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Headquarters: Centers of Corporate Control
Home Is Where the Money Is




Headquarters: Centers of Corporate Control
. . . A revealing look at Philadelphia’s position as a corporate headquarters center.

Home Is Where the Money Is
. . . It takes more than LSD— loan supply, demand— to turn a home builder on.

BUSINESS REVIEW

is produced in the Department of Research. Evan B. Alderfer is Editorial Consultant. Donald R.
Hulmes prepared the layout and artwork. The authors will be glad to receive comments on their articles.
Requests for additional copies should be addressed to Bank and Public Relations, Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania 19101.




Community leaders across the country strongly believe corporate headquarters are an important
asset to their local economies. The Philadelphia Metropolitan Area is no exception. Therefore, it is
understandable that the community is concerned because it feels headquarters are declining in the
region. Since this current concern has been based on fragmentary evidence, we were challenged to
find out whether a problem really exists.

H E ADQU ARTERS:
CENTERS OF CORPORATE
CONTROL
by Elizabeth P. Deutermann

Headquarters of business corporations histori­

that home offices house the companies’ key de­

cally have concentrated in the nation’s major pop­

cision-makers. They make the major choices with
respect to production, sales, purchases, research,

ulation centers. Philadelphia is one of them.
Among the ten largest metropolitan areas in the

and other operations. And it is strongly felt that

country, Philadelphia ranks third as a location
for headquarters of giant corporations.1 Unfor­

many company decisions are substantially influ­
enced by where the decision-makers live and

tunately, this observation is but a snapshot of the
top of an iceberg. Beneath the surface are num­

work. By virtue of residence of these executives,
the home town of the headquarters is blessed with

erous signs that the region has lost much of its

special economic benefits.

strength as a center for headquarters. Under­
water photography reveals a decline in the num­
ber of major corporations headquartered here,
relatively slow asset growth of those remaining,
and a greater-than-expected tendency of smaller
firms to be controlled by headquarters outside of
the region.

For

example,

top

corporate

executives in

Philadelphia will most likely give the lion’s share
of their company business to local banks, adver­
tising agencies, law firms, auditors, other service
industries and producers. When considering a
site for a new production facility, the decision­
makers will definitely include Philadelphia in the
choice— if not give the area top priority. Further­

WHY HEADQUARTERS ARE IMPORTANT

more, a large number of headquarters executives

Business leaders consider headquarters a vital

make an invaluable contribution to community

economic asset to their community. The reason is

well-being in a broader sense. They take the time,

1

References to Philadelphia throughout the article are
to the Standard Metropolitan Statistical Area. This is
also the case for other cities named. For Philadelphia,
the area includes the counties of Bucks, Chester, Dela­
ware, Montgomery, and Philadelphia in Pennsylvania
and Burlington, Camden, and Gloucester counties in
New Jersey.




and have the energy and desire, to make their
region a better one in which to live and do
business.
These views are widespread. They have prompt­
ed a plethora of promotional activity across the

3

bu siness r e v ie w

nation to attract headquarters to one’s home
town. They have prompted us to raise some ques­
tions concerning corporate headquarters in Phila­
delphia. As a starting point, how does the region
rank as a headquarters center? Where is it going?

TABLE 1

HOW HEADQUARTERS CONCENTRATE
IN THE LARGEST CITIES
S ta n d a rd

HOW PHILADELPHIA COMPARES
The opening reference to Philadelphia’s leader­
ship as a headquarters center includes corporate
“ giants” only— a subject to which we shall re­
turn.2 But Philadelphia’s economy is not domi­
nated by a few giants. It is characterized by a
high proportion of intermediate-sized firms. So,
to gauge the region’s strength as a headquarters
center calls for a broader view of the economy.
Therefore, let’s take a look at all firms with a

N um ber of
H e a d q u a rte rs ’
R a n k in g

M e t r o p o lit a n
A re a

P o p u la t io n
R a n k in g

N e w Y o rk

1

1

C h ic a g o

2

3

L o s A n g e le s

3

2

B o sto n

4

6
4

P h ila d e lp h ia

5

D e t r o it

6

5

S t.

