The Chemical World This Week
CHEMICAL LABOR EFFICIENCY IMPROVES Another sign of an aging recession seems to be showing up in the chemicals and allied products in dustry. This is a sharp efficiency drive by companies to arrest falling labor productivity and soaring unit labor costs. Preliminary results figured by C&EN from government data for the first quarter are encouraging. Month-by-month figures for labor productivity (physical output per man-hour) show a slight rise after a low point in January. Unit labor costs (labor costs per unit of physi cal output) appear to be leveling off at a peak. These two changes have occurred even though production itself has continued to fall through out the winter. The production dropoff for chem icals and allied products has been steep. Preliminary first-quarter fig ures show seasonally adjusted pro duction down 9.1% just from the fourth quarter of 1974, which itself was down 5.0% from the third quarter. By contrast, seasonally adjusted productivity in the first quarter dropped 1.8% from the fourth quar ter of last year. This rate is less than the 2.5% drop from the third to fourth quarters and far less than the drop in production. At the same time, unit labor costs in the first quarter rose 3.9% over the fourth quarter of 1974. This is an alarming rate but is still less than the 5.6% climb from the third to fourth quarter. The reason behind these strengthened efficiency rates is a painful cut in man-hours by chemi cals and allied products produc ers—7.3% in the first quarter from the fourth quarter of 1974, after a 2.6% cut in the fourth quarter from the third quarter. The result of this slash is that actual time worked now is considerably less than at the
Chemical productivity turns upward after sharp decline Febru- January ary March 1975a 1975 1974
Index, 1967 = 100
March 1975a
Productivity^ Unit labor costs0 Production
142.7 142.4 117.1 116.6
141.8 116.9
149.1 100.6
134.0
137.7
155.5
135.7
a Preliminary, b Calculated by dividing index of physical production by index of man-hours, c Calculated by dividing index of hourly wages by index of productivity. Source: C&EN calcula tions from U.S. government data
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C&EN May 12, 1975
bottom of the 1970 recession or, for that matter, less than at any time in the past eight years. However unpleasant, this manhour cutting appears to have stopped the steady erosion in chemical labor efficiency of the past two years. From a peak annual gain of 9.7% in 1972, productivity gains fell to 3.9% in 1973 and 0.7% in 1974. At the same time, unit labor costs changed direction radically. The comfortable 2.7% drop in 1972 gave way to gains of 2.3% in 1973 and 7.4% in 1974. This flabby efficiency perfor mance in 1973 and 1974 was worse than usual for the last part of a business expansion. In 1969, for ex ample, the last good year before the 1970 recession, chemicals and allied products had a 7.4% gain in pro ductivity and a 1.0% drop in unit labor costs. Figured on a year-to-year basis, chemical productivity and unit labor costs still look pretty bad. First-quarter productivity actually fell 4.5% from first-quarter 1974, the worst drop in at least eight years. Similarly, unit labor costs in the first quarter were 16.2% over
these costs in hrst-quarter 1974—again, the sharpest increase in at least eight years. For compari son, chemical production in the first quarter was 12.5% off the pace of first-quarter 1974. About the only efficiency factor that is not looking weak at this point is wages. Hourly wages in the chemicals and allied products in dustry rose steadily this winter as indeed they have almost every month since figures have been kept. Still, the 2.1% rise in the first quar ter over fourth-quarter 1974 was considerably less than the quarterto-quarter increases of 2.9% in the fourth quarter and 3.7% in the third quarter. Hence, even the inexorable rise in wages has moderated. That means wages are a bit less a spur to unit labor costs than they have been. The only efficiency factor that is still worsening quarter by quarter is production. But here, too, the most recent monthly readings show a far lower rate of drop than the figures last fall. Any turnaround in pro duction would greatly accelerate the turnarounds that may have hap pened in productivity this winter, π
Unemployment continues to worsen There are some signs that the worst of the current recession may be over. In the chemical area, for in stance, production of plastics and man-made fibers has moved up from the extremely low levels of earlier in the year. However, the worst is apparently far from over as far as unemploy ment is concerned. Joblessness reached a new post-World War II high last month. And unemploy ment traditionally has been some what of a lagging indicator of the state of the economy. The previous recession officially ended in late 1970. But chemical industry em ployment, for instance, did not bot tom out until some 18 months later. This recession so far has been largely a blue-collar one. But there are growing indications of weak nesses in the white-collar job mar ket, too. In April there were 8.2 million unemployed (seasonally adjusted) in the U.S., 8.9% of the work force. This was up from 8.0 million, or
8.7% of the work force, one month earlier. One year earlier there were a considerably more modest 4.5 million unemployed, 5.0% of the workforce. There was one encouraging sign last month, however. The total number employed moved up 240,000 from the March level to 80.8 million on a seasonally adjust ed basis. This represented the first gain in seven months. However, employment of profes sional and technical personnel did not increase last month. In fact, it drifted down to 12.6 million from 12.7 million one month earlier. Un employment among such workers reached a seasonally adjusted 3.4% in April, up from 2.9% one month earlier and 2.3% one year earlier. The actual number of professional and technical workers unemployed reached 450,000 in April, up from 283,000 in April 1974. White-collar employment in the manufacturing industry is also on the decline. In April it was down to 5.24 million from 5.26 million the
