Full text of New England Economic Review : May 1964

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NE~ ENGL AND

Capital Spending Spurts
Capital outlay in ew England wiJI increase
16 percent this year. Most pending will be
for machiner_ replacement - particularly m
the food, paper, and chemical indu tries.

Sights Up-in New England's
First Quarter Business
Some recent strengthening in the region's
busines ra i e hope for more improvement
ahead.

New Eng land's Electronic Future
Growth and product changes are in store for
the region's electronics industry according to
1970 forecasts.

...--
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F
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E T H

ANNIVERS ARY*

1 9 6 4

Capital Spending Spurts
E ' GLA D manufacturers' plant and
equipment outlays this year are expected
to rise 16 percent above the amount spent last
year. This jump will p]ace total spending at
$776 million, equal Lo the previous record
registered in 1957.
EW

Two-thirds of the total capital spending this
year will take place in the nondurable goods
sector, largely in the food and paper industries.
Durable goods manufacturers will up outlays by
a lmost a tenth with increases distributed among
most of the industries in this classification.
These results are reached on the basis of
reports to the Federal Reserve Bank of Boston
in the February - early April period of this
year. Replies were received from 825 firms
which account for 29 percent of the region's
manufacturing employment.
The regional increase expected in capital outlays this year is in line with that shown in
The New England Business Review is produced
in the Research Department. Edwin F. Estle
wa s primarily responsible for the articles,
" Capital Spending Spurts" and " New England 's Electronic Future, " and Harold F. Price
for " Sights Up- in New England's First Quarter
Business."

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surveys for the Nation as a whole. A Department of Commerce-Securities Exchange Commission survey in February showed manufacturers planning to increase outlays by 13
percent this year. A survey in March and
early April by the McGraw-Hill Company
found manufacturers nationally planning an
18 percent increase over last year's level.

In ew England some of this capital spending will be for expansion of machinery and
equipment, but the bulk of it will be for replacement of outmoded machines. This is a
continuation of the trend that has prevailed
in the region since 1957.
Outlays for new plant in the region will remain virtually unchanged from last year's
level. They will account for only 18 percent of
total spending this year, the same proportion
as shown for the ation in the McGraw-Hill
survey. Since 1957, when plant outlays were
31 percent of total spending, the proportion
spent for plant in ew England has fluctuated
in the narrow range of 18 to 24 percent.
Expe:nditures for expansion of facilities m
the region will show a substantial increase almost one-fifth - over last year's level. This
will raise the proportion of total outlays for
expansion from 36 percent last year to 37 per-

May 1964
cent this year. In 1957
regional manufacturers
evenly divided their
spending between replacement and expansion. Most of this year's
upsurge in expansion will
occur in the soft goods
sector, where such outlays will rise by twofifths. Large expansion
programs are underway
in the food, paper, and
chemical industries.

Capital Spending Plans of New England
Manufacturers -

1964

Total Expenditures

ALL MANUFACTURING
Durable Goods
Primary Metals .
Fabricated Metals
Machinery
Electrical Machinery
Transportation Equipment
Instruments

1963

1964

Percent

Actual

Planned

Change

($ Millions)

From 1963

$667.5

$776.l

+ 16

378.4
35.2
55.6
74.3
65.6
51.4
45.9
50.4

413.9
40.8
67.5
85.8
67.8
54.8
47.8
39.4

+ 9
+ 16
+ 21
+ 15
+ 3
+ 7
+ 4
-22

All Other Durables .
This spring's survey
indicates little pressure
289.l
362.2
Nondurable Goods
+ 25
on capacity to stimulate
62.8
52.0
Food
+ 21
large expenditures for
33.7
Textiles .
34.7
- 3
102.7
Paper
60.9
expansion of plant facili+ 69
24.0
38. l
Chemicals
+ 59
ties. The rate of capacity
36.6
37.8
Rubber
and
Plastics
+ 3
utilization has, on the
- 8
14.9
16.l
Shoes
average, shown little adAll
Other
Nondurables
64.8
72.2
+
ll
vance over the past three
Source: Federal Reserve Bank of Boston Survey.
ew England
years Ill
manufacturing. The tally
of replies to this spring's survey shows an avertwo industries are excluded, manufacturing in
age manufacturing operating rate of 78 percent
ew England shows an increase in capacity
compared to a preferred rate of 90 percent.
utilization from 79 percent at the close of 1962
However, nondurable goods producers report
to 82 percent at the end of 1963.
their rate of utilization increased from 82 percent at the end of 1962 to 84, percent at the end
Another factor in the hesitancy to increase
of last year. Durable goods manufacturers, on
expansion of plant is the 1964 sales expectation
the other hand, show a decline in operating
held by the respondents. After realizing a gain
rates from an average 76 percent to 74 percent
over 1962 of only 3 percent in the dollar volume
over this same period. The decline in durable
of sales last year, ew England manufacturers
goods is largely the result of reduced capacity
foresee a gain of only 2 percent this year. Hard
utilization in the transportation equipment and
goods manufacturers expect no change from last
electrical machinery industries. Respondents in
year's levels when sales rose only 1 percent.
both industries reported an actual decline in
Transportation equipment makers expect sales
sales from the previous year's level. If these
to fall by 5 percent this year, while electrical

