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Volume X X X II AUGUST, 1950 Number 8 Income dropped slightly in 1949 in the Eighth District and in the nation. Estimates of national and districtwide income are important, but fail to reveal striking regional differences. INCOME MEASURES AND THEIR PURPOSE Breaking down national and statewide averages into small area averages creates use ful tools for sales managers and market analysts: a new measure of purchasing power — patterns of consumer preferences9 deter mined by size of family9 location and income levels— a measure of where income is to be spent9and when. Although “ economic ivelfare99 is an elusive concept9 a careful study of the income varia tions between regions highlights the gap between the districts rural poor and the 66average99 American. Appraisal of regional differences in sources of income help guide economic development9 particularly when tied to the area9s total income growth and to its resource base. The most important resource of any area is its people9their abilities and skills. People work with land and capital. Capital funds for economic development come from cur rent income9 from business reserves9 from savings and bank credit. A more precise statement on the sources and uses of district funds is now in preparation. Income dropped slightly in 1949 in the Eighth District Eighth District income in 1949 was smaller than in 1948— smaller both in dollar amount and in terms of the amount of goods and services it would buy. The decline was not large by either measure ment. But the drop was somewhat larger in dollar amount than in terms of “ real income”— that is, income adjusted for price changes. When this adjustment is made, district income was off only about 1 per cent. . . . and in the nation. In the United States as a whole, the dollar amount of income also fell. The drop was rela tively smaller than that in the district and was just about the same, percentagewise, as the decrease in consumer prices. Thus, from 1948 to 1949, “ real income” at the national level held about constant. The greater decrease in district income was due to a combination of two developments. This dis trict, with its relatively heavy dependence on agri culture as an income source, was hit harder by the general decline in farm prices. In addition, the district experienced a poorer crop year than did the country as a whole, so the impact of the price decline was accentuated here. Within the district, income losses were most severe in the farm sections— particularly in the cot ton areas. In physical volume, the district cotton crop in 1949 was 21 per cent smaller than in 1948. These are the bare bones of the district’s income developments in 1949. A subsequent Review ar ticle will add some flesh to these bones by pre senting a detailed discussion of income changes in the 97 areas within the district and of changes in income and expenditure composition and pattern. Meanwhile, this article explains the purposes and uses of income data with particular reference to market analysis, measurement of economic wel fare, and the appraisal of economic development. Estimates o f natiomd and districtwide income are important9 Figuring out methods of measuring economic activity in terms of income trends may appear to be an academic exercise that has little relationship to practical, everyday life. But many bankers, businessmen, farmers, labor leaders, and Govern ment officials know better. They know that good business means new opportunities for most people — and that a general depression is bad news for most of us. They also know that they must keep Page 106 a weather eye on the state of the economy— and that measures of economic activity are essential to the successful conduct of their affairs. Practical men have come to regard income and expenditure statistics as significant measures of economic activity. The reason is that these fig ures are perhaps the most comprehensive meas ures of broad economic changes that are available. Against the background of such data, changes in the general indexes of production, employment, sales and so on can best be appraised. Over the years, various measures of income and expenditures have been developed. Each of these is particularly useful for one or more purposes. In terms of aggregate or total income and expendi tures, three basic concepts are widely used— the Gross National Product (G N P ), National Income, and Personal Income. Each of these measures pro vides a somewhat different view of the income total for the nation as a whole.* . . . but fail to reveal striking regional differences. All of these data together with more detailed in formation on components and sources of income are published regularly by the Department of Com merce for the nation as a whole. But national data, obviously, are of limited usefulness in de scribing developments in smaller areas. Some sections are growing faster than the national-average rate, some slower, and some are actually declin ing. Thus, it is useful to have measures of re gional or local-area income to go along with the over-all data on economic activity for the country as a whole. A great variety of information on local economic activity has been collected for some time. For example, each Federal Reserve Bank has developed a number of business indexes for its district and ♦The Gross National Product (often referred to as the GNP) is a measure of the market value of all goods and services currently produced including capital goods, com modities and services available for current consumption, and changes in inventories. It is therefore a very comprehensive measure of the output of the economy. No deduction is made for depreciation charges. The value of materials in corporated in final products is deducted, however, in order to avoid double counting. Thus receipts of farmers for sales of tobacco are included in the Gross National Product, but are not counted again as part of the price of cigarettes. In addition to currently produced goods and services actually marketed, the GNP includes estimated expenditures in kind such as food produced and consumed on farms and imputed expenditures such as the estimated rental on owner-occupied homes. No allowance is made, however, for the unpaid serv- parts of its district. But small-area income data are not generally available. This bank's income study is designed to fill this gap— at least in part— for the Eighth Federal Re serve District. In the following sections of this article, certain specific uses of regional and local income data are discussed. Tw o points should be noted in connection with this discussion. First, not all of the data referred to are gen erally available at present. For example, as was pointed out earlier, even total and per capita income figures are lacking for most small areas of the nation. Also, details with respect to income composition, source, size distribution, expenditure pattern, and so on, are available only to a limited extent. Second, income data do not constitute the one and only key to explaining economic behavior. These figures are very useful, but they must be correlated with other available economic informa tion to give maximum returns. Breaking down national and statewide averages into smalbarea averages creates useful tools The work being done by this bank in refining local-area income data and presenting such data in some detail is making additional useful informa tion available for market analysis. Some years ago Emerson wrote, “ If you write a better book, or preach a better sermon, or build a better mousetrap than your neighbor, the world will make a beaten path to your door.” Sales managers and salesmen have long felt that this statement is an oversimplification. Any product to be distributed in volume needs intensive sales effort behind it. Sellers are becoming increasingly convinced that the more accurately a market can be analyzed the more effective the sales effort can be. ices of housewives. It should be stressed that the series is confined to goods and services currently produced. Hence, transfers of real estate or of other existing assets are not taken into account. National Income is a measure of the factor cost of goods and services currently produced; i.e., it is a measure of the earnings of labor and property owners arising out of current production, and includes wages, rents, profits (both of corpo rate and unincorporated enterprise), and net interest. It excludes indirect business taxes (excise and the like) and depreciation since these are not payments to any of the factors of production, although they are included in market prices, and hence in the Gross National Product. Capital gains and losses arising out of exchanges of existing assets (i.e., not related to current production) are also excluded. Personal Income is income actually received by individuals, and includes wage and salary receipts, other labor income, . , . fo r sales managers and market analysts: Today the sales manager and the market analyst (in many cases the same individual) attempt to learn as much as can be learned about the markets in which they distribute their products or services. Income data are a major source of information for this purpose and, since most concerns operate in markets smaller than nationwide, there is consid erable demand for small-area income data. The fact that no one firm supplies everything demanded by the consumer has generated pressure for more detailed information on the income and expendi ture patterns of various consumer classes. . . . a new measure o f purchasing power— In many cases, the major stimulation for exten sion of income data has come from the desire of sales managers and market analysts for more con crete and current measures of purchasing power and its distribution. The regional income indexes developed by Business Week are designed to give current data (in index form) with respect to total income payments in each Federal Reserve district. Sales Management publishes annually its surveys of local buying power (figures on buying power for individual cities and towns). These and other materials of the same general nature are widely used in establishing sales potentials and attempt ing to forecast sales performance. The type of income data most important to the individual sales manager depends naturally on the type of goods he markets. In the heavy goods industries, he is concerned particularly with figures on gross business investment— that is, construc tion expenditures and purchases of producers’ durable equipment. To the seller of consumer goods, disposable per sonal income (total income less taxes, etc.) is the proprietors* and rental income, interest and dividends, and transfer payments. Part of the national income is not actually received by individuals, and is not included in personal in come— for example, corporate profits except as paid out as dividends to individuals. Other types of national income not received by individuals include social insurance contribu tions. On the other hand, some income received by indi viduals is not a payment for current production and hence is not part of the national income. Such income is, however, included in personal income. These “transfer payments” include Government interest payments, unemployment com pensation, pensions, relief payments, veterans* bonuses, and business transfer payments such as charitable contributions. Disposal Income is what is left of personal income after income tax payments and other personal taxes. It is that portion of personal income which individuals may spend or save as they see fit. Page 107 most important single figure. But disposable in come can be spent on a great variety of goods. Thus, it is important to know the size of total personal consumption expenditures, and also the trend for different types of goods.