previous month and 5.38 million in April 1974. This represents an almost 3% dip in the past year. Bad as it is, this decline is not nearly as bad as the cutbacks that have hit blue-collar workers in the manufacturing industries. In April 1974 manufacturing industries employed 14.6 million production workers. By April 1975 this had dropped a staggering 13% to 12.7 million—and it was still going down, if at a somewhat reduced rate. D
Senate NSF bill omits grant review The legislative portion of the controversy over a House amendment to the National Science Foundation budget bill, which gives Congress veto power over any and all NSF research grants, is drawing rapidly to a close. Within the past few days, the Senate Labor & Public Welfare Committee has unanimously approved for full Senate action an NSF budget bill drawn up by Sen. Edward M. Kennedy's (D.-Mass.) special NSF subcommittee that contains no provision whatsoever relating to the House amendment. It doesn't even contain a small bone to pacify potential Senate backers of the House amendment, which was sponsored by Rep. Robert E. Bauman(R.-Md.). However, there are some substantive differences between the Senate committee bill, which probably will be approved mostly intact in the next week or so by the full Senate, and the House bill. For instance, the Senate committee bill requires for the first time that NSF set aside 10% of its applied research budget for small R&D businesses. This would give small R&D outfits their first substantive crack at NSF monies, with the funds most probably coming from NSF's Research Applied to National Needs program. Depending on whose budget figures are used—House-Senate committee, or Administration—that could mean upwards of $8.1 million for the small R&D firms. Dr. Sam Z. Cardon, president of the American Association of Small Research Companies, who has long been urging that small R&D firms get a crack at NSF research money, applauds the action, commenting that it's a "great start." He adds, "We would like to see the same kind of thinking extended to other government agencies like the Energy Research & Development Administration and the Department of
Health, Education & Welfare." Whether the provision for small R&D firms will be bargained away in a House-Senate conference committee—the House bill contains no such provision—remains to be seen. There are other significant differences to be resolved between the two bills. These include the Senate committee bill provisions for a broadening of public participation in internal NSF planning and policy setting, a roughly $71.2 million difference between levels of NSF's budget authorization, and a $5 million "Science for Citizens Program." This program is designed, among other things, to improve public understanding of public policy issues involving science and technology, and to enable nonprofit, citizens' public interest groups to acquire necessary technical expertise to assist them in dealing with the scien-
the Senate committee bill provides $7 million. Further, the conference committee will have to resolve what to do about the Bauman amendment. Senate conferees will insist strongly that the amendment be deleted. And most likely many of the House conferees will agree. However, whether it will be deleted still depends on Senate floor action—some vestige might be tacked onto the budget bill—and on the makeup and leanings of the conference committee members. D
Breeder reactor costs ballooning
Nuclear energy was in the news again last week, following a report two weeks ago questioning the safety of light-water nuclear reactors used to produce electricity (C&EN, May 5, page 5). Probably the biggest news of the week was a somewhat downbeat report from the General Accounting Office, the Congressional fiscal watchdog agency. The study claims that the current fast-breeder reactor program eventually could cost the federal government an additional $1.7 billion in subsidies before it becomes economically competitive with other forms of energy. Original estimates of $1.8 billion for the breeder program have ballooned to $10.7 billion, GAO says, including $3.5 billion due to inflation. Government subsidies probably would account for only about $300 million of this inflated figure, Kennedy: bigger NSF budget but could grow to $2 billion if subtific and technical aspects of public sidies are needed for more than the first demonstration reactor slated policy issues. As usual, the Senate committee is for operation in 1982 on the Clinch more generous in authorizing money River in Tennessee. for the NSF budget than either the Added subsidies may be needed, House or the Administration. The according to GAO, if the current Senate committee bill authorizes an program fails to achieve its develop$826.6 million budget for NSF. The ment goals and resulting improveHouse voted $755.4 million—pre- ments, and if more conservative cisely the amount sought by the Ad- estimates are made. In addition, the ministration. And there are differ- GAO report calls "optimistic and ences among funding levels for possibly unrealistic" the Energy Respecific programs. For example, for search & Development Administraresearch project support, the Ad- tion's prediction that 186 commerministration sought $380 million, cial fast-breeder reactors will be the House voted $366.3 million, and operating by the year 2000. GAO the Senate committee bill provides says it bases this view on talks with $389 million. For educational pro- utility industries and reactor equipgrams including graduate education ment manufacturers. The comsupport, the Administration sought panies told GAO that, by and large, $73 million, the House voted $89.5 few utilities would be willing to million, and the Senate committee commit the large amounts of capital bill provides $102 million. And for needed unless they were certain that science information activities, the fast-breeder reactors would be techAdministration sought $6 million, nically and economically sound. the House voted $6.2 million, and The GAO report also notes that May 12, 1975 C&EN
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