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New England Business Review
machinery manufacturers see no change from
last year's depressed level. Producers of soft
goods items, on the other hand, expect sales
to rise 6 percent this year after a good gain of
5 percent last year. All the industries in this
category look for a rise of at least 3 percent in
their sales this year.
r nt Busine s P"cture

In comparison with the previous year, ew
England's manufacturing activity last year
showed a very slight gain. This Bank's index
of manufacturing activity averaged 119 percent of the 1957-1959 level last year, up only
1 percentage point from 1962. Nationally,
industrial production in relation to the 19571959 level averaged 124 percent in 1963 compared to 118 percent in 1962.
As the following article reviewing the region's
business shows, employment in the region's
manufacturing sector declined 1 percent last
year from the 1962 level, whereas nationwide
employment rose by 1 percent in manufacturing.

It is, therefore, somewhat surprising to find
the region's manufacturers planning such a
large percentage increase in capital outlays
this year. Since the 18 percent increase registered in 1959 when the economy was rebounding from the 1958 recession, the region's
producers have held their yearly increments
in plant and equipment outlays in the range
of 3 to 6 percent.
However, an element of optimism about the
future may have influenced plans this year.
The current business expansion of 38 straight
months has already exceeded any other peacetime expansion. Moreover, the tax reduction
this year may foster additional spending that
would sustain the expansion for months to
come. Also, manufacturers are continuing to

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hold their inventories at a relatively low level
in relation to sales. Excessive inventories,
therefore, are not currently a depressing influence on business activity.

I ys
Internal sources of funds, such as retained
earnings and depreciation allowances, will increase in importance this year as a means of
financing outlays. Whereas this source accounted for 85 percent of the funds last year,
it will represent 90 percent of total funds this
year. Borrowing is expected to decline from
12 percent of total funds last year to under 9
percent this year. Leasing arrangements likewise show a relative decline in importance,
falling from 3 percent to 1 percent of total
sources.
one of the respondents reported any
use of stock issues as a means of financing last
year, and none expect to make use of it this year.

Financing Ou

This shift to increasing use of internal sources
reflects an improvement in profit positions that
adds to retained earnings along with increased
depreciation allowances provided through the
accelerated depreciation rates in the revised
tax guidelines. In addition, the recent reduction in corporate tax rates will mean more
earnings retained by firms this year.
Industry Trends

Increased spending 1s scheduled in all but
two (lumber and furniture) industries in the
durable goods sector. The largest absolute
increases will occur in the fabricated metals
and nonelectrical machinery industries; both
will advance spending by $12 million. Respondents in these two industries report their
sales showed a strong improvement last year,
and they expect another good gain this year.
The electrical machinery industry plans to
up its outlays by only 3 percent this year.

May 1964
Production in this industry, according to the
Bank's index, fell 3 percentage points between
1962 and 1963. Consequently, plans for expansion expenditures this year have been reduced by more than a fifth from last year's
level. In an attempt to improve their competitive position, electrical machinery manufacturers will use the major portion, 85 percent,
of this year's spending to replace obsolete
machinery and equipment.
The electronic components segment of this
industry is now planning to cut back its spending by 15 percent this year. Respondents foresee sales expanding by only 2 percent this year.
At the beginning of this year they were operating at 82 percent of capacity, 13 percent below
their preferred rate.

plans to up outlays only 6 percent this year.
Respondents are quite pessimistic concerning
sales this year, looking for a 5 percent decline.
Aircraft and aircraft parts producers in the
region plan to advance their capital outlays by
8 percent. Ship and boat builders, on the
other hand, expect to reduce their spending by
30 percent, even though they see sales rising
by 12 percent. A substantial amount of excess
capacity, however, exists in this segment. Shipbuilders are operating at 74 percent of capacity
while they would prefer to operate at 96 percent.

