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THE BUSINESS 'C//K FEDERAL RESERVE RANK OF PHILADELPHIA FEBRUARY 1, 1914 Important and closely related changes in the industrial picture accompanied the expansion in munitions output continuing over the greater part of 1943. Major technical difficulties asso ciated with the mass production of a wide range of unfamiliar items gave way to smaller scale problems of a specialized nature. This resulted in cutbacks for a growing number of items, a measure which was resorted to with increasing frequency as the year progressed. While most of the early cancellations of con tracts were due to changes in design of equip ment, those made more recently have reflected in large part outright reductions in estimated re quirements over the foreseeable future. Toward the close of the year supplies of steel and some of the non-ferrous metals began to ex ceed the demands of fabricators, and what had been a highly critical raw material situ ation eased sufficiently to permit increases in the output of railroad and agricultural equip ment and the granting of permission to re sume on a small scale the production of a few items of civilian goods using war metals. Although the manpower problem remains a critical element in the industrial situation, it also has eased somewhat, developing into one of local shortages, rather than persisting as an over-all scarcity of the magnitude envisioned a few months ago. The significance of these changes lies first of all in the opportunity afforded munitions mak ers to concentrate their facilities, manpower, and materials on the production of items which will be required in much greater volume this year than in 1943. The other import of last year’s developments on the industrial front is the improved outlook for increasing further the output of certain essential civilian goods, and possibly expanding the short list of items already in limited production by gradually re converting the facilities of small manufacturers whose war orders have been cancelled or dras tically reduced. Although the War Production Board has em phasized in recent weeks that major reconver sions are not contemplated, it appears that plans are being perfected which would permit firms employing a maximum of fifty workers in certain areas to use surplus supplies of metals for the unrestricted manufacture of civilian goods. The War Production Board districts of Philadel phia, Cleveland, and Kansas City are said to have been selected tentatively as proving grounds for this plan; its successful operation in these localities would permit its extension on a nation-wide basis. The degree of manpower stringency, as indi cated by War Manpower Commission group ings, will determine which producers will be authorized to participate in this planned under taking. In addition to this limitation, prospec tive participants must establish to the satisfac tion of the War Production Board that they have little or no war business; that the product which they propose to turn out is important in Continued on page 8 Page One The Economy of The Third Federal Reserve District Manufacturing Industries The economy of the Third Federal Reserve District is built upon a foundation of agriculture, mining, and manufacturing. Since we live on the products of our fields, mines, and factories, our material well-being is related intimately to the volume and quality of products derived from these sources. By intensive cultivation the agri cultural resources are used to good advantage to supply the large urban markets of the district with specialized farm products. The mineral industries of the district, though somewhat less important today than formerly, still play a prom inent part in its economy. Manufacturing, for which the district is particularly well adapted, is the keystone of its industrial structure. As a cross-section of the major economic de velopments of the district, the survey is confined to agriculture, mining, and manufacturing. While it is recognized that other industries, such as trade, insurance, transportation, and finance perform indispensable functions, nevertheless the prosperity of these auxiliary industries is dependent very largely upon the primary indus tries that produce most of the essentials of life. The Predominance of Manufacturing in the Industrial Pattern of the District Manufacturing is the predominant economic activity of the district. In 1939 manufacturing industries employed almost 75 per cent of all employees in the primary industries of the dis trict. In that year manufacturing employed about five times the number of workers engaged in agricultural pursuits and more than six times the number employed in the extraction of min erals. The preeminence of manufacturing in the in dustrial pattern of the district is not a recent development. The foundation was being laid for it early in our history, but the most rapid growth occurred during the six decades follow ing the Civil War. Manufacturing industries at the close of the nineteenth century employed about 62 per cent of all workers in the primary industries of the district. Agriculture at the same time provided employment for about 22 per cent and mining about 16 per cent of the workers in primary industries. During the forty Page Two years between 1899 and 1939, manufacturing in the district grew faster relative to mining and agriculture, as shown in Table 1. While district manufacturing expanded from 62 to 74 per cent of the total, mining declined from 16 to 11 per cent, and agriculture declined from 22 to 15 per cent of all workers employed in the primary industries. TABLE 1: PERCENTAGE DISTRIBUTION OF WORKERS EMPLOYED IN MANUFACTURING, MINING, AND AGRICULTURE Third Federal Reserve District Year 1899 1909 1919 1929 1939 Mfg. Mining Agr. 62 62 72 70 74 16 17 14 15 11 22 21 It 15 15 United States Total 100 100 100 100 100 Mfg. Mhiing Agr. 38 40 51 50 53 3 4 5 5 5 59 56 44 45 42 Total 100 100 100 100 100 Source: United States Department of Commerce, Bureau of the Census. It is recognized that the use of number of workers employed is not a flawless measure of the changing relative importance of economic activities over a period of years. If manufactur ing industries, for example, made greater prog ress relative to agriculture, in mechanizing their productive processes, the number of workers employed understates the rate of growth in manufacturing. Such in fact seems to be the case. In recent years technological improve ments have occurred in both manufacturing and agriculture, but greater strides have been made in the field of manufacturing. The index of physical volume of production per wage earner in United States manufacturing increased from a base of 100 in 1899 to 199 in 1939.1 In agri culture, productivity per worker did not rise as much as in manufacturing. The output per farmer and per adult male laborer working on farms increased from a base of 100 in 1900 to only 154 in 1938.2 Among the primary industries, both manufac turing and mining play a more prominent part in the economy of the district than in the national economy. Relative to the total number em1 United States Department of Commerce, Census of Manufactures. 