L o u is

7

10

S a n F r a n c is c o

8

7

P it t s b u r g h

9

9

10

8

W a s h in g t o n

Source: Dun and Bradstreet, Inc., 1965, and U.S.
Bureau of the Census, 1965.

million dollars net worth or more.3 This then
covers the small wholesaler

in Montgomery

County, Pennsylvania, with two employees as

region. The more firms, the more headquarters.
However, Philadelphia is in a somewhat unique

well as a manufacturer in Camden with 27,000

position. It is the only metropolitan area rank­

employees.

ing higher in firms than in headquarters. (See

On this basis, where does Philadelphia stand

Table 2.) In addition, the region ranks higher in

as a corporate headquarters center? Among the

subsidiaries than headquarters. Relative to other

ten largest metropolitan areas, Philadelphia ranks

large regions,

fifth in the number of firms headquartered here.

slightly more prone to corporate control outside
of the area than within it.

This fact alone is not too surprising. To a con­

firms

in Philadelphia

appear

siderable extent, the largest population centers
have the most headquarters. For example, the
three top headquarters centers— New York, Chi­
cago and Los Angeles— also are the nation’s top
three population centers. People alone, however,
do not explain a region’s attraction for head­
quarters. If they did, Philadelphia would be in
fourth place, instead of fifth as seen in Table 1.
Compared to population, there is a stronger

TABLE 2

THE MORE FIRMS IN A REGION,
THE MORE HEADQUARTERS— USUALLY
M o s t A re a s R ank
t h e S a m e in N u m b e r s
o f H e a d q u a rte rs
a n d F ir m s :

Som e Rank
H ig h e r in
H e a d q u a rte rs
T h a n F ir m s :

N ew Y o rk

B o sto n

C h ic a g o

One R anks
H ig h e r in
F ir m s T h a n
H e a d q u a rte rs:

S t. L o u is

relationship between the concentration of cor­

L o s A n g e le s

porate control and the number of firms in a

P h ila d e lp h ia

D e t r o it
S a n F r a n c is c o

2 These are the nation s 750 largest industrial and non­
industrial corporations enumerated by Fortune magazine.
3 Comparisons of metropolitan areas throughout this
section are based on data obtained from Dun and Bradstreet, Inc. The data cover the year 1965.

4




P it t s b u r g h
W a s h in g t o n

Source: Dun and Bradstreet, Inc., 1965.

bu siness re v ie w

Locational advantage

to the total for all ten metropolitan areas. The

At this point we begin to see a tendency for some

measure of regional concentration, or speciali­

regions to be more home-office-oriented than

zation, used here works like this:

others.

as head­

quarters are the same proportion of employment

quarters centers is not in direct proportion to

in one region as all headquarters are to total

their size or number of firms. A further indica­

employment of the ten metropolitan areas, that

tion of this tendency is seen in the relationship
between headquarters and employment in an

one region would have an index of l .4 This is
frequently cited as having a “ fair share.” In

area. Although New York and Chicago still hold
the top spots as headquarters centers relative to

these terms, Philadelphia stands short of its

Their

comparative position

if head­

fair share.

employment, the relationship begins to fall apart
for the eight other regions. For example, Boston

Manufacturing’s role

and St. Louis rank third and fourth, respectively,

Philadelphia’s rather undistinguished position as

in the number of headquarters as a percentage

a headquarters dynamo is strongly weighted by

CHART 1

would appear that the manufacturing sector of

SOME REGIONS HOLD A LOCATIONAL ADVANTAGE
FOR HEADQUARTERS*

the economy might enhance the region’s head­

manufacturing corporations. At first glance it

quarters leadership. Further probing suggests

Location Quotient*

this is not the case.
As we take that first glance, we see that Phila­
delphia ranks fourth in the number of head­
quarters of manufacturing firms compared to
other metropolitan areas. This standing is right
in line with the region’s population rank, one
step above its “ all headquarters” position. One
would expect the region to rank high as home
base for manufacturing corporations because
Philadelphia is a manufacturing town. And, as
previously noted, the more firms in an area, the
of each region’s employment. Philadelphia again

more headquarters.

