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THE BUSINESS REVIEW
FEDERAL RESERVE BANK
OF PHILADELPHIA
OCTOBER, 1948
Commercial Bank Reserves
An appraisal of a plan for
uniform reserve requirements.
What’s New in Industry?
The impact of recent technological
developments will be widespread.
Commercial Bank Reserve Requirements: a Reappraisal
Address before the Forty-seventh Annual Conference,
National Association of Supervisors of State Banks
at Louisville, Kentucky, September 22, 7 948
by Karl R. Bopp, Vice President
Federal Reserve Bank of Philadelphia
Your President, Dick Rapport, put me on the ments once thought the obvious solution to a
spot when he asked me to discuss the highly bank’s inability to pay depositors on demand
controversial subject of commercial bank re was simply to require every bank to hold at
serve requirements. Nevertheless, I was happy least a certain minimum of reserves at all times.
to accept his invitation because it is an impor In arriving at this solution, they apparently
tant current topic and because I believe firmly overlooked the fact that a bank cannot pay out
that the best way to arrive at solutions to con reserves that it must hold. Required reserves
troversial public problems is through the demo can be used to meet a withdrawal only to the
cratic process of frank and open discussion. extent that they cease to be required or become
Everyone in this room has a peculiar responsi freed by the withdrawal itself. The only way
bility to help solve this particular problem in withdrawals could be met completely out of
whatever way is best for the country. In that required reserves would be to fix requirements
sense, we are all on the spot.
at 100 per cent of deposits.
It may help to keep the main points in mind
if I ask three basic questions at the outset:
1. Why should banks be required to maintain
reserves against deposits?
2. What amount of reserves should all banks
collectively be required to maintain ?
3. How should each bank’s share of the total
be determined?
It is easier, of course, to ask than to answer
these questions. I do not expect all of you to
agree with the answers I give. I have arrived
at them after many discussions with commercial
bankers, bank supervisors, central bankers, leg
islators, and college teachers. I expect my
thinking to be influenced further by comments
from this strategic audience.
7. Why should banks be required to maintain re
serves against deposits?
The idea of requiring banks by law to hold
at least a minimum of their deposits in reserves
apparently developed from a desire to assure
maintenance of the liquidity of banks. Govern
Page 110
Under a fractional reserve system, a drain
must be met primarily by selling assets or bor
rowing. If, for example, a bank is required to
maintain a reserve of 20 per cent and holds no
excess reserves, it must either liquidate 80 cents
of assets or borrow 80 cents for each dollar of
deposits withdrawn. Thus, a bank’s ability to
pay its depositors depends mainly on the qual
ity and marketability of its assets and its ability
to borrow. So long as the withdrawals remain
modest, other private buyers and lenders can
usually be found directly or indirectly. But if
withdrawals become widespread, panic may
ensue.
As you know, the panic of 1907 had much to
do with the creation of the Federal Reserve
System. One reason for establishing the System
was to provide an elastic money supply and
thus prevent currency panics. The method
adopted was to authorize the Federal Reserve
Banks to create reserves and money. Unfor
tunately, however, the authors of the Act could
not foresee future developments and imposed
what proved to be inappropriate limits on the
amount of notes the Reserve Banks could issue,
on the amount of reserves they could create, on
collateral for notes, and on the collateral
against which the Reserve Banks could lend.
These restrictions seriously aggravated our
monetary problems in the Great Depression.
Some of them have since been removed, as in
the Banking Act of 1935, which in effect made
all sound assets of member banks a potential
basis of advances by Federal Reserve Banks.
_ The founders of the System were interested
in far more than the prevention of money
panics. They charged the System with respon
sibility for influencing continuously the supply
availability, and cost of money, of which de
posits are the largest element. Now, although a
system of fractional required reserves does not
provide liquidity, adequate control over reserve
requirements is an indispensable tool in regulat
ing the volume of money in a country with some
14,000 independent banks. Without such re
quirements, the commercial banks would have
too wide a degree of freedom as to the amount
of deposits they could create or maintain on a
given amount of reserves. For example, $1 of
reserves will support $5 of deposits if the re
serve requirement is 20 per cent but will sup
port $10 of deposits if the reserve requirement
is 10 per cent. If banks were not required to
maintain minimum reserves, they would be able
to increase the supply of money by reducing
their reserve ratios.
A short answer to our first question, there
fore, is that unless commercial hanks are required
to maintain at least minimum reserves against de
posits, the country would he without a mechanism
for regulating the supply of money in the general
interest.
2. What amount of reserves should all banks col
lectively be required to maintain?
