Products . . . . + 8 .1 + 2 5 .1 A ll M a n ufa cturin g Industries — 0.1 + 2 4 .9 Source: 37% W OOD PRODUCTS . . 8 .9 % 1 9 6 3 Census o f M anufactures, U. S. Departm ent o f Com merce MATERIAL COSTS AND WAGES selection of other industries, average material costs and wage costs have been computed as a percent of the average value of shipments in 1961-62 (Table III). Material costs for the wood-using industries do not represent as large a percent of the value of shipments as they do for some of the other major industries, but since material costs account for over 50 percent of the value of shipments, most wood-using industries tend to locate relatively near the major source of Of the many factors considered in selecting the location for a particular manufacturing their raw material. enterprise, three usually receive high prior ity: accessibility of raw materials, material costs, and wages. To gain some insight into the relative importance of these factors in the wood-using industries as compared with a The distance that the raw material can be economically transported varies with the value of the raw material. Hardwood veneer logs, for example, may be transported seven to eight times the distance that hardwood 21 Table III. The furniture and fixtures industry, however, ranked near the top in wage costs as TABLE III Material Costs and W age Costs as a Percent of Value of Shipments 1 9 6 1 -6 2 A v e ra g e M a te ria l W age Costs Costs F ood & K in d re d Products . . 6 8 .8 % 1 2 .9 % T ransportation Equipm ent . . 5 9 .6 2 2 .5 2 2 .3 Prim ary M e t a l s .................. 5 9 .4 A p p a r e l ............................. 5 7 .8 2 6 .6 W o o d -U s in g Industries 5 5 .0 2 4 .2 F a b ricated M e t a l s ............... 50.1 2 8 .0 Electrical M a c h in e ry 4 4 .6 31.1 4 4 .9 3 3 .2 2 5 .9 . . . . . . . M a c h i n e r y .......................... Three M a jo r W o o d -U sin g : Lum ber & Products . . . . 5 7 .8 Furniture & Fixtures . . . . 4 9 .3 2 9 .6 P a p e r & A llie d Products . . 5 5 .4 2 1 .5 Source: 1 9 6 2 A nnual Su rv e y o f M anufactures, U. S. Departm ent o f Com merce pulplogs would normally be transported be cause of the marked difference in value. Within the wood-using industries, varia tions in material costs as a percent of the value of shipments reflect differences in the value of the respective end products due to the amount of value added in manufacture rather than to significantly different material costs per se. Thus, material costs represent a small er part of the value of shipments in the furni a percent of value of shipments, while wage costs for the paper and allied products indus try were among the lowest for the eight major industries listed. Another variable factor that influences wage costs as a percent of the value of ship ments is the amount of investment in plant and equipment. Relatively high plant and equip ment expenditures by the wood-using indus tries, and by the paper and allied products industry in particular, may be assumed to have contributed to the comparatively low wage costs of that industry. In 1961 and 1962, plant and equipment expenditures as a per cent of value of shipments were higher for the wood-using industries than for almost all of the major industry groups, as shown in Table IV. TABLE IV Plant and Equipment Expenditures of W ood-U sing Industries Compared with Other Manufacturing Groups 1961 and 1 9 6 2 Plant a n d Equipm ent Expenditures a s a Percent o f V a lu e o f Shipm ents 1961 — —— ture and fixtures industry, than in lumber and 1962 — — wood products, largely because furniture and W o o d -U sin g Industries 3 .6 0 % 3 .8 5 % fixtures generally represent an end product of higher value than lumber and wood Prim ary M e t a l s ...................... 3 .8 4 3 .4 3 M a c h i n e r y ............................. 2 .5 5 2 .5 3 F a b rica te d M e t a l s .................. 2 .0 3 2 .3 0 Electrical M a c h i n e r y .............. 2.51 2 .3 0 Foo d & K in d re d Products . . . 1.61 1 .8 8 T ransportation Equipm ent . . . 1 .6 4 1 .6 6 0 .5 3 0.61 products. Unlike material costs, wage costs tend to run higher in industries with an end product of higher value, not necessarily because manhour costs are greater but because more manhours are needed. As a group, the wood-using industries are about at the midpoint of the range in wage costs for industries listed in 22 . . . . Three M a jo r W o o d -U sin g : P a p e r & A llied Products . . . 4 .6 3 4 .7 9 Lum ber & W o o d Products . . 3.01 3 .4 8 Furniture & F ix t u r e s .............. 1 .5 0 1.73 Source: 1 9 6 2 A nn ua l S u rv e y o f M anufactures, U. S. Departm ent o f Com m erce MAY 1965 TABLE V Proportion of New Capital Expenditures on Plant and Equipment W ood-Using Industries and all Manufacturing Industries Percent 1954 Distribution 1958 1962 Structures Equipm ent Structures Equipm ent Structures Equipm ent P a p e r & A llied P r o d u c t s ...................... 24 76 22 78 19 81 Lum ber & W o o d P r o d u c ts ...................... 29 71 33 67 27 73 Furniture & F i x t u r e s ............................. 37 63 38 62 47 53 All M a n ufacturin g In d u s t r ie s .................. 30 70 33 67 26 74 Sources: U. S. Census o f M anufactures, 1 9 5 8 , Vol. I; 1 9 6 2 Anni S u rv e y o f M anufactures, U. S. Departm ent o f Com m erce As shown in the lower part of Table IV, the paper and allied products industry has been a significant factor in the relatively high level CONCLUDING of plant and equipment expenditures of the wood-using industries. As between plant or equipment, the paper industry has consistent ly spent a larger portion of new capital on More than one-third of the land in the Fourth Federal Reserve District is forested, and wood-using industries are of some im portance to the District economy. Against the new machinery and equipment than either of the other wood-using industries or manu facturing industries in general, as shown in Table V. background of the present article, a future one will discuss the current status and future prospects of timber resources and wood prod uct manufacturing in the Fourth District. COMMENTS Additional copies of the E C O N O M IC REVIEW m ay be obtained from the Research Department, Federal Reserve Bank of Cleveland, Cleveland, O hio 4 4 1 0 1 . Permission is granted to reproduce any material in this publication. 23 Fourth Federal Reserve District
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