Full text of Business Conditions (Federal Reserve Bank of Chicago) : April 1949

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. BUSINESS CONDITIONS
A REVIEW BY THE FEDERAL RESERVE BANK OF CHICAGO

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The Hog-Corn-Pork Situation
Increased Supplies, Lower Prices in Prospect
A record size 1948 corn crop and favorable hog-corn
price ratios in recent months laid the groundwork for a
large expansion in the 1949 spring pig crop. However, with
corn prices supported at profitable levels and considerable
uncertainty as to prospective hog prices for the 1949-50
fall and winter months, when hogs from the spring pig
crop would be marketed, farmers have had difficulty
reaching final decisions as to breeding, feeding, and
marketing plans.
Development of any substantial amount of unemploy
ment or decline in personal income during 1949 would
result in a further downward adjustment in meat and
livestock prices. The predominant opinion at this time
suggests a continuation of high employment and income
through 1949 although there are indications that the
strong postwar inflationary movement has come to a halt,
at least temporarily, and that general economic weakness
could develop before the end of the year.
If employment and income payments continue at cur
rent levels and hog marketings in the fourth quarter of
1949 increase no more than 10 per cent over the 1948
level, hog prices would be expected to average somewhat
lower than in the fourth quarter of 1948 but above support
levels. If combined with a 10 per cent drop in personal
income payments, however, prices probably would de
cline at least to support levels, particularly at any time
marketings exceeded the anticipated volume.
Supplies of beef and lamb are expected to be smaller in
1949 than in 1948, offsetting some of the price depressing
influence of increased pork supplies. A further consider
ation in the behavior of hog prices in the fourth quarter
of 1949, of course, will be meat packers evaluation of
meat supply and price prospects for the spring and sum
mer months of 1950. An aggressive storage demand for
pork in the winter of 1947-48 contributed to the high
December and January prices of that period. Storage
demand in the current season was less aggressive. If the
trend of prices and income payments should be level or
downward in the winter months of 1949-50, the storage
demand for pork probably would become a strong
price supporting factor only after prices had declined
substantially.
Consumer expenditures for meat following the end
of price control in 1946 were high relative to consumer
incomes. Meat expenditures accounted for 6.3 per cent of
disposable personal incomes in 1947 compared with around
.5.5 per cent in the late 1930’s and 4.4 per cent average
for 1942-45 when meat prices were under OPA control.
The percentage relationship to incomes rose to a high
point of 6.9 in the second quarter of 1948. There are in
dications, however, that it receded in the last quarter of
the year. “There is some evidence,” reported the Bureau
of Agricultural Economics, “that the gradually rising

demand for meat in the last two years has leveled off from
the high point reached last summer.” Whether this repre
sents a continuing adjustment in the direction of prew-ar
expenditure patterns for meat is still uncertain. The BAE
estimates that such an adjustment, should it occur, would
result in a level of meat prices relative to income about
10 per cent lower than in 1947 and 1948.
SIZE OF SPRING PIG CROP IN DOUBT

Unusual factors in the hog-corn-pork situation are
indicated by a prospective increase of only 10 per cent
in number of 1949 spring pigs in the face of corn supply
and price conditions which in previous years commonly
resulted in spring pig crop increases of one-fifth to onefourth. Early last December, farmers reported intentions
to breed 14 per cent more sows to farrow in the spring of
1949 than in the previous year. But this is expected to
increase pig numbers by only 10 per cent, to 56.5 million,
according to the U. S. Department of Agriculture, as the
number of pigs saved per litter in 1948 was a near record
of 6.44 and is not expected to be equaled this spring. The
Department had recommended an increase of 17 per cent
in the spring pig crop to 60 million head. The indicated
56.5 million pigs, if realized, would be the third largest
spring pig crop of record, but substantially below the
very large crops of 1942 and 1943.
Although farmers’ December intentions are not a certain
indicator of the size of the spring pig crop to follow, such
reported intentions in past years usually have shown
later developments with a fair degree of accuracy (see
Chart 1). Even though the intentions reported in Decern(Continued on Page 8)

CHART I

BREEDING INTENTIONS-^ FOR SPRING PIGS
COMPARED WITH SOWS FARROWED
1925-49
(PER CENT OF PREVIOUS YEAR)

INTENDED

ACTUAL

^URCEE^TMPARTMENTI0FRAGRICULTURE , BUREAU OF AGRICULTURAL ECONOMICS.

Unemployment Moves Upward
Rising Labor Force and Layoffs Increase Jobless Ranks
Recent increases in unemployment provide further
important confirmation of the slide-off in business ob
served earlier in terms of lagging sales and orders. The
number of jobless in the Seventh Federal Reserve District
is currently estimated to be about 575,000 persons, com
pared with 325,000 a year ago. Total employment in both
agricultural and nonagricultural activities, however, is
about equal to last year’s level, reflecting that the increase
in the number of new persons seeking jobs has been more
important than industrial layoffs in contributing to cur
rent numbers of unemployed.
Principally because of this continued high level of
aggregate employment, and because of the cushioning
effects of unemployment compensation payments to work
ers laid off, no appreciable decline in personal income as yet
appears to have occurred. In fact, total personal income
in February 1949 nationally was five per cent above the
same month of 1948, and this general relationship seems
likely to hold for the District as well. The recent rise in
unemployment, following the prewar pattern, has had
significant psychological repercussions upon business and
consumer expectations. Joblessness is feared both for
its causes and its effects. To date, unemployment has
not risen enough to constitute a strong cumulatively de
pressing force, but this may well occur later in the year
if the underlying trend is not reversed.
Seventh District states appear to be having a greater
relative increase in unemployment, as compared with
last fall, than the nation as a whole. This is because of
a very low level of jobless in the District last year rather
than because of any unduly high figure currently. How
ever, the District’s principal durable goods industries—
steel, automobiles, and machinery—may very well under
go market adjustments this year similar to those which
most nondurable goods industries experienced in 1948.
Thus, still further employment readjustments are in pros
pect for the Midwest, along with some possible gains in
certain lines which had employment set-backs last year.
Both cyclical and seasonal developments have com
bined to produce the recent rise in unemployment. Bar
ring some new and unexpected development, the peak of
the postwar boom now appears to have been passed, and
thus the cyclical influence on employment seems to have
started down at a slow rate. During the last five to
six months declines have occurred in most business
measures, including employment. In addition, seasonal
considerations, after extended absence, have begun to re
assert themselves. During January and February the
seasonal lull definitely accentuated whatever cyclical de
cline may be under way. In fact, many developments in
the recent slide-off in business are traceable to a seasonal
rather than a cyclical downturn, and hence there may
be less reason for deep concern over business prospects
than held in certain quarters.