Reserve requirements are one of the two
factors which determine the ability of a bank
ing system to create deposits. The other is the
aggregate amount of reserves available to the
banks. Control or influence over these two
factors are complementary means of influencing
the volume of money. Adequate administrative
authority over both is needed to enable the
Federal Reserve System to discharge its respon
sibility by developing a flexible policy adapted
to changing conditions.
The System has been obliged to shift its em
phasis as one or the other of these basic instru
ments appeared inadequate or inappropriate to
existing circumstances. Until the Great Depres
sion, the Reserve authorities operated entirely
through changes in the amount of reserves,
which they influenced primarily through open
market operations and the discount rate. They
had no authority to change reserve require
ments, which were fixed in the statute. Author
ity to change requirements was first given in
1933. At about that time, banks began to ac
quire automatically several billion dollars of
excess reserves as a result of imports of gold
over which the System had no direct control.
Although the System was pursuing an easy
money policy at the time, it was clear that its
power over the volume of reserves would be
inadequate if the flood of gold continued and a
strong inflationary movement developed. The
System increased requirements to the legal
maximum several years before we entered the
war in order to absorb some of the excess re
serves so that the System would again be able to
use open market operations effectively. On De
cember 31, 1940, the Board of Governors, the
Presidents of the Federal Reserve Banks, and
the Federal Advisory Council jointly recom
mended that Congress give the System authority
to increase requirements to double the level
then existing. Such authority, however, was not
granted.
^ During the war the System directed its ef
forts primarily to supporting Government se
curities in order to assure success in financing
the war. The most important decision was to
maintain an established pattern of rates on such
securities. The Reserve Banks paid for secur
ities with deposits, thus creating member bank
reserves. This meant in effect that the decision
to support Government securities implied loss
of control over the volume of reserves. At the
end of the war the System was confronted with
the alternatives of (a) continuing support of
the rate pattern at the expense of controlling
the volume of reserves, (b) regaining control
over the amount of reserves and making the
necessary changes in its program of support of
Government securities, and (c) acquiring addi
tional authority to immobilize reserves and thus
make them unavailable for further expansion.
As you know, it has done a little of each. Co
operation with the Treasury in using a large
Treasury cash surplus to keep banks under the
necessity of acquiring reserves has, of course,
been the major factor. The resulting liquida
Page 111
tion of securities by banks to meet reserve de
ficiencies has had some restraining effect on
still further liquidation for the purpose of mak
ing loans. The System has continued to support
the 2y2 per cent long-term yield level but has
withdrawn some of the newly acquired reserves
by allowing short-term rates to rise, thus mak
ing possible disposal of short-term issues. It
also has used part of the limited additional
authority secured in the special session of Con
gress to increase reserve requirements of all
member banks and has increased requirements
at central reserve city banks—which had been
reduced in 1942. Increases in reserve require
ments under the new authority may be expected
to have effects similar to those achieved through
the use to which the Treasury cash surplus was
put in the last fiscal year.
I have recounted this experience to indicate
that the monetary authorities can do a better
job if they can change reserve requirements as
well as the amount of reserves.
The amount of required reserves cannot, of
course, be considered without reference to the
assets that are counted as reserves. The defini
tion of such assets should be related to the pur
pose that the requirements are supposed to
serve; namely, limiting the volume of deposits.
Obviously—to take an extreme example—the
volume of deposits would be virtually unlimited
if banks could count all assets as reserves.
In the United States, Congress has placed re
sponsibility for the volume of money on the
Federal Reserve authorities. To discharge that
responsibility, it would be desirable if the only
asset that a commercial bank could count as
reserves would be a liability of a Federal Re
serve Bank. For reasons that I shall give later,
it isn’t particularly important what form that
liability takes or whether the commercial bank
holds it directly or indirectly. But it is impor
tant that the proportion be uniform and that it
be in the form of a liability of the central bank.
I need not remind you gentlemen that some of
the assets that many banks may now call re
serves do not, in the final analysis, provide
either control or liquidity.
This discussion provides a basis for a brief
answer to our second question. Banks should he
required to maintain reserves at such a level that>
the reserves available to them will support the vol
Page 112
ume of money that is appropriate to existing eco
nomic conditions.
3. How should each bank's share of the total be
determined?
Required reserves may be thought of as im
mobilized assets that cannot be further loaned
or invested. The amount of such assets that a
bank holds may be viewed as that bank’s con
tribution to an effective national monetary pol
icy. The question is: How much should each
bank be required to contribute?
I suppose all agree that the basic standard
should be equity—that each bank should be re
quired to hold its fair share of the total. It is
when we try to apply this principle that we run
into disagreements. As a general proposition,
it would seem to me that under an equitable
system banks that are alike in general nature of
business, size, and character of deposits should
be subject to the same reserve requirements.
