December 12, 1973
Reports from area businessmen indicate that energy shortages are beginning to affect the District's economy. A wide range of industries has already or is expected to be affected by direct shortages of energy or petrochemical by-products. Labor shortages and order backlogs also remain acute in most industries. Some stockpiling of materials which are in short supply was noted. The effect of currency realignments has improved demand for many products while causing shortages of some materials. In general, area businessmen expect a marked slowing of the District's economy next year.
Manufacturers of automobiles, boats, chemicals, textile and apparel goods, along with poultry producers, advertising firms, telephone companies, airlines, residential builders specializing in second homes, and the tourist industry have all been affected or will be affected by the energy shortage. The two large Atlanta area General Motors auto assembly plants have announced that more than 6,000 workers will be temporarily laid off beginning December 17 to permit retooling for smaller cars. Further reductions in schedules and employment have been announced by airlines headquartered in the District. Miami-based Eastern Airlines has announced that nearly 5,000 employees will be laid off, partially because of fuel shortages.
Several boat manufacturers in Florida and Tennessee have closed temporarily because of a shortage of petroleum derivatives needed in making fiberglass. Telephone companies are having trouble getting commitments for gasoline deliveries this year and next. This will curtail the large repair fleets of cars and trucks operated by these companies. Advertising has also been hit by the energy shortage. One Florida broadcasting company reports that weeks ago major oil companies canceled all long-term advertising contracts; airlines and most national auto producers soon followed. An Atlanta area advertising firm indicates that while most national advertisers have reduced their budgets, local advertising has taken up the slack.
There is also much speculation about the effects of the energy shortage on other industries. Man-made fibers, a petrochemical byproduct, are in short supply and limiting the output of the textile industry. Besides fuel shortages, one textile manufacturer noted that wool is in short supply and that he cannot supply customers with sweaters this winter. Fuel shortages may also cause serious cutbacks in Georgia's $800 million poultry industry, affecting transportation, production of feed, and heating of broiler houses. The fuel shortage is apparently hurting the resort and second-home markets and, in general, changing home-buying patterns, favoring inner city locations over more suburban neighborhoods.
Although some knowledgeable observers still express optimism about Florida's tourist industry, economists for the state reportedly forecasted a rise in Florida's unemployment rate, from the present 2.5 percent to the 6.5 percent range. Motel occupancy along Georgia's interstate highways, where customers are mainly out-of- state tourists, is down, and they are expected to be severely hurt by the gasoline situation.
Shortages of other materials are plaguing many District manufacturers, and there are attempts to stockpile. One large chemical manufacturer has reduced deliveries of polyesters by 10 percent because of a shortage of raw materials made from petrochemical feed stocks. Shortages of steel and boxes are also delaying delivery time, and his customers have attempted to stockpile some of these materials in short supply. The owner of a truck leasing firm felt that tires (again produced from petrochemical by-products) would soon be in short supply and indicated that he was now trying to stockpile a 60-day supply.
Area businessmen indicate that the currency realignments have had a beneficial effect on demand for their products. One textile manufacturer indicated that he could sell his products at higher prices overseas and make greater profits in the short run. The representative of a hosiery mill reports requests for such products as ski and sweat suits that were formerly bought in Hong Kong. A bicycle manufacturer also noted that foreign bicycles are now more expensive than U.S. bicycles and that his company's sales were increasing. The currency realignments may be heightening the shortage of materials, however. One textile manufacturer indicated that textile material shortages have been aggravated because foreign countries have stopped selling to the U.S. now that the foreign price is higher. Currency realignments also have intensified the steel shortage. One commercial contractor notes that wire mesh and bar steel are in short supply and that foreign countries will not sell to the U.S. now. Many U.S. scrap dealers are now selling in foreign rather than domestic markets because of the currency realignments, thus intensifying the steel shortage.
Most businessmen contacted were concerned over acute labor shortages. Without exception, they were unable to find labor, particularly skilled labor. However, they expected labor shortages to ease somewhat next year, since the general consensus was a marked slowing of the District economy, with shortages of energy and energy-related by-products largely responsible.