* In the district, as in the nation, the strength of consumer demand in 1949 and so far in 1950 has been largely due to the heavy spending for auto mobiles, household equipment, and other consumer durable goods. Less money has gone for soft goods. In the nation as a whole, consumer expendi tures for durable goods increased from $22.9 billion, in 1948 to $23.8 billion in 1949. Spending for soft goods decreased from $100.9 billion to $98.5 billion over the same period. There also has been a steady increase in purchases of services— from $53.7 billion in 1948 to $56.4 billion in 1949. This reflects larger expenditures for such items as housing, med ical care, recreation and transportation. . . . location Different social groups also show different ex penditure patterns. Most obvious are the differ ences in the way urban and rural families spend their money— even when they are in the same income class. A larger part of the farm family’s consumption originates in the farm household. For example, food and fuel produced and consumed on farms amount to more than 10 per cent of total consumption in many rural areas of the district. This means that less money (relatively) need be spent on soft goods and services, and more of the farm family’s dollar is available for the purchase of hard goods. Farm expenditures also may serve simultaneously both consumption and investment purposes. Thus, farm income-expenditure pat terns owe some of their special features to the difficulty of making any sharp distinction between personal and business items in the accounting of farm families. . . . patterns o f consumer preferences, T o the marketing analyst, it is important to understand the reasons for differences and shifts in expenditure patterns. Many shifts in local ex penditure patterns follow national trends in con sumer preferences. Thus, the unprecedented num ber of passenger automobiles sold in 1949, which permitted motor vehicle dealers to record an 18 per cent increase in dollar sales for the year, reflected the present availability of new cars after the long period in which families had to do with their old car, an experience common to all parts of the coun try. But different consumption patterns among various regions may be due to basic differences in income distribution and family composition. . . . determined by size o f family9 With the same per capita income, the expendi ture pattern of a large family will differ from that of a small family. Many parts of the Eighth Dis trict have a predominance of large families. For the country as a whole in 1940, 23 per cent of the population were children under 14 years of age. In most df the district states, however, the propor tion of small children was much higher. For exam ple, the Monticello area in Kentucky— a rural community in the mountains— had 34 per cent of its population in the children’s group. Thus, the expenditure pattern here and elsewhere in the dis trict would be expected to differ from that nationally. ^Estimates of 1949 income-expenditure patterns within different parts of the district are being developed and will be published in an early issue of the Review. Page 108 • . . and income levels— Another important factor in explaining differ ences in regional expenditure patterns is the dis tribution of personal income by size. The average per capita income in an area indicates little about the income-size distribution within the area. Lowincome families obviously have an expenditure pattern very different from that of high-income families. For the nation as a whole, 10 million American families received less than $2,000 during the highly prosperous year of 1948; of these, 4 million families received less than $1,000. The Eighth District has more than its share of these low-income families. This means that, in many district areas, a large proportion of all families have only a very limited amount of disposable income, with little left to spend at retail stores for anything over and above the necessities of life. . • . a measure o f where income is to be spent, The sales analyst also is very much interested in knowing where income is likely to be spent. Data previously published in this Review have indicated the “ net balance” between personal income and expenditures of district residents.** For the district as a whole in 1948, these figures indicated a net balance of $27 per capita. In other words, the typi cal Eighth District income recipient spent, net, $27 outside the district proper. The size of the net * * “ N et balance” measures the difference between “ abroad” (outside the region) by persons living in the amount spent within the region by “ foreigners” receive their income elsewhere). If the amount spent the net balance is positive. the amount spent a given area, and (nonresidents who “ abroad” is larger, balance varies considerably among different por tions of the district. It is greatest ($102) for south ern Illinois, in part indicating the large amount of income spent by residents of that section in the trade center of St. Louis. It is largest in the oppo site direction ($189) for western Tennessee, em phasizing the attraction of Memphis retail stores for income recipients in Arkansas and Mississippi. This net balance is the more important the smaller the area. In a small rural community, a very large percentage of total income is likely to be spent in the adjoining trade center. But metro politan areas like St. Louis or Memphis will attract a large amount of consumer dollars earned by non residents. The same holds for tourist centers, such as Hot Springs, and college towns, such as Fay etteville, Arkansas. The relative importance of trade centers is also indicated by the sales-income ratio measuring the relation between per capita sales and per capita in come in any given area. For the country as a whole, 63 cents of each dollar earned in 1948 was spent in a retail store, while the corresponding figure for the Eighth District was 65 cents. It should be noted that the sales-income ratio reflects two items: sales and income. Thus, a high ratio may be due either to low per capita income or to the presence of a trade center. Inversely, a low ratio may reflect the absence of trade facilities or relatively high per capita income. In Memphis, the 1948 ratio was as high as 89, indicating the attrac tions Memphis stores offer a wide trade area. In contrast, is the Mountain Home, Arkansas, area, where only 37 cents of each dollar earned was spent within the same area. Chart I illustrates relationships of retail sales to income payments in certain district areas. The line indicates the typical relationship between sales and income for the nation as a whole. Points clus tering around this line represent areas where the sales-income ratio is close to the national norm. The vertical distance of each point from the na tional sales-income line measures the relative im portance of this area as a trade center. Points above the line indicate areas with a sales experi ence that is higher than the national sales-income ratio, while points below the sales-income line in dicate areas without major trade facilities, where a less-than-national-average part of income earned is spent in retail stores of the same area. Trade centers do not necessarily coincide with high-income areas. Thus, residents of rural sec tions like the Clarksdale, Mississippi, area may spend a considerable part of their income in an I P E R C A P IT A IN C O M E S E L E C TE D AND INCOME SALES - 1948 AREAS PER CAPITA SALES adjoining urban center. An area of equal per capita income like Fayetteville, Arkansas, serves as an important tourist and student center and attracts trade. • • • and when• Finally, the sales manager likes to know when income is to be spent. Income currently saved is not directly available for current sales. The mar keting analyst therefore wants to know how much disposable personal income will be spent on con sumption. And that means disposable not only in the technical sense (income after tax payments), but it also means income that is freely disposable in the sense that it has not already been committed to the payment of debt, or to current saving and in vestment. (O f course, current sales may be financed out of past income whenever consumers are able and willing to draw on past savings. They also may be financed out of future income whenever consumer credit is made available for current sales.) To understand some of these time relationships between income and expenditures, the Board of Governors of the Federal Reserve System conducts regular surveys of consumer finances. These are designed to give comprehensive data about con sumer incomes, saving and dissaving, holding of liquid assets, and debt positions, together with information about consumer expectations and about plans consumers have for disposing of their income. The 1950 Survey of Consumer Finances indicates a willingness to use not only current but also exPage 109 pected future income for the purchase of houses, automobiles, and other selected durable goods. This survey, of course, reflects consumer expectations for the nation as a whole. But the findings are of equal interest for the Eighth District, since preliminary data indicate that consumers here, too, are willing to use past savings as well as consumer credit to maintain their purchases of hard goods. Relations between income, consumption, and sav ing are also indicated