1939. Vol. II, Part 1, p. 20. * Barger, H., and Landsberg, H. H.—American Agriculture 1899-1939, National Bureau of Economic Research, New York, 1942, p. 251. ployed in the primary industries, manufactur ing expanded and agriculture contracted in both the district and the country between 1899 and 1939. This reflects a growing industrialization of both areas. The proportion of people em ployed in mining to all employees in the primary industries declined from 16 to 11 per cent in the district since the turn of the century. For the United States, the proportion of workers in mineral extraction to all workers in the primary industries increased. The divergent trends arise from the fact that mineral resources in the South and the West afforded greater opportunities for development owing to comparatively recent dis coveries of rich mineral deposits. However, in 1939 mineral extraction continued to employ a larger proportion of workers engaged in the primary industries in this district than in the United States. Types of Manufacturing in the Third Federal Reserve District Manufacturing in this district is highly diver sified. The principal industries in Philadelphia, the largest manufacturing center of the district, are clothing, textiles, food processing, iron and steel, printing, chemicals, and machinery prod ucts. Among the principal industries in nearby areas of Pennsylvania are petroleum refining, textiles, cement manufacturing, iron and steel, transportation equipment, electrical machinery, and food processing. The southern half of New Jersey and the state of Delaware add considerable variety to the in dustrial pattern of the Third District. The out standing manufactures of southern New Jersey are metal products, electrical machinery, tex tiles and clothing, clay and glass manufactures, chemicals and transportation equipment. The TABLE 2: MANUFACTURING INDUSTRIES OF PENNSYLVANIA —1939 Major Industrial Groups Number of wage earners 242,062 234^989 65,769 61,586 45,064 28,906 27,971 27,874 23,574 21,676 14,613 12,253 11,534 40,431 858,302 Source: Census of Manufactures, 1939. Per cent oi total 28 2 27.4 7 7 7 2 '"P" 5.3 W 3.4 ^ 3 3 3.2 W 2.7 W. 2 5 1.7 * 1 4 1.3 4.7 100.0 principal industries of Delaware are chemicals, leather tanning, and iron and steel manufac turing. The diversification of manufacturing in the district is indicated by the variety of Pennsyl vania3 industries shown in Table 2. It is ap parent that the district has a wide range of industries which is an element of strength in its industrial structure. It should also be noted that textiles and clothing occupy a very promi nent position. These industries employ 27 per cent of all factory workers, thus contributing a considerable measure of stability of income in this district owing to the constancy of demand for textiles and apparel. Origin and Development of Manufacturing Prior to 1900 The origin and growth of manufacturing in Pennsylvania is closely associated with the de velopment of manufactures in Philadelphia, its leading manufacturing center today. Manufac turing in Philadelphia began almost immediately following its settlement. Philadelphia manu facturers produced coarse woolen fabrics that were superior to any like cloth made in other parts of the world. Leather tanning was like wise a prominent industry in the Delaware River valley. A thriving shipbuilding industry fostered the development of Philadelphia’s for eign commerce for which the city was favorably located. For the first hundred years or more the growth of Philadelphia, like that of other Col onial cities, was stimulated more by its foreign trade than its manufactures. In 1793, exports from Philadelphia were more than one-fourth of the total exports of the country. The early development of Philadelphia as a commercial city laid the foundation for its rise as a center of manufacturing. From its flourishing commerce was accumulated the nec essary capital to establish manufactures. An other factor contributing to the rise of manu facturing was the character of its early settlers. In the wake of the Quakers who were keen merchants, came the Germans, Dutch, English, and Scotch-Irish. These people were skilled in the industrial arts, for they migrated from coun tries noted in the eighteenth century for weav ing, spinning, and kindred crafts. 8 County data are required to portray the types of manufacturing in the Third Federal Reserve District. Pennsylvania data are used because the Census does not report this information by counties. Since 70 per cent of the factory workers of Pennsylvania are employed within the Third District, the industries of the state are substantially representative of the industries of the district, except for iron and steel manufacturing so heavily localized in the Pittsburgh area. Page Three Philadelphia in 1810 had more manufactur ing establishments and produced a greater vari ety of manufactured products than any other city in the country. In that year Philadelphia manufactures represented 36 per cent of the value of manufactures produced in Pennsyl vania. This indicates not only the importance of Philadelphia as a manufacturing center, but also the extent to which manufacturing had spread to other parts of the state. According to the Census of 1810, the total value of United States manufactures was $128 million. Of this, Pennsylvania, already the lead ing industrial state, contributed $32 million, or about 25 per cent. Pennsylvania produced al most twice the output of Massachusetts, which ranked second. The large cities did not afford, necessarily, the best factory location. When the scene of manufacturing shifted from the house hold to the mill or factory, largely as a result of technological changes, power became an impor tant factor influencing location, and before the age of steam, natural water power sites played a prominent part. These sites seldom coincided with large metropolitan centers founded upon commercial development; hence the growth of rural manufacturing centers remote from the principal cities. Between 1830 and 1840, while New England manufacturers were debating the relative merits of water power and steam power for textile mill operation, many Pennsylvania manufacturers already had converted to steam power. Mean while the introduction of hot blasts and mineral fuel strengthened the position of iron manufac turing in which Pennsylvania was already the leading state. Pennsylvania retained its position as the lead ing industrial state throughout the first half of the nineteenth century. However, manufactur ing developed so rapidly along the North At lantic seaboard that by 1861 New York dis placed Pennsylvania as the foremost manufac turing state in terms of gross value of products manufactured. In 1855 appeared an epoch-mak ing invention that was destined to have farreaching effects upon the economic development of this area and the entire