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Regional shifts in personal income by industrial component, 1959-83.

Regional Shifts in Personal Income by Industrial Component, 1959-83

FROM 1959, the earliest peak year of the business cycle for which BEA's industrially detailed regional income estimates are available, to 1983, the most recent year for which the estimates are available, the distribution of U.S. total personal income (TPI) shifted toward the South and West. The share accounted for by each southern and western region (Southeast, Southwest, Far West, and Rocky Mountain) increased, and the share accounted for by each northern and central region (Plains, New England, Great Lakes, and Mideast) declined. The share accounted for by the southern and western regions as a group increased from 39 to 49 percent.

This article discusses shifts in the distribution of TPI in each of two timespans included in 1959-83: 1959-79 and 1979-83.1 In both timespans, the distribution shifted toward the South and West. In both timespans, the share accounted for by each southern and western region increased. In 1959-79, the share accounted for by each northern and central region declined. In 1979-83, the shares accounted for by the Plains and Great Lakes regions continued to decline, but the shares accounted for by New England and the Mideast increased. Industrial diversification helped, increasingly as the 1970's and early 1980's progressed, to offset weakness in traditional types of manufacturing in New England and the Mideast and, thus, to account for the turnarounds.

1. The use of the two timespans permits comparison of longterm shifts in the 1960's and 1970's with shifts thus far in the 1980's. Except for 1983, the most recent year for which BEA's detailed regional income estimates are available, the choice of years for the two timespans is based on national business cycle peaks in order to separate trend from cyclical changes. For purposes of shift analysis, the division of 1959-79 into two timespans, using the peak year 1969 as the dividing year, would not significantly change the findings of this article.

Despite the turnarounds in New England and the Mideast, the shift in the distribution of TPI toward the South and West was larger, on an average annual basis, in 1979-83 than in 1959-79. In the southern and western regions as a group, a larger average annual increase in share after 1979 mainly reflected a substantial acceleration in the Southwest. The large national defense buildup in the 1980's led to a speedup in durables manufacturing production in the Southwest. In the northern and central regions as a group, a larger average annual decline in share after 1979 mainly reflected substantial decelerations in the Great Lakes and Plains regions. The severe economic recession of 1981-82 led to a slowdown in domestic demand for durable manufactured goods from the Great Lakes region; even in the recovery year of 1983, the region's increase in TPI was smaller than in any other region except the Plains. In the Plains, in 1979-83, slow growth in farming and related industries retarded the growth of TPI.

This article focuses on the detailed industrial composition of shifts in the distribution of TPI in 1959-79 and 1979-83. The first of two major sections, "Interregional Aspects,' discusses, for all regions together, the relative size and direction of shifts in industrial components of TPI.$F2$F The second, "Intraregional Aspects,' discusses, for each region in turn, the relative contributions of industrial components to each region's shifts in TPI.

2. TPI is the sum of wage and salary disbursements, other labor income, proprietors' income, personal dividend income, personal interest income, rental income of persons, and transfer payments, less personal contributions for social insurance. The first three components are the industrial components (that is, components for which industrial detail is available); together, they accounted for about 70 percent of U.S. TPI in 1983.

Interregional Aspects

Table 1 shows, for each of 71 industrial components of TPI in both 1959-79 and 1979-83, the percentage-point change in each region's share of the U.S. total for the component. This measure permits comparison, on a consistent basis across all regions, of the relative contributions of each region to the overall shift. Positive changes indicate gains in the region's share of the U.S. total for the component, and negative changes indicate losses in share.

Table 2 summarizes the changes by regional group; it shows, for each component and timespan, the percentage-point change in share of the U.S. total for the component, for the southern and western regions as a group. The negative of each entry in the table (not shown) is the percentage-point change in share for the northern and central regions (North) as a group. The entries in table 2 thus can be viewed as measures of the shift in the share of the U.S. total for each component from the North to the South and West.

