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Cyclical Behavior of Productivity in the Machine Tool Industry

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Cyclical Behavior of Productivity in the Machine Tool Industry Cyclical behavior of productivity in the machine tool industry Productivity growth was slow during 1958-80, partly because of the industry's tendency to retain skilled workers during cyclical downturns; computers and other electronic equipment aided production, but diffusion of such innovations has been slow JOHN DUKE AND HORST BRAND Output per employee-hour in the machine tool industry Machine tools Manufacturing rose at an average annual rate of 1 .1 percent over the Upswings : 1958-80 period-significantly below the 2.8-percent 1958-59 . 23.1 4.8 rate for manufacturing.' A combination of factors 1961-66 . 5.6 4.4 slowed productivity in the machine tool industry, in- 1971-74 . 7.8 2.9 1976-80 . 2.4 0.9 cluding the tendency of machine tool firms to keep highly skilled workers on the payroll, even when output Downswings : fell during cyclical slowdowns, and the slackened de- 1959-61 . 2.0 1 .7 mand for capital goods after the mid-sixties. However, 1966-71 . 4.2 2.0 the slowdown was moderated by technological advances 1974-76 . 5.2 3 .7 in the manufacture of machine tools, as well as by high Productivity in both the metal cutting and metal rates of productivity improvement in periods of cyclical forming segments of the industry paralleled the cyclical recovery. patterns shown above, although ,amplitudes differed . Until 1966, productivity in the machine tool industry Productivity improvement averaged 1 .5 percent annual- rose at a high annual rate, but thereafter the rate de- ly in metal cutting (which accounts for three-fourths of clined for several years. Its subsequent recovery re- total industry employment), and 0.1 percent in metal mained incomplete-the high levels of the mid-sixties forming . Upswings in productivity were more pro- were not reattained . The recovery was again interrupted nounced in metal cutting than in metal forming ; down- by a slump in 1974; it resumed in 1977, continuing to swings were more pronounced in metal forming . In 1979, but even then productivity did not top its 1966 metal cutting, productivity dropped in 8 of the 22 years peak . (See table 1 .) The cyclical behavior of productivi- examined (table 2); in metal forming, in 12 (table 3). ty in the industry and in manufacturing is shown in the The drops were only in part associated with general following tabulation (average annual changes in per- business cycles; they occurred in years of economic ex- cent): pansion as well as during contractions . Output recovery slow in the seventies John Duke and Horst Brand are economists in the Office of Produc- The machine tool industry manufactures cutting tools tivity and Technology, Bureau of Labor Statistics. for boring, drilling, gear cutting, grinding, and milling 27 MONTHLY LABOR REVIEW November 1981 . Productivity in Machine Tool Industry machines and lathes, as well as forming tools such as Table 1. Productivity and related indexes for the machine punching, shearing, bending, and forming presses. These tool industry, 1958-80 tools are usually shipped as units, that is, as single-pur- [1977 = 100] pose machines, but their basic features may also be Year Output per employee-hour output Employee-hours combined into "machining centers." The machine tools 1958 . 71 .5 63 .0 88 .1 may be equipped with manual controls or with pro- 1959 . 88.0 79 .2 90 .0 grammed numerical controls which require little labor 1960 . 84 .7 82 .8 97 .8 by users. Machine tools are not mass produced, al- 1961 . 84 .5 77 .4 91 .6 1962 . 88.5 88 .0 99 .4 though they may make mass production processes pos- 1963 . 90.1 93 .0 103 .2 sible in user industries . Rather, the parts and 1964 . 99.9 112 .3 112 .4 1965 . 101 .4 125 .3 123 .6 components of a finished machine tool are usually made 1966 . 111 .7 156 .1 139 .8 in relatively small batches, and require comparatively 1967 . 101 .8 149 .9 147 .3 large amounts of labor. 1968 . 97.9 137 .6 140 .5 1969 . 100.1 137 .8 137 .7 Output in the machine tool industry rose at an aver- 1970 . 91.7 112.0 122.1 age annual rate of 1 .6 percent between 1958 and 1980, 1971 . 87.9 81 .4 92 .6 . Underly- 1972 . 98.0 91 .2 93 .1 compared with 3.8 percent for manufacturing 1973 . 107.3 116 .3 108 .4 ing the long-term trend were cyclical swings of consid- 1974 . 109.4 127 .4 116 .5 1975 . 103.0 109 .1 105 .9 erable amplitude. The metal cutting and metal forming 1976 . 98.4 93 .9 95 .4 segments of the industry traced similar cyclical patterns. 1977 . 100.0 100.0 100.0 (See table 4.) 1978 . 102.6 111 .8 109 .0 1979 . 