The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
SEPTEMBER 1964 IN THIS ISSUE A Look Ahead at Manpower Utilization .. 2 Electric Power as a Regional Economic Indicator.....................10 ECONOMIC REVIEW A LOOK AHEAD AT MANPOWER UTILIZATION Many econom ic analysts spend much of expected size in 1965 and 1970 as projected their time keeping track of month-to-month by the U. S. Bureau of Labor Statistics from a changes in key areas. There is a risk, how 1960 base. A ccording to the projection, the ever, in being overly concerned with only total labor fo r c e —which by definition in current changes in the economy. It is instruc cludes the armed fo rce s—is expected to ex tive to consider from time to time some of the pand to over 85 million persons by the end broader and more far-reaching patterns and of this decade. This represents a growth of implications of various aspects of econom ic l. activity. This seems particularly true in the U .S . T O T A L L A B O R F O R C E case of unemployment where the monthly re turns are watched with an impatience match 1 9 5 0 -1 9 6 3 (actual) a n d 1 9 6 0 -1 9 7 0 (p ro jected ) M i l l i o n s of p e r s o n s 90 ANN UAL A VERA G ES ing the concern about a level of unemploy ment that is slowly receding. In the study of unemployment there is a fundamental long-run consideration that war rants serious attention, namely, whether the econom y in the years ahead will be able to utilize consistently more than 95 percent of the labor supply, something that has not been done since 1957. Thus, a closer look at the labor supply in terms of both present and anticipated future size and composition seems in order. Chart 1 shows the total U. S. labor force from 1950 through 1963 in annual averages, and the 2 o i___ i__ i__ i___i___ i___l ’5 0 ’5 2 S o u rc e o f d a t a : ’54 56 ’5 8 ’6 0 ’6 2 U .S . D e p a r tm e n t of L a b o r ’6 5 ’7 0 2 SEPTEMBER 1964 . NET C H A N G E IN U.S. T O T A L L A B O R F O R C E , 1950-60 and 1960-70 (p ro jected ) By Sex and Age Groups MEN WOMEN M i l l i o n s of p e r s o n s +7 +6 +5 +4 +3 +2 AGE GROUPS +1 F------- 1--------1-------- 1-------- 1--------1-------- 1~ 0 - 1 - 1 0 M i l l i o n s of p e r s o n s +1 +2 +3 +4 +5 +6 +5 +6 +7 1 4- 19 1 9 6 0 -7 0 20-24 25-34 35-44 45-54 55-64 65 and OVER ALL +7 +6 +5 S o u rce o f d a t a : +4 +3 +2 +1 0 -1 U .S . D e p a r tm e n t o f L a b o r more than 123^ million persons, or 17 per that tend either to encourage or to discourage cent, between 1960 and 1970, a consider active labor force participation by persons ably larger gain than the labor force expan not permanently committed to it.1 Participa sion by 83^ million persons, or 13 percent, tion rates, of course, also vary seasonally. during the 1950-60 decade. Changes in the size of the labor force de and 1970 shown in Chart 1 are derived by The projected labor force figures for 1965 pend primarily upon (1) changes in the num applying observed trends in participation ber of the population of working age (14 rates to population data without making allow years and older) and (2) shifts in the rate at ance for short-term fluctuations in rates b e which different age-sex groups participate in cause of unpredictable cyclical occurrences. the work force. Participation rates in turn are Projected growth will not occur at the same subject both to long-term trends and to short- rate for all component groups of the labor range force, as Chart 2 illustrates. A larger number fluctuations. The long-term trends largely reflect changes in social and e c o nomic patterns such as longer periods of 1 The large volume of monthly movements into and out of the labor force is indicated by the fact that in 1963, formal education preceding employment or for example, average monthly employment was 69 mil the turning away of women from domestic lion while a total of about 85 million individual persons duties toward employment outside the home. were employed —and thus attached to the labor force — The short-range fluctuations frequently coin cide with changes in labor market conditions at one time or another during the year. Turnover reflects retirements and deaths as well as individual in-and-out movements. 