Knox, Hugh W.

English

Research Papers in Economics

Invited Presentation
Emerging Trends in Agricultural-Based
Industries in the Northeast
Hugh W. Knox
The Bureau of Economic Analysis (BEA) at the
U.S. Department of Commerce produces long-term
regionalprojectionsof income, population, percapita
income and earnings, and employment by industry
for regions, states, Metropolitan Statistical Areas,
and BEA Economic Areas on a regular basis. The
projections are prepared every five years and were
last published in 1990.1
The program originated in the 1960s at the re-
quest of the federally sponsored Water Resources
Council. The projections have been utilized since
then for program planning in several major infra-
structure agencies, among them the Corps of En-
gineers, the Federal Highway Administration, the
Environmental Protection Agency, and the Ten-
nessee Valley Authority.
There are several characteristics of the BEA pro-
jection program that make the projections useful
for planning infrastructure that has both a long lead
time and a long useful life:
l flexible geographic and industrial detail
l a consistent national framework
l an assumption of a full-capacity/full-employ-
ment economy
The flexible geographic and industry detail makes
it possible to aggregate the projections into those
areas and industry clusters that are of interest to
users. For this paper, the projections in Table 1
are aggregated to shed light on emerging trends in
agricultural-based industries in the Northeast. The
“Northeast” is defined as the sum of the New
England and Mideast regions, essentially Mary-
land, Washington, DC, Delaware, and points north.
Hugh W. Knox is associate director for regional economics at the Bureau
of Economic Analy ais, U.S. Department of Commerce. This paper is
excerpted from an invited presentation to the Northeastern Agricultural
and Resource Economics Association, 18 June 1991, at Durham, New
Hampshire.
1 See U ,S. Department of Commeree, Bureau of Economic Analysis,
“Regional and State Projections of Income, Employment, and Popula-
tion to the Year 2000” by Kenneth P. Johnson, John R. Kort, and
Howard L. Friedenbcrg, Survey of Current Business, May 1990.33-
54.
“Agricultural based” is defined here as (1) farms,
(2) agricultural services, forestry, and fisheries, and,
stretching a bit, (3) certain durables and nondur-
able manufacturing sectors. About half of man-
ufacturing (by employment) could be considered
agricultural based, for example, in such sectors as
food and kindred products, paper and allied prod-
ucts, tobacco manufactures, and lumber.
The regional projections are designed to be con-
sistent from one region to another and to be con-
sistent with reasonable projections of the national
economy—two characteristics not always present
in the regional projections available to the major
infrastructure agencies in the 1960s. In those days,
the sum of locally generated projections would often
result in national growth rates several times a rea-
sonable growth rate for GNP. The natural optimism
of local forecasters led to local boomlets that im-
plied unrealistic GNP growth rates. A consistent
national framework means that for one region or
one industry to grow more quickly than the nation,
some other region or industry must grow more
slowly. Not all local economies can grow faster
than the national economy.
The full-employment perspective reflects a de-
sire on the part of the agencies planning infrastruc-
ture for the long term to be able to abstract from
short-term cyclical changes in the economy. This
means that the trends projected represent an econ-
omy functioning at full employment, although the
underlying historical data often reflect an economy
at much less than full potential. The desire to pro-
ject full-employment trends led to special problems
in projecting for the northeastern region under con-
sideration in this paper. The decade of the 1980s
was one of rapid growth for the Northeast, but as
the projections were being prepared, it was clear
that historical growth rates would not continue into
the 1990s. Whether the slowdown projected in Ta-
ble 1 will prove to approximate long-term full-
employment trends will be evaluated over the next
several years.
The projections methodology has many com-
ponents, both for the nation and for the states. For
the purposes of this paper, I characterize the pro-172 October 1991 NJARE
Table 1. Earnings and Employment Growth Rates, Total Industry and Selected Agricultural-
Based Industries, for the Nation and the Northeast, Selected Years 1979-2000
Earnings Employment
1979– 1988 1988–2000 1979-1988 1988-2000
United States
Total Industry
Farm
Agri. services, forestry, & fisheries
Nondurable
Food
Textiles
Paper
Tobacco
Leather
Durables
Lumber
New England
Total Industry
Farm
Agri. services, forestry, & fisheries
Nondurable
Food
Textiles
Paper
Tobacco
Leather
Durables
Lumber
Mideast
Total Industry
Farm
Agri. services, forestry, & fisheries
Nondurable
Food
Textiles
Paper
Tobacco
Leather
Durables
Lumber
2.02
– 3.02
3.02
0.39
–0.54
– 1.68
0.68
0,90
–5.10
–0.66
–0.54
3.97
– 1.83
5.70
0.46
–0.44
–3.04
0.36
6.31
–6.99
0.80
1.42
2.51
– 1.91
4.94
–0.07
–0.39
–3.77
–0.63
–5.14
–5.53
– 2.38
2.50
(Average annual growth rate, in percent)
1.94
0.42
3.12
1.25
0.63
1.15
1.26
1.16
–0.75
1.08
1.88
1.63
0,13
2.13
0.66
–0.30
–0.47
0.76
0.69
– 2.02
0.54
1.43
1.62
0.33
2.60
0,75
0,17
–0.31
0.97
– 1.24
– 1.24
0.32
2.09
1.92
– 1.78
5.21
–0.35
–0.65
–2.13
–0.22
– 2.47
–5.84
–1.14
–0.03
2.50
–2,31
5,94
– 1.78
– 2.23
–4.80
–1.15
1.33
– 8.27
–0.93
0.72
1.66
– 0.99
5.58
–1.57
– 1.40
– 4.49
– 1.55
–9.37
–6.68
–2.87