is in fifth place.
These four regions— New York, Chicago, Bos­
ton and St. Louis— appear to have a locational
advantage for corporate headquarters. They have
something going for them that the other six
regions don’t. However, Philadelphia does lead the
rest of the underachievers, as shown in Chart 1.
The chart graphically depicts the locational
advantage or disadvantage for corporate head­
quarters in each region. It shows the concentra­
tion of home offices in any one region relative




1 This is a descriptive measure of concentration, usual­
ly called a location quotient. It is a device for comparing
a region’s percentage share of a particular activity (in
this case, headquarters) with its percentage share of
some basic aggregate (em ploym ent). As used here, the
location quotient for the concentration of headquarters
in a region is stated by the formula
H r/E r

H r/H n

hFT F0
Fe T

e

Hr = the number of headquarters in the region; Er —
employment of the region; Hn — the sum total of head­
quarters in the ten regions; and En = the sum total of
employment in the ten regions.

5

bu siness re v ie w

But relative to its size as a manufacturing

TABLE 3

town, it falls short in local corporate control
over operations. For example, compared to the
other major metropolitan areas, Philadelphia
places low in the proportion of its manufacturing

HOW THE LARGEST REGIONS RANK AS
HOME BASE FOR CORPORATE GIANTS*
S ta n d a rd

M e t r o p o lit a n

phia holds the top spot for manufacturing sub­
sidiaries as a percentage of all firms. What this

R anked
1965

place. In other words, six of the nine other
regions have more home-town control over their
manufacturing enterprise. In addition, Philadel­

N u m b er o f H e a d q u a rte rs

A re a

firms headquartered in the region. It’s in seventh

1956

N ew Y o rk

1

1

C h ic a g o

2

2

P h ila d e lp h ia

3

3

P it t s b u r g h

4

4

San

4

6
8

F r a n c is c o

L o s A n g e le s

6

D e t r o it

7

5

the region make many key management decisions

S t . L o u is

8

6

about Philadelphia’s industrial activity, and to a
greater degree than in most other major metro­

W a s h in g t o n

suggests, therefore, is that executives outside of

politan areas.
The region’s comparative position as a center
of corporate control is less influenced by non­
manufacturing activities. But then Philadelphia

B o sto n

9

9

1 0

1 0

* Corporate giants refer to the 7SO largest manufac­
turing and nonmanufacturing corporations in the
nation.
Source: Fortune magazine.

is less of a nonmanufacturing region. In terms

When a major headquarters moves into a region,

of total nonmanufacturing firms headquartered
in the area, it places fifth. The same rank holds

or becomes a giant through acquiring firms out­

for the percentage of nonmanufacturing firms

loss of one such home office results in much

whose home offices are in Philadelphia. Non­

wringing of hands throughout the business com­

manufacturing appears neither to add to nor
subtract from the region’s strength as a cor­

munity.

porate headquarters center.

side the region, rejoicing follows. Conversely, the

Philadelphia’s present stand as a mecca for
this cream of the crop is excellent. As men­
tioned at the outset of this article, the region is

THE CREAM OF THE CROP

in third place in the number of major corpora­

To this point we have taken a very broad look

tions headquartered in Philadelphia. And it has

at Philadelphia as a headquarters complex. In­

held on to this position for almost a decade

cluded in this total picture are the corporate

(1956 to 1965). Only New York and Chicago
continue to surpass it. But how much longer

giants to which we referred earlier.5 Neverthe­
less, they warrant some special attention. Since
business leaders feel headquarters generally are

Philadelphia can retain its rank is questionable.
Some ominous signs are evidenced.

an important asset to the local economy, the
largest home offices are of particular interest.

Down the down staircase
Together, the ten largest metropolitan areas in

1 Comparisons oj metropolitan areas throughout this
5
section are based on Fortune magazine’s data on the
nation’s 7SO largest industrial and nonindustrial corpo­
rations.

