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FEDERAL RESERVE BO A R B STATEMENT FOR THE PRESS- 1.09 X-14C9 K^rch 5,1919, Release f o r a f t e r n o o n papers, March 6,1919, BUSINESS CONDITIONS IN FEBRUARY, 1919. v n.'j..'1 s progress in the readjustment of 'business t o peace conditions i s report: : by the Board's r e p r e s e n t a t i v e s in the s e v e r a l d i s t r i c t s t o have been Trade during the month of February, and while the advance in d i f f e r e n t p a r t s of the country i s reported g e n e r a l l y g r a t i f y i n g , sens u n e a s i n e s s i s expressed by t h e public a t l a r g e because the progress i s not more rapid, Although the readjustment process is s t i l l f a r froc. having reached completion t h e r e i s much evidence t h a t the f a c t o r s which trust be reckoned with in bringing about the d e s i r e d r e o r g a n i z a t i o n of business and f i n a n c i a l r e l a t i o n s h i p s a r e cooperating in a f a i r l y s a t i s f a c t o r y way. "Although business i s by no treats, on a s e t t l e d basis" " r e p o r t s the F i r s t Federal Reserve D i s t r i c t , "confidence is apparently r e t u r n i n g " , In the Third D i s t r i c t the process of readjustment ''"ifciS made some progress", while elsewhere in s p i t e of s. s d i f f i o v V t conditions approach to a s e t t l e d s t a t u s has been d i s t i n c t l y marked. In t h e Seventh D i s t r i c t i t i s observed t h a t "both l a b o r .and c a p i t a l a r e cooperating t o continue t h e orderly r e adjustment now u n d e r w a y , " This general s i t u a t i o n e s t a b l i s h e s a favorable b a s i s upon which t o build t h e processes of m o d i f i c a t i o n and a l t e r a t i o n t h a t are now a t work in various f i e l d s of e f f o r t * Labor and employment conditions ever since the s i g n i n g of the a r m i s t i c s with Gertnany have B O •T I regarded as. c o n s t i t u t i n g the XxinDATT'OTITal probXein cf business readjustment and coupled with thet) the rein"trod.ug*tin of a normal f o o t i n g f o r p r i c e s . Reports as t o l a b o r uneoipLoyr.,e-«x n^ve been nutrecous i n t h e press, but the r e p o r t s of Federal Reserve Agents shew t h a t —2— X—1409 t h e r e has probably thus f a r been over-anxiety and exaggeration with respect to t h i s m a t t e r . From several of the Manufacturing d i s t r i c t s of the Federal Reserve system i t i s reported t h a t l a b o r conditions are f a r from s a t i s f a c t o r y , and t h a t t h e r e i s considerable unemployment; but i t is a l s o noted t h a t the condition does not seem t o have grown worse during February. The process of absorbing unemployed labor is c e r t a i n l y proceeding with some degree of success vVhile the existence of unemployment is admitted by most of t h e Federal Reserve agents, i t appears that the surplus of l a b o r i s smallest in the South and Southwest, while in only a very few d i s t r i c t s is i t reported t h a t serious labor controversies are in progress. As t o wages and t h e i r readjustment t o the new conditions, the trend i s by no means uniform or d e c i s i v e , In the South and Southwest there are no i n d i c a t i o n s of any reduction in the wage s c a l e , vhile in the North and East employees are demanding higher wages, n o t withstanding the existence of considerable unemployments Some r e v i s i o n s of wage s c a l e s are reported from the kiddle West, but there is as yet no general revision of wages downward, although t h e r e are i n d i c a t i o n s of a tendency to l e t wages s e t t l e to a d e f i n i t e l e v e l which s h a l l withcut question be higher than t h a t e x i s t i n g before the war. There has been a tendency to provide labor f o r a g r e a t e r number of persons by eliminating overtime or e s t a b l i s h i n g s h o r t time. The connection between wages, p r i c e s and costs i s well recognized, and i t is the view of manufacturers in general t h a t wages should not go down f a s t e r than prices> Such r e v i s i o n s as are occurring, t h e r e f o r e , are f r e q u e n t l y p a r a l l e l , wages and p r i c e s receding in l i k e measure.