3 ECONOMIC REVIEW of men than women is expected to com e into numbers — despite declining participation the labor force during this decade, which rates —as a result of the rising share of young will be a reversal from the 1950's when people in the total population. women contributed more than half the net As a consequence of these changes, the gain in the labor force, as shown in Table I. labor force of 1970 will differ from that of However, the proportional gain of women is 1960 in several respects. In addition to being expected to exceed the increase for men b e much larger, the 1970 labor force will be tween 1960 and 1970 (see Table II). A large "younger", with almost one-fourth of its mem portion of the increase in the number of bers being men and women less than 25 years women will again come from the older age old, while barely one-fifth were in that age groups as it did in the 1950's. Among the bracket in 1960, as Table III shows. Con men two age groups are expected to decline versely, it will contain a smaller proportion in size, one group (65 years and older) b e of persons in their prime working years (25- cause of earlier retirements from the work 54 years old) than did the labor force of 1960. force and the other (35-44 years) because of It will still include almost two men for every the low birth rate in the 1930's. A highly woman but the proportion of men will be two significant change from the preceding de percentage points lower than it was in 1960. cade will occur in the groups under 25 years Some of the changes in the structure of the of age that will enter the labor force in record labor force, especially in conjunction with TABLE I U. S. Total Labo r Force, b y A g e a n d Sex, 1950, I, 1 9 7 0 (in thousands) Change 1950-60 amount percent 1950 (actual) 1960 (actual) 1970 (projected) 64,599 73,081 85,703 + 8,482 + 1 3 .1 % + 12,622 + 1 7 .3 % Men 14 years and over . . . . 1 4 - 1 9 ...................... 20-24 ...................... 25-34 ...................... 35-44 ...................... 45-54 ...................... 55-64 ...................... 65 and o v e r ............ 45,919 3,421 5,172 11,004 9,930 8,142 5,797 2,453 49,563 3,792 4,939 10,940 11,454 9,568 6,445 2,425 56,295 5,170 7,424 11,990 1 1,013 10,825 7,589 2,284 + 3,644 371 + 233 — 64 — + 1,524 + 1,426 648 + 28 — + + — — + + + — 7.9 10.8 4.5 0.6 15.3 17.5 11.2 1.1 + + + + + + - 6,732 1,378 2,485 1,050 441 1,257 1,144 141 + + + + — + + — 13.6 36.3 50.3 9.6 3.9 13.1 17.8 5.8 Women 14 years and over . . . 1 4 - 1 9 ...................... 20-24 ...................... 25-34 ...................... 35-44 ...................... 45-54 ...................... 55-64 ...................... 65 and o v e r ............ 18,680 1,982 2,681 4,101 4,166 3,328 1,839 584 23,518 2,408 2,558 4,159 5,325 5,150 2,964 954 29,408 3,328 3,939 4,719 5,513 6,606 4,108 1,195 + 4,838 426 + — 123 58 + + 1,159 + 1,822 + 1,125 370 + + 25.9 + 21.5 — 4.6 + + + + + + + + 5,890 920 1,381 560 188 1,456 1,144 241 + + + + + + + + 25.0 38.2 54.0 13.5 3.5 28.3 38.6 25.3 Total Labor Force ................ Source: U. S. Department of Labor Note: Figures may not be additive due to rounding. 4 + + + + + 1-4 27.8 54.7 61.2 63.4 Change 1960-70 amount percent — SEPTEMBER 1 9 6 4 T A B L E II U. S. Total Labor Force Participation Rates, b y A g e a n d Sex, 1950, 1960, 1 9 7 0 1950 (actual) 1960 (actual) 1970 (projected) structural changes in employment, may ad versely affect the utilization of the labor sup ply. Problems stemming from the fact that there will be a rising number of young job seekers without previous work experience 5 7 .4 % 5 7 .0 % and special skills competing for a shrinking Men 14 yrs. and over 14-19 . . . . 20-24 . . . . 25-34 . . . . 35-44 . . . . 45-54 . . . . 55-64 . . . . 65 and over . . 84.4 53.2 89.0 96.2 97.6 95.8 87.0 45.8 79.7 46.3 88.9 96.4 96.4 94.3 85.2 32.2 77.1 44.5 86.1 96.2 96.7 94.8 85.2 26.4 supply of suitable "entry” jobs have already Women 14 yrs. and over 14-19 . . . . 20-24 . . . . 25-34 . . . . 35-44 . . . . 45-54 . . . . 55-64 . . . . 65 and over . . 33.1 31.5 46.1 34.0 39.1 38.0 27.0 9.7 36.1 30.1 46.1 35.8 43.1 49.3 36.7 10.5 38.0 29.5 46.5 37.5 47.0 54.5 41.9 10.5 Total Labor Force . . . 