During March, however, the spring increase in buying
and the reactivation of seasonally depressed manufac
turing and construction operations began to exert an
opposing force on the cyclical decline, resulting in a de
crease in total layoffs and some limited rehiring. The
current month promises to test the strength of the two
forces in both the Midwest and the nation, with the
seasonal perhaps favored for the period immediately
ahead. If the spring buying increase fulfills current hopes,
including a good revival in new construction contract
awards, the cyclical decline will be halted at least for the
early part of 1949. However, if an important seasonal
upturn does not develop soon, prospects for business and
unemployment seem likely to worsen as the year pro
gresses.
WHAT IS UNEMPLOYMENT?

The apparent paradox of continued high over-all
employment and increasing unemployment is explain
able in terms of the “labor force” concept developed dur
ing the past decade. All persons 14 years of age or older
who are employed or are seeking work are considered to
be in the labor force. In an increasing population—par
ticularly one in which the number of persons of working
age is increasing—the labor force may be expected to rise
year by year. Hence, aggregate employment must increase
each year to keep unemployment at a minimum. Stated
conversely and more specifically, if average employment
in 1949 were to be exactly equal to the 1948 average, the
total number of unemployed could be expected to in
crease by the net addition to the labor force, an expected
one million persons.
Correct estimates of the labor force are difficult be
cause of the psychological factor of whether particular
persons choose to report themselves as seeking work.
From a practical standpoint, the problem centers princi
pally around the female segment of the labor force. For
example, a working girl may get married, begin house
keeping immediately, and remove herself from the labor
force. Later she may decide that family budget pressures
require a return to work and so she may re-enter the work
force. As a matter of fact, thousands of such movements
into and out of the labor force occur daily Through the
use of sampling techniques, the United States Bureau of
the Census measures these changes each month and pub
lishes the results in its series of Current Population
Reports called the Monthly Report of the Labor Force.
This release likewise supplies the official estimates of the
number of persons employed and unemployed each month.
All unemployment is not economically significant. It
is obviously not possible in a free job market to reduce
Page 1

joblessness to zero because there will always be certain
persons who are changing jobs or entering the labor mar
ket and thus are “unemployed” in the interim. This is
commonly described as frictional unemployment. Even in
the peak wartime year, i.e., 1944, an average of 670,000
persons, according to the Census Bureau, were unem
ployed. In view of the restrictions on job changes enforced
through the War Manpower Commission, this number
would appear to represent an irreducible minimum of
unemployment.
A more realistic peacetime minimum might be derived,
however, by taking the average unemployment for 1947
and 1948. During these years general business reached a
hitherto undreamed-of level of activity and, in the main,
persons willing and able could find work readily. Yet
unemployment still averaged about two million persons.
Except for certain minor depressed areas, such as towns
surrounding marginal coal and metal mines, this unem
ployment in large part represented persons who were
changing from one job to another. In addition, during
the high level years of 1947 and 1948, unemployment in
the months of January and February was markedly
greater than the average for the year, a pattern which
also obtained in the prewar year of 1940. The peak month
for unemployment in each of these years (considered in
relation to the civilian labor force for that month) was
February.
Viewed in this manner, the irreducible minimum un
employment for March 1949—that is, the proportion of
the labor force which was either seasonally unemployed

or “between jobs” as indicated by the 1947 and 1948
averages—would be about 2.5 million persons. The es
timated number in excess of this could be described as
“economic” or “cyclical” unemployment. Estimates for
March show a total of 3.2 million unemployed. As defined
above, roughly 700 thousand would comprise “economic
unemployment,” a much smaller, although still significant,
number.
MIDWEST UNEMPLOYMENT TRENDS

Total unemployment in the five states of the District
is estimated to be 575,000 currently, as compared with
about 200,000 last November. As indicated previously,
this rate of rise in the number of jobless in the District
during the past five months exceeds the rate of increase
in the nation, and is explainable chiefly in terms of layoff's
in durable goods manufacturing establishments, highly
significant in the District’s economic life. Greater-thanseasonal employment reductions also have occurred in
wholesale and retail trade, railroads, and some service
establishments.
Among the durable goods manufacturing industries
most affected by recent layoffs are gray iron foundries;
forging, stamping, and metal finishing; electrical machin
ery, particularly fractional horsepower motors and electri
cal supplies; home appliances; automobile parts and acces
sories; and furniture. Lesser declines of a non-seasonal
nature have occurred in the nondurable goods industries
of the District, e.g., chemicals, clothing, and paper. The

LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT
UNITED STATES, l929-49i
MILLIONS OF PERSONS
--------------------------- 70

MILLIONS OF PERSONS
70

CIVILIAN LABOR FORCE

. EMPLOYMENT

20
10
i

1929

1931

1933

1935

1937

1939

1941

1943

1945

1947

1948

J/ 1929-47. ANNUAL AVERAGES; 1948-49. MONTHLY: MARCH 1949 ESTIMATED
SOURCE: UNITED STATES BUREAU OF Th£ CENSUS J\ND UNITED STATES BUREAU OF LABOR STATISTICS.