-The opposition of l a b o r t o any reduction in wages i s very general and extremely p o s i t i v e , but in some cases i t i s accompanied by the modifying statement t h a t cuts in wages must not go f u r t h e r than changes in costs of l i v i n g . X-1409 -3- The p r i c e q u e s t i o n i s i n e v i t a b l y of commanding importance, not only t o the employee bat a l s o t o t h e community as a whole. The S e c r e t a r y of the Treasury has c a l l e d a t t e n t i o n in his l e t t e r to the chairman of t h e Ways and Cleans Committee t o the n e c e s s i t y of reducing c o s t s Of l i v i n g . t i o n s have, however, proceeded only very slowly. Altera- Sauerbeck's index number f o r B r i t i s h p r i c e s shows up to February 15 a r e c e s s i o n of 5-3/10 from the peak of 197, reached toward t h e close of the war. points The general index number of the Bureau of Labor S t a t i s t i c s f o r the p e r i o d ending January 31, has declined four p o i n t s from the peak of 206, reached during November and .December, 1919. The Board's a n a l y s i s of the p r i c e s f u r n i s h e d by t h e Bureau of Labor shows t h a t a r e c e s s i o n of about t h r e e p o i n t s has occurred in the group of raw m a t e r i a l s , where the index number f o r t h e p e r i o d ending January 31, d e c l i n e d from 198 to 195. The index numbers f o r a l l of t h e sub- groups included under the head of raw m a t e r i a l s have likewise d e c l i n e d . l r t h e subgroup of mineral products the r e d u c t i o n has boon from 182 t o 177, l a r g e l y due t o the decided cut i n the p r i c e of copper. During the month the market f o r metals g e n e r a l l y has shown a sharp decline with decided weakness at the end of the month. Lead, zinc, and copper have sihown marked r e c e s s i o n s , while g r a i n s , except wheat, have likewise f a l l e n o f f s h a r p l y . P r i c e s i n i r o n and s t e a l are l a r g e l y nominal, although t e n t a t i v e l y quoted the- same as at the apening of the y e a r , and t h e p o l i c y of the t r a d e is t o l-sava the i n i t i a t i v e as p r i c e concessions t o the consumer. w i l l probably be met by most p r o d u c e r s . Firm bids f o r d e s i r a b l e business -4<r * In monuf a c t u r t h e X-1409 1 J 2 problems of the read justment s i t u a t i o n a r e n a t u r a l l y more obvious than elsewhere, One of t h e most d i f f i c u l t problems i s presented by the t e x t i l e i n d u s t r y , In D i s t r i c t No„l curtailment of wo?len-mill production i s s t i l l in progress, while in D i s t r i c t No.3 readjustment i s s t i l l proceeding and values are u n s e t t l e d . The cotton industry ic even more d i r e c t l y a f f e c t e d . In New England the cotton market i s at a complete s t a n d s t i l l , so f a r as the raw material i s concerned, while the m i l l s t h a t are operating a r e running only a fe.v days each .week, and p r o f i t s have been reduced t o a minimum or have disappeared. In the Third D i s t r i c t demand f o r yarns has reached a minimum f i g u r e and >7£&q' s have declined s h a r p l y . Spot cotton business is in a complete s t a t e of s t a g n a t i o n , while i t i s estim&ted t h a t the m i l l s in both North and South have about a three months' supply of raw cotton s t i l l on hand. Cancellations have occurred in various l i n e s , while in a number of s p e c i a l t i e s , such as underwear, manufacturers continue t o s u f f e r from slack business. In l e a t h e r and shoes, raw m a t e r i a l i s today h i g h e r than when the a r m i s t i c e was signed, and by some i t i s predicted t h a t the price of shoes .yill advance r a t h e r than d e c l i n e . This has led some manufacturers to continue production, even though they have no o r d e r s . Leather d e a l e r s in the Third D i s t r i c t are reported to be o p t i m i s t i c . Iron and