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June 1993, Vol. 116, No. 6
Alexander Kronemer and J. Edwin Henneberger
L ately, the news has not been good for aircraft manufacturers. Because of the financial turmoil in the airline industry, production rates for new civilian aircraft have fallen in the face of decreases in new orders and cancellations and postponements of orders already on the books. The military sector is heading toward a potentially historic downturn that may significantly depress demand in the long run. Plants are closing, some companies are leaving the aircraft business altogether, and others have gone bankrupt. Tens of thousands of employees have lost their jobs, and many thousands more are at risk.1 Even in international trade, the usually good news is somewhat moderated. Published analyses have been pointing out that, while U.S. aircraft manufacturers maintain a very strong trade balance, the percent of the U.S. market share of free world production had slipped steadily since the mid-1980's, due to the entrance of Airbus and other foreign competitors into the market.2 Now, a new BLS study shows that the industry's productivity performance has also been mixed.3 As measured by output divided by employee hours, productivity increased 3.2 percent per year over the 19-year period from 1972 to 1991. The performance is clouded, however, by the fact that the long-term rate was made up of two very different periods, 1973-79, when productivity rose 3.8 percent annually, and 1979-90, when it rose, on average, just 0.3 percent annually. (These periods were selected because the years 1973, 1979, and 1990 were all peak years of business cycles, as determined by the National Bureau of Economic Research.) The following are compound average annual rates of change for the aircraft industry from 1972 to 1991:
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1 See Jeffery Cole, "Boeing Gets New Demand from United Seeking Change in Delivery of Jetliners," Aviation Week & Space Technology, Feb. 11, 1993, p. A3; John D. Morrocco, "Aspin to Chart Defense Draw Down," Aviation Week & Space Technology, Jan. 4, 1993, p. 28; Jeff Cole, "GPA Wins Pact on Order Cuts from Jet Firms," The Wall Street Journal, Jan. 25, 1993, pp. A3, A5; Jeff Cole, "McDonnell to Cut 10% of Work Force, Many at Its Commercial Aircraft Unit," The Wall Street Journal, Jan. 25, 1993, p. A5; Richard M. Weintraub, "Boeing, Pratt & Whitney Plan Huge Job Cutbacks," The Washington Post, Jan. 27, 1993, pp. F1, F3; and Jeff Cole, "Boeing Reduces Its Production of All Jetliners," The Wall Street Journal, Jan. 27, 1993, pp. A3, A5.
2 See Standard and Poor's Industry Surveys, "Aerospace and Air Transportation: Basic Analysis," July 25, 1992, p. A15; and International Trade Administration, U.S. Department of Commerce, 1993 U.S. Industrial Outlook (Washington, U.S. Government Printing Office, January 1993), pp. 20-27.
3 The aircraft industry is designated by the Office of Management and Budget as SIC 3721 in the 1987 Standard Industrial Classification Manual. This industry comprises establishments engaged primarily in the manufacture of completed aircraft. Establishments engaged primarily in manufacturing engines and other aircraft parts and auxiliary equipment are classified into SIC's 3724 and 3728.
The average annual rates of change in the text are computed using the compound rate formula. These rates reflect the average rates of growth between beginning and ending years. For comparisons among periods, peak years in the business cycle were chosen as the beginning and ending years.
Extensions of the indexes will appear annually in the BLS bulletin, Productivity Measures for Selected Industries and Government Services. A technical note describing the methods used to develop the indexes is available from the Bureau's Office of Productivity and Technology, Division of Industry Productivity and Technology Studies.
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