In the nondurable goods sector the paper
industry shows the largest increase, both in
absolute and percentage terms, in spending
this year. Outlays are expected to advance by
more than two-thirds. A large part of this
The transportation equipment industry,
mcrease may be a carryover from last year.
after increasing outlays by a fourth last year,
In both the spring and fall surveys last year
respondents in the paper industry
reported plans to advance spendNew England Capital Spending
ing substantially. However, this
spring's
survey shows that spendPercent Changes in 1963 Compared with 1962
ing actually declined by 4 perActual
Anticipated in:
cent in the regional industry last
1963
Spring 1963 Fall 1963
year. The same sort of shift is
ALL MANUFACTURING 1 .
+ 4.3
+ 5.9
+ 5.4
also shown nationally in the
Durable goods industries 1
+ 2.0
+ 5.0
+ 4.6
Department of Commerce-Securi- 4.0
4.6
Electrical Machinery .
+ 4.1
ties Exchange Commission survey.
+ 24.0
+ 28.4
+ 23.7
Transportation Equipment
Outlays were expected to advance
- 17.4
-17.2
- 3.7
Primary Metals .
6 percent last year, but final
- 24.2
Fabricated Metals .
+ 1.5
+ 9.7
figures showed paper producers
1
nationally held their spending un+ 7.6
Nondurable goods industries
+ 7.2
+ 5.9
changed
last year. This year they
- 3.8
+ 28.2
+ 15.8
Paper
plan
to
increase
outlays by a third.
-12.4
- 3.2
- 3.4
Textiles
Printing
Food
1

-11.9
+ 24.3

Includes industries not shown separately.
Source: Federal Reserve Bank of Boston Survey.

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+ 2.6
+ 23.9

+ 19.l
+ 40.4

Business activity in the region's
paper industry has improved substantially. Sales were up 11 percent last year over 1962 levels.

New England Business Review
Respondents foresee a 7 percent increase this
year. Moreover, excess capacity has been considerably reduced in this industry. At the
beginning of this year ~ew .England producers
were operating at 90 percent, compared to
86 percent the year before.
The region's food industry is cheduling an
advance of one-fifth in it plant and equipment
outlays this year following a rise of two-fifths
last year. Sales in this industry rose by 30
percent last year - exceeding all expectations.
This year respondents look for an additional
advance of 7 percent in their sales. Outlays
for expansion of both plant and equipment are
expected to represent 40 percent of total spending this year compared to 29 percent last year.
The region's textile manufacturers plan to
reduce capital outlays 3 percent this year. The
Bank's index of production shows a decline of
2 percentage points in textiles last year from
the 1962 level, and respondents report sale
fell by 2 percent last year. l\ ationally. according to the McGraw-1 liJI survey, textile manufacturers plan to up outlays b~· l et percent.
Chemical firms in l\ew England expect to
up their outlays by three-fifths this year after
holding expeNditures at 1962 levels last year.
Respondents' sales advanced 12 percen L in
1963, and they foresee a 7 percent gain this
year. Outlays for expansion will more than
double this year if present plans are fulfilled.
Business in the region's shoe industry last
year remained relatively stable. Preliminary
figures for 1963 indicate that the number of
shoes produced wa down 0.3 percent from
1962 levels in the region. The Bank's production index, which also includes leather processing, fell from 97 percent of the 1957-1959
average in 1962 to 95 percent last year. Couse-

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quently, leather and shoe producers plan t_o
reduce their capital spending in the region by
8 percent this year. Outlays for expansion purposes will fall by almost 18 percent.
In contrast to its shoe industry, ew England's rubber and plastic products industry
showed an increase in activity last year. As
measured by the Bank's index, production
advanced by over 2 percent last year in this
industry. Respondents report their sales rose
by 6 percent in 1963, and they expect an additional 3 percent gain in 1964. Average operating rates advanced in this industry last year to
86 percent of capacity from 83 percent the
year before. With this impetus rubber and
plastics manufacturers plan to raise capital
outlays this ~·ear about 4 percent with virtually
all the increase going into new plant.
1963 Programs Fulfilled

New England manufacturers' actual outlays
last year were quite close to those forecasted in
the Bank's fall urvey. They were up 5.9 percent over 1962 in comparison to the 5.4 percent
expected in the fall survey. As the table on
page 5 shows, durable goods producers spent
slight)~- less than had been anticipated, whereas
nondurable goods manufacturers exceeded expectations. The fall survey correctly indicated
the direction of change in spending in 15 of the
19 major manufacturing industries.
Last spring's total spending estimate for

1963 turned out to be 1. 7 percent below the
amount actua1ly spent. Ten industries, including nonelectrical machinery, instruments, food,
and printing, boo ted their spending last year
well above their spring estimates. This, of
course, points up the likelihood that spending
may change over the course of the year from
the estimates made in the spring.

May 1964
Th

F ture

The tendency, based on past experience, 1s
for firms to underestimate the extent of their
spending in times of bu ine expansion. But
thi year plans seem rather large in view of the
excess capacity and Jow ales expectation shown
in the urvey. However, a large increase in
busines activity could reduce this exces capacity and create the need for l ew England
manufacturers to increase spending for new
plant. This is the crucial element, for new plant

also calls for additional spending on machinery
and equipment.
The tran portation equipment and electrical
machiner~· indu trie, will be particnlarl~· important in determining the amount of capital
pending in the region. Combined, these two
account for more than a ixth of ~ ew England'
total pending. If, for example, the e indu Lrie
were to raise their current plans for expan ion
outlays to la t year' level, total spending in the
region would advance an additional 1 percenL.