Page 2

i i

1949

i i

food industries as a group have registered drops, but not
of greater degree than might be explained by seasonal
factors, and in some cases, such as the brewing industry,
rehiring for spring and summer already has begun.
The expected tendency for hours and earnings in man
ufacturing plants—and hence total manufacturing payrolls
—to decline simultaneously with employment has be
come evident in the factories of the District. Overtime
work is now practically nonexistent, and in numerous
instances firms have reduced operations temporarily to a
four-day week. As a result, aggregate factory payrolls in
the District, as in the nation, have declined somewhat
more than the number of employees. However, payrolls
in the District’s stores, offices, and other nonmanufac
turing establishments have not shown a comparable trend.
Within the Midwest, the states of Wisconsin and Iowa
now appear to have somewhat less unemployment in
proportion to labor force than have Illinois, Indiana, and
Michigan. Unemployment claims represent about 3.5
per cent of all covered employment in Iowa and Wis
consin, five per cent in Illinois, and almost six per cent in
Michigan. This appears to be further reflection of the
relatively greater employment declines in durable goods
industries, since these industries are relatively less im
portant in Wisconsin and Iowa than in the other states
of the District.
In general, business in the medium-sized cities and

small towns in the Midwest has been somewhat more ad
versely affected by the employment slide-off than in the
larger cities. Bloomington in Illinois; Fort Wayne, Ko
komo, and Logansport in Indiana; Muskegon and Jackson
in Michigan; and Janesville in Wisconsin are outstanding
but not unrepresentative examples of smaller cities in
which employment cut-backs have been quite marked.
WHY RISING UNEMPLOYMENT?

Aside from previously mentioned seasonal trends and
the normal increase in the total labor force, two principal
kinds of economic distortions are responsible for the
adjustments now resulting in increased unemployment.
The first of these is an outgrowth of the conversion of
existing productive capacity and the building and man
ning of new plants to fulfill wartime needs. The later re
conversion of these resources to postwar markets dom
inated by unusual backlogs of civilian demand has had
the effect of continuing this distorted use of the total
labor force. Even though much of the necessary read
justment has taken place gradually in the postwar period,
the year 1948 still found nearly 43 per cent of all nonagricultural workers engaged in manufacturing as com
pared with about 33 per cent before the war (see Business
Conditions, November 1948). Moreover, an increased
fraction of this larger-than-normal manufacturing force

UNEMPLOYMENT COMPENSATION CLAIMS
Seventh District States, 1945-49
Illinois

Indiana

Iowa

Michigan

Wisconsin

Five Seventh
District States

Seventh District
States as a
per cent of the
United States

Dec. 1945__

124,683

50,479

10,746

140,524

20,337

346,769

21.1

Dec. 28, 1946

57,293

10,137

4,372

36,566

5,541

113,909

13.6

Jan. 25, 1947.
Feb. 22, 1947.
Mar. 29, 1947
Apr. 26, 1947.
May 31, 1947
June 28, 1947
July 26, 1947.
Aug. 30, 1947
Sept. 27, 1947
Oct. 25, 1947.
Nov. 29, 1947
Dec. 27, 1947.

69,932
67,948
57,172
71,535
70,025
69,984
69,095
60,066
51,437
43,852
41,151
38,748

13,568
13,929
12,866
11,194
12,681
10,702
12.399
14,546
6,649
10,005
9,070
11,275

6,631
6,284
5,331
5,194
3,158
3,706
3,780
3,105
2,030
2,125
2,346
2,228

55,551
56,456
37,354
37.584
41,404
30,947
45,445
44,018
32,380
53,977
24,829
26,726

8,094
7,638
6,500
5,830
5,280
4,982
5,404
5,932
4,575
4,054
4,063
5,985

153,776
152,255
119,223
131,337
132,548
120,321
136,123
127,667
97,071
114,013
81,459
84,962

13.8
12.9
10.8
11.5
11.9
10.4

Jan. 31, 1948.
Feb. 28, 1948.
Mar. 27, 1948
Apr. 24, 1948.
May 29, 1948.
June 26, 1948.
July 31, 1948.
Aug. 28, 1948.
Sept. 25, 1948
Oct. 30, 1948.
Nov. 27, 1948
Dec. 25, 1948.

58,488
59,521
58,579
83,112
83,840
79,047
76,061
65,863
57,848
46,901
49,754
59,613

17,077
18,403
16,112
17,310
15,555
12,715
15,587
17,200
10,650
12.400
13,900
17,530

5,940
6,620
6,404
4,593
3,767
3,504
3,444
3,099
2,522
2,670
3,275
4,550

37,441
60,114
54,838
47,206
43,097
43,243
27,614
37,960
38.585
25,488
27,816
40,204

8,791
9,368
9,428
7,583
6,125
5,677
5,456
5,960
6,129
5,201
6,694
11,516

127,737
154,026
145,361
159,804
152,384
144,186
128,162
130,082
115,734
92,660
101,439
133,413

12.9
14.3
13.6
14.3
14.5
14.1
12.9
14.4
13.9

Jan. 29, 1949.
Feb. 26, 1949.
Mar. 12, 1949.