by relative movements of total deposits and their ownership. These measure the extent to which consumers add to their liquid savings by refraining from the expenditure of cur rent income; they also show the availability and use of these assets in supplementing current income. The size of bank deposits in relation to income can be expressed as the ratio between per capita deposits and per capita income in each area. Illustrating the difference between a metropolitan banking center and an area with limited banking facilities are the figures for St. Louis, where the ratio was 68 in 1948, and Caruthersville, Missouri, where the ratio was 24. These differences are shown in Chart II. The heavy line indicates the typical relationship between deposits and income for the country as a whole. Points above the line indicate banking centers where deposits are above the national deposit-income norm; points below the line indicate those with below-national-average ratios. It should be noted that Chart I shows a heavy cluster around the typical sales-income line, while Chart II illustrates a serious lag in the district deposit-income ratio. In other n PER CAPITA INCO M E SELECTED PER CAPITA OEPOSITS Page 110 AND INCOME D E P O S IT S -1948 AREAS words, the income-expenditure patterns of the dis trict are close to the national average, while incomedeposit patterns in the Eighth District are below the national norm. This is primarily due to the relative absence of large corporate business ac counts in this district, a fact that considerably com plicates the comparison of personal income and bank deposits. T o gauge the regional trend of savings and the use of liquid assets for current sales, it is necessary not only to have the deposit and income data for any given year, but also to compare the relative growth of personal income and individual deposits over a certain period of time. Recent district income shifts were highlighted in the deposit survey of 1949, showing the larger losses of deposits as com ing in the rural areas heavily dependent upon cotton production. It is hoped that the data made available in connection with the next deposit ownership sur vey will permit further analysis of relationships be tween income and deposit movements in the Eighth District. Although 66econom ic welfare55 is an elusive concept9 One of the most elusive concepts in the field of economics is that of “ economic welfare.,, It is hard to define economic welfare in absolute terms. But it is even more difficult to compare levels of welfare among different regions or over periods of time. For example, is the farm family with a small cash in come and the lack of many urban facilities actually worse off than the city family with higher income and all of the gadgets of city living? Or does the farm way of life make up for the difference? Do we live better today than our grandparents did? Such questions are hard to answer with any high degree of precision. Admitting the difficulties of defining and com paring welfare levels, it still is necessary to make some sort of judgment as to differences in the state of well-being. Under our present institutional set-up, administrative decisions have to be made regarding allocations of Federal, state and local funds for wel fare purposes. The general theory behind such grants-in-aid is that the “ poor” sections should re ceive proportionately larger shares than the more well-to-do sections. Income data provide approximate guides to such allocation problems. The Department of Commerce series on state income payments is used as a basis for allocating certain types of Federal grants-in-aid. But there is a growing demand for smaller area income data for use in allocating state and local funds. . . . a careful study o f the incom e variations between regions Income comparisons as between counties or re gions may be misleading because the state of de velopment of the market differs. In one area, for ex ample, most services may be purchased, whereas in another they may be provided in the household or community. Similarly, comparisons over periods of time face this same problem. Monetary market transactions today cover relatively much more of the goods and services produced than they did a century ago. An example of this problem may be seen in com paring living levels of farm and city families having the same dollar income. As noted earlier, food and fuel produced and consumed on the farm make up about 10 per cent of total consumption in most rural areas of the district. In some low-income farm sec tions, it runs as high as 35 per cent of the total value of production. These items are valued at cost for the farm family, but the city resident buys them at retail. Also, urban people have to use some of their income for expenses not ordinarily incurred by farm families—more clothing and transportation costs and so on. . . . highlights the gap between the district’ s rural p oor and the 66average99 American. These difficulties should properly be emphasized. But the wide gap between low-income rural areas within the Eighth District and the more industrial ized communities remains impressive enough, even after adjustments for differences in the cost of living and in the market structure have been made. Per capita income in metropolitan centers is three times that of many rural areas, especially in the southern parts of the district. Data on rural levels of living compiled from Cen sus sources by the Bureau of Agricultural Econom ics highlight differences in housing standards and in the availability of household conveniences for different areas of the United States. This rural level of living index shows the close relation between living standards and the recorded per capita income. When the average rural level of living for all coun ties of the United States is taken as 100, the index shows a value of 144 points for the metropolitan area of Louisville and the surrounding Blue Grass region, as compared with an index of only 31 points for the Monticello area in the Kentucky hills. For the densely settled southern delta around McGehee, Arkansas, the index is as low as 19 points, while, for the sparsely populated livestock area around Quincy, Illinois, it is as high as 138. These data show that differences in monetary per capita income (even though they may need some adjustments to take into account differences in family composition and the market structure) are paralleled by extreme differences in the level of living between low- and high-income areas. Several attempts have been made recently to ad just income data for differences in the cost of living and the market structure to make them more useful as an index of economic welfare. For the nation as a whole, these estimates suggest that “ real” incomes of farm and nonfarm families differed by at least 25 per cent in most prewar years, while they averaged about equal in 1945, attesting the success of farmers in achieving income “ parity.” But this “ parity” is only in terms of nationwide averages of income. Such limited regional data as are available indicate that, during the postwar years, farmers in certain parts of the western and north-central regions of the country may actually have been a good deal better off than nonfarmers. At the other end of the scale, particularly in certain parts of the South, the data show that farmers have remained at a substantial disadvantage, even during the farm prosperity of recent years. This makes it evident that, for large parts of the Eighth District, there remains the problem of rais ing the living standards of the rural poor to a level closer to the prosperity enjoyed by the rest of the American people. As pointed out before, this goal can be achieved only where per capita productivity in agriculture is substantially increased. It also calls for the development of industrial employment so people can move out of agriculture into industry in order to raise their own productivity in industry as well as the productivity of those who remain on the soil. The data on district income and the rural level of living index, quoted above, highlight the wide differ ences in economic welfare between areas of chronic low income—where too many people try to work on a limited resource base with outmoded production techniques— and areas where high per capita pro ductivity, in farm and factory, makes for a high per capita income and a high level of living. T o forecast sales, disposable personal income is the most useful concept. T o compare economic wel fare, levels of living are an appropriate index. T o appraise the challenge and promises of regional eco nomic development, details on the structure and flow of income in a given area are needed. Page 111 Appraisal o f regional differences in sources o f incom e help guide econom ic development, kansas. Agriculture produces more than 60 per cent of total income in Jonesboro, Arkansas, but less than 2 per cent in the metropolitan areas. Government paid 26 per cent of total 1948 income in Mountain Home, Arkansas, but only 7 per cent in Jonesboro, Arkansas. These differences in the income structure must be interpreted with care. The high percentage of Gov ernment income in most low-income areas reflects mainly the lack of other income sources. Even small Government benefits loom large in the total picture in such areas. Temporary public works projects, such as the construction of Norfork Dam, may greatly influence the industrial distribution of in come payments in any specific year. On the other hand, even where direct Government payments are relatively small, as in the Jonesboro area, Govern ment may play an important indirect role through farm price support programs. There is a wide difference between the income structure in the Eighth District and that in the na tion. There also are differences among the income areas within the district. While payrolls make up 64 per cent of total income payments in the country as a whole, they account for only 51 per cent in the district. On the other hand, entrepreneurial income accounts for 33 per cent of district income as con trasted with a national average of only 20 per cent. Agriculture is more than twice as important a source of income in the Eighth District than in the nation. Within the district, some differences in the in dustrial income structure are illustrated in Chart III. In Evansville, Indiana, manufacturing accounts for 36 per cent of all income payments. This con trasts with but 1 per cent in Mountain Home, Ar m SOURCES OF SELECTED AGRICULTURE ^^^G O VE R N M EN T MANUFACTURING a f.».».»)