5 8 .3 % come to light. Another problem may arise if, as predicted, more men than women come into the labor force while most of the new jobs continue to develop in industries with pre dominantly female employment. It is clear that growth in the total volume of the labor supply must be balanced by an expansion in employment if a rise in unem ployment is to be avoided. A second dimen sion is being added as changes in the struc ture of the labor force make it necessary to accommodate not only a larger number but Source: U. S. Department of Labor also a different mix of workers. What are the prospects of accomplishing this dual balance? T A B L E III Percent Distribution of the U. S. Total Labo r Force, b y A g e a n d Sex, 1950, 1960, 1 9 7 0 1950 (actual) 1960 (actual) It is easier to predict the size of the labor force and the accompanying number of jobs 1970 (projected) required than it is to forecast how many people actually will be employed and what 1 0 0 .0 % 1 0 0 .0 % industries and occupations will supply addi Men 14 yrs. and over 14-19 . . . . 20-24 . . . . 25-34 . . . . 35-44 . . . . 45-54 . . . . 55-64 . . . . 65 and over . . 71.1 5.3 8.0 17.0 15.4 12.6 9.0 3.8 67.8 5.2 6.7 15.0 15.7 13.1 8.8 3.3 65.7 6.0 8.7 14.0 12.8 12.6 8.9 2.7 tional employment. Projections of either em Women 14 yrs. and over 14-19 . . . . 20-24 . . . . 25-34 . . . . 35-44 . . . . 45-54 . . . . 55-64 . . . . 65 and over . . 28.9 3.1 4.2 6.3 6.4 5.2 2.8 0.9 32.2 3.3 3.5 5.7 7.3 7.0 4.1 1.3 34.3 3.9 4.6 5.5 6.4 7.7 4.8 1.4 Total Labor Force . . . 1 0 0 .0 % Source: U. S. Department of Labor ployment or labor supply, of course, do not purport to be outright predictions of what is going to happen. They are, rather, ''con d i tional” statements, i.e., statements of what is likely to happen if certain assumed condi tions actively develop. Such assumptions are both more numerous and more variable for employment projections than for projections of the labor supply. Employment projections are generally based upon assumed rates of labor utilization, econom ic growth and pro ductivity increases. Labor force projections, 5 ECONOMIC REVIEW on the other hand, primarily assume a con 80.5 million at the end of the decade. This tinuation of past trends in labor force partici involves an increase of 13.8 million jobs, or pation rates and a relatively high level of 21 percent, from 1960 to 1970, as compared econom ic activity. Continuity of econom ic with a gain of only 6.9 million, or 12 percent, and social patterns and the absence of war over the preceding 10 years. To accomplish or similar catastrophic events are assumed in an increase of that size, a rate of growth much either case. No assurance that assumed con larger than the average rate from 1950 to ditions will in fact be present is implied. 1963, and even larger than the considerable Employment projections for 1970 and later dates have been prepared by the U. S. De increase in 1963, will be necessary, as Chart 3 indicates. partment of Labor as well as by several other Because the volume of agricultural employ organizations. The Labor Department's pro ment is expected to shrink by 1.4 million jobs jections, which were published as part of the during the period, the gain in nonfarm em President's Manpower Report for 1963, are ployment must exceed the required net gain based upon the projected labor force as de in total employment by that amount. With scribed earlier, and upon such specific as only a small portion of the latter gain ex sumptions as a three percent unemployment pected to come from the self-employed group, level and a 50 percent increase in GNP from the bulk of the growth in total employment will 1960 to 1970. At 97 percent utilization of an have to occur in nonfarm wage and salary jobs assumed 83 million persons in the civilian whose number, as depicted in Chart 4, is labor force in 1970, as shown in Chart 3, civilian employment is expected to reach expected to expand by 13.4 million, or 25 per cent, from 1960 to 1970 in order to meet the required total employment level. In line with 3. U .S . C I V I L I A N L A B O R F O R C E EM PLOYM ENT the long-term shift away from the goods-pro- and ducing industries, only one out of every six 1 9 5 0 - 1 9 6 3 ( p r o j e c t e d to 1 9 7 0 ) additional wage and salary jobs is expected M i l l i o n s of p e r s o n s 90 AN N U AL A V ER A G ES to be in manufacturing and one out of every four new jobs in all the goods-producing in 80 CIVILIAN LABOR FORCE 70 - ■:: 