United States. The Bessemer steel-making process gave us our first cheap steel, which prepared the way for the great railroad expansion during the second half of the century. Page Four The consequent opening up of the West im mediately afforded larger markets for the prod ucts of eastern manufacturing industries but it was not long before eastern industries had to compete with rising manufactures in the states bordering the Great Lakes. Rich mineral and agricultural resources furnished the raw mate rials, and continued westward migration af forded expanding local markets for the new manufacturing industries of the area west of the Alleghenies. As a result of these developments, Pennsylvania, like other industrialized states of the East, could not maintain its former industrial supremacy. The relative decline of Pennsylvania as an industrial state is therefore the result of the industrialization of the United States which made rapid strides following the Civil War, and has continued to this day. District Manufacturing Declines Relative to United States Manufacturing Manufacturing in the Third District mani fested the same over-all trend during the forty years since 1899 that prevailed for some years prior to that year. In other words, district man ufacturing expanded but not as rapidly as the rate of growth of United States manufacturing. In 1899 the district produced 10.2 per cent of total United States value added by manufacture and employed 11.2 per cent of the factory wage earners. By 1939 its proportion of value added by manufacture had declined to 8.1 per cent, and the proportion of wage earners in manu facturing had dropped to 9.0 per cent. The con traction of district manufacturing relative to United States manufacturing as shown in Table 3, was not uniform from decade to decade, but the evidence is unmistakable that the forces making for geographic dispersion of industry, which began more than three quarters of a cen tury ago, have persisted down to the outbreak of the Second World War. TABLE 3: MANUFACTURING IN THE THIRD DISTRICT —EXPRESSED AS A PERCENTAGE OF THE UNITED STATES Year 1899............................. 1909............................. 1919............................ 1929............................ 1933............................ 1939............................ Value added Wage earners 10.2% 9.0 9.4 8.4 8.7 8.1 112% 10.5 10 2 9.2 9.8 9.0 Source; United States Department of Commerce, Census of Manufactures. The inevitable consequence of the growing in dustrialization of the United States is a contrac tion in the relative importance of manufacturing in this region. differences stand out sharply when reduced to percentage changes as shown in Table 4. TABLE 4: VALUE ADDED BY MANUFACTURE, AMOUNT AND RATE OF CHANGE Trends of Production During the four decades preceding the Sec ond World War, manufacturing in the Third Federal Reserve District expanded rapidly, but its rate of growth was somewhat less than that of United States manufacturing. Measured by value added, manufacturing in the district in creased from $580 million in 1899 to $1,994 million in 1939, an increase of 244 per cent. During the same period the value added of United States manufacturing rose from $5,678 million to $24,683 million, a gain of 335 per cent. Obviously, the real growth of manufacturing was somewhat less than the rate shown by these data of value added because they are exagger ated by the generally rising price level. A more accurate portrayal of actual growth is the in crement in physical volume of output. As re ported by the Census Bureau,4 physical volume of United States manufacturing shows an in crease of 273 per cent between 1899 and 1939. This represents an annual rate of growth of ap proximately 3.5 per cent. Although the trend of manufacturing in this district roughly parallels the trend of United States manufacturing, as shown in Figure I, significant differences are apparent in the changes from one decade to another. These 4 U. S. Department of Commerce, Bureau of the Census, Manufactures Volume I, 1940. FIGURE I THIRD DIST MILLIONS VALUE ADDED BY MANUFACTURE 3,000 UNITED STATES 2,000 DISTRICT 1909 U.S. BILLIONS Third District Year 1899 ........... 1909............... 1919............... 1929............... 1933............... 1939................ * Estimated. "Value added (millions) $ 580 772* 2,354 2,683 1,268 1,994 Per cent change 4- 33 +20S + 14 - 53 + 57 United States Value added (millions) $ 5,678 8,529 25,042 31,885 14,538 24,683 Per cent change + 50 +194 + 27 - 54 + 70 Source: U. S. Census of Manufactures. During the first decade of the present cen tury, manufacturing in the district increased 33 per cent in contrast to a 50 per cent increase in value added by all industries of the United States. The rapid growth of manufacturing in the country coincided with the rising tide of business activity that prevailed throughout most of this decade. Fundamental factors that contributed to the rapid expansion of manufacturing were the de velopment of new products, the discovery of new raw materials, the recovery of waste prod ucts, the transformation of industrial equip ment, changes in the form of industrial or ganization, and the diversification of domestic demand. The beginning of the century approx imately marks the time when our exports of agricultural products, except for cotton and to bacco, began to decline, and our energies were turned more toward converting our raw mate rials into manufactured products for domestic consumption. At this time also organized in dustry was assuming more and more of the functions formerly performed in the home. In dustries manufacturing capital equipment and durable goods, though still relatively small, had considerable influence in setting the pace during this period. Manufacturing in this district participated in the general industrial expansion but not to the same degree as industry in the United States as a whole. A number of the industries in their early stages of growth such as automobile manufacturing, canning, sugar beet refining, petroleum refining, and other branches of chem ical manufacturing, developed in areas outside of the district where proximity to raw materials or nearness to complementary industries played an important part in their development. Page Five Manufacturing activity during the second decade—from 1909 to 1919—was influenced more than anything else by the First World War. That war, like the present one, found the indus try in this district highly capable of quick con version from production for peace to production for war. Largely for this reason, manufacturing activity here expanded more rapidly than that throughout the country. Between 1909 and 1919 value added by manufacturing in the district increased 205 per cent, in contrast to an increase of 194 per cent in output for the country. The war created an enormous demand for steel and the fabricated products of steel, such as ships, machinery, ordnance, armor plate, etc. This district profited by its extensive facil ities for