|T R A P E 8 *P E R CAPITA INCOME Page 112 INCOME - 1 9 4 8 INCOME SERVICE UNCLASSIFIED AREAS . . . particularly when tied to the area's total incom e growth greatest strides. Chart IV illustrates the close re lationship between these two business indexes. For any one year, differences in income structure, by themselves, offer little clue to understanding forces that determine regional economic development. More important is a knowledge of total in come growth as it is related to the importance of specific income components and their movements over time. Thus, per capita and total income growth over the last decade have been most pronounced in areas where value added by manufacture has made Manufacturing development is commonly associ ated with relatively high levels of income. This is because manufacturing provides not only direct job opportunities in an area, but also affords immediate markets for the products of the surrounding farms, forests, and mines. In addition, it gives rise to em ployment in trade and service activities. Manufac turing industries thus have a large “ multiplier” effect on the remainder of the local economy. m TOTAL INCOME AND VALUE PE R CE NTAG E Per Cent INCREASE 8 th UNITED STATES 1948 ADDED BY MANUFACTURE 1939 -1948 L IT T L E DISTRICT ROCK Per Cent 1939 PADUCAH E. ST LOUIS OWENSBORO 300 200 100 1939 TOTAL VALUE INCOME ADDED 1948 BY MANUFACTURE Page 113 . . . and to its resource base. To be more useful for an understanding of re gional economic development, the income structure of an area should be related to its resource base. High per capita income may be associated with a predominance of farm income where the resource base permits profitable farming, and a limited num ber of farm operators assures high per capita pro ductivity, such as in the livestock areas of the Mis souri corn belt. On the other hand, low income may persist in some areas even where there is manufac turing activity. This may reflect the fact that the industrial development lacks proper relation to the resources available, or the original resource base has been depleted. The most important resource o f any area is its people? The most important resource of any area is its people. Analysis of regional development should concentrate on forces that determine the effective ness with which this basic resource contributes to income. Three factors affect this contribution: (1) the proportion of the total population participating in the labor force, (2) the continuity of employment, and (3) the degree of specialization permitted by the division of labor that emerges with industrialization. There are striking differences in the proportion of the total population actively participating in the labor force of the district. In the metropolitan areas, 45 per cent of all residents are gainfully employed. In some of the hill sections, this ratio (including the self-employed) drops to as low as 30 per cent. • A low labor force participation may reflect a lack of employment opportunities. It also may reflect the age distribution of the population, with a large per centage of the total population below working age. In such a case, low per capita income may evidence the large number of people outside the labor force among whom the total income of the area has been distributed; and the area may contribute a large share of its total income to the education of the young, possibly to the benefit of other regions to which these children will migrate once they reach maturity. Where the low labor force participation is due to a lack of employment opportunities, the area has a rich resource— its people— that is not being properly utilized. Under these circumstances, the expansion of factories, particularly in rural areas, may greatly increase the active labor force by drawing into full time industrial employment those family members who formerly were on part-time work at low pro ductivity on the farm. Page 114 . . . their abilities Differences in regional development are deter mined also by the conditions that mold the abilities of the people to produce. W ith the same labor force participation, a given population of the same in nate capabilities may be employed at very different rates of productivity. It is well known that per capita income differs widely among industries de spite the fact that individuals may expend the same effort. T o a large extent, the relatively low income of the Eighth District can be ascribed to the pre dominance of industries with a low rate of produc tivity. When the average per capita wage in all manufacturing industries for the nation as a whole is taken as 100, the district rate is only 85. In many district areas, it is less than half the United States average. . . . and skills. In this connection, the abilities that can be ac quired by the population of a given area are of central interest. In June, this Review carried a sur vey of educational facilities in the Eighth District. It was shown how the quality of our schools is affected by economic progress in the community be cause this determines the community’s ability to pay for educational facilities. At the same time, the ex tent to which economic development takes place is affected by the work accomplished in the schools. A full utilization of district resources presupposes the extension of educational opportunities to more and more people. It requires that the level of skills be pushed steadily upward. This process is one by which capital is “ invested” in human agents to develop technical and managerial skills that will determine the long-run productivity of the district. P eople work with land In addition to the people and their skills, there are resources of land and capital. Differences in farm income and per acre productivity partly reflect dif ferences in land fertility. Farm income is higher in the rich river bottom areas of the district than it is on the hills. Yet there are many areas with rel atively poor lands where low income has been overcome by shifts in resource allocation. Here, again, the main problem is to make the best use of the resources that are available. . . . and capital. Productivity of any area may be greatly increased by capital investment. Farm income is closely re lated to the size of the investment in farm equip ment. The number of farms using tractors may serve as one measure of the trend toward greater mechanization— toward the use of capital. By this index, Arkansas is leading the nation in the rate of increase in farm mechanization, the number of farms (per 1,000 farms) reporting tractors having more than quintupled over the last two decades. This growth was accompanied by a tripling of Ar kansas cash farm income from 1929 to 1948. Mis sissippi, on the other hand, starting with the same base, showed a 260 per cent increase in the number of farms using tractors and just doubled its cash farm income over the corresponding period. prompted the great interest in a fuller understand ing of the relations between income structure and income flows. Certain income shares are spent more readily for goods or services produced in the same area and therefore have a higher “ multiplier” effect than others. As pointed out above, manufac turing payrolls are likely to cause the growth of related trade and service industries in the commun ity to satisfy the demands of people engaged in the manufacturing process. All “ market-bound” indus tries are directly stimulated by the industrialization of a region. Total income is closely related to investment in manufacturing plant and equipment which, as pointed out before, has a stimulating effect on the area as a whole. Value added per production worker may serve as an index of local investment in man ufacturing facilities. When the national average is taken as 100, all the district’s high-income areas show a value added per employee that is above the national average. Most of the low-income areas, on the other hand, have values below the national norm. It should be emphasized again, how ever, that the value of an industry, in terms of regional economic development, does not depend on its absolute labor productivity. Rather it de pends on the extent to which it efficiently utilizes the available resource base. The extent to which current income payments will be used for the benefit of local economic devel opment depends on where and when income will be spent by the income recipients. The Eighth Dis trict, as noted before, has a “ net balance” . This indicates that, on balance, the personal income earned in this district but spent outside is not matched by an equal flow of “ foreign” income into the district. Current income payments, therefore, do not benefit the economic development of the district to the extent that they would if a larger percentage of these payments were used for expendi tures within the district. This, of course, is not meant to suggest that residents of the district, in a narrow isolationism, should spend all their income at home. Rather it means that, just as district resi dents spend part of their income “ abroad” , the district should be able to attract more funds from outside. The point is not to discourage “ imports” paid for out of district income. Rather it is to encourage more “ exports” of the goods and services produced by the people of the district, to be paid for out of a larger share of the national income. The role of trade centers in attracting funds earned out side the area has been stressed before. Another promising development along these lines is the fuller utilization of the scenic resources of the dis trict to attract more tourists. Capital funds fo r econom ic developm ent Economic development in its various aspects has the common goal of raising productivity. Produc tivity, in turn, means the ability to produce and a chance to work with capital goods— with equipment and machines. Low income in any area results from a shortage of productive apparatus and from lack of skills to use “ real” capital. Both can be overcome with the availability of financial resources to provide for modern equipment and for the educa tion to use it. Funds for economic development come from a number of different sources. The most important source is the current income that is spent by recipi ents on consumption and investment goods. Other nonfinancial sources are depreciation charges and related business reserves for the replacement of worn-out plant and equipment. Financial sources of funds for economic development may originate either in liquid savings or in new bank credit. . . . com e from current incom e, Income payments are the largest single source of funds available to any community. This has . . . from business reserves? For the