60 the service industries are counted upon to Unemployment supply most of the new employment, as shown TOTAL EMPLOYMENT 50 -II - 40 - - 30 -1 20 - dustries combined. Trade, government and Nonagriculturol - in Chart 5. It is apparent, especially by comparison with the actual amount of employment in crease in the 1950's, that a formidable task of providing over one million new jobs annu 10 ■ i n ’5 0 ’5 2 S o u rce o f d a t a : ’54 ’5 6 ’5 8 ’6 0 ’6 2 U .S . D e p a rtm e n t o f L a b o r 6 i i i i i 70 ally between 1960 and 1970 has been im posed upon the econom y by the accelerated growth in the labor supply. The record shows SEPTEMBER 1964 that at the pace established during the first achievement thus far in the first three years three years of this decade, the necessary mo of the 1960's may be offset by a larger volume mentum has not as yet been developed to of growth in some of the remaining seven reach the employment goal for 1970. At the years. As the amount of year-to-year expan end of the three-year period —which included sion during the first six months of this year a recession —total employment was 1.8 mil indicates, gains in employment and the labor lion short of its projected level for 1963.2 The force for 1964 will considerably exceed the shortfall reflects a less than expected increase projected annual amounts of growth. The in nonfarm wage and salary employment and pace may quicken further between now and a larger than anticipated shrinkage in farm 1970 if, for example, the rate of new family employment together with a loss, instead of formations increases as expected and thereby the expected moderate gain, in self-employ- sparks additional consumer demand. Among the assumptions underlying pro ment. It is worth noting that the net gain in total employment deviates from the antici jected employment levels the one concerning pated pattern in that it includes more women labor productivity appears most crucial b e than men, as apparently new employment op cause of the inverse relationship between portunities continued to develop in larger productivity and manpower needs, whereby numbers in industries favoring the employ a gain in productivity causes a loss in em ment of women. The shortfall in employment growth over ployment unless offset by a rise in output. the past three years reappears, of course, as effect of technological advancement on man a similar if smaller gap between the actual power needs, it has been suggested by many While there is no consensus as to the ultimate and the projected size of the labor force at the end of 1963. Again it is the case that a larger number of women than men entered the labor 4. T O T A L U .S . E M P L O Y M E N T I9 6 0 and 1970 force during the three years. This deviation M i l l i o n s of p e r s o n s from the expected growth pattern suggests 90 that a less favorable labor market outlook for 80 men than for women may have discouraged men from entering the labor force. m i 66.7 BiSS 50 ■<0 40 Hi growth in employment and the labor force to was not the case between 1950 and 1960, for 30 example, as Charts 1 and 3 show. The under 20 10 AGRICULTURAL ment was determined, by means of interpolation, to be I9 6 0 1970 about 1.2 million jobs at the beginning and about 1.4 actual p ro jected Wage and sa lary employees Self-employed 1 The annual amount of expected increase in employ million at the end of the 10-year period. NON AGRICULTURAL m ap 60 There is no reason to expect the projected occur in uniform annual increments. Such m i® S o u rc e o f d a t a : U .S . D e p a rtm e n t o f L a b o r 7 ECONOMIC REVIEW Manpower implications of automation and 5. C H A N G E IN U .S . E M P L O Y M E N T technological change were also the concern of 1 9 6 0 -1 9 7 0 (projected ) a recent study undertaken by the Bureau of La B y Industry D iv isio n In m i l l io n s of p e r s o n s -2 0 +5 +10 i i i—r -1—i—i—r +15 i i i i—| TOTAL bor Statistics for the President's Committee on Labor-Management Policy.3 The study covers 36 major industries from different sectors of the economy, particularly as to the effect that FARM the introduction of new machinery, processes, and products is likely to have on each in NONFARM SELF-EMPLOYED dustry's unit labor requirements. For each industry it is determined whether anticipated NONFARM W A G E & SALARY employment losses due to rising G o o d s-p ro d u cin g in d ustrie s produc tivity are more likely to outweigh, than to be outweighed by, expected additional man Service-producing ind ustrie s th • r power needs due to increasing volume of -!r S o u rc e of d a t a : I I 1 I__ l_J__ I__ I__ L 1 1 . 