October 13, 1971
Business conditions in the District are showing some signs of pickup, particularly in the depressed manufacturing sector. It seems likely that September may prove to be the low point in the recent sluggish phase of manufacturing activity, as well as the high point for unemployment. Although depressing effects from steel inventory liquidation are in large part over, near-term improvement in production is expected to be moderate.
Our latest survey of District manufacturers showed an increase in new orders in September, following weaknesses during the previous three months. Firms' anticipations for October call for further increases in new orders and shipments, a leveling in backlogs, which have been declining for some time, and a continued reduction in inventories. Although employment is expected to remain sluggish in October, firms anticipate an increase in the workweek.
The District's insured unemployment rate rose 0.5 percent in September, following an 0.4-percent increase in August. Unemployment began to decline toward the end of September; and it is likely that last month will have been the cyclical peak for the District's insured unemployment rate. Some metropolitan areas that are heavily dependent on the steel industry have recently suffered sharp increases in unemployment. From mid-July to mid-September, the insured unemployment rate went from 3.0 percent to 13.8 percent in Youngstown-Warren, from 4.1 percent to 9.6 percent in Canton, and from 4.3 percent to 6.7 percent in Pittsburgh. There were still scattered reports of layoffs in the steel industry in October.
Economists from the major steel companies in the District all reported an improvement in new orders in September, although two emphasized that their orders were well below normal. Steel orders from the auto industry have been running at about 20 percent of their consumption rate in October, compared with 50 percent during the 1968 inventory liquidation period. Auto firms are expected to be taking normal deliveries of steel by December, however. The economists estimated that steel inventories would be back to the prestrike hedge level sometime in November, but they also expect steel consumers to reduce inventories further in December. The economists asserted that inventory liquidation will definitely be over by year-end. The three steel industry economists agreed that steel ingot production, on a seasonally adjusted basis, would increase slightly less than 5 percent from the third quarter to the fourth quarter.