As you know, this is not true under our present
structure. Banks that are alike in the charac
teristics I have mentioned may have widely dif
ferent requirements, depending exclusively
upon their location, the authority that has
granted them charters, and status of member
ship in the Federal Reserve System. I would
be the first to admit that these characteristics
are very important in many ways. At the same
time, I must confess that I cannot see how they
are relevant in determining the equitable con
tribution a bank should make to keeping the
nation’s monetary house in order. That is a
very important responsibility for the safety of
the country and its place in the world today. It
is a responsibility which, as you all know, rests
upon the banking authorities of the States as
well as of the Federal Government.
In addition to being equitable, a structure of
reserve requirements should be administra
tively feasible. Also, in the development of a
new structure of requirements, attention should
be devoted to conditions at the time of the
changeover so that a smooth transition from
the old to the new structure may be made with
out creating unnecessary hardships for individ
ual banks. One might think of this standard as
equity in the short run.
Views differ, of course, as to the precise
structure that best meets these criteria. From
time to time the System has had members of
its staff work on the problem. As you know, I
banks to the higher requirements, whether or
not they actually held reserve deposits of other
banks. This method of basing reserve require
ments on the location of a bank rather than the
character of its business has resulted in in
equities. Inequities are bound to arise when
some banks in a city hold substantial amounts
of interbank deposits and others do not. The
only choice before the Board of Governors is to
Your President has asked me to review classify the city as a reserve city or as a non
that plan, which was presented to and pub reserve city. If it does the former, it penalizes
lished by the Joint Committee on the Economic —relative to banks doing similar business else
Report. I should like to emphasize that the where—the banks with little or no interbank
plan has not been approved by the policy-mak deposits. If it does the latter, it favors—rela
ing officials of the System. Establishment of tive to banks doing similar business elsewhere
the plan would involve a number of changes in —the banks with such deposits. Such inequities
the Federal Reserve Act. Although the plan have been mitigated slightly by the qualifica
deals only with member banks, the staff com tion that the Board may designate outlying
mittee feels that consideration should be given banks in central reserve and reserve cities as
to the desirability of prescribing uniform re country banks; but not all inequities can be
serve requirements for all commercial banks. eliminated because the adjective “outlying”
Counsel has advised us that such an extension also relates to location, not to character of busi
would clearly be constitutional. I have given ness. I need not remind you, who are bank
you reasons for my conviction that such a sys supervisors, of the headaches involved in the
tem would be much more equitable than the administration of a law that is inherently in
present system or other alternatives that might equitable.
be considered feasible from various points of
view.
The second point of the plan is that, for pur
poses
of assessing reserve requirements, de
I should like to emphasize that the plan for
posits
be classified into interbank, other de
uniform reserve requirements does not contem
mand,
and time deposits. Many theoretical
plate any change either in existing chartering
hairs
have
been split in disputes over whether
authority, Federal or State, or with respect to
and
how
deposits
should be classified. The
membership in the System. I am not an expert
compelling
practical
objection to treating all
in supervision, but I see no inherent reason why
deposits
alike
is
that,
depending on the level
a provision of this kind could not be adminis
set,
launching
such
a
system
would create enor
tered in the same way that the regulations con
mous
excess
reserves
in
central
reserve city
cerning security and consumer loans—Regula
banks,
enormous
deficiencies
in
non-reserve
city
tions U and W—have been administered.
banks, or both. The compelling practical ob
The plan itself consists of five interrelated jection to a detailed system of classification is
points. The first point is negative in that it that it would be impossible to administer. Any
would abolish central reserve city and reserve classification is somewhat arbitrary. Advan
city designations of banks. The Federal Re tages of the proposed classification are that, by
serve Act now classifies banks into three cate and large, the three classes of deposits are used
gories: central reserve city banks, reserve city for different purposes, are readily identifiable,
banks, and banks not in reserve cities (so-called have traditionally been treated differently, and
country banks)—and the Board of Governors differential treatment would minimize initial
establishes reserve requirements for each cate disturbances while yet retaining effective over
gory within the limits prescribed by the Act. all control.
Classification of cities was a method of identify
The staff committee concluded that initial
ing banks that were eligible to receive reserve
deposits of other banks under The National requirements might be established at 30 per
Bank Act. The obvious intent was to require cent against all interbank deposits, 20 per cent
reserve depository banks to carry larger re against other demand deposits, and 6 per cent
serves. The law, however, subjected all eligible against other time deposits. Several factors
have been chairman of the staff committee that
suggested a plan of uniform reserve require
ments. Many individuals have contributed to
the results. It is not possible to mention all of
them; but I do wish to single out two who made
major contributions, namely Mr. E. L. Smead
and Mr. J. E. Horbett of the Board’s staff. Many
of you know both of them.