6




the nation actually lost major corporate head­
quarters between 1956 and 1965. The total de­
cline was 6 per cent. A probable reason for this

bu siness re v ie w

loss is stepped-up mergers and acquisitions over
the period. Another is the movement from the

This area’s total decline has been slow but
steady. And both manufacturing and nonmanu­

top metropolitan areas to some of the smaller

facturing headquarters have participated in the

regions of the country where population and

drop. Of the ten regions, only San Francisco in­

employment growth have been booming. One

creased its number of giant manufacturing home

further possible explanation is that corporations

offices. The other areas either experienced no

in some areas outside the big ten have grown to

change or declined. Philadelphia is in the loss

join the ranks of the largest 750 corporations,

group. In fact, its rate of loss was surpassed only

therefore displacing headquarters formerly in the

by Detroit’s. Nevertheless, Philadelphia’s manu­

top ten.6

facturing headquarters base is strong. It was

Of the ten largest regions, three actually in­

sufficiently strong in 1956 to keep the area in

creased their number of corporate headquarters:
Washington, which started from a very low base

fourth place over the nine-year period, in spite
of the downtrend.

in 1956; San Francisco and Los Angeles— re­

The experience of Philadelphia’s nonmanu­

flecting rapid population and economic growth

facturing headquarters was similar to manufac­

in general. The other seven metropolitan areas

turing. In half of the metropolitan areas examined,

registered losses. Some areas were more ad­

home offices of nonmanufacturers increased or

versely affected than others. The greatest re­

remained unchanged. However, Philadelphia is

gional loss in the number of major corporate

in the losing half. Of the losers, only three fared
worse than Philadelphia.

headquarters was 20 per cent. The region is
Philadelphia.

Control of corporate wealth
0 Covered by Fortune.

CHART 2

MOST OF THE TOP TEN ARE
LOSING HEADQUARTERS
The chart shows the rate of increase or decrease in the
number of headquarters in each area, 1956-1965 *
Per Cent Change

If declining numbers of corporate headquarters
are a drag on the local economy, what is the
economic importance of the drag? Numbers alone
don’t determine the ability of headquarters to
stimulate business in other sectors of the regional
economy. Among other things, strength of the
stimulus depends on the economic wealth and
health of corporations headquartered in the area.
Take banking as an example. Declining head­
quarters in a region may mean fewer accounts
with local banks. However, if headquarters of
the wealthiest corporations are not part of the
decline, those fewer bank accounts may be fatter.
Then let’s look at what is happening to cor­
porate wealth of Philadelphia-based companies.
Although assets of corporations headquartered in

*Data refer to the 750 largest manufacturing and nonmanufacturing corporations
in the nation.
Source; Fortune Magazine.




each of the ten metropolitan areas are growing,
they are growing at the slowest rate in Phila­
delphia. Between 1956 and 1965, the total growth

7

bu siness re v ie w

rate for all ten regions was 72 per cent. In
Philadelphia, it was 39 per cent. As a result, the
area slipped from fifth to seventh place in the
value of corporate assets locally controlled.

was comparatively low or moderate at best.
CHALLENGE IN CONTEXT
In determining where Philadelphia stands as a

Assets of manufacturers headquartered here

headquarters center, and particularly where it

rose similarly to the total picture presented above.

is heading, a rather discouraging tale emerges.

They increased in all of the major metropolitan

But the story should be kept in perspective.

areas— except Washington, where no giant head­

Some recapitulation may help. Among the

quarters exist in manufacturing. But once again
Philadelphia’s growth rate was the slowest. Con­

ten largest metropolitan areas, Philadelphia is
the third largest center of major corporate head­

sequently, the region dipped comparatively from
sixth to seventh place in value of assets over the
nine-year span. In addition, manufacturing sales

quarters. It is surpassed only by New York and

of these locally headquartered companies in­

Philadelphia also continues to have the fourth
largest concentration of giant manufacturing

creased at a slower rate than in any of the other
regions.

Chicago. Philadelphia can still be considered the
leader of secondary centers of corporate control.

Nonmanufacturing assets, as a group, also

headquarters. With firms of all sizes included,
this region has only a small locational disad­

turned in a consistent performance. Increased

vantage for headquarters. And the fifth place

assets characterized all ten regions. Philadelphia
— growing at next to the slowest rate— dropped

standing for all headquarters is only one step

from fourth to fifth place between 1956 and
1965. Local banks, life insurance firms, and

Apparently, Philadelphia has had sufficient
strength in the past to hold its relative position

transportation companies all retained their rela­

as a major headquarters complex— in spite of

behind the area’s population rank.

tive position with other regions over the years.

all of the signs of decline. Nevertheless, these

Merchandising corporations and utilities in­
creased their standing in asset value. Nevertheless,

signs are warnings to a concerned business com­

asset growth for all nonmanufacturing groups

arrest the downtrend. The second is to reverse it.