107.0 125 .9 117 .7 The following tabulation shows the cyclical behavior 1980 . 106.9 129 .1 120 .8 of output in the machine tool industry and in manufac- Average annual ra tes of change (in p ercent) turing, 1958-80 (average annual changes in percent): 1958-80 . 1 .1 1 .6 0 .5 1975-80 . 1 .3 5 .4 4 .0 Machine tools Manufacturing Upswings : 1958-59 . 25.7 11 .7 During the seventies, a number of metalworking in- 1961-66 . 14.6 8.2 dustries representing key markets for machine tools reg- 1971-74 . 17.2 5.9 197(-80 . 9.1 2.9 istered comparatively slower growth or actual declines in output. For example, production of motor vehicles Downswings : after the mid-sixties rose at only about one-half the rate 1959-61 . -1 .1 0.2 for 1959-66. Similarly, output growth of construction 1966-71 . -11 .1 1 .0 machinery contracted . Steel output,, which had ad- 1974-76 . -14.1 0.9 vanced at more than 5 percent a year until 1966, be- Recoveries in machine tool output during the seven- came stagnant thereafter, then fell, as did output of ties were less vigorous than they had been in the 1958- electric motors and generators, nonferrous metals, 59 and 1961-66 upswings . Slumps were deep. Long- household appliances, and household furniture.' term factors contributing to the comparative weakening Furthermore, expenditures for machine tools dropped of output included the volatility in the demand for pro- as a proportion of total equipment expenditures by ducers' durable equipment. Following 12 percent annual manufacturing firms. In the sixties, such expenditures increases in' the 1961-66 period, growth in demand for accounted for 11 percent of the total, in the seventies, producers durable equipment contracted to 2 percent a for only 9 percent. Moreover, imports increasingly year for 1966-71. Demand rebounded at an 11-percent displaced domestic machine tools. In the sixties and up annual rate in the early seventies, declined by 3 percent to 1973, machine tool imports averaged well under 10 annually over the 1974-75 period, then recovered to a percent of total U.S. machine tool units purchased; 10-percent annual growth rate in 1976-79. Even so, the thereafter, the volume of machine tool imports soared, long-term growth in the demand for producers' durable and by 1978, they accounted for 21 percent of total equipment slackened in the seventies (compared with units purchased.' In contrast, exports did not rise mark- the demand in the sixties) from an average annual edly relative to output-exports represented 8 percent growth rate of 8.1 percent in 1958-68 to 4.8 percent in of machine tool units purchased in the sixties and about 1968-79. However, the levels of the sixties were consis- 10 percent in the seventies. tently exceeded subsequently-contrary to the situation Still another factor underlying slackened output of in machine tool output and productivity . Thus, the rela- machine tools has been the rapid rise in their productive tion between producers' durable output and machine capacity. (This factor will be explained more fully later tool output clearly weakened. in this article.) A study of more than 350 companies 28 showed that reduced machining time for numerically Table 3. Productivity and related indexes for metal controlled (or programmed) machine tools ranged from forming, 1958-80 35 percent to 50 percent .' According to the American [1977 - 100 Machinist's periodic inventories of metalworking equip- Year Output per employee-hour Output Employee-hours ment, the "population" of machine tools in use did not change significantly between 1963 and 1976-78, but the 1958 . 83 .6 784 938 1959 . 102 .8 951 92 .5 output of the metalworking industries using them gener- 1960 . 94 .5 88.9 94 .1 ally increased, indicating rising productive capabilities 1961 . 98 .0 91 .9 93 .8 of the machine tools, particularly those equipped with 1962 . 105 .7 1043 98 .7 1963 . 108 .4 107 .5 992 numerical controls.` Some engineering authorities main- 1964 . 115.5 122.2 105.8 1965 109 .3 1271 1163 tain that numerically controlled machine tools permit 1966 . 123 .1 160.8 130 .6 "drastically reduced" handling time because they elimi- 1967 . 112.7 147.9 131 .2 nate the separate operations of transferring and 1968 . 103.9 131.7 126.8 1969 . 107 .0 134 .3 125 .5 clamping and unclamping .' 1970 . 98 .5 1262 128 .1 The relative importance of all categories of machine 1971 . 95 .7 99 .6 104 .1 1972 . 1075 1121 104 .3 tools lessened during 1958-80, except lathes, drill- 1973 . 114 .1 139 .2 122 .0 ing machines, and machining centers. (Machining cen- 1974 . 111 .9 142 .5 127 .4 1975 . 104.0 114.1 109.7 ters combine the separate operations of boring, drilling, 1976 .
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