Page 113
were taken into account in selecting these par
ticular ratios. They were chosen wholly on the
basis of practical results after considerable dis
cussion and observation of conditions as they
existed several months ago. Many different
combinations were tested. On the basis of tests
made at the time, the suggested initial require
ments seemed to be more appropriate than
others in that fewer individual banks would
need to make significant adjustments from
present positions to meet the new requirements.
I should like to emphasize that the initial
requirements of any new system should be es
tablished with particular reference to total
existing requirements at the time and with re
spect to the impact of the change on individual
banks rather than with reference to any pre
conceived or established ratios. It is likely, for
example, that the exact ratios mentioned would
be inappropriate today because of changes that
have been made in requirements since those
ratios were proposed. In general, the proposed
requirements would hit banks now subject to
“country” bank reserve requirements which
nevertheless hold substantial amounts of inter
bank deposits. Banks that are “loaned up” and
have relatively small amounts of vault cash and
balances due from correspondents would also
be deficient. Conversely, banks with relatively
large amounts of vault cash and balances due
from correspondents would experience reduc
tions in their required reserves. In other words,
the inequities which now exist would in large
measure be eliminated.
fers to hold as reserves.1 The transition to the
new system of reserve requirements would be
facilitated by permitting banks to count vault
cash as legal reserves. Establishment of the
suggested uniform requirement against other
demand deposits would increase required re
serves of country banks. Since, however, such
banks hold somewhat larger amounts of vault
cash, relatively, the increase in their total re
quirements would be offset in part by permit
ting them to count vault cash as legal reserves.
The fourth point is that a bank be permitted
to count as reserve that portion of its balances
due from other member banks which those
banks, in turn, are required to hold as reserves
against such balances. The relationship be
tween correspondent balances and reserves is a
knotty problem with a long history. After many
discussions the committee came to the conclu
sion that correspondent balances ought to be
related to reserves in such a way that (a) a
shift of funds by member banks into or out of
“due from banks” would not affect the total
volume of excess reserves in the system as a
whole; (b) “reserve credit” would be allowed
for precisely the portion of “due from banks”
that is on deposit with Federal Reserve Banks
(by way of the reserve requirement imposed on
deposits due to banks) ; and (c) correspondent
bank relationships and interbank balances
would be recognized as an established part of
our banking system. The fourth point is de
signed to accomplish this result. So long as the
rate at which the depositing bank is allowed
reserve credit for its “due from” balances is
equal to the rate at which depository banks are
required to maintain reserves on interbank de
posits, a given reserve will support the same
volume of nonbank deposits irrespective of
how the owner-bank distributed its reserve
among deposits with its Federal Reserve Bank,
with its correspondents, and cash in vault. In
all cases, only vault cash and balances which
are directly or indirectly on deposit with Fed
eral Reserve Banks would constitute legal re
serves.
The third point is that banks be allowed to
count vault cash as legal reserve. The role of
vault cash in the banking system has changed
fundamentally in the past half century. Be
fore the Federal Reserve System was estab
lished, vault cash was the ultimate reserve of
the banking system, since it alone was avail
able to meet cash withdrawals. The Federal
Reserve Banks, however, have been empowered
to create additional reserves or cash when
needed. The use of vault cash as reserves would
not impair the System’s influence over the vol
ume of bank credit, provided initial require
The fifth and last point of the plan is that
ments are established at appropriate levels to
offset the change. From the point of view of the appropriate System authorities should be
credit control, System authorities need not be authorized to change the requirements within
concerned as to the form of Federal Reserve
It « recognized that vault cash may not be exclusively in the form
Bank liability—whether Federal Reserve notes of 1 Federal
Reserve notes; but the existence of other forms of currency
.*roin su,9jl as we have in the United States does not involve any
or reserve deposits—that a member bank pre a.significant
difference in principle.
Page 114
limits established in the law. I have already opportunity to expose these thoughts on reserve
discussed the desirability of enabling System requirements to your critical judgment. Inci
authorities to change reserve requirements from dentally, I have no pride of authorship in the
time to time within prescribed statutory limits specific structure of requirements, which con
in order to prevent injurious credit expansion tains no single item for which I could conscien
and contraction. Although the chief purposes tiously claim credit. As chairman of a hard
of authorizing changes in reserve requirements working committee, I have collected praise for
is to influence total reserves that all banks must the work that others have done. It is only fair,
hold, experience has demonstrated that discre therefore, that criticisms likewise be directed
tion should be granted as to the requirement for to me.
