# OAR Box 

# 1781 Prepped by Ollie Stewart



### Document

Number: 

# 68 ) IV-A- 1 Docket Number: 

# A-90-3 7 p. i i

Printed 10/29/200810:46:21 AM Sheet 68of 142P. 2 

# *ER G

Easter n Researc h Group , Inc . 7397-72-0 1 Environmenta l Scienc

e an d 

### S S S September

30 , 199 7
Economi c an d Regulator y Analysi s 

### Mr . Denni s Crumpler Environmenta l an d 

### Offic e o f

Ai r Qualit y Plannin g occupationa l Healt h ^ Standard s Service s 

### Integrate d Implementatio n Grou p (MD.-12 ) Environmental Protectio n Agency software^ppi^on

s Researc h 

### Triangl e Park , N C 2771 1 

## 'i 8 .•Ct^j 

# J

Pollutio n Preventio n 

### Dea

r Dennis : Technoi o Evaluatio n * ^ SUDrmttm 

### g a

### technica l mem o entitle d "Busines s Cycle s i n Major Emittin g Sourc e Industries" . Th e wor k wa s performe d under

Contrac t No . 68-D3-0033 , Wor

k Assignment

IH-72 , "Suppor

t Promulgatio n o f

New Sourc e Revie w (NSR ) Refor m Environmenta l . . „ Samplin g an d Analysi s Regulation s . Technica l Writin g an d

Editin g 

### I f yo u hav e an y question s o r comments , pleas e fee

l free to contac t

m e a t 461-1286 . Sincere )

Graphi c Desig n an d Medi a Service s 

### 'Conno r

Projec t Manager Publi c Relation s an d •_ , . 

### outreac h Enclosure Educatio n an d Trainin g

Equa l Ooportunrr y Employe r Printe d o n Recycle d Pape r 

### JRO'C:ka

m cc : SandraClark , EPA/OAR M (MD-33 ) Mar y Wilkins , EPA (MD-12 ) Jane t Mangum , ER G Darc y Wilson , ERG Projec t Fil e 7397-72-0 1

160 0 Perimete rPar k

(Office ) P.O . Bo x 201 0 Morrisville . N C 27560-201 0 Phone 919-461-141 9 Fa x 919-441 -MI 8 Corporat e Headquarters : 11 0 Hartwel l Avenu e Lexington . M A 02173-313 4 Phon e 617-674-720 0 Fa x 617-674-285 1 220 0 Wilso n Boulevar d Suit e 40 0 Arlington . V

A 2220 1 -332

4 Phon e 703-841-050 0 Fa x 703-841-144 0 90 0 Perimete rPar k (Lab ) P.O . Bo x 201 0 Morrisville . N C 27560-201 0 Phon e 919-461-141 9 Fa x 919-461-157

9 245 5 Horsepe n Road Suit e 22 0 Herndon . V

A 2017 1 -342 6 Phon e 703-713-650 0 Fa x 703-713-654 0P. 3

MEMORANDU

M Date : Septembe r 25,199 7 From : Davi d Casanova , ER G To : Joh

n O'Connor , ER G Subject : Busmes s Cycle s in Majo r Emittin g Sourc e Industrie s
I . Introductio n The ter mbusiness cycle refer s to th e recurren t up s an d down s i n ui e leve l o f economic activit

y whic h extend ove r aperio d O

f severa l years . Busines s cycle s ar

e mad e up o f fou r separat e phases : 1 ) th e peak—output

i s assume d to b e a t or nea r ful l capacity , 2 ) the recession—outpu t an d employmen

t decline , 3 ) th e trough—outpu

t an d employmen

t botto mout

a t thei r lowes t levels , an d 4 ) the recovery—outpu

t an d employmen

t expan d (McConnell , 1984) . Specific busines s cycle s var y greatl y in duratio n an

d intensity . Som

e economist s prefe

r t o us e th e ter m fluctuations, rathe

r tha n cycles, sinc e th e latter

ter mimplie s regularit

y an d th e forme

r doe s no t (McConnell , 1984) . Th

e irregularit

y o f th e fluctuation s i s apparen

t in the dat aexamined in thi s memorandum . Due to th e inconsistencie s o f busines s cycles , ther

e i s muc h difficult y i n drawin g conclusion s about pas t busines s cycle s or

making prediction s abou

t futur e busines s cycle s base d o

n an y one busines s cycle—eithe

r fo r the nationa

l econom y o r fo r individua l industries . II . Busines s Cycle s i n Majo r Emittin g Sourc e Industrie s ERG examine

d severa l industrie s whic

h ar e described as Clea

n Ai r Act majo r emittin g sources . Industr y busines s cycle s wer

e examined usin g industr

y outpu t datafo r the year s 198 2 to 1994 inclusiv e base d o n th e Office o f