In 1959-79, the South and West gained, and the North lost, shares in most industrial components. The largest interregional shifts were in manufacturing, construction, and service industries. In general, large manufacturing shifts reflected efforts by manufacturers to hold down production and distribution costs. Wage rates, energy and land costs, and State and local taxes were lower in the South and West than in the North, and improved highways and truck transportation gave the lower cost regions competitive access to national markets. In addition, manufacturers sought locations nearer rapidly growing southern and western regional markets.3 Within manufacturing, large shifts in apparel, textiles, and plastics brought these industries nearer to suppliers, such as the petrochemicals industry. Machinery industries that made apparel and textiles equipment also had large shifts. Large shifts in computing equipment, electronic equipment, and scientific instruments brought these industries nearer to those that they supply, such as aircraft and other defense-related industries. Large shifts in construction, and in the related sand-gravel mining, stone-glass manufacturing, and real estate industries, in part were responses to large increases in manufacturers' demand for new structures, as well as to strong demand for housing by persons who moved from the North to the South and West. Within service industries, large shifts in business services in part were responses to strong demand for advertising, research and development, consulting, and data processing services by corporate management units that moved from the North to the South and West. Large shifts in hotels, amusement-recreation services, and eating-drinking places in part were responses to large increases in the number of tourists to the South and West.

3. From 1959 to 1979, the share of U.S. population accounted for by each southern and western region increased, and the share accounted for by each northern and central region declined. The share accounted for by the southern and western regions as a group increased from 43 to 49 percent.

In 1979-83, the South and West continued to gain, and the North continued to lose, shares in most industrial components of TPI. On an average annual basis, the interregional shifts in most components were as large as in 1959-79 or larger.

In 1979-83, nearly all of the components with large shifts in 1959-79 continued to shift. Computing equipment, electronic equipment, and scientific instruments shifted at accelerating average annual rates; locations near the aircraft and related industries became even more desirable in view of the large national defense buildup in the 1980's. Construction and the related sand-gravel mining and stoneglass manufacturing industries shifted at accelerating or equivalent average annual rates; demand for housing in the South and West continued to be strong, as population migration from the North accelerated.4 In contrast, apparel and textiles shifted at decelerating rates, in part reflecting a narrowing of regional wage rate differentials and a reduced level of production in the North as a base from which to shift. Business services shifted at a decelerating rate as well, as some corporate management units chose northern locations. Hotels and amusement-recreation services shifted at decelerating rates; demand for these services by tourists and business groups in northern metroplitan areas strengthened, as the areas redeveloped their urban commercial centers.

4. From 1979 to 1983, the share of U.S. population accounted for by each southern and western region increased at an accelerating average annual rate, and the share accounted for by each northern and central region except the Plains declined at an accelerating rate. The share accounted for by the southern and western regions as a group increased from 49 to 51 percent.

Intraregional Aspects

Table 3 shows, for each industrial component of TPI in each region and timespan, the percentage-point difference between (1) the percent change in regional TPI, including the component, and (2) the percent change in regional TPI, excluding the component. This measure permits comparison, on a consistent basis within each region, of the relative contributions of each component to the percent change in TPI. A positive difference indicates that a component has a stimulating effect on the change in TPI; that is, the change in TPI is larger with the component than without it. A negative difference indicates that a component has a retarding effect on the change in TPI; that is, the change in TPI is smaller with the component than without it. In this article, an industrial component is referred to as a "major factor' in the change in TPI if it has either (1) a stimulating effect in a region that gains a share of U.S. TPI, or (2) a retarding effect in a region that loses a share of U.S. TPI. Discussions of the major factors for each region and timespan follow. The regions are discussed in descending order, based on the percentage-point change in share of U.S. TPI, 1959-79.

Southeast

In 1959-79, durables manufacturing industries were major factors that stimulated TPI growth; by 1979, the share of the region's total manufacturing income that was accounted for by durables manufacturing was nearly as large as the historically large share attributable to nondurables manufacturing. Among durables manufacturing industries, machinery and instruments were major factors; these industries supplied capital equipment to the region's textiles, apparel, food processing, and paper industries. Machinery and instruments also supplied inputs to defense-related industries, which grew rapidly in the Southeast. The motor vehicles industry, along with related industries, such as rubber tires and fabricated metal forgings-stampings, was a major factor, as some motor vehicles manufacturers from the Great Lakes region chose lower cost locations in nearby Southeast States. Among nonmanufacturing industries, truckingwarehousing and transportation services were major factors, reflecting substantial improvement in both the region's interstate highway network and its relative market size. In addition, eating-drinking places, amusement-recreation services, hotels, and museums were major factors, in part reflecting a large increase in the number of tourists to the Southeast. The health services industry also was a major factor, reflecting rapid growth in the region's population, in particular, in the number of retirees who migrated to Florida.

In 1979-83, nonmanufacturing industries continued to be major factors that stimulated TPI growth. Reflecting the region's continuing attractiveness to tourists, eating-drinking places, amusement-recreation services, and museums again were major factors, and air transportation became a major factor. The health services industry again was a major factor, reflecting the region's continuing rapid population growth.