Sights Up
In New England's First Quarter Business
E GLA D bu iness lifted its sights a
gathering strength in the first quarter of
1964 ga\e hope of even more vigor in the
months ahead. Statistics of business performance were generally impro ing. Outlook expectations reflected growing confidence and
timulated increased willingness to spend.

This by no means implies that vigorous boom
conditions had already pervaded the New England economy in the first quarter of this year.
Such conditions were prospective rather than
actual. During 1963 while the national
economy quickened the pace of its expan ion,
the ' ew England region wa at first a hesitant,
and later a _lagging participant. Even in the
clo ing months of that year there was considerable disparity among rate of expansion in
the various aspects of the region's economy.
Although performance in various measures of
consumer and business spending was quite

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satisfying, those based on emplo_ ment - e pecially in manufacturing - were di appointing. Some of that di parit)~ lingered in the
generally improved pattern of early 1961.
::\ew England' nonagricultural employment, adju ted for normal seasonal variation ,
was virtually unchanged over most of 1963.
A modest upturn began in i\"ovember. By
March of thi year the 12 months' growth rate
had doubled to 1.0 percent. This was well
below the 2.9 percent growth rate allained
nationally. Performance was not too bad in
the region's nonmanufacturing industry groups
uch as con truction, trade, finance, ervice ,
and government. Aggregate employment in
these group , sea onally adjusted, had begun
to turn up in the pring of 1963. By .\'larch
1964 it had reached an annual growth of 2.6
percent, not too far below the national rate of
3.5 percent.
7

New England Business Review

EMPLOYMENT

insured unemployment in its six states was 4
percent less than a year earlier, whereas nationally there had been a decrease of 7 percent.
Despite the region's less satisfying recent trend,
its March unemployment rate was estimated
to be 5.3 percent of the labor force, seasonally
adjusted, compared to 5.4 percent nationally.

New England and U.S.
Jon . 1963=100

102

98
104

TOT AL NONAGRICULTURAL

:==============~~==~

NONMANUFACTURING
9a.._......__..........__.__.,__......__.........___._.,___._........._---1.._......____.___.
J

FMAMJ

JASOND

1963
SOURCE:

JFM
1964

U . S . Bureau of Labor Statistics, Adjusted
Federal Reserve Bank of Boston .

ew England's lag in employment growth
was mostly attributable Lo rather slow activily
in some of its manufacturing industries. Their
total employment, seasonally adjusted, showed
virtually no change over the first half of 1963,
slumped in the second half, and has been hesitant in its early 1964 recovery. In March
it was still 1. 7 percent less than a year earlier
in contrast to the 1. 7 percent net rise achieved
nationally. While nearly all of New England's
manufacturing industries shared in the net
decline of 24,100 workers from a year ago, its
electrical machinery industry accounted for
about one-third of that total decline.
Just as the region's employment has responded slowly to cyclical advance in the
ation's economy, so its unemployment has
receded more slowly. In the last week of March,
8

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The recent trend of manufacturing production in Tew England likewise displays a
comparative lack of real vigor. This Bank's
seasonally adjusted index for March measured
only 2.4 percent higher than that for a year
ago. Nationally, a comparable index registered
a 5.8 percent rise over the same period.
Statistics of total personal income are
affected by manufacturing payrolls along with
other components. While New England per
capita income continues to be high, the recent
growth trend of its total income has tended to
be slower. Business Week estimates for the
first two months of 1964 indicate that the ew
England total was growing at an annual rate
of 3.6 percent while total U.S. personal income
was growing at a 5.4 percent annual rate.
When consideration turns to recent trends
in spending and in other financial transactions,
the New England region turns out a relatively
lively performance.

In formulating capital expenditure plans
for 1964,
ew England manufacturers in
general are advancing with boldness. A companion article in this Review reports in de tail
the results of this Bank's survey of such plans
as they were reported in March and April.
With expectation of a 1.8 percent increase in
their sales over 1963, these ew England manufacturers planned on an average to spend 16
percent more in 1964 for new plant and equip-

