First Mover Advantage:
A Portfolio Perspective
of the State’s Industries
at University of Delaware
June 25, 2013
Paul R. Flora, Elif Sen, and Mike Trebing
Economic Analysts
FEDERAL RESERVE BANK
FEDERAL RESERVE OF
BANK
PHILADELPHIA
OF PHILADELPHIA
Disclaimer
Our remarks today reflect our own views,
not the views of the Federal Reserve,
nor others in the Federal Reserve.
First Mover Advantage:
A Portfolio Perspective
of the State’s Industries
ECONOMIC
OVERVIEW
Paul R. Flora
Senior Economic Analyst
FEDERAL RESERVE BANK
FEDERAL RESERVE OF
BANK
PHILADELPHIA
OF PHILADELPHIA
An Early First Mover
One of Delaware’s early
first movers has had an
out-sized impact on the
state’s economy.
[Brochure printed in 1910]
Delaware was largely agrarian
at the start of the Great Depression
Delaware Location Quotients: 1929
Relative to the U.S. = 100
200
175
150
125
100
75
50
25
0
Source: Bureau of Economic Analysis
Delaware
Job growth in Delaware in the 40s and 50s
outpaced the nation’s and neighboring states’
Total nonfarm payroll jobs indexed to 1939 = 100
210
190
170
150
130
110
90
1939
1942
1945
1948
US
DE
Source: Bureau of Labor Statistics
1951
MD
1954
NJ
PA
1957
1960
Delaware grew apace into the early 70s, then
stagnated relative to Maryland and the nation
Total nonfarm payroll jobs indexed to 1959 = 100
210
190
170
150
130
110
90
1959
1962
1965
1968
US
DE
Source: Bureau of Labor Statistics
1971
MD
1974
NJ
PA
1977
1980
Delaware’s fiscal practices were inadequate
to cope with the economic stress of the 70s
Moody’s G.O. Bond Ratings: 1973 to Present
Maryland
Aaa New Jersey
Delaware
Aa1
Aa2
Aa3
A1
Pennsylvania
A2
A3
Baa1
Baa2
Baa3
Below Investment Grade
1973
1977
1981
1985
1989
1993
1997
Note: Rating changes are date specific, but plotted monthly.
Rating refinements occurred in 1997-98;
recalibrations occurred in 2010.
Source: www.Moody’s.com (accessed June 14, 2013)
2001
2005
2009
2013
Relative job growth in the 80s and 90s
mirrored the 40s and 50s
Total nonfarm payroll jobs indexed to 1979 = 100
170
150
130
110
90
1979
1982
1985
1988
US
DE
Source: Bureau of Labor Statistics
1991
MD
1994
NJ
PA
1997
2000
Delaware kept pace with the nation into the 2000s
but has lagged in recent years
Total nonfarm payroll jobs indexed to 1999 = 100
110
105
100
95
90
1999
2002
2005
2008
US
DE
Source: Bureau of Labor Statistics
2011
MD
2014
NJ
PA
2017
2020
Impact of 1990 to 1991 Recession on Delaware
Jobs gained/lost from March 1990 to August 1991
Thousands of Jobs -10
-5
Logging, Mining & Construction
Manufacturing
Wholesale Trade
Retail Trade
Transport, Warehousing & Util.
Information
Finance, Insurance & Real Estate
Professional & Business Services
Educational Services
Health Services
Leisure & Hospitality
Other Services
Total Government
Source: Bureau of Labor Statistics
0
5
10
15
20
Impact of 1991 to 2001 Expansion on Delaware
Jobs gained/lost from August 1991 to March 2001; cumulative change shown in wide bars
Thousands of Jobs -10
-5
Logging, Mining & Construction
Manufacturing
Wholesale Trade
Retail Trade
Transport, Warehousing & Util.
Information
Finance, Insurance & Real Estate
Professional & Business Services
Educational Services
Health Services
Leisure & Hospitality
Other Services
Total Government
Source: Bureau of Labor Statistics
0
5
10
15
20
Impact of 2001 Recession on Delaware
Jobs gained/lost from March 2001 to March 2003 – extends through jobless recovery
Thousands of Jobs -15
-10
Logging, Mining & Construction
Manufacturing
Wholesale Trade
Retail Trade
Transport, Warehousing & Util.