each type of bank or deposit as well as to re
quirements as a whole. In this connection, it
I shall conclude with a few very general ob
should be pointed out that different groups of servations. A century ago Karl Marx predicted
member banks could be variously affected by that our type of economic system could not last,
selective use of changes in the requirements that depressions would become increasingly
against different classes of deposits. Thus, com severe until a final depression overwhelmed the
binations of changes in requirements on the entire system. We are all determined to prove
three classes of deposits could be utilized to Marx wrong. We will leave no stone unturned
exert differential influence on banks doing dif to maintain employment and real output at
ferent types of business. For example, because high levels. We cannot do this through mone
of the proposed new treatment of balances due tary policy alone; but neither can we do it
from banks, an increase in the requirement without a proper national monetary policy. It
against interbank deposits would result in in would be unfortunate, therefore, if we judged
creases in required reserves of banks with an proposals for changes in banking primarily
excess of “due to other banks” over “due from from the point of view of local versus national
other banks,” while at the same time causing sovereignty rather than in terms of this common
increases in excess reserves of banks with an objective.
excess of “due from other banks” over “due to
other banks.” If all commercial banks were
In banking, as in all phases of life, we are
subjected to the requirements, no change in the
torn between the forces of continuity and of
total amount of required reserves would result
change. We want a banking system suited to
from an increase in the requirements against
our changing needs. We know from experience
interbank deposits. An increase or decrease in that we will not maintain such a system if we
the requirement for either nonbank demand de
posits or time deposits would, of course, affect resist adamantly all change, and yet we have
become familiar with and adjusted to what we
all banks alike in proportion to their holdings
have. We hesitate to change also because our
of such deposits.
banking history includes numerous instances—
such as the failure of reserve requirements to
We are now in position to give a brief answer assure liquidity—in which seemingly obvious
to our third question. A reasonably equitable eco solutions have proved not to be solutions at all.
nomically defensible, and administratively feasible Since we have no basis for assuming that we are
system of reserve requirements can be based on the noticeably more intelligent than our forebears,
three major classes of deposits, irrespective of the the study of banking history makes for humility
location or the enfranchising authority of the in of spirit. Humility, however, should not be con
dividual bank, provided the reserve, whether held fused with defeatism. History shows that we
directly or indirectly, is a liability of the central cannot be mere conveyors. We cannot—and
bank.
we would not discharge our responsibilities if
we could and did—merely pass on to our chil
Concluding comments
dren what we have inherited from our parents.
I regret that the necessities of the occasion Instead we should cultivate cooperatively the
have made these remarks rather technical. I legacy of our forefathers so that we may pass
want to repeat my sincere appreciation for the on an enriched testament to posterity.
Page 115
What’s New In Industry?
Rapidly changing technology opens up innumerable opportunities
Continuous casting, cold rubber, cooking with
electrons, pressurized smelting, isotopes, rotary
looms, television, and textile fibers made out of
sand are some of the latest technological devel
opments in our manufacturing industries.
Scarcely a day goes by without the announce
ment of a new raw material, or a new product,
or a new method of production.
While American industry has never been ac
cused of backwardness in exploring new ideas,
the war and post-war years seem to have been
unusually productive of new developments. It
is especially significant to observe that recent
technical changes are occurring not only in the
newer industries such as aircraft and synthetic
fibers, but also in the older industries such as
textiles and steel. Some of the oldest industrial
arts—spinning and weaving, canning, tanning,
and smelting—were thought to have attained
substantial technological maturity. Now we are
not so sure. A number of basic practices are
undergoing changes that may have far reaching
effects on our economy.
Technological changes speed up the growth
of some industries and open up entirely new
markets. New opportunities are created for
investment of capital. Low-grade mineral re
sources and industrial by-products are utilized
more effectively. New job opportunities are
created. These and other consequences will be
considered after surveying some of the new
developments in our major industries.
Iron and Steel
Continuous casting is probably the most sig
nificant innovation in the steel industry since the
introduction of continuous rolling in 1924. A
relatively inexpensive mold takes molten steel
directly from the furnace, forms the billets,
cools and cuts them into desired length all in one
continuous operation. It eliminates expensive
and massive equipment such as ingot molds,
soaking pits, and blooming mills employed in
conventional steel making processes.
Page 116
Since the development is a simplification in
one branch of the steel industry, the principal
advantage appears to be a great reduction in
capital investment and reduced maintenance
charges. The cost of producing steel billets—
semi-finished shapes used for making into such
products as rods, bars, and hoops—may be re
duced considerably. It is also claimed that the
new process will aid decentralization of steel
production. However, this equipment must be
operated in conjunction with basic furnaces and
finishing mills.
Pressure blowing is the term applied to an im
proved method of blast furnace operation in the
production of pig iron. Experimental operations
over the past two years with several furnaces
equipped for pressure blowing of air have re
sulted in increased output of 20 per cent together
with a 12 per cent reduction in coke consump
tion per ton of pig iron. Furnaces with suffi
ciently powerful blowing equipment now in
stalled can change to pressure blowing at a cost
of $70,000 to $150,000 per furnace for altera
tions. This innovation is particularly important
in view of the high costs of coke and the ap
proaching exhaustion of our best grades of
coking coal.