May 1964
ment than they spent in 1963. This compares
favorably with the 13 percent increase expected nationally from the latest quarterly
survey conducted by the U. S. Department of
Commerce and the Securities Exchange Comm1ss1on.
The rate of spending on total new construction in
ew England has advanced
vigorously in early 1964. F. W. Dodge Company reports the dollar amount of new contract
awards for the area during the first three months
to be 21 percent greater than that of the comparable 1963 period. On a nationwide basis a
16 percent gain was reported. The New England net increase is derived from gains of 36
percent in residential and 33 percent in nonresidential building con tracts, which well offset
a 6 percent decrease in contracts for public
works and utilities. In partial support of this
burgeoning activity, reported building permits
in Massachusetts for the first three months of
1964 were 12 percent higher in aggregate value
than those of a year earlier.
ew England department store sales,
matched to those for comparable 1963 periods,
were reported to be up by 3 percent for J anuary, by 14 percent for February, and by 15 percent for March. Factors contributing to the
cumulative gain, but difficult to measure were:
an Easter date two weeks earlier than in 1963,
the extra leap year day, and the spending
stimulus generated by or in anticipation of reduced personal income taxes.
ot all spring
shopping was advanced by two weeks, however. Reported sales at downtown Boston
stores for the four weeks preceding the 1964
Easter were 4 percent less than those for the
four weeks immediately preceding the later
1963 Easter date.

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ew England automobile dealers
Most
were enjoying a sustained good sales market.
First quarter 1964 registrations of new cars
in the area were 5 percent more than those of a
year ago, - close to the comparable national
gain of 7 percent. Inventories were not considered unduly high in relation to sales. Used
car markets were deemed to be in good shape.
Savings in ew England financial institutions continued to expand rapidly. During the
first quarter annual growth rates approximated
8 percent for savings and loan association share
capital and 9 percent for savings accounts at
mutual savings banks and weekly reporting
commercial banks. At the latter banks other
time deposits including certificates of deposits
rose more than 50 percent over the 12 months'
period.
Further credit expansion accommodated
needs of the growing economy without undue
pressure on the supply of available funds.
Weekly reporting commercial banks in the
region had at the end of the quarter about
9.5 percent more business loans outstanding
than a year earlier. They and other lending
institutions accommodated comparable or
greater rates of expansion in real e tate and

consumer credit. The prime business loan rate
and the Federal Reserve Bank's discount rate
remained unchanged at 4½ and 3½ percent,
respectively. Yields at weekly auctions of 3month Treasury bills ranged somewhat above
the discount rate. Typical rates for conventional home mortgage loans ranged from 5¼
in Boston to 6 percent in rural areas. In
general, interest rates remained relatively
stable with ample credit available.
In the first quarter ew England farmers
faced both rising production and sensitive

New England Business Review
prices. Dairymen were weJl situated with only
mode tly increased output for continuing
strong sales. Potato growers started with less
burdensome stocks, and aided by seed stock
shipments, should benefit from moderate price
improvement. Broiler operators, however,
with strong supplies of hatching eggs and growing birds, faced the threat of sharply lower
prices. Egg producers also, with more layers
and prospectively more eggs, struggled to keep
costs in line with income. There was hope for
somewhat lower feed cosLs, but costs of farm
labor, taxes, equipment and financing threatened to pinch more tightly.
In manufacturing, the electrical machinery industry, including electronics,
continues as the outstanding area of weakness
in the region. Employment currently is running
about 5 percent less than a year ago. While
the decline in activity is especially notable at
Massachusetts plants making communications
equipni-ent and electronic components, it permeates the industry extensively. Reduced flow
of government procu1·ement contracts is an
important factor in the industry's reduced
sales, profits, and operations.
New England's nonelectrical machinery
industry is faring somewhat better. While employment is still somewhat less than a year ago,
there has been some lengthening in average
workweeks. Increased orders are permitting
textile machinery producers to expand operations again after cutbacks in 1963. The rapid
surge in new orders to the Nation's machine
tool producers is commencing to show its impact on operations at New England plants.

In New England's transportation equipment industry, aggregate employment has
slipped below year-ago levels. This is due to

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the sharp decline in employment at the large
shipyard in Quincy following its sale and the
uncertainty as to its future use by the new
owner. Meanwhile operations are continuing
to expand at the New London submarine
building yard. The region's automobile assembly plant has been very busy and activity has
also been quite high in aircraft equipment
production at most regional facilities.
The region's primary and fabricated
metals industries continue to be less active
than a year ago as measured by aggregate employment. Foundry operations have some
bright spots and scrap exports continue at a
good rate. Expanding orders have strengthened markets for brass and copper products
considerably with some upward pressure on
price structures.
Employment at Tew England ordnance
plants in early 1964 continued to be depressed
about 13 percent below that of a year earlier.
The severest part of the decline occurred last
fall with the completion of government contracts for the procurement of guided missiles
and had its major impact at Massachusetts
plants. The Connecticut ordnance industry,
devoted more to the production of small arms,
hunting rifles, and ammunition, was less severely
affected.
For New England furniture producers a
good backlog of orders gives expectations for a
5 or 10 percent increase in sales for 1964 over
1963. Operations are somewhat slowed, however, by inadequate stocks of kiln dried
hardwood.
New England textile employment continues
to decline despite some recent stability, and in
March was about 4½ percent less than a
year earlier. Average workweeks have shown

May 1964
some recent contraction. Daily average consumption of cotton, however, has tended to be
higher than a year ago. Mill operators are
hopefully studying the possible benefits which
may accrue from the new cotton pricing
schedules.