1 .1__ L. +10 +5 +15 U .S . D e p a rtm e n t o f L a b o r production. This determination serves as the basis for grouping the industries as to their probable employment changes by 1970. The observers that rising productivity is responsi group with potentially growing employment is ble for the displacement of 2 million workers the largest, in terms of present employment, annually for whom replacement jobs must be found in addition to the volume of new em and includes banking, insurance, construction and other nonmanufacturing industries but ployment needed to absorb the growth in the very few manufacturing activities. Most of the labor force. Thus a rapid rise in productivity manufacturing industries are found in the might alter the rate of worker displacement group in which employment may decline, and aggravate the problem of developing or in the middle group where it may change enough new employment. in either direction or not at all. Observers of productivity trends in the De The study presents no quantitative conclu partment of Labor do not anticipate any dras sions and does not appear to modify the Labor tic changes in the rate of productivity growth Department's earlier employment projections for the near future. There are others, how other than by supplementing the projected ever, who believe the time is not far off when aggregate totals with some industry detail. automation and electronic data processing Viewing the problem of manpower utiliza will push productivity to a point where man power displacement will exceed the ability of tion during the next several years as merely a matter of bringing aggregate amounts of the hitherto expanding sectors of the econ o supply and demand into close balance or, my to absorb the surplus. Thus, they assert, it would be misleading to base employment projections upon past productivity trends. 8 3 T ec h n o lo g ica l Trends in 3 6 M a jo r A m erica n In dustries. U. S. Government Printing Office, Washing ton, D. C. (1964). SEPTEMBER 1964 more correctly, of creating sufficient employ supply and employment opportunities may ment to keep abreast of the rapidly growing labor force, would be to overlook the quali not grow proportionately in all parts of the tative and the geographical aspects of the state changes in the size of the labor force problem. from 1960 to 1970 include gains of 50 per country. For example, projected state-by- "Labor supply" means people with vary cent or more anticipated in some of the fast ing amounts of training and skill and with growth states of the West and South along different job preferences and expectations; with an expected shrinkage of almost 10 per "employment" stands for jobs that may re cent in West Virginia's labor force. quire anything from highly specialized train Continued efforts to increase total demand ing to only minimum qualifications. The ex for manpower, to provide adequate prepara istence of several million jobless persons tion of prospective workers along with re lacking the skills that would qualify them to training of the disemployed, and to facilitate apply for job openings that remain vacant for relocation of workers or industries for better want of suitable applicants is a constant re geographic balance are the major tenets of minder of the qualitative side of manpower our current manpower policies. In the opin utilization. The skill gap is likely to persist as ion of some observers, curtailment of the structural changes in the industrial and o c growing labor supply, through measures cupational distribution of employment con shortening the number of years spent in the tinue. labor force or the number of hours spent at In addition to total numbers and skills, lo cation is another aspect to consider. Labor work during each of those years, also merits serious consideration. 