8




munity. The first challenge to the region is to

HOME IS WHERE
THE MONEY IS
by D. Russell Connor

Sharply and as suddenly as anyone can remem­
ber, a dramatic change in the availability and
cost of mortgage money is happening now in the
eight-county Metropolitan Philadelphia Area.*
Since January— in marked contrast to the
tight money environment of 1966— local mort­
gage lenders have been amassing loanable funds

“ points,” miscellaneous fees— have largely dis­
appeared on prime single-family residences.
Equities are less and terms longer.
Money at six per cent simple interest is now
generally available for conventional mortgages
on desirable home properties in the Greater
Philadelphia area. In special circumstances, a few

in increasing quantities. Pressures to get these

mortgages are being financed at 5% per cent,

funds invested are mounting. But the demand

fewer still at 5 % per cent. If the relationship of

for them to date, although improving, is short
of earlier anticipation.

supply and demand continues as it has been
through the first third of the year— admittedly,

Responding to supply-demand factors, mort­

a low period of new construction— the near-

gage rates are coming down; many say more
quickly than in their experience. Add-ons to

term prospect is that rates below six per cent
will become more common.

which mortgage loans were subject last year—

Bankers and builders have problems. Bankers
look for a two-way stretch from government:

* Bucks, Chester, Delaware, Montgomery and Philadel­
phia counties in Pennsylvania; Burlington, Camden and
Gloucester counties in New Jersey.




action in one direction, non-action in another.
Builders are conducting a two-pronged search:

9

b usiness re v ie w

for work crews disbanded last year, and for

mutuals, after a time lag, began in January to

worthwhile developmental sites from a dwindling

gain a net inflow of funds.

inventory in the eight-county area.
The prospective home buyer has problems,

liquidity and to retire indebtedness to the Federal

too. The price of money— the mortgage interest

Home Loan Bank, incurred during their deposit

rate— is hut one of the prices he must pay to

drought. The inflow continues, however, and now

Federal S&L’s used the new funds to rebuild

move. Others are the price of the property, prices

thrift institutions must put their money to work

of services, fees, and incidentals inherent in relo­
cation, and the price of dis-saving. But he has an

in traditional ways. Principally, that means into

drawn from conversations with lenders, builders,

new mortgage loans.
This brings about a dilemma. So long as the
demand for mortgage loans fails to keep pace
with the swelling supply of savings in S&L’s and

out: apartments.
Those are the eclectic facts and inferences
and realtors over the past several weeks. A more

mutuals, competitive pressure impinges on the

universal theme is that the hoped-for homebuilding boom in the Greater Philadelphia area
may be delayed until 1968.

mortgage rate. Thus success in attracting de­
posits cuts into potential profit per deposit.

The bankers— different dilemmas

mortgages nationwide. However, what is hapen-

Savings and loan associations and mutual
savings banks together grant more residential

ing here is happening elsewhere, and profits on
out-of-state mortgages are narrowing also.

mortgage loans than all other financial institu­

Another complication intrudes. Mutuals and

tions. Their main source of funds is discretionary

S&L’s are paying relatively high rates for new

income in the hands of the public, for which they
must compete. In 1966 a process termed dis­

against a 6 per cent mortgage rate, there’s little

intermediation took place. High yields in the

spread to cover operating expenses, let alone

Thrift institutions are not wholly dependent
on the local market; they can and do invest in

funds— up to 514 per cent on certificates. Posited

market attracted potential savings shares and

provide a profit. Again, competition helps deter­

savings deposits directly, and away from the

mine a rate, this time the dividend rate paid by

financial intermediaries, the thrift institutions

the thrift institutions. Unilateral reduction of its

and commercial banks. Dis-intermediation thus

dividend rate, each thrift institution seems to

reduced the amount of mortgage money available

fear, would merely drive its clientele to a com­

from S&L’s and savings banks.

petitor. And it cannot join with its sister institu­

Financial intermediaries also compete with
each other for savings. From January 1, 1962,

tions in a cabal to curtail the prevalent rate;
that’s against the law.

through December 5, 1965, interest rates per­

So the savings banks and savings and loan

mitted to be paid by commercial banks for sav­

associations look to government for relief. They
would welcome rulings by regulatory agencies
lowering the permissible maximum rates for

ings and time deposits were raised in fractional
steps. Commercial banks became stiffer com­
The signals were changed last year. A rate

savings in all institutions. They view this man­
dated reduction as an escape route from their

permitted commercial banks on a certain class of
time deposits was lowered, and local S&L’s and

the short run, unless and until the saver gets

petitors for savings, and captured a bigger share.