Southwest

In 1959-79, manufacturing industries that supplied capital equipment for the mining, refining, and transportation of oil and gas, as well as manufacturing industries that used refined oil and gas products as inputs, were major factors that stimulated TPI growth. The machinery and instruments industries were major factors, as they responded to strong demand for oil field, oil refining, and pipeline equipment. The fabricated metals industry, which supplied pipes and valves for oil refining, also was a major factor. In addition, the petrochemicals industry was a major factor; it benefited from the accessibility of large supplies of refined oil and gas products. Among nonmanufacturing industries, both business and legal services were major factors, in part reflecting strong demand for these services by corporate management units that moved to the Southwest from the Mideast.

In 1979-83, the machinery and instruments industries continued to be major factors that stimulated TPI growth. These industries responded to the capital equipment needs of the national defense buildup. In addition, early in the timespan, these industries continued to respond to strong demand for oil field equipment; later in the timespan, however, demand weakened, as oil exploration declined in the face of falling oil prices. In 1979-83, among nonmanufacturing industries, hotels, amusement-recreation services, and museums became major factors, in part reflecting a large increase in the number of tourists.

Far West

In 1959-79, industries that manufactured advanced technological equipment, as well as related nonmanufacturing industries, were major factors that stimulated TPI growth. The scientific instruments, computing equipment, electronic equipment, and plastics industries were major factors; these industries supplied inputs to the aircraft and aerospace industries, which had grown rapidly in the Far West during and after World War II. In turn, the educational services industry, which was a source of innovation and know-how for the advanced technological industries, was a major factor; major universities, such as the California Institute of Technology and Stanford, provided educational services. The business services industry was a major factor; it supplied data processing and consulting services to the advanced technological industries. Among other industries, air transportation, hotels, amusement-recreation services, and museums were major factors, in part reflecting a large increase in the number of tourists. The health services industry also was a major factor, supplying services to the region's rapidly growing population, in particular, the large number of retirees who migrated to California.

In 1979-83, reflecting the national defense buildup, scientific instruments and electronic equipment, as well as the related educational and business services industries, continued to be major factors that stimulated TPI growth. Also reflecting the buildup, the Federal military became a major factor. Petroleum refining became a major factor; the region's refineries gained access to large supplies of Alaskan oil. The health services industry again was a major factor, reflecting the region's continuing rapid population growth.

Rocky Mountain

In 1959-79, industries that expanded in response to an increase in the Nation's demand for domestically produced sources of energy were major factors that stimulated TPI growth, especially after 1973. Oil-gas mining and coal mining were major factors. Machinery and instruments were major factors, in part reflecting the production of oil field and other mining equipment. Among other industries, heavy construction, along with industries that supply it, such as sand-gravel mining and stone-glass manufacturing, was a major factor, as highway construction spurted in the region. In addition, both business and legal services, banking, and other credit agencies were major factors, reflecting the increasing role of the Denver metropolitan area as a supplier of these services to the Rocky Mountain region.

In 1979-83, oil-gas mining and the manufacturing of oil field machinery and instruments continued to be major factors that stimulated TPI growth. Most of the stimulus occurred early in the timespan; later, oil exploration declined in the face of falling oil prices. The manufacturing of other advanced technological machinery and instruments also became a major factor, as the region continued its rapid industrialization. In part reflecting the national defense buildup, transportation equipment (except motor vehicles) and the Federal military became major factors.

Plains

In 1959-79, as large-scale mechanization continued to reduce opportunities for farm employment, farming and related nondurables manufacturing industries and nonmanufacturing industries were major factors that retarded TPI growth. Within nondurables manufacturing, the food processing, leather, and agricultural chemicals industries were major factors. Among nonmanufacturing industries, general building and related sandgravel mining were major factors, in part reflecting reduced demand for farm structures. Brokerage services for farm commodities, as well as the retailing and repairing of farm equipment, also were major factors.

In 1979-83, farming and related industries continued to be major factors that retarded TPI growth. In manufacturing, food processing, leather, and agricultural chemicals continued to be major factors, and the production of farm equipment became a major factor. Outside manufacturing, the wholesaling and trucking of agricultural commodities became major factors, and the retailing and repairing of farm equipment continued to be major factors.