In the ew England apparel industry continuing cold weather left an ~~average" first
quarter business for women's wear with little
stimulus from the early Easter. For the
workers in the Providence, Fall River, and ew
Bedford areas, negotiations this spring led to
wage increases and other benefits. Men's wear
business picked up from last year's late slump.
Contrary to the national experience, employment at the region's shops continued to lag.
Producer are renewing efforts for tariff treatment which will give more effective protection
to the domestic industry from the increased
imports of apparel.
Optimi m prevailed in the shoe and leather
industry during early 1964 for the first time in
three years. Output and retail sales of New
England leather footwear were running ahead
of the 1963 pace, and producers hoped to get
their one-third share of the estimated national
output ri se to 620 million pairs. Imports of
foreign footwear, after a rapid rise, appear to
have stabilized. Use of Corfam and other
synthetics for uppers is a future problem which
producer believe they can adjust to. Hide
prices have firmed again from their unusually
low price of last year. The industry expects

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no major wage problems to develop this year.
Fir t quarter business for jewelry producers
m
ew England averaged somewhat better
than a year ago. The gain accrued mostly to
makers of better quality carat gold jewelry, as
customers upgraded their demands and as imports were mostly of lower priced items.
Employment at Rhode Island planls was above
that of a year ago but down from levels reached
in earlier years. The current stabilization of
the price of silver at .'l.29 an ounce eased
pricing for makers of jewelry and silverware.

Paper mills in ew England shared in the
increased demand which boosted national output 5 percent for their products during the first
two months of 196'1, over that of a year ago.
Price increa es made late last vear will be
supplemented by others Lo become effective
ew England producers reporting to
April 1.
this Bank's recent survey slate their 1964
planned expenditures for new plant and equipment Lo be 69 percent greater than those made
in 1963.
Food Processing was one of Lhe few ew
England manufacturing industries which in
early 1964 employed more workers than a
year earlier. 13usine s for manufacturers of confectionery and chocolate products was reported
to be substantially improved. The 1963 Maine
sardine pack of 1.6 million cases, al though less
than that of 1962, sustained the recovery from
the extremely low 1961 pack and checked the
growth in imports of sardines.

New England Business Review

New England's Electronic Future
recent cutbacks, 1970 employment
in New England's electronics industry
will exceed present levels by at least 25 percent.
Almost all of these new jobs will call for highly
skilled technicians and professional workers.
The regional industry will probably be concentrating its production in military and industrial
products with less emphasis on electronic
components.

ESPITE

This synopsis of the future of New England
electronics is based upon national projections
of the industry developed by the U. S. Bureau
of Labor Statistics. 1 It assumes that the region
will maintain its present share of national production in the various sectors of the industry.
However, the composition of the region's industry has been changing in recent years
toward a concentration in products where demand is expected to rise more rapid! y. If this
structural change continues, the region's industry may show an even greater employment
growth by 1970.
The Industry Defined

Electronics is essentially the technique used
to direct and control the conduction of electricity in gas, vacuum, liquid, or solid-state
matter. The products of this industry fall into
four major categories: 1) military and space
products, 2) industrial and commercial products, 3) consumer products, and 4) components.
1

Employ111R11t Outlook and Cha11gi11µ Occupational Structure i11 Hlectro11ics Ma11ufacturi11g, Bulletin No. 1363,

October 1963, United States Department of Labor,
Bureau of Labor Statistics.

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The last of these represents the parts and
accessories used in the other three product
categories.
Region's Past Growth

New England's electronics industry has
grown rapidly in recent years. During the
1958-1963 period employment expanded by
almost 23 thousand workers, a gain of twofifths. Over three-fifths of these new jobs were
added in the military and industrial product
subdivisions with most of the remainder added
in electronic components.
The region's electronic components sector,
although it added a net of 8 thousand jobs over
the 1958-1963 period, has been registering a
decline in employment since early 1962. This
segment has been adversely affected by overcapacity, foreign competition, and shrinking
backlogs of Government orders which have
led to reduced prices for components and narrowing profit margins. Between 1962 and 1963
employment m component manufacture
dropped by more than 5 thousand jobs.
Massachusetts added a net of 5 thousand
workers in its electronics industry over the
1958-1963 time span. This was the result of a
6 thousand gain in military and industrial
electronic product employment with an offsetting decline of a thousand jobs in the component subdivision.
The other states in the region added almost
8 thousand workers in component production
and 7 thousand in the military and industrial