Information
Finance, Insurance & Real Estate
Professional & Business Services
Educational Services
Health Services
Leisure & Hospitality
Other Services
Total Government
Source: Bureau of Labor Statistics
-5
0
5
10
15
20
Impact of 2001 to 2007 Expansion on Delaware
Jobs gained/lost from March 2003 to February 2008; cumulative change shown in wide bars
Thousands of Jobs -15
-10
Logging, Mining & Construction
Manufacturing
Wholesale Trade
Retail Trade
Transport, Warehousing & Util.
Information
Finance, Insurance & Real Estate
Professional & Business Services
Educational Services
Health Services
Leisure & Hospitality
Other Services
Total Government
Source: Bureau of Labor Statistics
-5
0
5
10
15
20
Impact of 2007 to 2009 Recession on Delaware
Jobs gained/lost from February 2008 to February 2010 and cumulative since March 2001
Thousands of Jobs -15
-10
Logging, Mining & Construction
Manufacturing
Wholesale Trade
Retail Trade
Transport, Warehousing & Util.
Information
Finance, Insurance & Real Estate
Professional & Business Services
Educational Services
Health Services
Leisure & Hospitality
Other Services
Total Government
Source: Bureau of Labor Statistics
-5
0
5
10
15
20
Impact of Current Recovery on Delaware
Jobs gained/lost from February 2010 to April 2013 and cumulative since March 2001
Thousands of Jobs -15
-10
Logging, Mining & Construction
Manufacturing
Wholesale Trade
Retail Trade
Transport, Warehousing & Util.
Information
Finance, Insurance & Real Estate
Professional & Business Services
Educational Services
Health Services
Leisure & Hospitality
Other Services
Total Government
Source: Bureau of Labor Statistics
-5
0
5
10
15
20
Payroll jobs are growing in most metro areas;
April 2012 to April 2013
1- Harrisburg-Carlisle
2- Lebanon
3- Lancaster
4- York-Hanover
5- Reading
6- Allentown
-Bethlehem-Easton
7- PhiladelphiaCamdenWilmington
8- Trenton-Ewing
9- Newark-Union
10- Atlantic City
11- Vineland
-Millville-Bridgeton
12- Ocean City
13- Dover
14- Baltimore-Towson
15- Washington, DC
16- Salisbury
Source: Bureau of Labor Statistics
Note: U.S. and Dover payroll job growth was 1.6 percent; Wilmington was 0.7 percent.
Unemployment rates are edging down;
still far from the low rates of the roaring 90’s
Percent
10
9
8.6
8
7.5
7.2
6.7
7
6
5
4
3
2
1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US
DE
Source: Bureau of Labor Statistics
MD
NJ
PA
Unemployment rates in Delaware’s metro areas
closely matched the nation’s rate in April 2013
1- Harrisburg-Carlisle
2- Lebanon
3- Lancaster
4- York-Hanover
5- Reading
6- Allentown
-Bethlehem-Easton
7- PhiladelphiaCamdenWilmington
8- Trenton-Ewing
9- Newark-Union
10- Atlantic City
11- Vineland
-Millville-Bridgeton
12- Ocean City
13- Dover
14- Baltimore-Towson
15- Washington, DC
16- Salisbury
Source: Bureau of Labor Statistics
Note: U.S. unemployment rate was 7.5 percent, Wilmington 7.6 percent; Dover 7.7 percent
Labor force participation is below the level
that would be predicted by aging of the population
Civilian Labor Force Participation Rate (SA)
Percent
72
70
68
66
64
62
60
58
56
1948
1956
1964
1972
US
DE
Source: Bureau of Labor Statistics
1980
MD
1988
1996
NJ
PA
2004
2012
Extent of seriously delinquent mortgages
remains at historic levels
Percent of mortgages in foreclosure, or past due 90+ days
14
13.2
12
10
8.3
7.1
6.5
6.4
8
6
4
2
0
1999
2001
2003
US
2005
DE
2007
MD
NJ
2009
PA
Source: Mortgage Bankers Association
Data are quarterly, last quarter plotted: 2013:Q1
2011
2013
House prices appear to have stabilized
FHFA HOUSE PRICE INDEX
Index: 1989=100
DE
MD
NJ
PA
U.S.