I.50
1.12
– 0.63
2.74
0.38
0.04
0.16
0.12
–0.53
– 1.81
0.20
1.01
0.97
–0,63
2.48
–0.23
–0.69
– 1.05
–0.31
–0.74
–2.83
–0.22
0.65
0.88
–0.56
2.61
–0,16
–0,32
– 1.07
–0,21
–2.71
–2.27
– 0.48
1.22
Source: U.S. Department of Commerce, Survey of Current Business, May 1990, pp. 40, 42.
cess as having three steps: national, state, and BEA/
state review. In the first step, preliminary national
projections were developed for 1995, and 2000 and
beyond.2 GNP was projected based on projections
of population, labor force, employment, and GNP
per employee. The populationprojectionswete based
mainly on the work of the Census Bureau, and the
labor-force projections were based mainly on the
work of the Bureau of Labor Statistics. The meth-
odology assumes that an acceptable estimate of a
full-employment labor force combined with an es-
2 For a detailed discussion of methodology, see U.S. Department of
Census, Bureau of Economic Analysis, BL?A Regional Projections m
2040, Vol. 1: States, 1990, M-2-M-12,
timate of how productive that labor force is will
provide a reasonable estimate of full-employment
GNP. Full employment was assumed to be an un-
employment rate of 5’%0 and productivity growth
was projected to be about 170per year. For 1995,
alternative national projections of total personal in-
come, and employment and earnings by industry
(derived by summing econometric projections for
states) were used to help set the national totals.
In the second step, preliminary state projections
of employment and earnings by industry, popula-
tion, and total personal income were made within
the framework of the corresponding projected na-
tional totals. The methodology focuses initially on
the historical patterns of change in the share of anKnox Emerging Trends in Agricultural-Based Industries 173
industry’s employment in a state relative to the
nation. A key assumption underlying the meth-
odology is that states and industries will not main-
tain especially high or low growth rates forever.
Countervailing economic forces, such as migration
to fast-growing areas or the movement of jobs to
lower-labor-cost areas, will lead to a long-term nar-
rowing of state per capita income differentials, Be-
ginning in 1929,the firstyear in BEA’s statepersonal
income series, such narrowing has taken place with
the exception of the 1980s, when areas such as
New England and the Mideast diverged from the
national average.3
In the final step, an intensive and detailed eval-
uation of the preliminary projections by BEA staff
and by the state government agencies and univer-
sities that participate in the Federal-State Cooper-
ative Program for Population Projections was
undertaken before the results were made final. The
comments from state representatives are especially
valuable in identifying changes that may have long-
term significance but which do not yet show up in
the historical data. The results of the projections
are shown in Table 1 and discussed below.
Throughout the 1990s, the national economy
(under a fulLemployment assumption) is projected
to have slower annual growth than in the 1980s for
both earnings and employment—for earnings,
1.94% versus 2.02%; for employment, 1.12% ver-
sus 1.92?Z0. This reflects, in part, a slowing of pop-
ulation and a slower rate of increase in participation
rates, resuiting in a slowing in labor-force growth.
The trends for the New England and the Mideast
regions are similar to the nation in direction but
more dramatic, reflecting both the very rapid growth
3 For an in-depth analysis of convergence/divergence in state per capita
income, see U. S, Department of Commerce, Bureau of Economic Anal-
ysis, “Accounting for Regional Differences in Per Capita Personal In-
come Growth: An Update and Extension” by Daniel H. Garnick, Survey
of Currem Busines$, January 1990, 29-4),
in those regions in the 1980s and their very slow
growth currently. For New England, annual earn-
ings growth is projected to slow to 1.63% from
3.97%, and for the Mideast, annual earnings growth
is projected to slow to 1.62% from 2.51Yo.Similar
trends are projected for employment.
For the New England region, the only industries
projected to grow close to or faster than the all-
industry national average are agricultural services,
forestry, and fisheries; finance, insurance, and real
estate; and services. For the Mideast, only agri-
cultural services, forestry, and fisheries, and ser-
vices are projected to grow close to or faster than
the all-industry national average, reflecting a pro-
jected sharp falloff in growth rates in the finance,
insurance, and real estate industries. The farm sec-
tor is projected to decline more slowly in New
England and to show only modest growth in the
Mideast when comparing the 1990s to the 1980s.
Summary
In summary, from the perspective of the north-
eastern agricultural-based industries vis+vis the
nation and the larger regional macroeconomic pic-
ture, there is strong growth projected in agricultural
services, forestry, and fisheries, and some im-
provement in the farm sector. For those durables
and nondurable manufacturing industries con-
nected to agriculture, only lumber in the Mideast
is projected to grow faster in earnings and em-
ployment than is the nation. However, no agricul-
tural-based industry looms large enough in New
England or the Mideast to strongly influence the
region’s outlook. For the 1990s, the northeastern
regional outlook is for slow to moderate growth,
a significantly different picture from the robust
1980s.

EMERGING TRENDS IN AGRICULTURAL-BASED INDUSTRIES IN THE NORTHEAST

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