Among numerous technical refinements in
iron and steel mill operations is the use of oxy
gen which is injected into the furnaces to
increase output of pig iron and steel. Although
still in the experimental stage, some companies
report favorable results. Use of oxygen in
creases production by cutting down the time
required to smelt iron from the ore and to make
a batch of steel in the open hearth furnace.
Textile Industries
^ Developments in the textile industries range
from new synthetic fibers to improvements in
yarn production, cloth weaving, and finishing
operations.
New Fibers. Natural fibers are almost certain
to encounter more competition from synthetic
fibers. Rayon, which already has run ahead of
wool in volume of consumption, no longer has
the field of synthetics to itself. In addition to
nylon, which filled the wartime gap in civilian
markets left by silk, are such new synthetics as
Fortisan, Kohron, Terylene, Velon, Vinyon, Vicara, and Vitron—the last a glass fiber already
in commercial production. By reason of special
characteristics, the various synthetics alone or
blended with other fibers produce results un
matched by natural raw materials.
Continuous Spinning. One of the leading rayon
companies just announced perfection of a pro
cess for continuous spinning of filaments. The
idea is not strictly new, but the process is.
Before the war, another company produced
rayon filament by a continuous process which
proved successful after perfection of a special
reel that allows the thread to spend just the
right amount of time at each stage in the pro
cess. The latest development, scheduled to go
into production this fall, uses the conventional
type of spinning unit to form the filaments but
performs subsequent operations like bleaching,
cleaning, and oiling in long narrow troughs
instead of a battery of reels.
Improved Weaving Processes. A number of new
developments are taking place in the age-old art
of weaving. The new Kellogg loom is a high
speed machine able to turn out cotton cloth at
a rate 30 to 40 per cent faster than most looms
now in use. Constructed on the principle of unit
assemblies for each major function performed,
it is possible to make easy replacement of any
unit and so reduce the downtime for repairs.
Fayolle-Anget circular loom. It eliminates the
shuttle entirely and is said to be capable of turn
ing out cloth three to five times as fast as
present-day looms. It offers a great variety of
patterns without any reduction of speed and is
adaptable to all kinds of fabrics. This machine
is not yet in production, but some American
machinery manufacturers are seeking licenses
to make it here.
Improved Finishing Operations. Under pressure
of rigid Army and Navy specifications, textile
manufacturers developed new finishing tech
niques to cloth useful now for civilian use. By
means of special finishing operations, fabrics
are now being engineered to obtain particular
characteristics. Typical examples are flame
proofing, mildew-proofing, and shrink-proofing.
Availability of new synthetics, of course, in
creases the possibility of obtaining unusual re
sults at all stages from fiber to finished cloth.
Automobile Industry
Strange as it may seem, the automobile indus
try, with a distinguished pre-war record for
advancing technology, has performed no post
war miracles. This may be explained by the
huge task of reconversion required, the frequent
interruptions caused by labor-management dis
agreements and material shortages, or by the
avidity of the public for new cars regardless of
pre-war design. This is not to imply that the
motor industry has made no technical progress;
there have been changes, but nothing phenome
nal. Higher compression motors which give
greater fuel economy are in the offing, and there
may be other developments in process to make
their appearance when the market is considered
to be ripe for them.
One of our leading machine tool companies
has just brought out an American adaptation of
the Swiss Sulzer loom. The outstanding feature
of this machine is the substitution of lightweight
steel gripper shuttles for the old wooden flying
shuttle to insert the filler yarn. Abrasion and
tension are considerably reduced, and greater
output is obtained by virtue of the fact that
cloth of 110-inch width can be woven compared
to the usual 36- to 60-inch widths. This machine
is at present undergoing factory tests and is
expected to be on the market next year.
The automobile industry is one of the machine
tool industry’s best customers, but the two in
dustries emerged from the war with market
prospects as unlike as day and night. During
the war, the machine tool industry built as many
machine tools as in the preceding forty years.
When the war ended there was a tremendous
surplus stock which threatened to spoil the
market for years to come.
What promises to be the most revolutionary
change in weaving is the French designed
The adverse effect of the war surplus turned
out to be far less serious than was feared. Some
Machine Tool Industry
Page 117
of the equipment had little or no peacetime
utility and much of it was speedily rendered
obsolete by subsequent improvements in tech
nology. Present-day machine tools equipped
with carbide cutting edges, individual motor
drive, automatic lubrication and operating con
trols have at least a third greater productivity
than those built during or just prior to the war.