10




present dilemma— perhaps the only way out, in

bu siness re v ie w

off his fireside and starts to spend for new hous­
ing.

Mortgage bankers per se are a different breed
of catalyst in the mortgage/construction scheme

Commercial banks are in a somewhat different

of things. They are essentially traders, buying

situation. They have a broader lending universe,

and selling mortgages for clients— insurance
companies, welfare and pension funds, and other

are not so dependent on mortgage loans. Local
banks have cut back deposit costs by individually

non-bank investors, as well as for banking in­

reducing their CD rates. Although some commer­
cial banks are permanent lenders for single­

stitutions. They may hold mortgages for their
own accounts, or they may “ warehouse” them

family residences, others specialize in construc­

with commercial banks (use them as collateral

tion loans, mortgage loans for apartment com­

for loans), reinvesting the proceeds in still more

plexes, or in nonresidential, commercial mort­

mortgages for resale. They may service mort­

gage loans. Proximate commercial banks, there­

gages for clients, for which they charge a fee; and

fore, are not as intra-competitive for mortgages

for bringing mortgagor and mortgagee together,

as are thrift institutions.

they occasionally earn a “ finder’s fee.”

In common with thrift institutions, commercial

To be successful, mortgage bankers need ac­

banks have more money to lend this year than
last. New reserves supplied by the Federal Re­

tivity. They trade on fractions of one per cent;
it takes a lot of fractions to add up to a profit.

serve in the past six months have done much to
ease the posture of tight money characteristic of

Last year when residential construction was in
the doldrums, little building and little money

1966. Overall loan demand by business and con­

put a double squeeze on mortgage bankers.

sumers is not matching the rates of growth ex­
perienced last year. As a consequence, interest
charges on commercial bank loans are under­

There’s more activity now but it’s unbalanced.
Insurance companies, more liquid this year as
policy loans slough off, are back in the mortgage

going some compression, as witness the recent
reduction in the prime rate, locally and na­

market, predominantly for apartments and com­
mercial construction. Non-bank investors, find­

tionally.
Philadelphia-area commercial banks that are

ing opportunities in other fields shrinking, are
adding to the mortgage money supply. As in­
dicated, so are banking institutions. It all adds

residential mortgagees did not actively seek new
mortgage loans last year, because of their limited

up to supply picking up faster than demand.

funds and intensive loan demand from other

There is another condition mortgage bankers

sectors. Now they are seeking them, and to that

would superimpose on balanced activity: stability

extent are contributing to the downward tilt

of the rate structure. They, along with other

of the mortgage rate. A resurgence in business

mortgage lenders, see the current six per cent

and consumer borrowing— more profitable than

mortgage rate as an equitable one for seller and

mortgage lending— could alter the slope. But

buyer alike. They do not view six per cent as a

until these borrowers increase their demands,

deterrent to the prospective home buyer. In fact,

renewed emphasis is on mortgage lending. Banks

they consider six per cent as clothed with legal

are not asking aid from government, but are

sanction: it’s the usury rate limitation set by the
states in the Third Federal Reserve District,

demanding better results from advertising and
new business staffs. They’d rather do it them­
selves.




Pennsylvania, New Jersey, and Delaware.
A stable rate permits mortgage bankers to

I
T

bu siness re v ie w

plan for the future with some assurance. Six

quo, apprehensive of the party affiliations of

per cent allows them to trade with a margin for

potential newcomers.

miscalculation, and make a profit. That’s why

Home building, too, is not without its prob­

mortgage bankers, unlike their cousins the sav­

lems. Costs are going up as local zoning boards

ings banks and savings and loans, seek non­

set higher minimum acreage requirements, insist
on basic improvements such as in-place sewers.

action from government. They do not want
FHA to lower its present six per cent rate on

Along with land, labor and materials are more

Government-insured mortgages.

expensive, boosting the price of a 1967 house 10

The builders’ rock and roll

per cent higher than in 1965, and making it
somewhat more difficult to sell.