Managemen

t an d Budget' s Standar

d Industria l Classification (SIC ) cod

e fo r individua l industrie s (OMB , 1987) . Output wa s measure d a s rea

l gros s produc t

originatin g (GPO ) b y industry . Dat a fo r GP O wer e obtaine d fromth e Burea

u o f Economic Analysi s an

d converted t o 1994 dollar s usin g th e -1 -P. 4

Engineering News Record's Constructio n Cos t Inde x (BEA , 1996 ; BEA , 1997 ; an d ENR, 1997) . GP O i s define d a s th e contributio n o f

each privat

e industr y an d governmen

t t o gros s domesti c produc t

A n industry' s GP O i s equa

l t o it s gros s output

(sale s or receipt s an

d othe r operatin g income , commodit y taxes , an d inventor y change ) minu s it s immediat e input s (consumptio

n o f good s an d service s purchase d fromother industrie s o r

imported ) (BEA , 1996) . Althoug

h datawer e availabl e fo

r year s prio r

t o 1982 , ERG believe s tha t datafrom198 2 o

n presen t amor e accurat e pictur e o f the mode meconom y tha n woul d previou s data. 1 It shoul d b e noted tha

t peak s in abusines s cycl

e ar e usuall y define d a s the las t

quarte r o f growt h befor e a t leas t tw o quarter s o f

declin e an d tha t trough s i n abusines s cycl

e ar e usuall y define d a s th e las t quarte r o f decline befor

e a t leas t tw o quarter s o f

growth . Thes e definition s requir e quarterl y dat ai n orde

r to identif y busines s cycl

e changes . Figure s 1 an

d 2 indicat e the sligh t difference s betwee

n annua l an d quarterly data . Figur

e 1 present s U.S . gros s domesti c produc t using annua

l data ; Figur

e 2 present s U.S . gros s domesti c produc t usin g quarterly data . The annua l dataprovide s a

n pictur e o f a n econom y wit h smoot h constant growth , excep t

fo r abrie f downtur n in 1991 . The quarterl

y dat amor e accuratel y present s the errati c movemen t o f th e U.S . econom

y uirough time ; the recession o f the earl y 1990 s i s muc

h mor e eviden t whe n the quarterly datai s used . Sinc e onl y annua l datawer e available a

t the four-digi

t SI C level , thi s analysi s provide s les s precis e estimate s o f

busines s cycl

e peak s an d troughs . I t

should als o b e note d tha

t the vertica

l scale s fo r eac h o f the figure s diffe

r b y industr y an d should no t

b e used fo r inter-industr

y comparison . Charcoa l Productio n Charcoa l productio n (not

including activated charcoal ) i s include d in SIC cod

e 2861 : Industria

l Organi c Chemicals—Gu

man d Woo d Chemicals . I t

should b e noted tha

t thi s SIC cod

e include s th e manufactur

e o f numerou s othe

r item s whic

h coul d affec t the data . Figur

e 3 present s the annua

l GP O o f thi s four-digi t SI C code . Ther

e ar e industr y peak s in 198

4 an d 1989 , whil

e ther e i s atroug

h i n 1987 . Thi s suggest s afive yea

r cycl e pea k to peak .

'Th e perio d from197 2 t o 198 2 wa s characterized b y double-digit

inflation , th e oi l pric e shock s o f 197 3 an d 1976 , an d th e monetar

y policy-induced recession o f ui e earl y 1980s . Thi s i s wh

y the perio d prio r

t o 198 2 i s no t characteristi c o f

th e perio d sinc e 1982 .Figur e 1

Annual U.S . Gross Domesti c Product , 1982-1994 Trillion s of

199 4 Dollars

cl. i

Source : Slater , C . M . 1996 . Busines s Statistic s of th e Unite d States : 199 5 Edition . Lanham , MD : Berna n Press .

biFigure 2

Quarterl y U.S . Gros s Domesti c Product , 1982-199 4 Trillions o

f 199 4 Dollar s J7. 0

$6. 5

$6. 0 —

$5. 5

$5. 0

M j I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I \ 198 2 198 3 198 4 198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 Yea r Source : Slater

, C . M . 1996 . Busines s Statistics o f the Unite d States : 199 5 Edition. Lanham , MD : Berna

n Press .