recessions
300
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Federal Housing Finance Agency
Data are quarterly, all transactions, last point plotted: 2013:Q1
House prices are improving along urban corridor;
Change from 2012 Q1 to 2013 Q1
1- Harrisburg-Carlisle
2- Lebanon
3- Lancaster
4- York-Hanover
5- Reading
6- Allentown
-Bethlehem-Easton
7- PhiladelphiaCamdenWilmington
8- Trenton-Ewing
9- Newark-Union
10- Atlantic City
11- Vineland
-Millville-Bridgeton
12- Ocean City
13- Dover
14- Baltimore-Towson
15- Washington, DC
16- Salisbury
Source: Federal Housing Finance Agency
A recovery in home building
has emerged and appears sustainable
(Total Housing Permits)
Index: 1992=100
DE
MD
NJ
PA
U.S.
recessions
250
200
150
100
50
0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: U.S. Census Bureau
Data are a three-month moving average, last month plotted: April
2010
2012
First Mover Advantage:
A Portfolio Perspective
of the State’s Industries
WHITHER
MANUFACTURING?
Mike Trebing
Senior Economic Analyst
FEDERAL RESERVE BANK
FEDERAL RESERVE OF
BANK
PHILADELPHIA
OF PHILADELPHIA
U.S. manufacturing output and employment
Thousands of
Employees
18000
Index
120
110
17000
Industrial
Production
100
16000
90
15000
Manufacturing
Output
80
70
14000
13000
Employment
(right scale)
60
12000
50
11000
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: Bureau of Labor Statistics and Federal Reserve Board
2010
2012
Auto production has led growth
Index, 2007=100
SAAR, Mill. Units
105
14
Motor Vehicle Assemblies
(right scale)
12
100
Industrial
Production
10
95
8
90
Manufacturing
Output
85
6
4
80
2
75
0
00
01
02
03
04
05
06
07
Monthly data: Last point plotted is May 2013
08
09
10
11
12
13
Share %
Manufacturing boosts employment
most prominantly in the Midwest
70
Manufacturing Employment Share
60
57.7%
Share of U.S Manufacturing
Employment Growth
(Since Trough of February 2010)
50
40
The manufacturing sector
has accounted for approx.
14 percent of total job
growth since the trough
of 2010.
29.7%
30
20
14.8%
12.4%
10
0
8.0%
7.2%
7.7%
14.0%
8.8%
-2.2%
Northeast
Midwest
-10
Source: Haver Analytics
South
West
US
Manufacturing employment shares
18
Percent of total payroll employment
Three-State Region
16
14
12
U.S.
10
Delaware
Wilmington Div.
8
6
Dover
4
2
0
1990
1992
1994
1996
1998
2000
Source: Bureau of Labor Statistics
2002
2004
2006
2008
2010
2012
Growth rate of manufacturing employment in DE, U.S.,
and Three States (DE, PA, NJ)
Year over year change (%)
5
U.S.
DE
0
Three States
-5
-10
-15
2006
2007
2008
2009
Source: Bureau of Labor Statistics
2010
2011
2012
2013
Delaware manufacturing output by major
industry
Real Output, Millions of 1985 dollars
6000
5000
4000
Chemical
output tends
to influence
State output.