nation as a whole, depreciation charges form a substantial source of business funds. Here, again, there is a relative absence of large business enterprise in many parts of the district. This has meant that this source of funds is available within the district only to a limited extent. Yet a promis ing factor here is the growing interest of national companies in erecting branch plants within the dis trict. These branches are at least partly financed out of national depreciation reserves, and the extent to which the district succeeds in attracting new Page 115 plants will determine the availability of this source of funds. . . . from savings Availability of liquid savings is partly measured by the size of commercial bank deposits in relation to income. For the nation as a whole, at present, a dollar of current income is matched by 67 cents in a commercial bank deposit. The corresponding ratio for the district is only 51 cents. This suggests the extent to which the Eighth District is disad vantaged by a shortage of liquid asset balances. Obviously, deposits held outside the district may be owned by district residents and— whether owned by residents or others— spent in the district. To the extent that this is done, the district can draw on out-district funds for its economic development. But the fact remains that local funds are less readily available for the financing of business expansion in the district than they are in the nation as a whole. . . . and bank credit. One important financial resource for economic development is bank credit. The banking commun ity of the district has the responsibility of wisely extending credit— under more “ normal” conditions — so as to encourage further income growth. The opportunities for growth are there; the human and natural resources of the district await fuller utiliza tion by equipping them with the knowledge and the machines to make all our citizens productive workers and to enrich our soil. The resultant in come, in turn, will become the source of new funds available to the district economy. Page 116 A m ore precise statement o f the sources and uses o f district funds is now in preparation. A more precise analysis of these financial relations is the goal of measuring regional income payments and tracing regional income flows. A statement on the sources and uses of funds within the Eighth District is now in preparation and should help to indicate more fully the role of the financial com munity in administering these funds for economic growth. A statement on the sources and uses of district funds should also clarify the financial relations be tween the district and the national economy. To repeat, regional development does not imply a “ closed economy” . Fortunately, district lines are no barrier to “ imports” and “ exports”— to the out flow and inflow of funds. Regional development, rather than taking away opportunities from other areas, encourages that type of economic growth that is in the long-run interest of the region as well as the nation. It proceeds as a complementary rather than a competitive endeavor. The relations of the district economy with the rest of the world are not limited to a consideration of the district and the national interest. In a period when this country is called upon to promote the growth of world trade which will help free nations remain free, regional economic development must be appraised in terms of how well it contributes to this world responsibility shared by all sections of the American economy. Werner Hochwald La Verne Kunz Sumy of Current Conditions The district’s economy, as well as the nation’s, was operating at close to peacetime capacity levels in June— before the outbreak of hostilities in Korea. Eighth District manufacturing output was at or near a new postwar high; steel production was at a rate equalled only twice since 1944; construction was considerably over the volume in June, 1949, and employment was just under the postwar peak in 1948. Eighth District agricultural output was at high levels although below the 1948 and 1949 vol umes. Consumer demand, in substantial volume as a result of the increased industrial output, was bol stered by expanding credit. The outbreak of hostilities in Korea added to the demand for goods and commodities. One of the principal effects of the sudden increase in demand was on prices. Within the first three weeks of the outbreak of the Korean war, sharp increases occurred in certain basic commodity prices, in numerous wholesale prices and, to a more limited extent, in retail store prices. Many manufacturers and merchants attempted to build up their inven tories and many consumers bought certain goods in excess of current requirements. In addition to the strong private business and consumer demand, our participation in the Korean hostilities will accelerate military demand for some goods. While demand is being thus expanded fur ther, need for more men and women in the armed services will reduce, to some extent, the labor force available to provide the goods and services. Under the circumstances, which are inflationary, the President proposed legislative action to curb _____________________ PRICES__________________________ W H O L E S A L E P R IC E S IN T H E U N IT E D S T A T E S Bureau of Labor June, 1950 Statistics compared with (1 9 2 6 = 1 0 0 ) J u n e/50 M a y /5 0 Ju n e/49 M a y /5 0 J u n e/49 A ll Commodities..... 157.3 155.9 154.4 + 0 .9 % + 1 .9 % Farm Products... 165.9 164.7 168.5 + 0.7 — 1.6 F oods...................... 162.1 159.9 162.4 + 1.4 — 0.2 O ther...................... 148.8 147.6 145.5 + 0.8 + 2.3 C O N S U M E R P R IC E I N D E X Bureau of Labor June 15, 1950 Statistics June 15, M ar. 15, June 15, compared with (1 9 3 5 -3 9 = 1 0 0 ) 1950 1950 1949 M ar. 1 5 /5 0 June 1 5 /4 9 United States........... 170.2 167.0 169.6 + 1 .9 % + 0 .4 % St. Louis............... 169.7 167.4 169.8 + 1.4 — 0.1 M em phis................ 169.9 169.4 173.5 + 0.3 — 2.1 R E T A IL FO O D Bureau of Labor June 15, 1950 Statistics June 15, M ay 15, June 15, compared with (1 9 3 5 -3 9 = 1 0 0 ) 1950 1950 1949 M ay 1 5 /5 0 June 1 5 /4 9 U . S. (51 cities).... 204.6 200.3 204.3 + 2. 1% + 0 .1% " St. Louis............. 212.4 208.4 212.8 + 1.9 — 0.2 Little R ock........ 2 01 .0 197.4 204.2 + 1.8 — 1.6 Louisville............ 194.1 188.9 194.1 + 2.8 - 0M em phis.............. 206.4 204.3 215.3 + 1.0 — 4.1 consumer credit and to divert to military use what ever goods and materials were necessary to prose cute the Korean defense successfully. Restrictions on the use of Government credit and guarantees in the real estate field were ordered. While it is still too early to measure the full impact of the Korean war situation on the Eighth District economy, it is clear that the additional demand generated by the war has increased prices— primarily basic commodity prices—and that the credit restrictions ordered in the real estate field and suggested in the consumer credit field would exercise a restraining influence on the currently inflationary situation. Further restraint could be exercised by individuals and business and Govern ment (in its nonmilitary domestic affairs) with equally helpful results in dampening the inflation ary potential. EM PLOYM EN T More people were working in June and for longer hours and higher wages than at any time since the peak of 1948. Fewer persons were looking for jobs and those with experience were having less trouble finding work than at this time last year. A few scat tered labor shortages were beginning to appear in June for the first time in many months. Nationally, total employment in June was the second highest on record. In the week ended June 10, the number of persons holding jobs was 61.5 million, or only 133,000 less than the record set in July, 1948, and 1.8 million more than in May, 1950. Average employment in the major Eighth District cities was also higher than in any month since late 1948. The expansion in total employment in the nation between May and June was almost twice as large as last year due primarily to a substantial pick-up in the agriculture, manufacturing and construction inW H O LE SA LIN G Line of Commodities N et Sales D ata furnished by June, 1950 Bureau of Census, compared with U . S. Dept, of Commerce* M a y , 1950 June, 1949 Automotive Supplies............ + 10% + 7% Drugs and Chemicals........... — 10 — 15 D ry Goods................................. + 1 + 11 Groceries.................................... + 2 — 1 + 22 Hardware.................................. + 1 Tobacco and its Products... + 5 + 2 Miscellaneous........................... + 6 + 14 **T otal A ll Lines.............. + 1% + 10% * Preliminary. **Includes certain items not listed above. Stocks June 30, 1950 compared with June 30, 1949 — 5% + + + + — + 37 10 4 4 11 17% Page 117 dustries. A major portion of this year’s gain con sisted of school-age persons, but employment of adults also edged upward. Agricultural employment rose seasonally between May and June at a rate slightly higher than last year, but continued to be substantially lower than a year ago. During the first six months of 1950, the number of farm workers in the nation averaged almost 10 per cent below 1949. The same trend is believed to be true for the district. None of the five major areas in the Eighth Dis trict had more than a moderate labor surplus in May, according to the classifications of the Depart ment of Labor. Only three small areas (Cairo, Crab Orchard and Mt. Vernon, Illinois) were considered “ critical” with a very substantial labor surplus; and only one area (Springfield, Missouri) had a substan tial labor surplus. St. Louis and Memphis had a moderate portion of their labor force unemployed this May as well as a year ago. Employment con ditions improved in Louisville and Little Rock dur ing the year. The outstanding instance of labor market gains in this district occurred in Evansville. This area had a substantial labor surplus in January, 1950 and was only one step away from the “ critical” classification. By May, however, an expansion in the manufacture of nonelectrical machinery and transportation equipment plus seasonal gains in construction had resulted in a change in classifica tion to an area of balanced labor supply. This meant that in May less than 3 per cent of the Evans ville labor force was unemployed as compared with over 8 per cent in January. Unemployment rose in both this district and the nation between May and June, although not as much as normally would be expected. This rise was due primarily to school graduates and to students seek ing summer jobs. Probably more significant than the