1 3Figur e 3

Annual Output , 1982-1994 : Gum and Woo d Chemical s Manufacturin g (SI C Code 2861 ) Billion s o f

1994 Dollars $0. 9

i $0.8 —

199 2 199

3 Source : U.S . Departmen

to f Commerce

, Burea u o f Economi c Analysi s websit

e a thttp7/www.stat-usa.gov/BEN/bea2/national/scbio.hbnl/ves.ex e o n Septembe

r 23,1997 .P. 8

Carbo n Blac k Manufacturin g Carbo n blac k manufacturin

g i s included in SI C cod e 2895 : Miscellaneou s Chemica l Products—Carbo n Black . Figur e 4 presents th e annua

l GP O o f thi s four-digi tSI C code . Ther e ar e industr y peak s i n 198 4 an

d 1990 , whil e ther

e ar e industr y trough s i n 1983,1987 , an d 1992 . Thi s suggest s a si x yea r cycl e peak t o pea

k an d fou r an d fiv e yea r cycle s troug

h t o trough . Portlan d Cemen tManufacturin g Portlan d cementmanufacturin

g i s included i n SI C cod e 3241 : Hydraulic Cemen tFigur e 5 presents th e annua l GP O o f thi s four-digitSI C code . I tshoul d b e noted tha

tthi s SI C cod e include s th e manufactur e o f numerou s othe r item s whic

h coul d affec

tth e data . Ther

e ar e industr y trough s i n 198 3 an

d 1991 ; th e onl y industr y pea k during thi s period appear s t o b e i n 1984 . Thi s suggest s a n eigh tyear cycl e troug

h t o trough . Lim e Manufacturin g Lim e manufacturin

g i s include d i n SI C cod e 3274 : Concrete , Gypsum , an d Plaste r Products—Lime . Figur e 6 present

s th e annua

l GP O o f thi s four-digitSI C code . Ther e ar e industr y troughs i n 1983,1986 , an d 1991 ; ther

e ar e industr y peak s in 198 5 an

d 1988 . Thi s suggest s three an d fiv e yea r cycle s troug

h t o troug h an d a three yea r cycl e pea

k t o peak . Iro n an d Stee l Manufacturin g Iro n an d stee l manufacturin

g i s included i n SI C cod e 3312 : Stee l Works , Blas tFurnaces (Includin g Cok e Ovens) , an

d Rollin g Mills . Figure 7 present s th e annua

l GPO o f thi s four-digi tSI C code . There ar e industr y peak s i n 198 4 an

d 1988 , whil e ther

e ar e industr y troughs i n 1983,1986 , an d 1992 . Thi s suggest s a four yea r cycl e pea

k t o pea k an d thre e an d si x year cycle s troug

h t o trough .Figur e 4

Annual Output , 1982-1994 : Carbo n Blac k Manufacturin g (SI C Cod e 2895 ) Billion s o f

199 4 Dollar s

• U

Source : U.S . Departmen t o f Commerce , Burea

u o f Economi c Analysi s website a t http://www.stat-usa.gov/BEN/bea2/national/scbio.html/ves.ex e on September 23,1997 .

T l C OFigur e 5

Annual Output, 1982-1994 : Hydrauli c Cemen tManufacturin g (SI C Cod e 3241 ) Billion s o f

199 4 Dollars

o o

$4. 2 198 2 198 3 198 4 198 5 198 6 198 7 198 8 Yea r 198 9 199 0 199 1 199 2 199 3 199 4 Source : U.S . Departmen

to f Commerce

, Burea u o f Economi c Analysi s websit

e a thttp://www.stat-usa.gov/BEN/bea2/national/scbio.html/ves.ex e o n Septembe

r 23,1997 .