It takes more than LSD— loan supply, demand—

From the builders’ viewpoint, these considera­

to turn a builder on. It takes time. Time to lure
workmen back from the industrial jobs they

tions add up to selective residential construction

took last year when residential construction was

homes than apartments in the three New Jersey

slack. Time to renegotiate land leases lapsed

counties, where land and labor seem relatively
more abundant and less expensive. (Including an
innovation in suburban “ town houses,” which
Philadelphians will term row houses, by one na­

last year when money was scarce. Time to get
samples built. And time to reestablish the mo­
mentum of building and selling homes.

this year. Emphasis will probably be on more

There was, it is true, quite a bit of residential

tionally known builder.) In the five Pennsylvania

building locally in 1966, but of a special kind:

counties, probably emphasis on apartments. In

apart­

all eight counties, a lag. Builders were rocked by

ments. Smart ones can get in and out of apart­

the events of last year, and it takes time to get
rolling again.

garden-type

apartments.

Builders

like

ment construction with very little of their own
capital. Apartment building has some elements
of mass production, sadly lacking in the con­

The buyer— in the driver’s seat, with safety belt

struction business generally. A maximum num­
ber of living units can be crammed onto a

On the other side of the savings window is the
potential home buyer/mortgagor.

He is em­

minimum amount of land, land that is becoming

ployed in record numbers in the metropolitan

precious in suburban Philadelphia. And many
investors like apartments; the six per cent limita­

Philadelphia area today, and is saving more than
ever. He likes the high return his savings and

tion on mortgage loans doesn’t apply.

other investments are earning. It affords him the

Builders claim apartments have a salutary

luxury of choice.

effect on local tax structures. That they’ve been

He makes subjective comparisons. Five per

persuasive is evidenced by the mushroom growth

cent from the bank is no more than right; six

of apartments in the boroughs and townships

per cent for the bank, and for the real estate

ringing Philadelphia. Not all local officials are

agent, is too much. Friends from other states tell

believers, however. They cite narrow country

him housing here offers as much or more value

roads overcrowded with the cars of apartment
residents. They point to instances of shoddy
materials and workmanship, visualize slum prob­

parison is strictly local and several years ago,

lems ahead. They may prefer the political status

12




than in any other metropolitan area. His com­
when last he and the missus looked at new
houses. In terms of personal economics, houses

bu siness re v ie w

cost too much, banks and realtors charge too

home is where the money is.

much, and if he spends his savings he loses too
At press time

much.
He may elect, as dictated by his economics, to

A recheck with interviewees indicates that in the

do nothing; many of his fellows are watching

first week of May there is continued imbalance

and waiting. If he is induced to improve his

between mortgage money supply and demand.

housing standards, he has several choices. He

Despite this, the six per cent rate on convention-

can use the rationale that housing values and

als is holding firm, as investors are reluctant to

costs will continue to rise, and decide he’d better

commit themselves to a lesser return. Some

move now. He can add rooms and conveniences

builders are resisting service charge and con­

to his present dwelling. Or he can opt for an

struction loan rates, but construction is improv­

apartment, the safety belt of the buyer-saver in

ing. However, the bulk of new starts will not be

the driver’s seat.

salable until later in the year.

Apartments enjoy an “ in” status in the “ City

Hard hit by tight money last year, some lend­

of Homes” and its environs. Once the recourse

ers are apprehensive that a rising Federal deficit

of “ empty nesters” and moneyless newlyweds,

could cause a turnabout in monetary ease in the

they now appeal to affluent families who like

second half of the year. Their advice to the

mobility and dislike the confinement of home

prospective home buyer is to take advantage of

ownership. Apartment developments in the Great­

the current situation, and arrange his point-free

er Philadelphia area offer a wide range of
rentals and locations, plus the pleasurable amen­
ities of golf courses, tennis and swimming facil­

six per cent financing now. But others look to a
reduction in the FHA rate, and see conventional
rates coming down shortly thereafter.

ities, and even marinas. And they seem economi­

In sum, the situation is fluid, and no one is

cally advantageous to many, requiring minimum

confident of its resolution. But it is better for all

investment and permitting retention of savings

concerned than 1966, and may improve still more

income.

in 1968. This years seems an interim period.