seasonal rise in total unemployment was the fact that long-term unemployment (persons out of work for four months or more) declined for the second successive month, following a steady rise for more than a year. The number of persons collecting unemployment compensation in the district has been on the down grade for the past several months (summer workers and school graduates generally are not eligible for compensation). In St. Louis, fewer compensable claims were filed in June than at any time since last October and the June volume of claims was less than three-fourths of the January peak. The biggest improvement occurred in Evansville, where the number of unemployment compensation claims in June was only one-fourth as large as in March. Page 118 IND USTRY Industrial activity in the Eighth District con tinued to expand during June, with most segments of the economy sharing in the gain. Production in the manufacturing industries probably reached a new peak, and the construction boom continued. Coal production and crude petroleum output, how ever, were off slightly in June. The consumption of electric power by manufacturers in the district’s leading industrial areas in June was up slightly from May and was substantially higher (21 per cent) than last June. Manufacturing Activity Higher in June This district’s manufacturing plants apparently produced more goods in June than in May, or in June of 1949. Preliminary figures indicate that manufacturing output in June may have reached a new postwar high. The recent gains have been strongest in the durable goods industries, with pro duction in such industries as electrical machinery, stone-clay-glass, lumber, nonelectrical machinery, and steel more in June than in May. In the soft or nondurable goods field, several industries, including chemicals, shoes, textiles, and meat packing, suf fered declines which were, however, partly seasonal in nature. The basic steel industry in the St. Louis area was operating in June at 83 per cent of capacity, 7 points higher than in May and 23 points above the year-ago level. The June rate was equalled in only two months since 1944. During the first six months of 1950, the average rate of operations was 12 per cent above that of the same period last year. _________________________ IN DU STRY___________________ C O N S U M P T IO N O F E L E C T R IC IT Y June, M ay, June, June, 1950 1949 1950 1950 compared with K .W . H . K .W . H . K .W . H . M a y , ’ 50 June, ’ 49 ( K . W .H . in thous.) ... 15,462 4,624 74,171 27,763 7,149 93,965 14,614 4,760 73,426 30,056 6,615 92,944 12,422 5,142 61,814 24,782 6,023 74,104 , 223,134 222,415 184,287 Little R ock.... ,, Pine B lu ff...... + 5 .8 % — 2.9 + 1.0 — 7.6 + 8.1 + 1.1 + — + + + + + + 21. 1 % 0 .3 % 2 4 .5 % 10.1 20.0 12.0 18.7 26.8 L O A D S IN T E R C H A N G E D June,’ 50 M a y ,’ 50 F O R 25 R A I L R O A D S A T S T . L O U I S First Nine D ays June,’ 49 July,*50 Ju ly,’ 49 6 mos. *50 6 m os. *49 110,339 112,550 103,244 29,561 29,647 641,200 S ource: Terminal Railroad Association of St. Louis. CRUDE O IL P R O D U C T IO N — D A IL Y 630,155 AVERAGE June, 1950 compared with M ay, 1950 June, 1949 (I n thousands June, 1950 of bbls.) M ay, 1950 June, 1949 79.1 ..172.0 , 30.2 ..26.1 79.3 175.0 29.2 26.3 76.4 176.5 25.0 23.9 -0 -% — 2 + 3 — 1 ..307.4* 309.8 301.8 — 1% + 4% — 3 +21 + 9 + 2% The demand for lumber continued to be very strong during June reflecting both the construction boom and the expected record production in the furniture industry this summer and fall. During June, the Southern pine mills produced slightly less lumber than in May but about 8 per cent more than last June. During the first half of 1950, production averaged considerably higher than in 1949. The reporting southern hardwood producers operated at 93 per cent of capacity in June as compared with 90 per cent in May and only 64 per cent in June, 1949. Since February, the southern hardwood producers have operated at greater capacity than in the cor responding month of last year. The manufacture of shoes in the Eighth District was curtailed during May, although not nearly as much as last year. The drop in shoe production in this district between April and May was relatively much smaller than that for the United States as a whole. W ith the exception of the month of March, district shoe production has fallen off steadily so far this year. However, slightly more shoes were pro duced during the first six months of 1950 than in the same period of 1949. Meat packing operations in the St. Louis area in June were reported to be at the lowest level since March. About 390,000 animals were slaughtered in June as compared with 419,000 in May and 409,000 last June. A substantial drop in the volume of hogs slaughtered was responsible for the May-June decline. Less Coal and Oil Produced Less coal and oil were produced in the district in June than in May, but production remained higher than in June of 1949. About 7.5 million tons of coal were mined in June— 1.1 million tons less than in May but 4.3 million tons more than last June. Each of the three major coal producing areas, Illinois, Indiana and western Kentucky, mined less coal in June than a month earlier, but western Kentucky was the only one of the three which did not exceed its last year’s output. During the first six months of 1950, coal production averaged about 11 per cent less than in 1949 due to the abnormally low output PROD U CTION IN DEXES COAL P R O D U C T IO N IN D E X 1 9 3 5 -3 9 = 1 0 0 _____________ Unadjusted_____________ ______________ Adjusted______________ June,’ 50 M a y ,*50 J u n e /4 9 J u n e/50 M a y /5 0 J u n e/49 139* 163* 109 147*" 158* 116 S H O E P R O D U C T IO N IN D E X 1 9 3 5 -3 9 = 1 0 0 Unadjusted _________ ______________ Adjusted______________ H Pay/50 A p r il/5 0 M a y /4 9 M a y /5 0 A p r il/5 0 M a y /4 9 123* 139 •Preliminary. 108 127* 137 112 CONSTRUCTION B U IL D IN G P E R M IT S M onth of June N ew Construction Evansville......... Little R ock....... Louisville.......... M em phis............ St. Louis........... N um ber Cost 1950 1949 1950 1949 64 113 $ 223 $ 895 135 58 1,211 466 215 299 1,611 964 2 ,429 1,181 5,170 2,894 391 304 3,050 2,006 June Totals.. M ay Totals... '3 ,2 3 4 1,955 $11,265 $7,225 2,512 2,472 $17,075 $7,333 (Cost in thousands) Repairs, etc. N um ber Cost 1950 1949 1950 1949 82 100 $ 188 $ 61 273 215 437 286 90 76 76 80 219 200 128 143 348 320 642 831 1,012 911 $1,660 $1,212 1,008 969 $1,553 $ 940 in the months of January and February. During the last four months, output has exceeded the yearago level. The average crude oil output in June of about 307,000 barrels per day was the smallest volume reported so far this year. The production of crude oil in June was fractionally less than in May, but was moderately above last June. During the first six months of 1950, output of oil has been con sistently higher than in either 1948 or 1949. Construction Continues to Break Records Building activity continued at a high level in June. Construction during the first half of 1950 broke one record after another. Building permits were issued for approximately $70 million worth of new construction in the first six months of this year in the five major district cities. This was twice the amount issued during the same period last year, with all cities except Evans ville contributing to the increase. New construc tion authorized in June— $11 million— was substan tially lower than in May, but was half again as high as a year ago. The dollar volume of construction contracts awarded in the Eighth District totaled $82 million in June, bringing the total for the year to date up to $407 million. The^ June volume of contracts awarded, according to the F. W . Dodge reports, was down from May, but was considerably higher than last June. Both nonresidential and residential building contracts dropped during June, but public works and utilities construction gained. During the first half of 1950, the total dollar volume of construction was 44 per cent higher than in 1949, with residential showing an 82 per cent and nonr residential showing a 26 per cent gain. TR A D E The picture of retail sales in the Eighth District for the first half of 1950 reflected continuing con sumer eagerness to purchase durable goods. Soft goods retailers had to combat the weather and con sumer preference for hard goods. But the life of retailers of durable goods was not bright in all lines. Page 119 TRADE D E P A R T M E N T STORES Stocks Stock _____________N et Sales________ on H and Turnover June, 1950 6 mos. ’ 50 June 3 0 ,’ 50 Jan. 1, to compared with to same comp, with June 30, M a y ,’ 50 June,’49 period ’ 49 June 3 0 /4 9 1950______ 1949 8th F .R . D istrict... — 9 % F t. Smith, A r k ........ — 5 Little Rock, A r k . . . . — 20 Q uincy, 111................ — 8 Evansville, In d ........— 4 Louisville, K y ..........— 10 St. Louis Area1.......— 5 St. Louis, M o ..... — 5 Springfield, M o .......— 6 M em phis, T enn.......— 19 *A11 other cities...... — 4 + 4 % 4- 5 4- 5 — 1 +15 +12 + 1 - 0+ 5 + 2 4 -1 4 — 1% — 4 —0— — 2 + 3 + 2 — 2 — 3 + 1 -0 — + 1 + 3 % 4 -4 +15 + 7 — 2 + 6 + 2 + 2 — 4 — 1 + 4 1.88 1.83 1.86 1.64 1.79 2.08 1.87 1.88 1.67 1.94 1.54 1.92 1.96 2.00 1.64 1.70 2.08 1.90 1.91 1.59 2.02 1.52 *E1 D orado, Fayetteville, Pine B luff, A r k .; Harrisburg, M t. Vernon, 111.; N ew Albany, Vincennes, I n d .; Danville, Hopkinsville, Mayfield, Paducah, K y . ; Chillicothe, M o . ; Greenville, M is s .; and Jackson, Tenn. 1 Includes St. Louis, M o . ; A lton , Belleville, and East St. Louis, 111. Outstanding orders of reporting stores at the end of June, 1950, were 20 per cent greater than on the corresponding date a year ago. Percentage of accounts and notes receivable outstanding June 1, 1950, collected during June, by citie s: Instalm ent E xcl. Instal. Accounts Accounts Fort S m ith .... Little R ock.... Louisville ...... M em phis ......... IN D E X E S OF ....% 16 17 17 47% 42 50 40 Instalment E xcl. Instal. A ccounts Accounts Quincy ........... St. Louis......... Other Cities.... 8th F .R . D ist. 1 8% 18 13 17 53% 54 55 49 D E P A R T M E N T ST O R E SA LE S A N D STOCK S 8th Federal Reserve District June, M ay, April, June, 1950 1950 1950 1949 Sales (daily average), unadjusted 2....................... ..293 Sales (daily average), seasonally adjusted 2........326 Stocks, unadjusted 8........................................................299 Stocks, seasonally adjusted 3.......................................299 323 330 313 313 316 319 329 329 283 314 280 280 2 D aily average 1 9 3 5 -3 9 = 1 0 0 . 