manufacturing steel products and espe cially the heavy steel products: castings, forg ings, plate and armor steel, heavy ordnance, turbines, and related marine equipment. An other factor that gave considerable stimulus to manufacturing in this district was the heavy reliance placed upon facilities existing at the outbreak of the war. This district, therefore, benefited by reason of its manufacturing capa city and particularly its capacity to produce those goods in greatest demand at that time. The decade from 1919 to 1929 is character ized by an unusually high rate of industrial ac tivity after the short post-war business read justment in 1920-21. Value added by manufac turing industries of the United States attained an all-time peak of almost $32 billion, which was 27 per cent above the value added in 1919. Production by the manufacturing industries of the district increased 14 per cent during this period—about half the rate of growth of manu factures of the United States. Another factor that affected this district ad versely was the pronounced change that oc curred in American habits of consumption. Dur ing the ’twenties the demand for consumer goods of durable and semi-durable character increased faster than the demand for non-durable goods. The physical volume of production of such goods as automobiles, furniture, floor coverings, and household electrical appliances increased at an annual rate of 6.3 per cent between 1922 and 1929.® For the same period the physical volume of production of foods and textiles increased respectively at annual rates of only 1.6 and 2.2 per cent.6 In view of the prominent part that textile manufacturing plays in the Third Dis trict, the lagging demand for textiles was partly responsible for the slower rate of growth of dis trict manufactures during this period. The severe business depression that began in 1929 affected manufacturing in this district with about the same degree of adversity as the indus try in the country generally. Between 1929 and 1933 value added by manufacture in the district declined 53 per cent in comparison with a 54 per cent decrease in all manufacturing industries of the United States. The non-durable consumer goods industries, such as food, tobacco, textiles, clothing, leather, and shoe manufacturing, put a floor under the depression because the prod ucts of these enterprises are currently consumed and require constant replacement. Since indus tries of this class make up a substantial propor tion of district manufacturing, the recession of the district was no more severe than that of the country. During the six years of industrial recovery from 1933 to 1939 the output of manufactures in the district increased 57 per cent, in contrast to an increase of 70 per cent by the industries of the United States. The slower recovery of man The slower rate of growth of manufacturing ufacturing here is again a reflection of the char in the district during the decade of the ’twenties acteristic behavior of the industries so prominent was due, in part, to the inevitable adjustments in this area. Demand for non-durable consumer following the First World War. Numerous in goods is not as responsive as demand for durable dustries of the district that had prospered to an or capital goods during a period of recovery. unusual degree during the war period declined Trend of Employment precipitously after the war. Conspicuous in this Employment in the Third Federal Reserve group was the shipbuilding industry. After the war this industry virtually collapsed, and as a District, like value added, reflects the more ad consequence, demand was seriously impaired for vanced stage of industrialization of this region the products of those industries closely allied in contrast to manufacturing in the country. In with shipbuilding, such as the manufacture of 1899 the manufacturing industries of the dis structural steel, castings, forgings, propulsion trict employed 595 thousand factory wage earnmachinery, marine hardware, and electrical B Mills, Frederick C., Economic Tendencies in the United States—Na tional Bureau of Economic Research Publication No. 21, p. 274. equipment. 0 Ibid., pp. 270, 272. Page Six ers; forty years later they employed 707 thou sand workers, as shown in Table 5. This repre sents an increase of 19 per cent. Employment in the manufacturing industries of the United States increased from 5,321 thousand in 1899 to 7,887 thousand in 1939, an increase of 48 per cent. TABLE 5: MANUFACTURING WAGE EARNERS, NUMBER AND RATE OF CHANGE Third District United States Year No. employed (000 omitted) 1809............... 1909............... 1919............... 1929............... 1933............... 1939............... * Estimate. 595 697* 925 811 593 707 Per cent change +17 +33 -12 -27 +19 No. employed (000 omitted) Per cent change 5,321 6,615 9,096 8,839 6,056 7,887 +24 +38 - 3 -32 +30 Source: U. S. Department of Commerce, Bureau of the Censu The long-run expansion of employment in dis trict manufacturing was rather consistently be low the growth of employment in national man ufacturing. During the first 20 years of the present century, manufacturing employed an in creasing number of workers in both areas, but . the rate of increase was less pronounced in the district, as shown by the milder slope of the curve in Figure II. From 1919 to 1929 employ ment both here and in the country declined but the decline of employment in the district was relatively greater than that of United States manufacturing. During the depression years from 1929 to 1933, the recession of employment in the district was relatively less than that of United States manufactures but in the subse quent years of recovery—1933 to 1939—em ployment in district manufacturing again rose more slowly. figure; ii MANUFACTURING EMPLOYMENT THIRD DIST THOUS. UNITED STATES THIRD — DISTRICT 1899 1929 1933 USMILLIONS Relation Between Employment and Production It is significant to note a considerable diver gence between the trend of employment and the growth in production which is revealed by a comparison of Figures I and II.7 Between 1899 and 1939 output of manufacturing industries of the district increased 244 per cent but the num ber of employees engaged in manufacturing in creased only 19 per cent during the same period. Similarly, output in manufacturing of the United States increased 335 per cent during this period in contrast to an increase of only 48 per cent in employment. Not all of the disparity between employment and output trends is accounted for by inflated dollar values of output; some of it is due to increased productivity of labor as a result of the mechanization of manufacturing processes. Prior to 1919 changes in number of employ ees engaged in manufacturing probably reflect changes in physical volume of output with rea sonable accuracy. However, after 1919, as Fig ure II shows, the number of manufacturing em ployees of both the district and the country declined, despite the continued expansion in volume of output. The greatest strides in indus trial mechanization