9 ECONOMIC REVIEW ELECTRIC POWER AS A REGIONAL ECONOMIC INDICATOR Most observers of the econom ic scene are industries in Cleveland produce a large num attentive to manufacturing activity because ber of products, and it would be virtually im of its pervasive effects at both national and possible to combine these products in a physi regional of cal index of output. Consequently, alternative manufacturing activity and employment and methods of estimating manufacturing output income is such that changes in the former must be employed. levels. The interdependence tend to be diffused throughout the economy For some time, consideration has been and tend to have varying degrees of impact given to the use of electric power data as an on various econom ic regions. indicator of changes in manufacturing ac- For the nation as a whole, the most com pre hensive monthly measure of physical output is the Federal Reserve Board's index of indus V a lu e Added by M a n u fa c tu re trial production.1 Unfortunately, there is no regional counterpart of the national index because it is difficult to collect physical out put data for a region when physical activity is not basically homogeneous. Even if the current dollar value of a region's output were available, it would be difficult to adjust the data appropriately for price and quality dif ferences. Similarly, if data on total produc tion worker man-hours were available, there is a problem of determining appropriate ad justments for changes in regional labor pro ductivity. As an illustration, manufacturing 1 Almost one-half of the F.R.B. monthly index of indus trial production is based on production worker manhours adjusted for changes in output per man-hour. These data are used to estimate the major part of physi cal output in important industries such as machinery, metal fabricating, and transportation equipment. 10 and Electric P o w e r C o n su m p tio n b y M a n u fa ctu re rs, C le v e la n d A r e a Rank 1 2 3 4 5 6 7 8 Major Industry Group Transportation equipment . . . Primary m e tals................... Machinery, except electrical Fabricated metal products . . . Electrical m achinery............. Chemicals and allied products . Printing and publishing . . . . Food and kindred products . . TOTAL, 8 LARGEST . . . . . Percent of Percent of total elec. power total value added by consumption by manu manu facture facturers 1 9 .2 % 14.8 14.3 10.8 9.4 6.6 5.5 5.5 86.1 % 1 5 .3 % 43.5 5.2 5.7 4.5 15.3 0.7 2.1 9 2 .3 % Sources: 1958 Census of Manufactures; Federal Reserve Bank of Cleveland Note: The Cleveland area is the service area of the Cleveland Electric Illuminating Company (see appendix). The value added shares were derived from the 1958 Census of M anufactures, which provides more comprehensive data than the latest A n n u a l Survey of M anufactures (1962). If 1962 value added weights had been used, the relative importance of each industry group would not be affected to any significant degree. SEPTEMBER 1964 1. MEASURES of MANUFACTURING ACTIVITY in the CLEVELAND AREA 1957 1958 1959 1960 1961 1962 1963 1964 1957 1958 1959 1960 1961 1962 1963 1964 1957 1958 1959 1960 1961 1962 1963 1964 Sources of data: NOTE: Federal Reserve Bank of Cleveland; Ohio Bureau of Unemployment Compensation; Annual Surveys of Manufactures; Census of Manufactures, 1958 Shaded areas represent recession periods 11 ECONOMIC REVIEW tivity on both national and regional levels. Thus, an unweighted kilowatt hour series In this connection, the Federal Reserve Sys would not reflect overall changes in Cleve tem is currently developing monthly data on land's manufacturing output. The table high electric power consumption by manufactur lights the disparity between each major in ing and mining industries. These data can be dustry's contribution to final output (value used on the national level to review com po added by manufacture) and its importance nents of the industrial production index that as an electric power user. are based on man-hour data. To compensate for this situation, weights As a participant in the Federal Reserve's have to be applied to the electric power data. national electric power program, this Bank Value added by manufacture for each major is developing data based on electric power industry constitutes the best available weight consumed by manufacturing establishments ing factor in deriving a comprehensive and in the Fourth District. This article is con representative electric power index.2 