s t e e l production has shown no increase in a c t i v i t y and the derrand f o r s t e e l i s i n s u f f i c i e n t to take the output of the m i l l s , while equipment establishments are working mostly on old o r d e r s . In the P i t t s b u r g h d i s t r i c t there has been a decrease of business, while in Youngstown operations are about 60 per cent of normal. The d i v i s i o n of the s t e a l industry which i s a f f i l i a t e d with the r a i l r o a d s i s p r a c t i c a l l y suspended. U n f i l l e d orders of —5— X—1^09 it: * the United S t a t e s S t e e l Corporation show a continuous d e c l i n e from 7,379,15s; tons a t the close of Decen.ber t o 6,684,268 tons a t the c l o s e of January, t h e index numbers being 140 and 127, r e s p e c t i v e l y , while pig iron production shows a d e c l i n e from 3,433,617 tons in December t o 3,303,260 tons in January, the index numbers, r e s p e c t i v e l y , being 148 and 143. S t e e l ingot production has increased from 2,992,291 tons to 3,082,427 tons, an i n c r e a s e of f o u r p o i n t s frem 125 t o 129. In view of t h i s s i t u a t i o n i t i s n o t a b l e t h a t some iron and s t e e l men p r e d i c t a period of unusual p r o s p e r i t y a f t e r a somewhat f u r t h e r r e adjustment has occurred. In coal, demand has been r e l a t i v e l y l i g h t , due t o the mild w i n t e r , and consuming p l a n t s a r e well equipped- This has enabled miners in some d i s t r i c t s t o moderate t h e i r a c t i v i t y , and from Ohio and Pennsylvania i t i s reported t h a t some of the l a r g e r mines a r e operating only from one t o three days per week. In metals some d r a s t i c r e v i s i o n s of conditions have occurred. P r i c e s of lead, z i n c , copper and o t h e r nonferrous metals have f a l l e n in a n o t a b l e way, and t h e market has shown weakness. Gold mining has improved in t h e Colorado d i s t r i c t . Petroleum, while threatened with a d e c l i n e in crude, shows steady progress in the development of new w e l l s and in the p u t p u t . The production of copper during January shows c u r t a i l m e n t , while mining earnings were poor and p r i c e s shrank in some cases t o 16 cents per pound, The l a r g e accumulation of copper which occurred during the l a t t e r months of the war has provided the l a r g e r mines with the means of meeting the demand f o r many months t o come. A g r i c u l t u r a l l y t h e outlook throughout t h e country i s b r i g h t . From the Southern S t a t e s comes the r e p o r t t h a t the prospects i n d i c a t e a l a r g e cotton acreage, so much so t h a t a determined e f f o r t has been organized f o r t h e purpose of holding off the market as much of l a s t y e a r ' s , crop as p o s s i b l e and f o r t h e curtailment of the p l a n t e d a r e a by o n e - t h i r d , m t h r e f e r e n c e t s vtheat, t h e Ninth d i s t r i c t r e p o r t s t h a t t h e mid-winter output has been helped by Digitized for and FRASER that preparations a r e b e i n g ma.de w i t h a v i e w t o a v e r y l a r g e CQit&iUcna, The -6- : X-1409 P a c i f i c Coast r e p o r t s t h a t stored stocks of*grain are beginning t o move slowly, and t h a t the general outlbok i s e x c e l l e n t , the s o i l being in good condition, while combined acesage of w i n t e r and spring wheat nay a t t a i n record proportions Flour m i l l i n g in the Ninth d i s t r i c t , however, i s s u f f e r i n g from lack of orders, due in p a r t t o t h e f a l l i n g off in exports r e s u l t i n g from the s h i f t i n g of foreign demand to the Argentine and Australian product. In the Tenth d i s t r i c t t h e r e has been a spurt in a c t i v i t y during the f i r s t s i x weeks of 1919. The January production of wheat flour* f o r the country a t l a r g e as reported t o the United States Food Administration wag 12,994,000 b a r r e l s , as coir pared with 11,759,000 b a r r e l s in December. Cereals o t h e r than wheat have f a l l e n in p r i c e s , and in consequence