May 1964
product portion of the industry. Connecticut
expanded employment in components by more
than one and a half times and military-industrial product employment by more than half.
New Hampshire increased its employment m
the components segment by three-fifths.
P

11pos·tiori

More than 1 in every 10 electronics workers
in the Nation is employed by New England
firms. However, the region's proportion of
national employment varies widely among the
product classifications. Its concentration is in
electronic components where in 1963 it accounted for almost 17 percent of the Nation's
total electronic component employment. In
contrast, it accounted for only 9 percent of
employment in military and industrial electronics and 3 percent in consumer electronics.
There has been a considerable shift in ew
England's employment between the various
electronic sectors in the past two years. As the
table below shows, employment has been shifting from electronic components to military
and industrial electronic products. In the remainder of the Nation there has been very
little shift in employment distribution between
products over the period.

Emp oynient Change to 1970

The national projections are based on a
number of assumptions as to the trend in each
sector of the industry. Military and space
electronic products are expected to show an
expansion because of the increasing complexity
of space craft, missiles, aircraft, and other defense items, because of the national objective
of a manned lunar flight, and because of the
expansion of the military space programs. Even
though defense outlays are levelling off, producers of electronics will still find their business
expanding.
Projections for industrial and commercial
products are based on expectations of greater
outlays on business plant and equipment, including electronic items, as population and
incomes increase. More automation systems
are expected to be installed. Product quality
control, as well as the automatic operation of
metalworking machinery, will be accomplished
by means of electronics.
In the consumer products field, such as television sets, radios, and phonographs, production is expected to expand because of rising
income per capita, increased family formation,
and greater use of laborsaving devices in the
home, much of which will be electronic.

Electronics Employment in New England

1961-1963
Electronic Product
Sector
Military and Industrial

January 1962
Percent January 1963
Percent
Percent
January 1961
Employment Distribution Employment Distribution Employment Distribution
24,998

33.5

28,730

35.8

31,898

40.8

2,843

3.8

3,064

3.8

3,196

4.1

Components

46,750

62.7

48,387

60.3

42,980

55.1

All Products

74,591

100.0

80,181

100.0

78,074

Consumer

---

100.0

Source: U. S. Department of Labor, Bureau of Employment Security.

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New England Business Review
The components ea tt>New England's Proiected Electronics Employment,
gory is expected to show
1963-1970
a much smaller employ(In Thousands}
ment growth than the
Percent
January
January
Employment
three end product classi Growth
1970
1963
Growth
fications even though its
demand is a reflection
49.l
61.4
12.3
25.0
Massachusetts
of the demand for end
13.0
16.5
3.5
26.9
Connecticut
10.5
2.3
28.0
New Hampshire
8.2
products.
The major
4.6
1.2
35.3
Vermont
3.4
reason for this is the
0.7
25.9
Rhode
Island
2.7
3.4
rapid advance in pro23.5
Maine.
1.7
2.1
0.4
ductivity. Shipments per
26.l
20.4
employee have been adNew England
78.l
98.5
vancing at a rapid rate
Source: Federal Reserve Bank of Boston.
in recent years; and this
trend is expected to continue over the remainder
which have occurred in i\ew England smce
of the 1960's.
1961 from components to the other, fastergrowing sectors would increase the employThe only sector of the electronics industry
ment growth rate to 3.1 percent per year. This
where annual emplo) ment growth is expected
would give the region a total of 98.5 thousand
to increase over the 1961-1970 period in comworkers in electronics in 1970. This would be
parison with that of 1958-1961 is in military
an increase of 20 thousand jobs over present
and space products. The rate is expected to
levels with two-thirds of the increase in the
advance by about 14 percent. The other three
military and industrial product sectors.
product categories will each show a substantial
decline in employment growth rates. The rate
Looking into the future there are indications
for electronic components, the most significant
that the region's composition will change even
for -ew England, is expected to fall from 10.9
more in this direction, raising the growth rate
percent a year in the 1958-1961 period to 1.5
even higher. For example, the NASA center
percent a year in the remainder of the 1960's.
in the greater Boston area may further increase
If the region were to maintain the share of
the electronics industry that it held in 1961,
these projected growth rates applied to New
England data would give the region an employment total in electronics of 96. 7 thousand in
1970, an annual growth of 2.9 percent. This is
below the 3.8 percent rate for the K ation because of the region's concentration in electronic
components.
Allowance for the changes m employment
14

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employment in the military and industrial
products sector.
By 1969 the center will be in full operation
and is expected to employ some 2,100 professional and supporting personnel. At that time
its budget for research at the center will be in
the neighborhood of $35 million, and it will be
making some . . 45 million in grants and contracts for space electronics research to umversities, nonprofit research institutions, and

May 1964
industrial laboratories across the Nation. This
research will be directed toward improving the
reliability and capability of advanced space
systems.
The Boston area is well adapted to the center's needs and can be expected to participate
actively in this space research. Three universities in the area are currently conducting
electronics research. Moreover, about 15 thousand people in the area are employed in some
120 established firms which are engaged in
electronic-related research and development.
This type of activity can be expected to develop
further as the center becomes fully established.