cerned with the use of electric power by Electric power consumption and other manufacturing firms in the Cleveland area for the period from 1957 to m id-1964. measures of manufacturing activity in C leve Electric power is either purchased from is plotted as a two-month moving average b e land are illustrated in Chart 1. Electric power utilities or generated by manufacturing firms, cause cycle billing results in the inclusion of and is used directly or indirectly in the manu some power sales for the previous month and facturing process. Although a precise rela the exclusion of some sales for the month re tionship between changes in electric power input and changes in output is difficult to es ported. Although no individual indicator in Chart 1 precisely measures the level of out tablish, electric power data do throw light on put, the series taken together provide a frame manufacturing activity and thus have a num work for analysis of the area's performance ber of advantages as indicators, particularly in manufacturing. on the regional level. These advantages in clude coverage of major It should be noted that the electric power manufacturing index has a long-run upward bias as an indi groupings, cyclical sensitivity, ready avail cator of output because the manufacturing ability, and ease of collection. Hence, e lec sector as a whole has been using greater tric power data used in conjunction with quantities of electricity per unit of output for other indicators help to gauge the direction operating machinery and electronic equip and magnitude of changes in manufacturing ment, heating and cooling processes, light activity. ing, space heating, and air conditioning. Of Three industries—primary metals, trans major concern here, however, is the short- portation equipment, and chemicals —con run change in manufacturing activity as re sume roughly three-fourths of total electric flected by electric power use. power used by Cleveland's manufacturing Total manufacturing employment is less industries but only account for approximately 2 See appendix for a description of the construction of 40 percent of manufacturing output. the electric power index. 12 SEPTEMBER 1964 responsive to changes in output than is elec manufacturing activity that is part of the tric power. In the long run, employment has Federal Reserve's index of industrial produc declined relative to output because of in tion. Covered manufacturing payroll, how creasing productivity, reflecting in part tech ever, is more sluggish than output because nological improvements and increased capi wages and salaries of nonproduction workers tal investment per worker. Employment data are relatively stable. The relationship of the for Cleveland cannot be adjusted for number annual index of covered manufacturing pay of hours worked each month or for changes roll for the U. S. to the index of manufacturing in labor productivity. is exceptionally good for the years 1959 The impact of manufacturing employment through 1962 (the latest year available). on the local econom y is imparted through A reasonable assumption then is that the income. That is to say, changes in manu annual level of manufacturing payroll for facturing activity and employment generate Cleveland is a crude approximation to the changes in payrolls, which in turn influence level of manufacturing output. A corollary spending and borrowing of businessmen and of this proposition is that the increasing gap consumers. To place this in perspective, the between the payroll and the electric power quarterly index of manufacturing payroll for indexes provides some indication of the long- the Cleveland area is shown in the center run upward bias in electric power. panel of Chart 1.3 It is evident that manufac The broad movements of manufacturing turing payroll tends to move in concert with activity in Cleveland are indicated by the the electric power index, although recently lower panel of Chart 1. Here, value added by the payroll series has lagged somewhat. manufacture and production worker man- At the national level, the manufacturing hours confirm the cyclical swings evident in payroll index varies closely with the index of the various series plotted in the upper two panels. Unfortunately, in addition to lack of timeliness, neither value added by manufac 3 