88,412
98,872
104,250

28,250
33,990
39,580

8,925
11,550
11,925

65,412
74,565
89,875

20,962
23,389
24,406

211,961
242,366
269,936

12.8
13.4
13.9

Week Ended

11.8

13.0
11.9
14.7
11.6
11.9

11.1

11.0
11.5

™™Pcn,®able and waiting-period claims; excludes initial claims.
QUUKCk: U. c. Bureau of Employment Security.

Page 3

has been employed in making durable goods, such as
steel, machinery, automobiles, and household goods.
The temporary demands which justified the increased
capacity in many individual lines have since declined,
resulting in excessive capacity in relation to “normal”
needs at least at prevailing prices. This situation is true
not only as respects plant capacity and equipment, but
also the work force. Marginal workers were kept on pay
rolls because the output was badly needed, and could
be sold at prices making the employment of this labor
profitable. As the most pressing needs have been met,
however, a gradual reduction of this marginal work force
has taken place. Many of these workers were above nor
mal working age, and have since retired from the labor
force. Others are simply less desirable employees for
other reasons than age and continue in the ranks of the
unemployed.
The second type of economic distortion is in the realm
of production costs and selling prices. Raw material
prices in many cases—especially those in which gray
markets developed—reached fantastically high levels since
the end of the war. Three successive rounds of wage-rate
increases not accompanied by significant improvements in
productivity (see Business Conditions, November 1948)
added further to rising costs of production. These in
creased costs of production in turn were reflected in
higher selling prices, in many cases to the point where
large segments of the expected market were “priced out.”
Readjustments to correct these two broad types of dis
tortions have coincided with the period of greatest sea
sonal lull, that is, the winter months. With high fixed
costs, high break-even points, and rigid wage-rates,
numerous firms have found that the only satisfactory
“adjustment” is to reduce the work force, particularly
the above-mentioned marginal workers, eliminate all over
time work, and in some cases, reduce the work week to
less than 40 hours. The regular additions to the labor
force at the same time greatly intensify the rising un
employment problem.
FUTURE PROSPECTS

With the expected seasonal increases in lines directly
associated with agriculture and construction, unemploy
ment may decline, or at least level off, in the months
immediately ahead. This trend, however, will be counter
balanced by the addition of a large group of June grad
uates to the labor force, including many G. I.’s now
finishing their training. The problem is not whether such
graduates individually will find employment—most of
them will—but whether over-all employment opportuni
ties will increase sufficiently to absorb the net increment.
Withdrawals from the labor force, of course, are occur
ring continuously as a result of deaths, retirement of
aged, and other reasons, but these will not by any means
offset completely the expected new entrants.
Among the factors presently affecting the prospects
for business and employment in the months immediately
ahead is the trend of employment itself. The decline in
sales—basic cause of initial layoffs—tends to be accent
Page 4

uated during the early stages by the adverse psychological
effect upon sales of the layoffs themselves. Consumers are
inclined to tighten their belts. Hesitancy to buy, especially
where instalment commitments are involved, becomes the
order of the day. This first effect, however, may be temp
orary and could disappear quite readily if general rehiring
begins to take place.
A second and basically more fundamental influence is
consumer reaction to the trend in prices. Declines have
taken place in the prices of many finished products, in
cluding such consumer durables as refrigerators and other
home appliances. Will a sufficient number of consumers
be stimulated to new buying by the initial price reduc
tion, or will too many expect further declines and hold
off purchases in anticipation of them? As was stated
earlier, tfie current month seems likely to test the strength
of the seasonal upturn in buying, and may well provide
the answer to this important question. Likelihood that
these adjustments can continue throughout 1949 without
a serious and general decline in business appears to be
most profitably assessed by balancing the factors of
strength against the weaknesses already pointed out.
Among the factors of the underlying strength in to
day’s business situation are the following:
1. There is general agreement that the postwar desires
for consumer goods, both durable and nondurable
have not been satisfied. Once price-quality adjust
ments have been accomplished, a vast market is in
prospect.
2. Financial strength characterizes the entire economic
system. In general, this is true of farmers, urban
consumers, and businesses, as well as of financial
institutions. An unprecedented volume of well dis
tributed savings exists and, although many families
have exhausted their liquid assets, a significant
fraction of these savings will be ready to come into
the market when the owners consider that prices are
right.
3. There has been very little speculation during this
postwar period. Speculative bubbles are more likely
to burst suddenly than the kind of price-income in
flation which has taken place in this postwar period.
4. Government appears more willing to take actions de
signed to strengthen weak segments of the economic
structure, and numerous “support” programs already
are operative or can readily be made so. It has been
widely accepted that during 1947 and 1948 such pro
grams as veteran payments for bonuses and terminal
leave bonds, increased military expenditures, and
the European Relief Program had stimulating effects
upon business.
Although continuing readjustments still lie ahead and
“confidence” in business is decidedly lacking, the basic
economic conditions leading to a major recession this
year do not now appear to be present. On balance, it
seems more likely that, while unemployment in 1949 will
average higher than in 1948, the year is not likely to
bring sharply spiraling joblessness. In retrospect, the year
1949, it still seems likely, will be classified as an integral
part of the postwar boom.