Impact Upon Occupational Needs
As the region's electronics industry shifts
more to the production of military and industrial products, a higher level of skills will be
required in its work force. National data show
that only 27 percent of the workers in the mili-

tary and space products sector are semiskilled
and unskilled whereas in consumer products
the proportion is 63 percent. Engineers and
other technical workers account for a third of
the work force in military products compared
to ohly a tenth in consumer products. The
components sector would tend to have a distribution similar to consumer products since
both involve mass production techniques.

Three-fifths of the region's growth in electronics employment over the remainder of this
decade will occur in Massachusetts, excluding
the impact the center may have upon the
State. Of the 12 thousand new jobs expected
in this State's electronics industry, over 8
thousand will be in producing mili Lary and
industrial electronic items. However, electronic components wiH continue to play a
major part in the State's electronics complex.
In 1970 this subdivision will stilJ account for
half of total electronics employment.

The proportion of employees who are engaged
in production is an indirect measure of this
difference in skill needs between sectors. Nonproduction workers include engineers and technical workers, administrative and executive
personnel, and clerical and stenographic workers. In ew England's military and industrial
electronic sector, nonproduction workers account for 44 percent of total employment. In
the consumer product and electronic component
sectors, on the other hand, they account for
slightly less than 20 percent.

As the table on page 14 shows there may
be substantial differences in the growth of the
electronics industry among the states of the
region to 1970. Those with the higher relative
growth rates, such as Vermont, have a larger
proportion of their work force engaged in producing military and industrial electronic items.

Clearly, as New England's electronics industry changes its composition, more of the
new jobs created will be in these skills of the
nonpro<luction type. The training emphasis
will have to be placed on these non production
skills if the region is to avoid structural unemployment as these job needs change.

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Here's New England MANUFACTURING INDEXES (seasonally adjusted)
1957-59 = 100

NEW ENGLAND
pMar. '64
Feb. '64
Mar. '63

UNITED STATES
Mar. '64
Feb. '64
Mar. '63

All Manufacturing

120

121

119

129

122

Nonelectrical Machinery
Electrical Machinery
Transportation Equipment

132
123
138

130
127
139

123
128
144

136
135
130

133
134
131

123
131
122

Textiles, Apparel, leather

100
102
108
92

103_
105
112
94

104
111
106
93

123
119
n.a.
n.a.

116
114
122
99

113

115

n.a.

123
119
132
100
128

Textiles
Apparel
Leather and Shoes
Paper

Percent Change From:
BANKING AND CREDIT
Commercial and Industrial Loans($ millions)
(Weekly Reporting Member Banks)
Deposits ($ millions)
(Weekly Reporting Member Banks)
Check Payments ($ millions)
(Selected Cities)
Consumer Installment Credit Outstanding
(index, seas. adj. 1957-59 = 100)

DEPARTMENT STORE SALES
(index, seas. adj. 1957-59 = 100)

Mar. '64
1,708

Feb. '64
+ 4

Mar. '63
+ 9

Insured Unemployment (thousands)
(excl. R.R. and temporary programs)
Consumer Prices
(index, 1957-59 = 100)
Production-Worker Man-Hours
(index, 1957-59 = 100)
Weekly Earnings in Manufacturing($)

Percent Change From:
Mar. '64
37,853

Feb. '64
+ 1

Mar. '63
+ 8

5,312

139,654

12,151

197,708

+14

143.0

161.9

+12

127

+ 9

n.a.

EMPLOYMENT, PRICES, MAN-HOURS
& EARNINGS
Nonagricultural Employment (thousands)

124

3,754

57,336

2,102

-11

109.5
(Mass.)

107.8

94.0

101.3

93.13
(Mass.)

101.40

175

OTHER INDICATORS

Total Construction Contract Awards* ( $ thous.)

138,651

+17

+19

3,587,319

+16

Residential

59,181

+18

+36

1,596,674

+17

Nonresidential

51,685

+15

1,163,751

Public Works and Utilities

27,785

826,894

+24

139

+18
+ 1

+24
-12

+16
+ 5

148

+26

+64

991

+28

+14

Electrical Energy Production (4 weeks
ending Mar. 21, 1964)
(index, seas. adj. 1957-59 = 100)
Business Failures (number)
New Business Incorporations (number)
*3-mos. moving averages Jan., Feb., Mar.

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preliminary

1,320
17,631
n.a.

not available

+10
7

Full text of New England Economic Review : May 1964

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