At present high wage rates most users of ma
chine tools cannot afford to do without the most
modern equipment.
Rubber Industry
Last year the United States consumed a mil
lion tons of rubber, about equally divided be
tween natural and synthetic. The Rubber Act of
1948 requires the Government to keep in oper
ation or in readiness 600,000 tons of synthetic
capacity for purposes of national preparedness,
and tire manufacturers must use 200,000 tons of
it annually. Under the circumstances, rubber
manufacturers have sought to bring the quality
of synthetic up to that of natural rubber for use
in motor vehicle tires — the principal rubber
market. For some years prior to the war the
market for synthetic rubber had been confined
to certain special uses, for example, gasoline
pump hose where it gave longer service than
natural rubber.
The usefulness of synthetic rubber has been
enhanced by the recently announced cold rub
ber process. By adding several new “speed-up”
chemicals, compounding is done at temperatures
ranging from zero to 41° Fahrenheit instead
of 122° as heretofore. The product greatly re
duces the tendency of synthetic rubber tires
to overheat and crack under hard usage. This
improvement promises to remove the chief ob
stacle to the use of synthetic rubber in motor
vehicle tires.
Electrical Industries
Consumption of electrical energy in the
United States has increased from 188 billion
kilowatt-hours in 1940 to approximately 300
billion this year. The huge increase is indicative
of both current high levels of business activity
and the many new uses of electricity both in
industry and in the home.
In industry, electricity is being used more and
more for such operations as welding, annealing,
Page 118
brazing, radio-frequency and infra-red heating,
and iron ore beneficiation. Despite the great
expansion in aluminum producing capacity dur
ing the war, present demand for the metal is
difficult to satisfy because of the scarcity of
electricity required to produce it.
In the home, electricity is put to constantly
expanding uses such as space heating, air condi
tioning, deep freezing, and the ever-widening
list of household appliances like electric ranges,
mangles, and water heaters.
Television is one of the fastest growing post
war industries. With 37 broadcasting stations
already on the air, over 300 new applications
are pending. Receiving sets are being manufac
tured at a rate six times faster than last year.
The industry is rapidly approaching the billiondollar class.
Petroleum
This is another rapidly expanding industry
scarcely able to meet the post-war demand for
its products. Railroads are shifting rapidly from
coal burning locomotives to oil burning Diesels.
Demand for fuel oil is rising fast as a result of
the large number of installations of household
oil heating units, and rapidly growing registra
tion of motor vehicles is causing a sharp increase
in demand for gasoline. Under pressure for
more petroleum products, the industry is widen
ing the search for new sources, re-surveying
existing fields, drilling deeper, expanding trans
portation, refining and marketing facilities.
New developments in this field are taking the
course of exploring the technical and economic
feasibility of substitutes for our dwindling oil
resources. From our estimated oil reserve of
21 billion barrels, we are using 2 billion barrels
a year, whereas our total fuel reserves line up
like this: 98.8 per cent coal and lignite, 0.8 per
cent shale oil, and only 0.4 per cent about
equally divided between oil and natural gas.
Our tremendous coal reserves have induced
efforts toward developing synthetic liquid fuels,
utilizing coal as a basic material.
Conversion of a solid fuel like coal into a
liquid fuel like gasoline requires the addition of
hydrogen (hydrogenation) and removal of oxy
gen—a process which simultaneously changes
the size and structure of the molecules. Both
industry and the Government are experimenting
with two German processes to accomplish this
—the Bergius process of direct hydrogenation
and the Fischer-Tropsch method of indirect
hydrogenation.
Industry Efforts. Eight oil companies have
joined in building a $21 million gasoline-fromnatural-gas plant at Brownsville, Texas, and an
other large oil company is investing $82 million
in a similar plant in Kansas. This is the cheap
est and quickest source of synthetic gasoline,
but it can be only a temporary expedient be
cause we have only an estimated 30 to 35 years’
supply of natural gas at current rates of con
sumption.
An eastern oil company and a Pittsburgh coal
company have joined resources to construct a
pilot coal-to-oil plant in Pennsylvania. A plant
of commercial size is estimated to cost $120
million.
Government Efforts. The Federal Government
is exploring several synthetic processes. Last
year a $2 million plant was completed in Colo
rado for the production of liquid fuel from oil
bearing shale. A $7 million coal-to-oil plant
for direct hydrogenation (Bergius process) is
scheduled for completion this year. This is a
200-barrel-a-day pilot plant. A $4.4 million
pilot plant (80 barrels daily capacity) for indi
rect hydrogenation (Fischer-Tropsch) is to be
completed this year.
Recently the Secretary of the Interior pro
posed a 10-year program for the establishment
of a synthetic fuel industry with a daily capac
ity of 2 million barrels—the equivalent of 40
per cent of our present daily production of
petroleum. Beginning with small commercial
units, the entire program would ultimately re
quire about $9 billion of capital and 16 million
tons of steel.