Developments in Social Security—I
Average Payments Up Sharply From Prewar Levels In Most Programs
The recent proposals of the President have directed
public interest in the government programs providing
for the relief of various types of dependency. These are
among the most important services of the Federal, state
and local governments, in terms of both expenditures and
the number of persons benefiting from the services (see
Table 1). In fiscal 1948, more than 3 billion dollars was
spent on the seven major programs for the relief of econ
omic distress caused by old-age, unemployment, loss of
parental support by children, and blindness. In October
1948, 7.8 million persons—more than five per cent
of the population—were recipients of payments for old-age
and survivors insurance, unemployment insurance, rail
road retirement, disability, and unemployment insurance,
and public assistance which comprises old-age assistance,
aid to dependent children, aid to the blind, and general
assistance.
Five of the seven programs were initiated on a national
scale in 1935 by the Social Security Act and involve
fiscal and administrative participation by the Federal
Government. The Railroad Retirement Act of 1937 and
the Railroad Unemployment Insurance Act established
insurance programs based upon payroll taxes on carriers
and their employees. The seventh program, general as
sistance, at present is entirely financed and administered
by the state and local governments. Two distinct ap
proaches to the problem of dependency are incorporated
into these programs. Old-age and survivors insurance and

unemployment insurance, as their names imply, are based
on the principles of contributory insurance, with bene
ficiaries required to qualify on the basis of previous
contributions. Since in both programs, part or all of the
contributions are paid by the employer rather than the
insured, qualifications are stated in terms of previous
work experience. Recently, half of total employment has
been covered by these two programs.
I he four public assistance programs are designed to
assist persons in need due to certain categories of de
ficiencies in the capacity for support. At the present time,
most of those receiving public assistance are persons
generally regarded as unemployable—the very old and
the very young, the blind, and those suffering from
temporary or permanent physical or mental disability.
However, during the depression period, the assistance
rolls, mostly general assistance, were crowded with many
persons willing and able to work.
The distinction between social insurance and public
assistance is associated with important differences in
the operation of the two types of programs. In social
insurance both qualification for benefits and the size of
individual benefit payments can be readily determined
by the use of clearly-defined criteria such as previous
earnings and present employment or age status. In public
assistance programs, time-consuming investigation of in
dividual need and resources is required in order to de
termine both initial eligibility and the amount of assist
ance granted.

TABLE 1

PAYMENTS, BENEFICIARIES, AND RECIPIENTS
IN MAJOR SOCIAL INSURANCE AND PUBLIC ASSISTANCE PROGRAMS
SEVENTH DISTRICT STATES
(Payments in millions of dollars, fiscal 1948)
(Persons in thousands, October 1948)
Illinois
All Programs

Indiana

Number
Pay
of
Persons ments

Iowa

Michigan

Number
Pay Number Pay
of
of
Persons ments Persons ments

Wisconsin

Number Pay Number
Pay
of
of
Persons ments Persons ments

Seventh
District States
Number
of
Persons

Pay
ments

United States
Number
of
Persons

All programs..................

465

202.1

184

61.0

110

44.6

322

142.6

134

54.6

1,215

Old-age and survivors
insurance1...................

136

33.3

13.9

5.5

22.9

10.9

47.8

8.9

2.5

36.1

4.0

21.0

10.4

6.8

7.3

6.6

100

52.1

390

125

60.9

19.2

24.2

41.9

21.1

362

167.3

2,469

Unemployment insurance...........
Railroad retirement, survivor,
disability, and unemployment
insurance’.....................................
Old-age assistance*...............

Pay
ments

504.9

7,833

3,114.3

369

86.5

2,254

497.6

99.3

659

757.7

268.1s
1,041.9

Aid to the blind*...................

2.4

5.2

38.6

21.7

Aid to dependent children*.

4.7

3.6

19.6

7.4

157

57.0

1,176

327.0

General assistances*»4..........

15.0

3.1

1.3

14.1

4.0

141

37.5

800

183.4

FData on persons are for June 30, 1948 except for United States total; state
data on payments estimated.
’Estimated state data on persons are for June 30, 1948 except for United
states total, and include persons receiving lump-sum survivor benefits.
Excludes all persons in whose behalf payments are made and all such payments
made for or in behalf of recipients, such as payments for medical care,
bunal, foster home care, etc,

■‘Number of persons estimated from data on the number of cases.
-Total includes estimated lump-sum survivor benefits.
Note: Expenditures for administration of these programs, estimated at 250
million dollars, are not included in this table.
SOURCES: Social Security Bulletin; Railroad Retirement Board.

Page 5

Other distinctions have arisen due to differences in
financing. Funds for public assistance usually are ap
propriated from the general revenues of the Federal, state,
and local governments. In most places, this has meant
that the need for relieving dependency has been tempered
by fiscal considerations. Social insurance has been financed
so far by payroll tax contributions. It is often assumed
that payroll taxes levied on employers for unemployment
insurance are wholly shifted to their employees in the
form of lower wages. To the extent that these taxes are
paid by the general public in the form of higher prices,
the right of employees to maximum unemployment bene
fits regardless of need is negated.
DEVELOPMENTS SINCE 1939

Substantial changes have occurred during the decade
in which these programs have been fully operative. The
total number of persons benefiting from the programs
is approximately one-half million less than in 1939. In
that year more than half were recipients of general as
sistance, while in 1948, this group made up only a small
fraction of the total. Today the aged—including in this
designation both beneficiaries of old-age and survivors
insurance and recipients of old-age assistance—comprise
the major portion.
Average benefits and payments have increased very
substantially in all programs, except old-age and survi
vors insurance (see Table 2). Increases in average month
ly payments in public assistance have been accelerated by
the sustained rise in the cost of living in the past decade.
Federal fiscal participation was extended in 1946 and
1948. Average payments have increased more than the
Consumers’ Price Index since 1939. The low number of
recipients during the war years encouraged many states
to increase individual payments in the direction of fully
meeting needs. State legislatures have provided for higher
maximum payments, and in some cases, the complete re
moval of maximums.
The basis for increases in average benefits in social
insurance has been different. Weekly benefits in unem