3000
2000
1000
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total Manufact Output
Source: BEA, Haver
Food
Petroleum
Chemicals
Plastics
Computers
Motor Vehicles
Delaware manufacturing output by major
industry
Real Output, Millions of 1985 dollars
2000
1800
1600
1400
1200
1000
800
600
400
200
Chemicals
Computers
Food
Petroleum
Plastics
Motor Vehicles
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: BEA, Haver
Delaware manufacturing gross state product
by industry (NAICS) from 1997-2011
Remaining Industries 90
80
70
Chemicals
60
50
Food Products
Petroleum & Coal
Motor Vehicles &
Parts
Paper Products
Source: Bureau of Economic Analysis (BEA)
Electronics &
Computers
40
30
20
10
0
Percent of manufacturing gross state product
100
Finance and insurance vs. manufacturing
Share of Delaware’s quarterly personal income by sector (%)
25
20
Finance and Insurance
15
10
Manufacturing
5
0
1990
1992
1994
1996
1998
2000
Source: Bureau of Economic Analysis
2002
2004
2006
2008
2010
2012
First Mover Advantage:
A Portfolio Perspective
of the State’s Industries
A FIDUCIARY
FOUNDATION
Elif Sen
Economic Analyst
FEDERAL RESERVE BANK
FEDERAL RESERVE OF
BANK
PHILADELPHIA
OF PHILADELPHIA
Finance, insurance, and real estate employment
set Delaware apart over the 80s and 90s
Relative to the U.S. = 100
1979
1999
200
175
150
125
100
75
50
25
0
Construction
Wholesale
Trade
Retail Trade
FIRE
Note: SIC Industries
Source: Bureau of Economic Analysis
Services
Business
Services
Health
Services
Education
Services
Legal Services
Credit institutions employment led the way
Relative to the U.S. = 100
1979
1999
400
350
300
250
200
150
100
50
0
FIRE
Credit
Institutions
Security &
Commodity
Brokers
Note: SIC Industries
Source: Bureau of Economic Analysis
Insurance
Carriers
Insurance
Agents, Brokers
Real Estate
Holding & Other
Invest. Cos.
Other FIRE
Despite recent losses, Delaware remains a
financial center
Relative to the U.S. = 100
400
Credit Intermediation and Related Activities
350
300
250
Management of
Companies & Enterprises
Finance, Insurance, and
Real Estate
200
150
Securities, Commodity
Contracts, and Investments
100
Note: NAICS Industries
Source: BEA, Haver
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
50
New sources of strength in health and
recreation?
Relative to the U.S. = 100
260
Management of
Companies & Enterprises
240
220
200
180
Finance, Insurance, and
Real Estate
160
140
Arts, Entertainment,
and Recreation
120
100
80
Health Services
Professional and Technical Services
Education Services
60
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: BEA, Haver
Education and health services has helped prop
up Delaware employment in recent years
Index
2000=100
160
Education & Health
150
140
130
Other Services
120
Leisure & Hospitality
110
100
Financial Activities
90
80
Professional & Business Services
70
Information Services
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: BLS
First Mover Advantage:
A Portfolio Perspective
of the State’s Industries
CONCLUDING
REMARKS
Paul R. Flora
Senior Economic Analyst
FEDERAL RESERVE BANK
FEDERAL RESERVE OF
BANK
PHILADELPHIA
OF PHILADELPHIA
Delaware’s current portfolio of industries will help
determine the state’s future rate of growth
Delaware Location Quotients: 2012
Relative to the U.S. = 100
325
300
275
250
225
200
175
150
125
100
75
50
25
0
Source: Covered Employment and Wages, Bureau of Labor Statistics
Delaware
Summary of Delaware’s Strengths
• An entrepreneurial spirit celebrates first-mover feats
but excels at trumping others with second-mover acts
• The Court of Chancery underlies over 200 years of
innovation in corporate and financial law
• A culture of pragmatic, bipartisan governance fosters
a predictable business climate and healthy finances
• An envied portfolio of generally high-wage industries
stands to grow as the U.S. economy improves
Contact Information
Paul R. Flora
Elif Sen
Mike Trebing
Senior Economic Analyst
Economic Analyst
Senior Economic Analyst
(215) 574-6649
(215) 574-6424
(215) 574-6426
paul.flora@phil.frb.org
elif.sen@phil.frb.org
mike.trebing@phil.frb.org
For online access to our latest data and research, go to:
http://www.philadelphiafed.org/research-and-data/
First Mover Advantage:
A Portfolio Perspective
of the State’s Industries
at University of Delaware
June 25, 2013
Paul R. Flora, Elif Sen, and Mike Trebing
Economic Analysts
FEDERAL RESERVE BANK
FEDERAL RESERVE OF
BANK
PHILADELPHIA
OF PHILADELPHIA