were made in the two dec ades after the First World War, a fact cor roborated by the Census Bureau’s estimates of changes in productivity per wage earner. Using 1899 as a base of 100, productivity per worker rose moderately to 116 in 1919 but then in creased sharply to 199 in 1939. The greatest gains in productivity occurred after 1919. The period between 1919 and 1939 was one of widespread innovations in technology. The steel industry introduced continuous rolling which effected considerable savings in the man ufacture of sheet and strip steel. Foundries cut down labor requirements through the use of die casting and centrifugal pipe casting. In the metal fabricating industries labor costs were greatly reduced by the standardization of parts, serialized arrangement of machinery and power driven intra-plant conveyors. Thermal and cata lytic cracking replaced straight-run refining in the petroleum industry. Machine-made cigars all but displaced hand-made cigars. The glass container industry was revolutionized by the appearance of automatic bottlemaking machin ery. These and other improvements contributed very largely to the increasing productivity of labor in manufacturing industries. 7 These are ratio charts. Equal vertical distances represent equal per centage increases or decreases; therefore rates of change are emphasized. Page Seven The adoption of technological improvements were primarily responsible for the growth of by manufacturers in this district is reflected in American manufacturing throughout the greater the rising productivity of its factory workers. part of the period. Productivity as measured by value added per As an integral part of the national economy, wage earner increased almost threefold between 1899 and 1939. Value added per wage earner activity in the Third District was stimulated by in the country as a whole increased at substan the same forces that contributed to the growth of national manufacturing. The fact that manu tially the same rate. facturing in this district did not maintain the Throughout the entire period from 1899 to same rate of growth as prevailed in the country 1939 the value added per wage earner was uni is no indication of industrial stagnation. The formly lower in this district than that in the slower rate of growth is primarily a reflection country generally. This is due chiefly to the rel of a more advanced stage of industrial devel atively larger proportion of textile and apparel opment. manufacturing in this district. The value added The highly industrialized economy of the per worker is characteristically lower in these Third Federal Reserve District was a national industries than in manufacturing as a whole. asset of inestimable value at the outbreak of the Second World War. The district had available During the forty-year period preceding the for immediate conversion to the war effort a outbreak of the Second World War manufac variety of industrial resources. Its facilities were turing in the Third Federal Reserve District, on not on order—they were on hand. They con the whole, paralleled the development of manu sisted of established, operating industries that facturing in the United States. It was a period supplied some of our most pressing needs when characterized by a growing population, the rise we were forced into total war. This contri of new industries, the development of largebution of the district to national defense and . scale production, exploitation of natural re the effect of the war upon its industries will be sources, the appearance of new products, and the widening of markets. These developments the subject of subsequent analyses. Business and Banking the civilian economy; and that they can use surplus metals in their present state, or after processing with their own facilities. preceding year, reflecting chiefly a sharp ex pansion at manufacturing plants turning out munitions and other heavy war goods. Output of coal was in about the same volume as in 1942, but the production of crude petroleum showed a substantial decline. The value of this small beginning for total re conversion after the war ends lies in the fact that its successful operation, particularly if m the interim it became nation-wide in scope, might furnish the pattern for the unprecedented undertaking facing industry at some future date. Moreover, the very existence of the program constitutes tangible proof that the War Produc tion Board intends that reconversion be a sys tematically planned and well-regulated return to peacetime production, rather than a chaotic readjustment. Operations at factories producing durable goods expanded 27 per cent in 1943, as against a rise of only 2 per cent at establishments mak ing lighter products. The sharpest increase in heavy goods lines—51 per cent—was reported by manufacturers of transportation equipment. Increases in non-durable goods lines were sub stantial in the case of certain food and chemical products. Material and labor shortages were chiefly responsible for a lower level of output in the textile and leather products industries. Continued from page 1 Industry and trade. Industrial production in the Philadelphia Federal Reserve District in 1943 averaged 16 per cent higher than in the Page Eight Factory employment, payrolls, and working time in Pennsylvania were maintained at near record levels in December. The number of wage earners fluctuated narrowly a little above 1*4 ► * r , duction gains that might haV been expected as a result of the longer work-' sek adopted very early in the year. In the tw Jve months ended last December, output of anthracite was about the same as in 1942 but approximately 5 million tons short of estimated requirements. The pro duction of bituminous coal in Pennsylvania de creased slightly in 1943. INDUSTRIAL AND TRADE ACTIVITY THIRD FEDERAL RESERVE DISTRICT PERCENT PRODUCTION 5EPARTMENT STORE SALES 193 9 194 0 194 I 1943 million over most of 1948, with the average for the twelve months only 5 per cent higher than a year earlier. Substantial additions to the work ing forces in heavy industries were partly offset by reductions at plants manufacturing nondur ables, chiefly for civilian use. Factory payrolls showed an almost uninterrupted rise in 1943 to a peak of approximately $55 million a week. For the year as a whole they were more than one-fifth above the average for 1942. Total em ployee-hours worked increased moderately, av eraging about 10 per cent more in 1943 than a year earlier. The weekly income of wage earners at re porting plants in Pennsylvania advanced last year from an average of $42 in January to above $46 in December, continuing a pro nounced upward trend that began more than three years ago with the inception of our de fense and war production program. Average hourly earnings also have been rising with few interruptions since about the middle of 1940. Working time per employee increased from an average of about 431/2 hours a week at the be ginning of 1943 to 4514 in the closing month of the year. The supply of coal for heating purposes re