ployment insurance are based on formulas usually de
signed to compensate for approximately 50 per cent of
the wage loss, and thus the amount of each benefit is
determined by each person’s previous earnings. With the
rise in dollar earnings of the past decade, benefits of
necessity increased; however, it would have been neces
sary to raise absolute statutory maximums in order to
allow beneficiaries to fully realize the higher benefits made
possible by their higher earnings. In many places, ceilings
continue to prevent this realization. Although the increase
in average benefits is in no way based on the increase in
the cost of living, benefits have more than kept pace with
living costs over the decade as a whole. However, since
September 1945 benefits have risen but seven per cent,
compared to an increase in the Consumers’ Price Index
of 30 per cent in that period.
Benefits in unemployment insurance have two dimen
sions: duration as well as amount. The increases in the
maximum duration of benefits allowed by state laws since
the inception of the unemployment insurance program
have been extensive. In 1937 and 1939, the typical state
law permitted a maximum of 16 weekly payments; by the
end of 1948 the typical state provided for a 20-week max
imum. Moreover, there were seventeen states with max
imums in excess of 20 weeks at the end of 1948 where
there had been none in 1939. The increase in the maximum
duration of benefits has contributed to reducing the bur
den on general assistance of providing relief to unem
ployed persons exhausting their benefit rights.
Average benefits in old-age and survivors insurance
rose but slightly from 1940, the first year in which
monthly benefits were paid, to 1948. Like unemployment
insurance, old-age and survivors insurance benefits are
based on previous work experience. The Social Security
Act formula provides primary benefits ranging currently
from 17 per cent of the average monthly wage since 1936
of those receiving maximum benefits to 40 per cent of an
average monthly wage of $50 or less; in addition to this
there are provided benefits for the wives and minor
children of beneficiaries equal to one-half the primary
benefit. Since primary benefits are computed in terms of
the average monthly wage throughout the beneficiary’s

TABLE 2

AVERAGE PAYMENTS TO BENEFICIARIES AND RECIPIENTS
WAGES AND LIVING COSTS, 1939-48
(Data are annual averages, except where otherwise indicated)
Item
Average monthly benefit:1
Old-age and survivors
insurance................................................
Average weekly benefit:3
Unemployment insurance.................
Average weekly wage in covered
employment*........................................
Average monthly payment:6
Old-age assistance...............................
Aid to the blind...................................
Aid to dependent children...............
General assistance...............................
Consumers’ Price Index........................

1939

1940

1941

1942

1943

1944

1945

1946

1947

1948

$25.28

$22.69

$22.96

$23.29

$23.58

$24.14

$24.63

$24.85

$10.66

10.56

11.06

12.66

13.84

15.90

18.77

18.50

17.83

18.77

26.15

27.02

30.23

35.90

41.25

44.28

45.11

46.69

50.82

57.214

19.30
25.44
31.77
24.89

20.26
25.37
32.39
24.28

21.27
25.81
33.63
24.39

23.37
26.54
36.27
25.23

26.66
27.95
41.57
27.76

28.43
29.31
45.58
28.77

30.88
33.52
52.05
32.83

35.31
36.67
62.23
39.48

36.24
38.19
62.44
40.51

39.27
41.30
67.62
44.07

99.4

100.2

105.2

116.5

123.6

125.5

128.4

139.3

159.2

171.2

1Average primary benefit in force, December 31, 1940-46, and average primary
benefit in current-payment status, October 1947-48.
3Average weekly benefit for total unemployment.
'Data for 1947 and 1948 are quarterly averages, April-June of each year.

Page 6

Estimated.
'Average payment per case.
SOURCE: Social Security Bulletin.

CHART |

AVERAGE

PAYMENTS TO BENEFICIARIES AND RECIPIENTS,
WAGES

AND LIVING COSTS

ANNUAL AVERAGES,1939-48
DOLLARS

CONSUMERS' PRICE INDEX

•25% CHANGE

WAGES IN COVEREO
EMPLOYMENTJ/

1
•

1
/ .0—°'

,^o0L0 -AGE

ounVI VUna „
INSURANCE */

IT 1947 AND 1948 FIGURES ARE FOR APRIL-JUNE.
^1947 AND 1948 FIGURES ARE FOR OCTOBER.
SOURCE: SOCIAL SECURITY BULLETIN

working life back to 1937, the lower wage levels prevailing
in prewar years tend to keep the levels of benefits down.
However, as the system matures, the advances in wage
levels which have occurred in the past decade will be
increasingly reflected in higher average monthly benefits.
In Seventh District states, average payments have
followed the national trend, increasing 100 per cent or
more in the past decade, in most programs (see Chart 2).
In October there were an estimated 1.1 million persons
supported by benefits and assistance payments in Seventh
District states. During the same month, payments to
CHART

beneficiaries and recipients in Seventh District states
amounted to more than 37 million dollars. Illinois and
Michigan account for approximately two-thirds of both
totals, a larger share than is explained by their population
alone. The greater extent of urbanization in these two
states with the subsequent loss in economic self-suffici
ency is among the most important causal factors.
Three major causes have been responsible for most of
the changes—qualitative as well as quantitative—which
have occurred since 1939. Unemployment during the
latter part of the decade has not been a major problem;
the relatively small amount of unemployment which has
existed has been covered by the expansion of the unem
ployment insurance system. At present, the relief rolls
largely are supporting special types of involuntary unem
ployment—that caused by temporary or permanent dis
ability, amounting to as much as half the total number
of general assistance cases, and that of the “marginal”
members of the labor force. As a result of the decline in
unemployment, expenditures per inhabitant for general
assistance declined two-thirds between fiscal 1939 and
fiscal 1948. A second major factor operative in the past
decade has been the increase in the price level, resulting
in the very large increases in public assistance payments.
The third cause has been the change in the age com
position of the population. The estimated increases since
1940 in both that part of the population 65 or more years
of age and the child population have been greater per
centagewise than the increase in the total population.
Although the proportion of these sectors of the population
receiving assistance was almost the same in 1940 and
1948, increases in the numbers of these groups have caused
large increases in the number of recipients. Per inhabitant
expenditures for old-age assistance have more than
doubled and those for aid to dependent children have
almost tripled in the period. In addition, the old-age and
survivors insurance system is supporting an increasing
proportion of the aged population.
2