T l OFigur e 6

Annua l Output, 1982-1994 : Lim e Manufacturin g (SI C Cod e 3274 ) Billion s of

199 4 Dolla n $1. 1



### 4 > $1. 0 —

$0. 9 —

$0. 8 —

$0. 7 198 2 198 3 198 4 198 5 198 6 198 7 198 8 Yea r 198 9 199 0 199 1 199 2 199 3 199 4 Source : U.S . Department

o f Commerce , Burea

u of Economi c Analysi s websit e a t hnp^/www.stat-usa.gov/BEN/bea2/national/scbio.html/ves.ex e on Septembe r 23,1997 .Figur e 7

Annual Output , 1982-1994 : Stee l Works , Blas tFurnace s (Includin g Cok e Ovens) , an d Rollin g Mill s (SI C Cod e 3312 ) Billion s o f

1994 Dolla n $60. 0

$55. 0 —

$50. 0 —

$45. 0 —

$40. 0 198 2 198 3 198 4 198 5 198 6 198 7 198 8 Yea r 198 9 199 0 199 1 199 2 199 3 199 4 Source : U.S . Departmen

to f Commerce

, Burea u o f Economi c Analysi s websit

e a thttpy/www.stat-usa.gov/BEN/bea2/national/scbio.html/ves.ex e o n September 23,1997 .

T lP.1 3

Primar y Coppe r Smeltin g Primar y coppe r smeltin g i s include d in SI C cod e 3331 : Primar

y Smelting an

d Refinin g o f Copper . Figur e 8 present s th e annua

l GPO o f thi s four-digit

SI C code . Ther

e ar e industr y peak s i n 1983,1989 , an d 199 2 whil e ther

e ar e industr y trough s i n 198 6 and 1991 . Thi s suggest s si x an d thre e yea

r cycle s pea

k t o pea k an d afive yea

r cycle trough to trough . Primar y Aluminu mProductio n Primar y aluminu mproductio n i s included i n SI C cod e 3334 : Primar

y Productio n o f

Aluminum , Figur e 9 present s th e annua

l GPO o f thi s four-digi

t SI C code . Ther

e ar e industr y peak s i n 198 3 and 1988 , whil e ther e ar e industr y trough s in 198 6 an

d 1993 . Thi s suggest s afiv e yea r cycle pea k t o pea k an d aseven yea r cycle trough t o trough . Primar y Zin c Smeltin g an d Primar y Lea d Smeltin g Primar y zin c smelting an

d primar y lea d smeltin g ar

e include d in SI C cod e 3339 : Primar

y Smeltin g an d Refinin g o f Nonferrou s Metals , Excep t Coppe r an d Aluminum . It

should b e note d tha

t thi s SI C code include s th e manufactur

e o f numerou s othe

r item s whic

h coul d affec t the data . Figur

e 1 0 present s th e annua

l GP O o f thi s four-digit

SI C code . Ther

e ar e industr y peak s in 198 3 an

d 1989 , whil e ther

e ar e industr y trough s i n 198 6 an d 1993 . Thi s suggest s asi x yea r cycle pea k to pea k an d aseve n yea r cycle trough t o trough . Secondar y Meta l Productio n Secondar y meta l productio n i s included in SI C cod e 3341 : Secondar

y Smelting an

d Refining o f Nonferrou s Metals . Figur

e 1 1 present s th e annua

l GP O o f thi s four-digi

t SI C code . Ther

e ar e industr y peak s i n 198 4 an d 1988 , while ther

e ar e industr y trough s in 198 6 an

d 1993 . Thi s suggest s afou r yea r cycl e pea k t o pea k an d aseve n yea r cycl e trough t o trough . -11 -Figur e 8

Annua l Output , 1982-1994 : Primar y Smeltin g an d Reflning o f Coppe r (SI C Cod e 3331 ) Billion s of

199 4 Dolla n $7. 0



## V $6. 0 —

$2. 0 198 2 198 3 198 4 198 5 198 6 198 7 198 8 Yea r 198

9 199

0 1991 199 2 199

3 199

4 Source : U.S . Departmen

t o f Commerce , Burea

u of Economi c Analysi s website a t http://www.stat-usa.gov/BEN/rjea2toational/scbio.html/ves.ex e o n Septembe r

23,1997 .Figur e 9

Annual Output , 1982-1994 : Primar y Productio n o f

Aluminu m (SI C Cod e 3334 ) Billion s o f

1994 Dolla n $10. 0

I

$5. 0 198 2 198 3 198 4 198 5 198 6 198 7 198 8 Yea r 198 9 199 0 199 1 199 2 199 3 199 4 Source : U.S . Departmen

to f Commerce

, Burea u o f Economi c Analysi s websit

e a thttp://www.stat-usa.gov/BEN/bea2/naticmaVscbio.htrnl/ve3.ex e o n Septembe

r 23,1997 .