mains tight, necessitating the continued diver sion of small quantities of industrial fuels to meet emergency requirements. Reserves at manufacturing plants have decreased some what, particularly in the case of certain steam sizes usually carried in stockpiles by produc ers of primary iron and steel products. .Re peated shutdowns in both the anthracite and bituminous coal fields during 1943 offset pro r With the greater part of military installations, plant facilities, and war housing projects com pleted some months ago, operations in the con struction industry have continued to decline, releasing manpower, materials and productive capacity for use in other fields. Further re ductions in activity are in prospect during the present quarter on the basis of the small volume of new contracts awarded in the closing months of 1943. In this district, awards of building contracts declined 60 per cent last year from a peak of well over $400 million in 1942. Moreover, pro nounced changes occurred in the type of struc tures covered in new contracts. As the need of living quarters for workers increased sharply with the completion of munitions-making facili ties and other war essential projects, emphasis shifted to residential building, with contracts in this classification accounting for over one-third of the dollar volume of all awards, as against less than one-fifth in 1942. Contracts for dwell ing units showed a decrease of only 19 per cent last year, compared with declines of 68 and 76 per cent respectively in the case of factory buildings and public works and utilities. Shipments of commodities by rail in this dis trict, as in the country, increased to new high levels last year, although the number of cars used to transport the record volume of wartime freight was approximately the same as in 1942. Peak performance of the railroads in 1943 with scant additions to rolling stock reflected contin uing improvements in car utilization, including heavier loadings per car, more direct routing of shipments, and reductions in turn-around time. According to the Association of American Railroads, freight traffic in the twelve months ended December expanded nearly 14 per cent to an estimated 725 billion revenue ton miles. Primary distribution by wholesalers in this district also continued to expand in 1943, when the value of sales in eight reporting branches was about one-tenth greater than in the prePage Nine ceding year. Increases over the twelve months occurred in all lines but hardware, jewelry, and paper. Larger dollar sales than in 1942 re flected principally the influence of higher prices, and in most cases were associated with substan tial declines in inventories. LOANS AND INVESTMENTS OF ALL MEMBER BANKS THIRD FEDERAL RESERVE DISTRICT MILLIONS 2500 U S. GOVERNMENT OBLIGATIONS —p (direct and guaranteed) 2000 Continued expansion in consumer buying raised the dollar volume of retail sales in the majority of reporting lines to new high levels in 1943. At department stores in this district the value of sales was 6 per cent greater than in the preceding year. Demand for women’s apparel remained exceptionally heavy, with sales by stores specializing in these lines averaging about one-fifth more than in 1942. Business at men’s apparel stores also was somewhat more active last year, but at shoe stores the limitations im posed by rationing were reflected in a slight de cline in sales. Unusually large consumer pur chases, in some cases continuing over many months, together with the growing difficulty of obtaining new merchandise, have substantially reduced retail inventories. Banking conditions. At the opening of the Fourth War Loan Drive on January 18 a large volume of funds was available for investment in Government securities. Customers’ bank de posits were at high levels, much currency was in the hands of the public, and civilian incomes, taken as a whole, were substantially in excess of current expenditures. In this district deposits of individuals and bus iness concerns at the weekly reporting banks, most of which are in Philadelphia, stood at $1.9 billion on January 19, approximating closely the record high reached just before the Third Drive. These balances have expanded over one-quar ter billion dollars in the past year. The gain in deposits at the country member banks in this dis trict during 1943 appears to have been even larger than that of the city institutions. Individ uals, business houses, banks, and others bought heavily of the securities offered by the Treasury last year, but the funds turned over to the Treas ury in payment returned in large measure as they were spent for war supplies. Member banks entered 1944 with $2% billion of Government securities, an investment which was nearly four times as large as at the outbreak of war in Europe; two-thirds of earning assets were in this form, as against one-third in June 1939 and only 7 per cent at the close of 1929. Page Ten LOANS OTHER SECURITIES '29 '30 ’31 ’32 ’33 ’34 ’35 ’36 ’37 ’38 ’39 ’40 41 42 43 Gains during 1943 were sharp at both country and city banks, although holdings of the latter declined in the closing months, when heavy drafts were being made upon war loan ac counts. Loans at Philadelphia banks have been well sustained recently at levels somewhat above pre-war, but at country banks are the lowest in many years. Investments in securities other than Governments have continued to shrink. The fully invested position of the city banks, taken as a whole, is indicated by the fact that in late months reserves have been only a few per cent above requirements. Excess reserves have declined at the country banks also, but in the first half of January reserves still averaged 26 per cent above requirements. Three years earlier reserves of all member banks in the dis trict were more than double requirements. Reports for the period December 22 to Janu ary 19 show an increase of $38 million in re serves to $653 million. Net disbursements of the Treasury reached $120 million in the period, but $90 million of this reflected the retirement at maturity of bills held by the Reserve Bank under the repurchase option. The total so held declined $103 million to $170 million. The increase from only $6 mil lion a year ago is an indication of the increased pressure on reserve positions resulting partly from active currency demand and payments to the Treasury. Note circulation of the Bank in creased $300 million in the year. In contrast with the relatively active use of Treasury bills for the adjustment of reserve positions, dis counts have been little used. The largest volume of bills discounted on the books of the Reserve Bank in the year was less than $12 million. BUSINESS STATISTICS Production Employment and Income in Pennsylvania Philadelphia Federal Reserve District Industry, Trade and Service Adjusted for weasonal variation Per cent cl ange Indexes: 1923-5=100 Dec. 1943 fr<}m Dec. Nov. Dec. 1943 1943 1942 Not adjusted Employment Mo. ago Year ago 1943 from 12 mos. 1942 + 8 + 9 + 11 + 2 + 7 3 + 22 + 18 12 — 29 + 15 6 + 1 + 16 + 18 + 27 2 + 12 2 + 51 + 13 11 — 23 + 15 7 + 3 INDUSTRIAL PRODUCTION 157p 158 MANUFACTURING.............. 