8 End of M onth Average 1 9 3 5 -3 9 = 1 0 0 . S P E C IA L T Y STO R E S Stocks ____________ N et Sales________ on H and June, 1950 6 m os.’ 50 June 3 0 /5 0 compared with to same comp, with M a y /5 0 J u n e/49 period *49 June 3 0 /4 9 M en ’ s Furnishings.... — Boots and Shoes......... — 6% 7 — — 1% 2 — — 5% 3 — 1% — 6 Stock Turnover Jan. 1, to June 30, 1950 1949 1.25 2.25 1.27 2.26 Percentage of accounts and notes receivable outstanding June 1, 1950, collected during June: M en’ s Furnishings ................ 41% Boots and Shoes....................... 4 2 % Trading d a ys: June, 1950— 2 6 ; M a y , 1950— 2 6 ; June, 1949— 26. R E T A IL F U R N IT U R E S T O R E S ** N et Sales Inventories Ratio June, 1950 June, 1950 of compared with compared with Collections M a y /5 0 J u n e /4 9 M a y /5 0 Ju n e/49 J u ne/50 Ju n e/49 8 th D ist. T o t a l1..... — 3 % St. Louis A r e a 2......— 3 St. L ou is................— 3 Louisville A r e a 3.... — 9 Louisville.............. — 14 M em phis..................... - 0Little R ock ................ + 4 Springfield.................— 19 Fort Sm ith................ — 1 + 12% +20 +20 +20 +19 - 0+ 8 — 4 — 20 — — — — 2% 1 1 5 — 4 — 2 + 2 — 7 * + 12% +21 +21 +18 +18 — 20 + 4 + 2 * 21% 26 26 15 14 13 16 17 * 24% 31 31 17 16 15 20 20 * *N o t shown separately due to insufficient coverage, but included in Eighth D istrict totals. 1 In addition to following cities, includes stores in Blytheville, and Pine B luff, A rkansas; Hopkinsville, Owensboro, K entucky; Greenwood, M ississippi; Hannibal and Springfield, M issouri; and Evansville, Indiana. 2 Includes St. Louis, M isso u ri; and Alton , Illinois. 3 Includes Louisville, K en tu ck y; and N ew Albany, Indiana. **41 stores reporting. PERCENTAGE D IS T R IB U T IO N O F June, ’ 50 Cash Sales................................. Credit Sales.............................. Total Sales........................... Page 120 14% 86 100 % F U R N IT U R E M ay, *50 14% 86 100% ’ SALES June, *49 15% 85 100% Sales of some lines of major appliances and furniture lagged, and competition grew keener and, in some instances, extended into the field of credit terms. Percentagewise, the growth in instalment credit nationally, since the end of 1949, has been about three times that for total consumer credit outstand ing. Automobile sale credit outdistanced other types substantially and at midyear was about onesixth larger than at the end of 1949. Of the reporting district retail trade lines, only furniture store sales were larger in the first half of the year than in the corresponding period in 1949. Department store sales were slightly under those last year. W om en’s specialty store sales were about one-sixth less and men’s wear store sales were down 5 per cent. Department Stores—June sales of reporting stores dropped seasonally from May but were 4 per cent larger than in June, 1949. In the district, seasonally adjusted daily average sales were 326 per cent of the 1935-39 average as compared with 330 per cent in May and 314 per cent in June, 1949. St. Louis department store sales in June were unchanged from those a year ago. In contrast, all other district cities except Quincy registered in creased sales. The largest gain occurred in Evans ville where sales increased about one-sixth. Sales of durables continued to contribute heavily to the strength in department store sales in June. Of the major divisions in St. Louis stores, only housefurnishings, small wares, and men’s and boys’ wear showed gains from last year. Sparked by sales of television sets, which had more than doubled, housefurnishings sales were 12 per cent larger than last year. Small wares divisions averaged slightly better than in 1949 with the major portion of the gain occurring in umbrella sales— up one-third from a year ago. Men’s and boys’ wear declined slightly in the upstairs divisions but the gain in basement sales was large enough to boost the total to slightly over last year. Inventories, at retail value, of reporting district department stores on June 30 were 7 per cent less than on May 31 but were 3 per cent larger than on June 30, 1949. The value of outstanding orders on June 30 was about four-fifths larger than a month earlier and one-fifth larger than a year ago, pos sibly reflecting fear of future goods shortages plus a growing optimism concerning the level of sales for the remainder of the year. Specialty Stores— Both women’s specialty and men’s wear store sales in June were less than in the previous month and the corresponding month in 1949. St. Louis women’s specialty store sales were about a third less than in May and 15 per cent less than in June, 1949. The retail value of inventories on June 30 was one-tenth less than on May 31 and 16 per cent under that a year ago. Men’s wear store sales in June declined 6 per cent from their May level and were 1 per. cent less than a year ago. Inventories at the end of June dropped 7 per cent under those a month earlier but were slightly under those last year. Furniture Stores— Reporting district furniture store sales were 3 per cent less than in May but were 12 per cent larger than in June, 1949. The retail value of inventories on June 30 was slightly less than on May 31, but was 12 per cent larger than on June 30, 1949. AGRICULTURE Generally, the prospects for 1950 crop production indicate a higher outturn of crops than for any year prior to 1942, but considerably lower than in 1948 and 1949. Corn production, for example, was esti mated on July 1 at 3,176 million bushels, compared with 3,378 million in 1949— a 6 per cent reduction. However, a crop of this size would be 500 million bushels above the corn goal fixed at the outset of the crop season, 200 million bushels above the 10-year average, and the third largest crop of record. Prospects for other district crops improved during the month. Wheat yields are exceeding earlier ex pectations in Missouri, Illinois and Indiana, where most of the district wheat is grown. The July esti mate of total United States wheat production (957 million bushels) represented an increase of 12 mil lion bushels over the June estimate. Similarly, the July estimate of the oats crop (1,395 million bush els) indicated an increase of 15 million bushels from a month earlier. Crop prospects in district states varied from excel lent to poor. In Missouri, corn production was estiAGRICULTURE ( I n thousands M ay, 1950 of dollars) Arkansas..... $ 2 2,886 Illinois.......... ... 132,318 74,200 Indiana........ K entucky.... ,, 27,559 ... 13,308 Mississippi.. M issouri...... .« 71,312 Tennessee...,... 25,466 T otals...... ,$367,049 R E C E IP T S AND Cattle and calves.... l o g s ............................ ph eep ........................... T o ta ls..................... C A S H F A R M IN C O M E M a y , 1950 5 month total Jan. to M ay compared with 1950 April, M ay, compared with 1950 1949 1950 1949 1948 + 33% — 13% $ 104,685 — 35% — 17% + 28 + 7 638,642 — 5 + 1 + 21 + 5 331,243 — 2 — 12 + 44 + 3 203,991 + 9 + 1 — 13 — 36 69,717 — 61 — 47 + 35 + 7 314,647 — 7 — 10 + 39 — 9 134,612 — 8 — 17 + 28% $1,797,537 — 10% — 10% + 1% S H IP M E N T S A T N A T IO N A L ST O C K Y A R D S _________ Receipts____________ _________ Shipments__________ June, 1950 103,049 239,642 78,833 421,524 June, 1950 compared with June, M a y ,’ 50 June,*49 1950 +13% — 9% 34,889 -— 18 — 4 97,298 — 4 +35 44,553 — 9% -0 -% 176,740 June, 1950 compared with M a y ,*50 J u n e/49 4 -1 1 % — 11% + 9 +24 — 15 +95 + 2% +26% mated at 181 million bushels, 7 million higher than in 1949. Estimated corn production in other district states included in the commercial areas where allot ments are in effect was less than in 1949. The de clines ranged from 17 per cent in Illinois to 13 an<^ 9 per cent in Kentucky and Indiana. In the other three district states, corn production was expected to increase. Missouri soybean acreage was estimated at 1,136,000 acres, a record high, and 279,000 acres more than were planted in 1949. Soybean acreages in Mississippi, Arkansas and Tennessee were up 171, 72 and 50 per cent, respectively, from a year earlier. Although substantial acreage increases have been made in Indiana, Illinois and Kentucky, the propor tionate increase has been smaller than the 31 per cent increase for the country as a whole. Total cotton acreage on July 1 was estimated at 19 million acres, more than 7 million acres less than in 1949—a decline of nearly one-third. This would indicate a crop in the neighborhood of 10 million bales, compared with 16 million in 1949. In district states, the acreage decline averaged 29 per cent. The decline in Mississippi was 27 per cent, in Arkansas 34 per cent. While crop prospects for all district states indi cate a high level of production, it might be noted that the spring-sown crops are still dependent on weather during the remainder of the crop season. Dry weather in the second week of July was dam aging the crop in some localities. IN D IC A T E D 1950 C R O P A C R E A G E S A N D P R O D U C T I O N July 1, 1950 _______ Corn_________ Soybeans (for beans)__________ Cotton Per cent Per cent Per cent (Am ounts in 1950 change 1950 change 1950 change thousands) Production from *49 Acreage from ’ 49 Acreage from ’ 49 ... 34,032 + 20% 500 + 72% 1,720 — 34% •* .. 429,777 — 17 3,865 + 22 ... 226,416 — 9 1,680 + 17 * — 13 131 + 10 ... 77,875 293 + 171 ... 57,050 + 20 2,085 — 27 ... 180,643 + 4 1,136 + 33 440 — 27 ... 