AVERAGE PAYMENTS TO BENEFICIARIES AND RECIPIENTS IN SEVENTH DISTRICT STATES
SEPTEMBER FIGURES, 1939-48
UNEMPLOYMENT

INSURANCE V

GENERAL ASSISTANCE

OLD-AGE ASSISTANCE2/
DOLLARS
50------------

MICHIGAN -----

ILLINOIS

MICHIGAN

WISCONSIN

INDIANA

‘43

J/ AVERAGE WEEKLY BENEFIT.
4/ 1948 FIGURE IS FOR OCTOBER.
SOURCE: SOCIAL SECURITY BULLETIN.

1939
2/

'40

‘41

AVERAGE

’44

‘45

’46

‘47

MONTHLY PAYMENT PER CASE.

‘48

1939
3/

‘40

AVERAGE

‘42

‘43

MONTHLY PAYMENT PER RECIPIENT.

Page 7

THE HOG-CORN-PORK SITUATION
(Continued from Inside Front Cover)

ber may have been accurate at that time, they still
might not materialize since adjustments to unforeseen
developments can be made after plans are reported. If
conditions should change materially within about two
months following breeding, some of the bred sows and
gilts can be marketed for slaughter without appreciable
price discount, as apparently was done in 1946, or also,
additional gilts can be bred for late spring farrow.
It is standard practice on many farms to breed more
animals than it is intended to carry to farrowing time.
This permits some delay in reaching a final decision on
numbers. Only about one-third of the sows and gilts to
farrow in the spring season normally are bred at the time
of the December 1 intentions report. Also, the number of
pigs saved per litter at farrowing time, which has ranged
from a low of 5.12 in 1924 to a high of 6.46 in 1946, ma
terially affects the size of pig crop. Thus, the number of
pigs which may be raised to marketable weight from the
1949 spring pig crop still is quite uncertain and could be
materially above or below the December indication of
56.5 million head. At this time, it appears that the in
crease may be somewhat more than 10 per cent.
Reflecting the large supply of corn on farms, an ex
tremely favorable hog-corn ratio prevailed during the
breeding season. In these circumstances the indicated in
crease in pig numbers for the spring of 1949 suggests that
many farmers hesitate to assume the risks involved in
increasing hog production since they can avoid possible
losses from price declines on corn and hogs by placing
corn under Government loan at about $1.42 per bushel.
At an average hog-corn ratio of 12 this would be equiva
lent to $17 hogs. The Government is also committed to
the support of hog prices at 90 per cent of parity through
March 1950. But farmers’ experience with price supports
for the large wartime production of hogs raises doubts
as to their effectiveness if tested by adverse market con
ditions. No well developed and effective price support
techniques have been demonstrated for hogs and pork.
The hog price support level for the October-March
period of 1949-50 will be based on the September index
of prices paid by farmers. If by that time the index
should have declined five per cent, the support price for
hogs would range from about $16.50 early in October to
about $14.50 at the end of December, Chicago basis for
good and choice butcher hogs. This prospective support
level is below the prices at which a large part of the 1948
spring pig crop was marketed by about 30 to 35 per cent.
The great uncertainty as to the price which would be
realized for 1948 corn sold as hogs in the winter of 1949-50,
apparently makes the corn loan an attractive alternative
to the risks and effort involved in making a large expan
sion in hog production above the 1948 level.

spring (see Chart 2). The volume of marketings in any
one month or week in this period, however, may show
no relationship whatever to the size of the pig crop. Thus,
a 10 per cent increase in the number of pigs raised does
not guarantee that marketings at any particular time will
be 10 per cent above marketings in the similar period
of some previous year, but it would indicate a sizeable in
crease in hog marketings during most of the usual market
ing season.
The pattern of hog marketings and hog prices in the
last two seasons has been unusual in some repects. For
merly, in years of large corn crops, relatively cheap corn,
and increasing hog production, farmers commonly fed
hogs to heavy weights with the result that marketings
were delayed and the January-February recovery from
the low prices of December was less marked than in
other years. Also, prices normally averaged higher in the
spring than in the fall. In years of short corn crops, rela
tively high corn prices, and decreasing hog production,
marketings from the spring pig crop usually were earlier
and at lighter weights with the result that prices showed
a distinct rise after the first of the year (see Chart 3).
The distribution of hog marketings in the fourth
quarter of 1948 were somewhat unusual, being similar to
years when corn was in short supply and high priced.
Federally inspected slaughter of hogs in October through
December was equal to 30 per cent of the 1948 spring pig
crop, considerably more than the average of 27 per cent
for 1937-46.
This unusal marketing pattern in 1948 probably re
flected a fear on the part of many hog producers of a
sharp break in hog prices later in the season. Such an
appraisal of the outlook may prevail in 1949 also, and
would influence marketings in a similar manner even with
a favorable feeding ratio. Even so, the fourth-quarter de
cline in hog prices this year might be no greater than the
25 per cent September-December price decline in 1948.
This still would be materially greater, however, than the
average decline of 17 per cent for the 20 year period 192039.
CHART