some reduction in acreage may occur. Citrus f r u i t crops have been damaged by unfavorable weather in December and January, but the e n t i r e y i e l d i s l i k e l y to develop f a v o r a b l y . Complete returns f o r 1918 a r e now a v a i l a b l e as t o prunes, r a i s i n s , and the l i k e , the r a i s i n crop of 1918 being t h e l a r g e s t ever recorded, with a t o t a l value close t o $19,000,000, From the Southeast i t i s reported t h a t f r u i t and truck crops have been unusually remunerative, the movement of oranges and g r a p e f r u i t being vary l a r g e . In l i v e stock e x c e l l e n t crop prospects and improved conditions are leading to l a r g e expansion of business by stockmen. The Tenth d i s t r i c t r e p o r t s unusually heavy r e c e i p t s of c a t t l e , f a t s t e e r s , ranging up t o $18,40 per hundred pounds, as compared with $13.50 a year ago. Receipts of hogs during January a t Kansas City were 535,000 head, or 50 per cent more than in January 1918, with p r i c e s a t a maxiimro. Receipts at 15 p r i n c i p a l markets were considerably h e a v i e r than a year ago with respect t o a l l food animals* The r e c e i p t s of hogs were e s p e c i a l l y l a r g e , the f i g u r e s standing a t 4,603,335, as compared with 3,333,591 a year ago. On the other hand, f i g u r e s f o r January f o r c a t t l e and sheep show a s l i g h t f a l l i n g off from the December l e v e l . In r e t a i l t r a d e f a v o r a b l e r e p o r t s a r e g e n e r a l , notwithstanding d i s t u r b e d conditions and reduced production in some d i s t r i c t s . Even f rem some of the manufacturing d i s t r i c t s i t i s reported t h a t the r e t a i l business s i t u a t i o n i s very encouraging, with an increase in some l i n e s of 25 per cent over 1918, 1 1 5 -7- ' 7-1409 In the F i r s t d i s t r i c t the public i s purchasing f r e e l y , while in the South and. Wast a t l e a s t f a i r l y good t r a d e i-s r e p o r t e d . In the Midal- e Wsst reductions of prices a r e noted in some q u a r t e r s and buying has not bean s a t i s f a c t o r y . Everywhere r e t a i l e r s thorns elveo a r e purchasing £ rem hand t o mouth on account of u n c e r t a i n t y of p r i c e s . This has u n s s t t l e d the jobbing and wholesaling business •which in any case would show a no r e a l reduction in a c t i v i t y a t t h i s season of the year. There is a strong dstrand in cany q u a r t e r s f o r jewelry and l u x u r i e s , including pianos, which i n d i c a t e s t h a t consumers s t i l l have resources f o r current u s e . F i n a n c i a l l y , conditions during the month have bean q u i e t and r e a s s u r i n g . have I n t e r e s t and discount r a t e s /on the whole baen s t a b l e , with a tendency toward moderate decline in r a t e s f o r time paper, e s p e c i a l l y paper with prima commercial names. Call money has been firm, with an upward tendency reaching ? per cent on February 34.. The suspension of operations by the money pool has had but l i t t l e if any p e r c e p t i b l e e f f e c t upon c o n d i t i o n s . Rates a t Federal Reserve Banks have retrained p r a c t i c a l l y unchanged, with the exception of a s l i g h t a l t e r a t i o n a t Boston. Bank operations, as shown by the Board's report of bank iep.osits ( published in place of clearings ) show a marked increase in volume, which has been e s p e c i a l l y pronounced in the l a r g e r c e n t e r s . From the Seventh d i s t r i c t i t i s reported t h a t bank c l e a r i n g s are s t i l l very l a r g e , gross bank deposits ah owing decided i n c r e a s e . Banking conditions in general show a condition of g r e a t e r ease, with some accumulation of funds a t centers and a s t r o n g tendency on t h e part of hoarded money t o r e t u r n t o t h e banks. According t o some bankers 1 estimates, the amount of hoarded money ths.t has' been returned, t o banks since the a r m i s t i c e would aggregate $300,000,000.
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