162p 165 260p 272 94p 91 Metal products........................ 189 182 Textile products..................... 7 Op 69 Transportation equipment. . 717 798 Food products......................... 123p 120 Tobacco and products.......... 123 89 Building materials................. 39p 38 Chemicals and products. . .. 165 166 Leather and products........... I08p 109 Paper and printing................ 95 97 r Individual lines Pig iron...................................... 105 109 Steel............................................ 146 146 r Silk manufactures.................. 87 86 r Woolens and worsteds.......... 59p 53 Cotton products...................... 36 47 Carpets and rugs.................... 51p 48 Hosiery...................................... 77 68 Underwear................................ 152 153 Cement...................................... 36p 35 Brick.......................................... 56 55r Lumber and products........... 32 30 145r 149 234 r 93 r 176r 72 586 104 141 55 143 115 94 - 1 - 2 — 4 + 4 + 4 + a -10 + a +38 + 4 - 1 - 1 - 1 105r 140 82 63 58 55 83 160 84 71 r 30 Slaughtering, meat packing. 119 Sugar refining.......................... 174 Canning and preserving. . . . 153p Cigars........................................ 122 Paper and wood pulp............ 85 Printing and publishing. . . . 97 Shoes.......................................... 133 Leather, goat and kid........... 81p Paints and varnishes............. 101 Coke, by-product................... 160p COAL MIMING........................ 75 Anthracite................................ 72 Bituminous............................... 95 CRUDE OIL.............................. 394 ELEC. POWER—OUTPUT .. 403 Sales, tolul.............................. 413 Sales to industries.................. 379 BUILDING CONTRACTS TOTAL AWAKDSf................. 44 Residential!............................. 37 Nonresidentialt...................... 57 Public works and utilities!.. 43 122 118 149 88 85 r 99 123 95 97 165 65 64 74 380 407 444 370 104 112 112r 140 82 97 151 81 93 165 68r 66 r 88 r 459 373 381 310 - 3 0 + a + 10 -22 + 6 +14 - 1 + 5 + 3 + 4 0* - 2 +48 + 3 +40 0 - 2 + 8 -12 + 4 - 3 +15 + 12 +29 + 4 - 1 0 + 2 44 34 53 56 183 60 234 426 - 1 + n + 8 -23 + + — — — — — — + + + + + + + + + + — + 4+ — _ — 0 5 6 7 37 7 7 5 57 20 6 10* 15 56 36 13 4 1 12 4 8 3 9 9 8 14 8 16 23 76 38 75 90 _ + + _ — _ + Dec. Nov. Dec. 1943 1943 1942 155p 159 161p 166 181 70p 740 122p 89 37p 163 102p 96 _ _ 168 r 71 606 102 102 50 141 108 95 104 110 104r 137 140 r 131 89 87 r 84 56p 57 60 48 49 62 52p 51 55 75 80 77 150 154 158 30p 34 69 55 54 69 r 31 31 29 1 7 4 3 7 6 2 2 42 14 6 — _ -f+ 7 + 50 + 28 11 0 + 3 6 —. 7 + 6 + 2 0 0 — 2 — 12 + 11 + 15 + 21 _ 183 70 787 122 106 38 166 r 104 97 143r 147r 129 113 159p 88 86 98 113 91p 98 15Sp 75 72 100 371 431 456 360 135 77 162 105 85 r 100 116 92 100 159 66 64 81 369 423 458 378 112 73 113r 101 83 98 128 88 90 160 69 66r 92 r 432 399 392 294 48 36 62 52 48 38 53 65 203 58 252 511 44 8 54 52 Payrolls Nov. 1943 Dec. 1942 Nov. 1943 Dec. 1942 Allentown........... Altoona............... Harrisburg.......... Johnstown.......... Lancaster............ Philadelphia. ... Reading............... Scranton.............. - 1 0 + 1 0 + 1 - 1 0 + 4 - 4 + 8 - 3 - 6 +13 + 5 - 3 +20 - 2 + 3 0 + 1 + 1 - 2 - 3 + 6 + 11 + 15 + 6 +20 +22 + 17 + 7 +32 Wilkes-Barre.... Williamsport.. .. Wilmington........ York..................... 0 - 1 - 1 0 + + - + - -18 + 8 +26 + 1 5 1 8 5 1 1 2 1 Bui ding per mits va lue Nov. 1943 Dec. 1942 +140 + 18 - 58 - 82 + 39 - 50 + 7 - 17 +122 - 16 - 29 - 66 +536 +100 + 92 - 75 - 45 +176 +347 +257 + 49 - 30 * Area not restricted to the corporate limits of cities given here. GENERAL INDEX............ Manufacturing.................... Anthracite mining............. Bituminous coal mining. . Building and construction. Quar. and nonmet. mining. Crude petroleum prod.. . . Public utilities.................... Retail trade......................... Wholesale trade.................. Hotels.................................... Laundries............................. Dyeing and cleaning......... 81 46 92 135 99 147 105 101 100 95 + 02 + — 18 2 0 +1 - 70 - -12 - 7 2 2 -18 - 4 - 2 0 -1 - 1 +- 75 + 21 - 9 +16 __ <> - 2 333 497 69 364 114 293 224 139 184 146 162 158 152 Employment* + 3 - 1 +10 + 13 -21 +12 -1 -1 +10 - 1 0 - 41 - -11 +12 + 7 - 4 + 2 +11 - 3 + 3 +72 +82 - 5 - 3 0 Payrolls* Per cent Per cent Dec. change from Dec. change from 1943 1943 index Nov. Dec. index Nov. Dec! 1943 1942 1943 1942 Indexes: 1923-5=100 TOTAL..................................... Iron, steel and products. .. Nonferrous metal products. Transportation equipment. lex Liles and clothing.......... Textiles................................. Clothing............................... Food products...................... Stone, clay and glass.......... Lumber products.................. Chemicals and products... Leather and products..... Paper and printing.............. Printing................................ Others: Cigurs and tobacco........... Rubber tires, goods........... Musical instruments......... 122 132 192 177 83 76 111 124 90 50 123 77 104 95 0 0 0 - 1 0 0 0 0 - 1 - 2 0 0 0 0 + 2 + 2 0 +16 - 6 - 6 - 6 + 5 - 4 - 2 + 4 -17 58 151 100 - 1 + 2 + 2 + i 203 276 414 31.1 122 111 165 183 134 80 211 113 147 129 - 1 - 1 0 - 2 - 1 - 1 0 + 1 + 2 - 2 0 + 2 - 1 - i +13 + 13 + 13 +24 + 4 + 4 + 6 +19 + 7 + 11 + 15 -12 + 9 + 8 -15 +27 + 27 81 293 185 - 1 + 2 + 2 - 7 +45 +49 * Figures from 2892 plants. and per cent change from year ago Re tail Scilea 141 190 50 Manufacturing Factory workers A verages Local Business Conditions* Employment Indexes: 1932 =100 ■ Hours and Wages * Unadjusted for seasonal variation. p—Preliminary. 13-month moving daily average centered at 3rd month, r—Revised. Percentage change— December 1943 from month and year ago Payrolls Per cent Per cent Dec. change from Dec. change from 1943 1943 index Nov. Dec. index Nov. Dec. 1943 1942 1943 1942 De bits Nov. 1943 Dec. 1942 Nov. 1943 Dec. 1942 +28 +33 +34 +30 +25 +21 +34 +45 +33 +44 + + + 5 6 5 2 0 - 6 + 2 +10 + 2 +11 +40 +39 + 1 + 3 +13 +12 +28 + 12 + 9 +22 + 17 +20 +20 +23 + 9 +49 +25 + 18 + 9 + 10 + 7 + 18 + 14 + 12 + 15 + 1 +22 -14 + 2 + 17 Weekly working time* Hourly earnings* Weekly earnings! Aver age Ch'ge Aver Ch’ge Aver Ch’ge hou rs age age 45.2 + 3 $1.027 + 7 $46.17 +10 46.2 + 4 1.090 + 5 50.35 + 9 45.8 + 3 .977 + 7 44.77 +11 0 1.183 + 6 57.21 48.4 + 6 40.0 0 .740 + 10 29.18 +11 41.1 + 1 +11 .763 + 9 31.30 37.6 — 1 + 12 .681 + 12 25.74 44.1 + 4 + 15 .798 + 11 35.26 40.4 + 5 .910 + 6 36.74 + 11 44.6 + 1 +12 .741 +11 32 80 44.9 + 7 1.028 + 4 46.08 +11 40.4 0 .724 + 8 29.12 + 7 43.3 + 3 .873 + 4 38.07 + 6 40.2 + 2 1.030 + 6 41.44 + 6 TOTAL............................ Iron, steel and prods... Nonfer. metal prods.. . Transportation equip.. Textiles and clothing.. Textiles........................ Clothing....................... Food products.............. Stone, clay and glass.. Lumber products......... Chemicals and prods.. Leather and products. Paper and printing. • • Printing........................ Others: Cigars and tobacco. . 42.0 Rubber tires, goods.. 44 2 Musical instruments. 49 0 + 1 + 3 + 3 * Figures from 2742 plants. f Figures from 2892 plants. .603 + 8 .974 + 11 .989 + 14 25.34 43.04 48.49 + 9 +14 + 17 Page Eleven Distribution and Prices Per cent change Wholesale trade Unadjusted for seasonal variation Sales Total of all lines..................... Boots and shoes.................... Drugs....................................... Dry goods............................... Electrical supplies............... Groceries................................ Hardware............................... Jewelry.................................... Paper....................................... - 6 +53 + 4 -28 +28 -18 -13 - 1 - 7 - 1 0 + 6 -21 - 8 - 1 +17 +10 +21 + 3 + 1 +24 + 3 + 2 -12 - 2 _ 2 -10 -31 +25 - 7 — 8 -24 Per cent ch ango Dec. Nov. Dec. 1943 1943 1942 Indexes: 1935-1939=100 + 9 + 8 + 4 +13 +16 +12 - 5 - 6 0 Inventories Paper....................................... Basic commodities (Aug. 1939 =100).... Wholesale (1926=100)................ Farm............................. Food............................. Other............................ Living costs (1935-1939=100)___ United States............. Philadelphia............... Food........................... Clothing..................... Bent............................ Fuels........................... Housefurnishings... Other.......................... RETAIL TRADE Sales Department stores—District........................ Philadelphia............... Women’s apparel.............................................. Men’s apparel.................................................... Shoe...................................................................... 179 0 + 4 + 79 103 122 106 98 0 0 0 0 + + + + + 38 + 100 + 57 + 22 FREIGHT-CAR LOADINGS Total..................................................................... Merchandise and miscellaneous................... M erchandiae—l.c.l........................................... Coal............................................................. . Ore............................................................... Coke............................................. Forest products....................................... Grain and products.......................................... Livestock............................................ 124 124 136 132 J 07 109 125 1 16 0 0 + i 0 0 + 3 0 0 + + + + + + + + + + + + MISCELLANEOUS LiTo insurance sales.......................... Business liquidations Number................................................ Amount of liabilities................................ Check payments...................................... 3 3 4 5 0 + 5 + 2 + 2 4 8 7 3 8 5* 1943 from 12 mos. 1942 Dec. Nov. Doc. 1943 1943 1942 + 6 + 5 +19 + 7 - 1 249 242 231 248 160 200 200 183 182 140 260 261 215 242 174 127 129 174 93 160 158 216 93 137 143 144 103 133 126 140 135 133 157 149 162 160 142 139 137 131 132 144 -15 -15 -13 -16 - 6 +19* + + - 139 137 177 103 132 130 150 152 92 114 + 5 + 6 3 4-11 — 8* — 7 -10 +21 — 10 —15* 140 137 88 136 149 208 128 134 138 141 135 90 118 228 175 112 152 133 126 126 77 116 166 188 110 116 132 - 1 + 2 - 2 +15 -35 +19 + 15 -12 + 3 +11 + 9 +15 + 17 -10 +10 +16 +15 + 4 - 1 - 1 0 0 -10 + 2 - 5 +10 +12 134 130 87 146 74 225 109 139 149 142 189 93 127 228 196 107 172 152 121 119 76 125 81 203 93 121 141 92 105 84 -13 +10 +12 99 118 90 143 o* +92* + 6 -56* -51* + 12 -63* 10 +12* 7 +17 193 Inventories Per cen t change from Dec. 1943 Month Year Aug. 1939 ago ago 2 7 1 2 Dec. 1943 from Month Year ago ago Source: U. S. Department of Commerce. Prices Not adjusted Adjusted for seasonal variation 1943 from 12 Month Year mos. ago ago 1942 Dec. 1943 from 26 26 46 33 4 13 25 IS ioi i53 10 24 15 4 163| 172 * Computed from unadjusted data. Source: U. S. Bureau of Labor Statistics. BANKING STATISTICS MEMBER RANK RESERVES AND RELATED FACTORS Reporting member banks (000,000’s omitted) Assets Jan. 19, 1944 Loans to brokers, etc............. Other loans to carry secur.. . Loans on real estate.............. $ 255 37 10 39 Other loans............................... 103 Changes in— Four weeks -$ 4 - 1 - 2 - 1 One year +$ + - 13 10 2 7 ii Philadelphia Federal Reserve District (Millions of dollars) Dec. 29 Jan. 5 Jan.12 Jan.19 Changes in four weeks Sources of funds: Reserve Bank credit extended in district.................. Commercial transfers (chiefly interdislrict)....................... Treasury operations................................... -83.3 +22.7 +70.5 -19.1 +22.3 -22.1 -20.0 + 4.8 +47.8 - 2.9 -14.7 +24.1 -125.3 + 35.1 + 120.3 + 9.9 -18.9 +32.6 + 6.5 + 30.1 + 11 +12.7 - 3.9 - 0.0 - 6.7 -10.9 — i.i - 0.2 + 3.0 +30.7 — 1.2 + 0.1 + + - 0.3 6.0 1.0 0.2 - 2.9 + 38.1 - 5.1 - 0.3 + 9.9 -18 9 +32.6 + 65 f 30.1 Total......................................................... Uses of funds: Currency demand............................................................ Member bank reserve deposits.......................... Other deposits at Reserve Bank.......................... Other Federal Reserve accounts.............................. $ 444 -$ 8 Government securities.......... $1489 Obligations fully guar’teed.. 71 Other securities...................... 175 +$ 9 +$467 + 2 - 61 Total.................................................................... 1 Total investments................ $1735 +$ 8 +$408 Member bank reserves (Daily averages; dollar figures in millions) - Total loans & investments. $2179 Roserve with F.R. Bank___ 397 Gash in vault.......................... 29 Balances with other banks.. 82 Other assets—net................... 59 +$20 - 3 - 3 + i +$408 - 47 + 3 - 26 4 Liabilities Demand deposits, adjusted.. $1679 1 imo deposits.......................... 171 U. S. Government deposits.. 303 Interbank deposits................. 353 +$40 + 5 - 45 + 15 +$200 + 3 + 140 - 18 Other liabilities....................... Capital account...................... + + + Page Twelve 13 227 i i 2 7 Phila. banks 1943: Jan. 1-15.. Dec. 1-15.. Dec. 16-31. . 1944: Jan. 1-15 . . Country banks 1943: Jan. 1-15.. Dec. 1-15.. Dec. 16-31. . 1944: Jan. 1-15.. Re Held quired $418 371 367 370 256 263 269 27 2 Ex cess $358 360 357 357 $60 11 10 13 184 213 214 215 72 50 54 57 Ralio oi excess to re quired 17% 3 3 4 39 24 25 26 Changes in weeks ended— Federal Reserve Bank of Phila. (Dollar figures in millions) Chan ges i n Jan. 19, 1944 Four weeks Bills discounted.... $ 1.2 Bills bought.............. 0 Industrial advances. 4.4 U. S. securities......... 785.1 -$ 0.4 0 + 0.1 - 75.9 +$ Total......................... Note circulation.. . . Member bk. deposits U. S.general account Foreign deposits... . Other deposits......... Total reserves.......... Reserve ratio............ -$76.2 + 1.8 + 38.4 -41.3 - 0.8 - 5.1 + 90.8 + 4. R°7, HS343.9 h 301.6 - 20.2 + 4.0 + 60.7 1.6 2.0 - 12.9% $790 7 1150.8 652.7 27.0 131.1 5.9 1183.3 60.1% One year 0.8 0 + 0.1 +■ 343.0
@FedFRASER