SPRING PIG CROPS AND HOG SLAUGHTER^
IN OCTOBER-APRIL FOLLOWING
1925-49
(PER CENT CHANGE FROM

PRECEDING YEAR)
PER CENT CHANCE

HOG SLAUGHTER

v !i

SPRING
PIG CROP

PATTERN OF MARKETINGS VARIES

In past years, the number of hogs slaughtered in the
six month period—October to April—usually has reflected
fairly closely the changes in size of pig crop the preceding
Page 8

J/ FEDERALLY INSPECTED SLAUGHTER.
2/ BASED ON DECEMBER BREEDING INTENTIONS.
SOURCE : U S. DEPARTMENT OF AGRICULTURE, BUREAU OF AGRICULTURAL ECONOMICS.

CHART

SEASONAL CHANGES IN HOG PRICES
BY YEARS OF INCREASING AND DECREASING PRODUCTION‘S
DOLLARS PER 100 POUNDS

DOLLARS PER 100 POUNDS

17 YEARS OF
DECREASING PRODUCTION

17 YEARS OF
N
INCREASING PRODUCTION

NOV

OtC.

J INCLUDES 1900-38 EXCEPT FOR FIVE YEARS OF VERY SMALL PRODUCTION CHANGES
SOURCE: IOWA STATE COLLEGE.

Hog slaughter in the first quarter of the year was
about equal to the first quarter of 1948. Hog prices nor
mally increase about 10 per cent during this period. In the
second and third quarters of the year hog slaughter is
expected to exceed the year ago level, reflecting the eight
per cent increase in the 1948 fall pig crop. This undoubt
edly will keep, the summer rise in hog prices from reaching
as high a level as in 1948. Fourth-quarter marketings, re
flecting the increase in spring pig crop and farmers de
cisions relative to feeding and marketing schedules, are
expected to show a substantial increase over the fourth
quarter of 1948.
MORE HOGS IN THE LONG-RUN

From a longer time viewpoint, there are some additional
factors which merit consideration in the hog situation. If,
as many students of agriculture believe, the feed grain
production capacity of farms has increased permanently
in recent years as a result of such technological develop
ments as more productive seed, better insecticides, im
proved tillage methods, increased application of fertilizer,
and the like, it follows that the livestock production cap
acity of farms has increased also. The supply of grain for
livestock feed in the years immediately ahead may exceed
the large supply of the current season. If realized, annual
production of hogs may range around 100 million head as
compared with 85 million in 1948 and 77 million average
for 1937-41. This would give a total annual production
of pork in excess of 12 billion pounds, compared with
about 10 billion pounds in 1948. Total meat production,
however, would not increase proportionally as the cap
acity for beef and lamb production will be limited for
several years by the recent reductions in number of cattle
and sheep on farms. For the longer-run period, of course,
increased feed supplies will encourage increased produc
tion of beef and lamb as well as pork.
In view of these production prospects, pork probably
will be relatively low priced compared with other meats
for several years ahead. The 1935-40 experience may be
repeated. In these years pork increased from 41 to 52 per
cent of total per capita meat consumption and the whole
sale price of hog products declined relative to other meat

prices. Although there is some indication that over the
past 22 years consumers have shown an increasing prefer
ence for other meats over pork, pork production and con
sumption probably will be at high levels in the years
immediately ahead unless the production and use of feed
grains is restricted by unusually bad weather or Govern
ment programs.
With a high level of pork production, lard is likely
to resume its prewar problem status. Production will
exceed domestic requirements and prices will be very
low unless an active export demand prevails. Recent
declines in lard prices have contributed to the weakness
in hog prices, particularly of the heavier weights, and
in view of large potential supplies of competing fats and
oils, may continue to exert a depressing influence. In
recent years lard production has averaged between 30
and 35 pounds per hog slaughtered. A 10 cent per pound
price decline for lard, such as occurred during 1948, ac
counts for about a $1.50 per cwt. decline in hog prices.
Historically, hog production and prices have tended
to run in cycles with two to three years of increasing
production and declining prices, followed by two to three
years of declining production and rising prices. In the
present cycle, hog production showed only minor increases
in 1947 and 1948. This trend, no doubt, will continue at
an accelerated rate through 1949 and, barring a qorn
crop failure this year, probably will continue into 1950.
The changing ratio of prices of hogs to corn is cited
frequently to explain changes in the number of hogs
raised by farmers. This is an important factor but it fails
to explain many changes which occur (see Chart 4).
It may be of even less significance in the future if Fed
erally sponsored price support and grain storage opera
tions are continued and enlarged. Such programs, if
handled skillfully and directed toward a stabilization of
supply rather than the maintenance of prices, might
reduce the cyclical variations in hog production. Currently,
however, the major objective of these programs is to
support grain prices, largely ignoring their effects on live
stock production.
CHART 4

HOG-CORN

RATIO AND

PIG CROPS

1924-48
(IN MILLIONS)

TOTAL•=' PIG CROP

J/NUMBER OF BUSHELS OF CORN EQUAL IN VALUE TO 100 POUNDS OF LIVE HOGSAVERAGE OF 12 MONTHS BEGINNING OCTOBER OF PRECEDING YEAR.
2/PIGS RAISED.
SOURCE: U S. DEPARTMENT OF AGRICULTURE, BUREAU OF AGRICULTURAL ECONOMICS.

SEVENTH FEDERAL

IOWA T

RESERVE DISTRICT

Full text of Business Conditions (Federal Reserve Bank of Chicago) : April 1949

FRASER