T lFigur e 1 0

Annua l Output , 1982-1994 : Primary Smeltin g and Reflnin g of Nonferrou

s Metals , Excep tCoppe r and Aluminum (SI C Cod e 3339 ) Billion s of

199 4 Dolla n $6. 0

Source : U.S . Departmen

to f Commerce

, Burea u of Economi c Analysi s websit

e a thttp://www.stat-usa.gov/BEN/bea2/nati<mal/scbio.html/ves.ex e o n Septembe

r 23,1997 .

T JFigur e 1 1

Annua l Output , 1982-1994 : Secondar y Smeltin g and Reflnin g o f Nonferrou s Metal s (SI C Code 3341 ) Billion s o f

199 4 Dolla n $9. 0

CJ\ i

$5. 0 198 2 198 3 198 4 198 5 198 6 198 7 198 8 Yea r 198 9 199 0 199 1 199 2 199 3 199 4 Source : U.S . Department

o f Commerce , Burea

u o f Economi c Analysi s websit e a t http://www.stat-usa.gov/BEN/bea2/hau'onBl/scbio.html/ves.ex e o n Septembe r 23,1997 . 

# IP.1 8

DX Conclusion s A s ca n b e see n in the nine industrie s analyzed here , busines s cycle s diffe r markedl y b y industry . Eve n in industrie s i n whic

h multipl e busines s cycle s wer e identified , the busines s cycle s wer e no t o f th e sam e duration . Pea

k t o pea k cycle s ranged fromthre e t o si x years , whil e troug h t o trough cycle s range d fromthre e t o eigh t years . A t the nationa

l level , a n entir e busines s cycl

e cannot eve n b e identifie

d betwee n 198 2 and 1994 . The mos t recen t nationa l cycle s (determined b y the Nationa l Burea u o f Economi c Research an

d widel y use d fo r busines s cycle analysis ) ar

c fromJul y 198 1 t o July 199 0 pea k to pea k (nin e years ) an d fromNovembe

r 198 2 t o Marc h 199 1 troug

h t o troug h (ove r 8 years ) (Slater , 1996) . However, i t should b e note d tha

t th e perio d fromNovembe

r 198 2 to Jul

y 199 0 represent s the longes t peacetim e expansion in U.S . history . Industr y busines s cycle s o f

five year s o r

mor e ar e sufficiend

y frequent tha t afive yea r perio d woul

d probabl y b e insufficien

t to provid e reasonabl e certaint

y tha t industiy fluctuation s ha

d bee n captured . Sinc e th e longes t

busines s cycl

e identifie d amon g uies e industrie s was eigh

t years , aminimu

mofte n year s o f

dat a i s recommende

d to captur e a n entir e industr y cycle . IV . Reference s BEA . 1996 . "Improved Estimate s o f Gros s Produc t

b y Industry , 1959-94. " Surve y o f Curren t Business . Augus t 1996:133-155 . Washington , DC : U.S . Departmen t o f Commerce , Economic s an

d Statistic s Administration , Burea

u o f Economi c Analysis . BEA . 1997 . Dat adownloade d fro mBurea u o f Economic Analysi s a

t http7*/www.stat-usa.gov/Bl^/bca2/national/s*bio.html/ves.ex e o n Septembe

r 23,1997 . Washington , DC : U.S . Departmen

t o f Commerce , Economic s an

d Statistic s Administration , Burea u o f Economi c Analysis . ENR . 1997 . "Constructio n Cos t Index. " Engineering New s Record . Marc h 31,1997:64 . Ne w York : McGraw-Hill Co . McConnell , C R 1984 . Economics : Nint h Edition . New York : McGraw-Hil l Co . OMB . 1987 . Standar

d Industria l Classificatio n Manual : 1987 . Washington , DC : Executiv e Office o f th e President , Offic

e o f Managemen

t an d Budge t Slater , C . M . 1996 . Busines s Statistic s o f the Unite d States : 199 5 Edition . Lanham , MD : Bema n Press . -16 -