Covered manufacturing payroll refers to payments to employees covered by Ohio unemployment compen sation law — virtually all manufacturing employees in the Cleveland area. ture nor production worker man-hours can be adjusted to annual benchmarks of physical output. J D IX The kilowatt hour data for the Cleve adjusted, and converted to percent rela land area were reported by the Cleveland tives with the m onthly average of 1957-59 Electric Illuminating Company and by taken as 100. The adjusted percent rela large plants in the steel, chemicals, and tives for each industry group then were textile industries that generate a sub combined with value added weights to stantial portion of their electric power form requirements. The data were classified manufacturing. by 18 major industry groups, seasonally firms, which use more than 95 percent of the electric power index for all Approximately 2,000 13 ECONOMIC REVIEW 2. TRANSPORTATION EQUIPMENT 1957 1958 1959 1960 1961 1962 1963 1964 3. PRIMARY METALS 4 . 1957 1958 1959 1960 1961 1962 1963 1964 NONELECTRICAL MACHINERY The most important indus tries in Cleveland are trans portation equipment, pri m ary metals, electrical and nonelectrical machinery, and fabricated metal products, accounting for two-thirds of the are a’s valu e added by manufacture. These indus tries are particularly sensi tive to fluctuations in spend ing for both capital go o d s a n d c o n s u m e r d u r a b le goods. In charts 2 through 6, the performance of each major industry is indicated by changes in em ploym ent and the use of electric power. Transportation equipment manufacturing in Cleveland is concentrated in motor vehicles and parts produc tion. Em ploym ent in that in dustry kept pace with the use of electric pow er until the latter half of 1962, w hen d iv e rge n c e occurred be tween the tw o series. This m ay reflect increased use of electric power as the indus try turned to additional re liance on processes. 1957 1958 1959 1960 1961 1962 1963 1964 *Labor-management disputes Sources of data: Federal Reserve Bank of Cleveland; Ohio Bureau of Unemployment Compensation 14 capital-oriented The primary metals industry in Cleveland has experi enced w ide sw in g s in em ploym ent and in the use of electric power, and is the SEPTEMBER 1964 most volatile industry in the area, a s reflected by the chart. The performance of the steel industry during re cent years has m ade it diffi cult to develop reliable sea son al adjustments for the use of electric power. 5. FAB RIC ATED M E T A L PR O D U C TS IND 160 140 120 110 100 90 80 1957 1958 1959 1960 1961 1962 1963 1964 6. ELECTRICA L M AC HINER1 i INDEX 1 f f 9=19P t % RATIO SCAl E n il cLEilKIV. rUWcK lUlttUMNIUN (2-mo. mov. cr/erage m to* ”T,j IS!..... .... ii n ,IU 100 on /*■ ** A S i H 1957 w M 1 1958 1959 1960 b C/> m C/> O z > B0 MPLOYMENT .LY AD USTED 1961 1962 1963 NOTE: Federal Reserve Bank of Cleveland; Ohio Bureau of Unemployment Compensation Major industry groups classified in accordance with Standard Industrial Classification Manual — 1957 Revision. (U. S. Bureau of Budget). 1957 employment data (based on 1945 Standard Industrial Classification) are not strictly comparable with data of subsequent years. Appendix ( continued) Production of fabricated metal products in Cleveland has remained on an upw ard course since early 1961, ex cept for som e hesitancy in 1962. 1964 *Labor-management disputes Sources of data: The nonelectrical machinery industry in Cleveland experi enced a brief recovery from the 1960 recession, but then leveled off. Expansion w a s renewed once a g a in in the fa ll of 1962, c o n t i n u i n g through the first half of 1964. A s measured by em p lo y ment and electric power consumption, the electrical machinery industry has pur sued a course sim ilar to that of the fabricated metal prod ucts group. the 1958 Census o f Manufactures, cover the the total electric power consumed by all service area of the Cleveland Electric manufacturing Illuminating Company, i.e., Cuyahoga establishments in the Cleveland area, are included in the index. and Lake Counties, m ost of Ashtabula The electric power index and the value and Geauga Counties, plus the north added weights, which were derived from eastern corner of Lorain County. 15 Fourth Federal Reserve Distric
@FedFRASER