69,960 + 2 90 + 50 650 — 23 Eighth District 7,695 + 27 ...1,075,753 — 8 4,895 — 29 — 6 12,937 + 31 19,032 United States ...3,175,602 — 31 *N o t reported separately. Source: Crop Production, U .S .D .A . _ _ Agricultural prices in mid-June were unchanged from a month earlier, following a rise from January to May. Prices paid increased 1 per cent in the month to mid-June. Prices of wheat and dairy products declined, but were offset by higher prices for cotton, fruit, poultry and eggs. However, since June 15, and with the outbreak of the Korean war, prices of agricultural products generally again moved upward. The Bureau of Labor Statistics weekly index of grain prices rose 2 per cent between June 27 and July 11. Livestock prices increased 12 per cent during the same period. Page 121 BANKING BANKING The upward trend in bank activity in this district continued in June, 1950, although at a somewhat less rapid rate than in the earlier months of the year. The expansion in total loans at country banks —$7 million— was offset by the seasonal shrinkage in loans at the larger city banks. Combined total loan volumes at all reporting member banks showed a reduction of $14 million in comparison with a $42 million decline in June, 1949. In June, 1950, invest ments were reduced $16 million in contrast to an increase of $18 million in investments during June, 1949. Demand deposits were off $51 million and time deposits were off $4 million for the month. A year ago, in June, demand deposits declined about an equal amount and time deposits increased slightly. The drop in loans at the larger city banks was occasioned by the declines in business loans and loans to banks ($19 million and $12 million) partly offset by gains in real estate, security and “ other” (largely consumer credit) loans—$5, $1, and $4 million, respectively. The year ending June, 1950, as a whole, was a moderately expansionary period in banking as well as in business generally. For all district member banks, total assets increased $232 million over the level of June, 1949. Earning assets increased even more— $270 million. (The greater increase in earn ing assets was primarily the result of the lowering of reserve requirements in August, 1949.) Gross demand deposits increased $192 million, time de posits $18 million and capital accounts $24 million. Although both earning assets and deposits of all member banks in the Eighth District declined in the first six months of 1950, these declines were less than the average of the past three years. In other words, allowing for seasonal declines, the trend in bank earning assets and demand deposits was up ward for the six-month period. This expansionary trend in earning assets and deposits of all member banks in the district can be seen from the following comparison. C H A N G E S IN E A R N IN G A S SE T S A N D D E P O S IT S D U R I N G F I R S T S I X M O N T H S , 1947-1950 Eighth District M ember Banks (I n millions of dollars) Loans ................................................................... U . S. Governments........................................ Other securities ................................................ Dem and deposits ............................................. 1950 $— 34 — 31 +18 — 41 A v . *47, *48, *49 $— 69 — 79 + 10 — 193 (It should be noted that a small part of the differ ence in demand deposits between 1950 and previous years might be accounted for by the change in the date of levying state taxes on bank deposits in Louisville from July 1 to September 1.) Page 122 P R IN C IP A L A S SE T S A N D FED ER AL RESERVE BAN K L IA B IL IT IE S O F ST. L O U IS Change from June 21, July 20, July 19, 1950 1950 1949 (I n thousands of dollars) Industrial advances under Sec. 13b........... $ Other advances and rediscounts.................. .........6,732 U . S. securities.................................................... 985,699 Total earning assets..................................... 5f5 992,431 $ ................ + 690 + 10,534 $ + 11,224 $ ................ -— 6,288 — 12,673 $— 18,961 Total reserves....................................................... $5 719,367 Total deposits...................................................... 659,312 F . R . notes in circulation................................ 1,044,379 $+ — + $— 50,542 — 36,331 — 28,927 Industrial commitments under Sec. 13b.. Jj $ ................ 872 382 4,796 * ...............7 P R IN C IP A L A S SE T S A N D L IA B IL IT IE S W E E K L Y R E P O R T IN G M E M B E R B A N K S E IG H T H F E D E R A L R E S E R V E D IS T R IC T (I n thousands of dollars) 34 banks reporting Change from July 20, July 19, June 21, 1949 1950 1950 ASSETS Gross commercial, industrial and agri cultural loans and open market paper.. $ 477,048 $ + 947 $ + 15,517 Gross loans to brokers and dealers in 6,829 — 1,578 — 798 Gross loans to others to purchase and + 3,069 + 1,626 carry securities ............................................. 24,115 + 46,741 + 6,743 Gross real estate loans...................................... 213,116 + 3,606 + 3,837 Gross loans to banks........................................ 4,482 Gross other loans (largely consumer + 29,104 240,825 + 7,775 $ Less reserve for losses............................ Treasury bills ..................................................... Certificates of indebtedness............................ Treasury notes .................................................... U . S. bonds and guaranteed obligations Other securities .................................................. Total investments ........................................ Other assets ......................................................... Total assets .................................................... 966,415 12,121 $ 954,294 80,746 77,853 253,900 680,097 189,056 $1,281,652 748,495 26,164 $3,010,605 $ + 1 9 ,1 1 9 $ + 97,470 + 96 + 2,986 $ + 1 9 ,0 2 3 $ + 94,484 + 15,338 + 22,023 — 21,962 — 119,141 + 2 1 4 ,4 6 3 + 1,855 + 1,972 — 93,068 + 1,037 + 37,127 $— 1,760 $ + 61,404 + 4,709 + 33,251 + 1,032 + 1,876 $ + 51,546 $ + 162,473 L IA B IL IT IE S Demand deposits of individuals, part nerships, and corporations....................... $1,563,412 $ + 36,773 $ + 117,59* 3,797 + 24,235 — Interbank deposits................................................. 557,110 + 47,557 981 65,077 — U . S. Government deposits.......................... — 15,153 — 3,720 116,196 Other deposits .................................................... Total demand deposits................................. $2,301,795 $ + 56,307 $ + 146,199 + 6,095 493,324 — 1,685 Time deposits ....................................................... 1,305 8,120 — 2,610 — + 3,203 20,588 — 1,144 Other liabilities .................................................. + 8,281 + 678 186,778 Total capital accounts...................................... Total liabilities and capital accounts.. $3,010,605 $ + 51,546 $ + 162,473 Demand deposits, adjusted*.......................... $1,448,331 $ + * Other than interbank and government items on hand or in process of collection. demand 9,283 $ + deposits, 68,605 less cash DEBITS TO DEPOSIT ACCOUNTS (In thousands of dollars) June, 1950 M ay, 1950 June, 1949 22,256 22,985 $ 25,728 $ E l Dorado, A r k ............. ..$ 39,409 37,689 39,383 Fort Smith, A r k ..... ..... 5,639 5,542 6,122 Helena, A r k ..............«...■ 117,955 122,100 130,005 Little Rock, A r k ........... .. 24,406 23,325 24,430 Pine Bluff, A r k .............. 10,294 10,640 10,447 Texarkana, A r k .* ......... 24,677 23,953 26,750 A lton , 111........................... 108,570 111,500 E .S t .L .-N a t .S .Y ., 111... 112,995 28,353 30,153 31,547 Quincy, 111....................... 116,921 123,494 136,187 Evansville, In d .............. 531,336 530,383 563,995 Louisville, K y ................ . 29,136 31,577 31,856 Owensboro, K y ............ 14,223 16,046 16,566 Paducah, K y .................. 18,422 16,050 18,474 Greenville, M iss............ 11,132 11,156 12,201 Cape Girardeau, M o..., 8,758 8,476 8,020 Hannibal, M o ................ 45,673 34,619 39,368 Jefferson City, M o ....... 1,478,267 .. 1,704,070 1,582,573 10,256 10,374 10,148 Sedalia, M o ..................... 61,641 58,567 53,419 Springfield, M o ............. 18,305 16,254 Jackson, T enn................ 18,017 524,088 533,671 435,705 M em phis, Tenn............ .. June, 1950 compared with M ay/SO June,*49 + 12% + 4 + 10 + 6 -(3 — 2 + 12 + 1 + 5 + 10 + 6 + 1 + 16 -i 0+ 9 + 3 — 14 + 8 — 1 + 5 + 2 — 2 + 5% + 16% - 0+ 9 + 10 + 5 + 1 + 8 + 4 + 11 + 16 + 6 + 9 + 3 + 15 + 10 + 9 + 14 + 15 — 2 + 15 + 13 +20 + 13% Total debits £<t *These figures are for Texarkana, Arkansas, only, banks in Texarkana, Texas-Arkansas, including banks in the E lev en th District, amounted to $26,229. From mid-June to mid-July, the rate of activity at district banks quickened. Total loans at larger city banks reporting weekly increased $19 million while in the corresponding weeks a year ago they increased $5 million. The expansion this year occurred in all categories of loans. Business loans were up $1 million for the four-week period. Real estate loans rose $7 million and “ other” loans in creased $8 million. At mid-July, 1950, real estate loans had increased $47 million (28 per cent), and “ other” loans $29 million (14 per cent) over their year-ago levels. ' D IS T R IC T M E M B E R B A N K ASSE TS A N D L IA B IL IT IE S B Y SELECTED GROUPS A ll Member Large City Banks 1 Change fro m : Change fro m : M ay, 1950 June, 1949 M ay, 1950 Tune, 1949 to to to to June, 1950 June, 1950 June, 1950 June, 1950 June, 1950 June, 1950 $+186 $ 3 ,8 6 4 ' $— 30 $— 31 $ + 270 $2,232 — 21 + 87 1,497 — 14 954 + 120 1,997 — 12 — 8 1,089 + 96 + 51 — 2 + 48 370 — 4 189 + 54 — 22 1,151 — 24 — 43 712 — 11 — 35 563 + 21 — 75 366 + 15 — 26 + 13 346 588 — 45 + 32 — 3 26 44 — 8 + 1 + 5 $— 45 $ + 165 $5,059 $— 62 $ + 232 $2,970 E IG H T H ( I n Millions of Dollars) Assets 1. Loans and Investm ents................................... a. Loans ................................................................... b. U . S. Government O bligations............. c. Other Securities ............................................. 2. Reserves and Other Cash Balances........... a. Reserves with the F .R . bank.................. b. Other Cash Balances 8................................. 3. Other Assets ......................................................... 4. Total S. 6. 7. 8. 9. Assets ......................................................... Liabilities and Capital Gross Demand Deposits................................... a. Deposits of Banks........................................... b. Other Demand D eposits............................ Tim e Deposits ............................ .......................... Borrowings and Other Liabilities................ Total Capital A ccounts...................................... Total Liabilities and Capital Accounts.... $3,713 563 3,150 990 28 328 $5,059 $— 51 — 16 — 35 — 4 — 9 + 2 $— 62 $ + 192 + 10 + 182 + 18 — 2 + 24 $ + 232 $2,261 530 1,731 500 21 188 $2,970 $— — — — — + $— 34 16 18 2 10 1 45 $ + 153 + 7 + 146 + 7 — 3 + 8 $ + 165 Smaller Banks 2 Change fro m : M ay, 1950 June, 1949 to to June, 1950 June, 1950 June, 1950 $1,632 $ + 84 $+ 1 + 33 543 + 7 — 4 + 45 908 — 2 + 6 181 — 21 — 13 439 — 40 197 + 6 242 — 19 + 19 18 — 5 + 4 $2,089 $— 17 $ + 67 $1,452 33 1,419 490 7 140 $2,089 $— -0 — — + + $— 17 17 2 1 1 17 $+ + + + + + $+ 39 3 36 11 1 16 67 1Includes 2Includes 15 St. Louis, 6 Louisville, 3 M em phis, 3 Evansville, 4 Little Rock and 4 East St. Louis-N ational Stock Yards, Illinois, banks. all other Eighth D istrict member banks. Some of these banks are located in smaller urban centers, but the majority are rural area banks. * Includes vault cash, balances with other banks in the United States, and cash items reported in process of collection. Page 123
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