Perhaps now more than heretofore,




13

FOR THE RECORD...

Third Federal
Reserve District
Per cent change
SUM M ARY

United States
Per cent change

March 1967
from
mo.
ago

year
ago

3
mos.
1967
from
year
ago

March 1967
from
mo.
ago

year
ago

M a n u f a c t u r in g

E m p lo y ­
m ent

3
mos.
1967
from
year
ago

+ 1
+ 2
- 2
+ 1
+ 2
- 1
— 17
>

+
—
+
+
-

4
2
2
3
0
8

+ 2

P a y r o lls

Check
P a y m e n ts * *

T o ta l
D e p o s its * * *

Per cen t
ch an ge
M a r c h 1967
fr o m

Per cent
ch an ge
M a r c h 1967
fro m

Per cent
change
M a r c h 1967
fro m

Per cen t
ch an ge
M a r c h 1967
fro m

m o.
ag o

m o.
ago

year
ago

m o.
ag o

year
ag o

m o.
ag o

+

+

-1 8

+

LO C A L
C H A N G E S

S ta n d a rd
M e t r o p o lit a n
S ta tis tic a l
A re a s *

MANUFACTURING
Production ...................
Electric power consumed + 7
Man-hours, total* ....... + 4
0
Employment, total ........
Wage income* ........... + 4
CONSTRUCTION** .......... +36
COAL PRODUCTION ........ -1 3

.....

W ilm in g t o n

—

1

+34
- 1

- 7
- 3

-1 1
+ 2

T re n to n

+

8f

+
+
+
+
+

1
1
3
3
3
0

+
+
+
+
+
+

6
6
9
6
13
9

+
+
+
+
+

6
7
4
1
11
12

‘ Production workers only
“ Value of contracts
‘ “ Adjusted for seasonal variation




+

2f

+ 3*

0
0

0
+ 3

year
ag o

A lto o n a

8

+ 19

1

1

+

—

.............

1

+

3

+

2

0

+

4

+

6

+ 13
+ 12
0

.......

La n ca ste r

.........

L e h ig h

V a lle y

2

+

2

+ 11

+

2

+

-

1

+

5

+

0
-

+
+

fl5 SMSA’s
^Philadelphia

1
3

+

1

2

+

1
2

-

1

..................

+

3

2

1

+

3

+ 10

2

4

+

1

+ 10

+

3

+ 10

+

4

-

4

+

2

+

+

7

+

4

+

2

+

7

0

-

4

+

2

+

5

2

7

5

+

4

+

2

+

4

0

+ 10

—

6

+

4

-

2

0

-3 9

+

2

+

9

-

8

+

1

0

+

7

0

-

0
+

+

-

+ 12

0

3

-

Y o rk

-

2

—

...

3

0

.

...........

+

0

+

P h i l a d e l p h i a .....
R e a d in g

6

-

1
0

+ 31

-

2

-

.......

—

0

4
0

-

S c r a n t o n ...........

ot

2

+ 13

W ilk e s - B a r r e

PRICES
Wholesale.....................
Consumer .....................

6

...........

H a r r is b u r g

+ 7
+ 10
+ 1
- 7
+ 10

0

A t l a n t i c C it y ...

J o h n s to w n

+ 7
+ 9
+ 4
- 3
+ 12
+ 5t

year
ag o

+ 3

BANKING
(All member banks)
Deposits ...................... + 1
Loans ......................... + 1
Investments.................. + 2
U.S. Govt, securities .... + 1
Other ......................... + 4
Check payments***.......
- It

B a n k in g

+

4

-

1

+

9

+

1

+

7

1

+

9

-

1

+ 16

+

1

+

5

‘ Not restricted to corporate limits of cities but covers areas of one
or more counties.
“ All commercial banks. Adjusted for seasonal variation.
“ ‘ Member banks only. Last Wednesday of the month.




SEE BACK OF VOLUME FOR
MAY 1967 SUPPLEMENT


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102