New England

In 1959-79, industries that manufactured nondurable consumer goods, as well as related industries, were major factors that retarded TPI growth. The textiles, leather, and apparel industries were major factors; responding, in part, to increased foreign competition, these industries developed production processes that required larger production sites and a larger supply of unskilled labor than New England could provide. The nonelectrical machinery industry, which supplied capital equipment to the nondurable consumer goods industries, also was a major factor. Among nonmanufacturing industries, domestic services provided to private households were a major factor. The Federal military also was a major factor, in part reflecting large reductions in naval operations in Rhode Island in the 1970's.

After declining in 1959-79, the share of U.S. TPI accounted for by New England increased in 1979-83. Industries that manufactured advanced technological equipment were major factors that stimulated TPI growth. The electronic equipment and scientific instruments industries benefited from scientific innovations developed at major universities, such as the Massachusetts Institute of Technology and Harvard. Business services, which provided data processing and consulting services to the advanced technological industries, also was a major factor. Among other industries, insurance was a major factor, reflecting a resurgence in New England's longstanding role of providing this service to other regions.

Great Lakes

In 1959-79, durables manufacturing industries relating to the production of transportation equipment were major factors that retarded TPI growth. The primary metals, fabricated metals, and machinery industries were major factors; these industries supplied inputs to the motor vehicles industry, which grew less rapidly in the Great Lakes than in most other regions. The railroad equipment increasingly, airplanes and trucks were meeting the Nation's demand for public passenger and freight transportation, respectively. Among nonmanufacturing industries, construction and related sand-gravel mining were major factors; demand for industrial and residential structures weakened, as both manufacturing firms and workers relocated to the South and West. Retail trade industries also were major factors, in part reflecting slow growth in personal consumption expenditures as a result of population outmigration.

In 1979-83, as domestic motor vehicle production declined in the face of strong foreign competition, high interest rates, and economic recession, transportation equipment and supplier industries continued to be major factors that retarded TPI growth. Among supplier industries, primary metals, fabricated metals, and machinery continued to be major factors, and rubber tire manufacturing became a major factor. Among other industries, construction and retail trade continued to be major factors, as a decline in Great Lakes population dampened the demand for housing and consumer goods. No other region had a population decline.

Mideast

In 1959-79, mining and related manufacturing industries were major factors that retarded TPI growth. Coal mining was a major factor, reflecting the continued displacement of coal by oil as an energy source. The nonelectrical machinery industry, which manufactured coal mining equipment, was a major factor. The primary metals industry was a major factor; new steel producers tended to locate "minimills,' which use production processes that are scrap metal-intensive and coal-saving, near rapidly growing markets in the South and West, at the expense of traditional production sites in the Mideast. The chemicals industry also was a major factor; the use of oil instead of coal as an input encouraged manufacturers of industrial chemicals to locate petrochemicals plants near Southwest oil and gas fields. The apparel industry was a major factor, in part because the increased use of synthetic fibers encouraged apparel manufacturers to choose sites near petrochemicals suppliers, and in part because the manufacturers chose sites with lower labor and distribution costs. Among nonmanufacturing industries, railroad transportation was a major factor, in part reflecting a decline in the volume of coal traffic. Wholesale trade was a major factor, in part reflecting the decline of the New York metropolitan area, relative to southern and western areas like Miami and Los Angeles, as a center for international trade.

After declining in 1959-79, the share of U.S. TPI accounted for by the Mideast increased in 1979-83. Financial, business, and other services were major factors that stimulated TPI growth; rapid increases in service industries tended to offset slow growth or declines in the production of many types of manufactured goods. Banking, security-commodity brokers, and insurance were major factors, reflecting the revitalized role of the New York metropolitan area as a supplier of these services to other regions. Business and legal services were major factors; these industries met a strong demand for advertising, consulting, and related services by corporate management units, some of which located in the Mideast in 1979-83. Hotels, amusement-recreation services, and museums were major factors; the redevelopment of urban commercial centers in New York, Philadelphia, and Baltimore, as well as the construction of casinos in Atlantic City, encouraged increased tourism and business travel.

Table: 1.--Percentage-Point Change in Share of U.S. Total, for Total Personal Income by Industrial Component, 1959-79 and 1979-83, BEA Regions

Table: 2.--Percentage-Point Change in Share of U.S. Total, for Total Personal Income by Industrial Component, 1959-79 and 1979-83, Southern and Western Regions

Table: 3.--Percent Change in Total Personal Income (TPI), by Industrial Component, 1959-79 and 1979-83, BEA Regions
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Author:Friedenberg, Howard; Bretzfelder, Robert
Publication:Survey of Current Business
Date:Nov 1, 1984
Words:3518
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