Chemical Industries
In these industries, new processes and new
products are so frequent as to be almost com
monplace. One reason is the wide variety of
products produced, such as dyes, fertilizers,
pharmaceuticals, insecticides, plastics, soap,
paint, solvents, industrial gases, explosives, and
fabric coatings. Another reason is the nature
of the industry—efforts to improve a product or
to utilize a by-product waste material often lead
to the development of a new product.
Chemical technology is always changing rap
idly. This may be illustrated with reference to
plastics, of which there are now a number of
well-defined family groups. Before the war,
cellulose plastics were in the lead; now vinyls
hold first place. Polystyrene, scarcely heard of
before the war, is now competing with cellulose
plastics for second place, but several others are
gaining rapid acceptance.
Atoms In Industry
The most dramatic wartime development was,
of course, the $2 billion exploration into the
atom which led to the atomic bomb. Since the
end of the war, research into peacetime appli
cation of atomic energy has been carried on by
Government, industrial, and university scien
tists. We are only beginning to appreciate the
uses of isotopes, or “tagged atoms.” As stated
in the last semi-annual report of the Atomic En
ergy Commission: “The services that isotopes
are capable of performing for science, medicine,
agriculture, and industry are so fundamental
that no complete inventory will ever be made of
their potential uses.”
Fields of practical utilization of atomic en
ergy thus far are confined largely to medicine,
plant physiology, bacteriology, chemistry, phys
ics, industrial research, and metallurgy. Indus
tries are finding isotopes most useful as tracers
or “tags” to measure minute physical and chem
ical changes in manufacturing processes. For
example, they will reveal the exact origin of im
purities like sulphur in a batch of steel or the
displacement of the minutest quantity of metal
caused by friction in piston rings. As devices
for measuring and controlling production, they
offer possibilities far beyond the most accurate
and sensitive instruments used heretofore. In
dustrial use of isotopes has thus far been limited
by insufficient productive capacity. Use of
atomic energy for power production is reported
as a possibility within 15 or 20 years after con
quering both technical and economic obstacles.
Construction of an experimental atomic power
plant at a cost of approximately $20 million is
to be started this year, according to a recent an
nouncement by the Atomic Energy Commission.
Page 119
Shortages and the Industrial Arts
One of the chief stimuli to the widespread
changes taking place in the industrial arts is a
shortage of materials and labor. Through in
numerable improvements in technology, produc
tion miracles were performed during the war;
but meanwhile unfulfilled civilian demands kept
piling up, so that after three years of peacetime
operation at high levels we still are not caught
up in many lines. The persistence of high-level
demand and real shortages in the post-war pe
riod have continued to stimulate technological
change.
During the war, over-all demand for all goods
and services increased tremendously; but the
greatest difficulties were encountered in those
industries, like shipbuilding and aircraft, where
output had to be redoubled many times over,
and in those like rubber tires where raw mate
rial supplies were cut off. Labor shortages were
encountered in all industries, and in the highly
technical processes which required skilled labor
ingenious methods had to be devised to meet the
acute shortages in the skilled trades.
How improved technology came to the rescue
to alleviate most serious shortages may be illus
trated by some of the wartime developments in
our leading industries. The rubber crisis was
met by a $700-million synthetic rubber industry
based upon petroleum as a raw material. Im
provements in the refining process helped the
petroleum industry to meet the greatly ex
panded demand for high octane aviation gaso
line. The output of light metals for aircraft
construction was supplemented by a ninety-fold
increase in magnesium extracted in part from
sea water. Shipbuilding was speeded up greatly
by welding instead of riveting steel plates.
Metal fabrication in numerous industries was
simplified by the design of highly automatic ma
chines that could be operated by relatively un
skilled workers.
Ever since the end of the war, demand for
goods and services has maintained business ac
tivity near the top of our productive capacity
so that we have had continued shortages instead
of surpluses. On top of the backlog of demand
accumulated during the war are the require
ments of an expanding population, the need for
replacing rundown and obsolete equipment in
industry, agriculture, commerce, transportation,
Page 120
and mining. But most of the time-saving tech
niques developed during the war had extremely
limited civilian application. The continuing
pressure of peacetime demand in excess of pro
ducing capacity has been a powerful stimulus
for the development of new techniques to over
come current shortages.
The quest for improved technology is also mo
tivated by the shortage and rising cost of labor.
Each round of wage increases adds to the cost
of production unless output is increased com
mensurately. In order to cut unit costs, manu
facturers are installing modern equipment as
rapidly as it is becoming available. As buyers’
markets appear, price competition will provide
another stimulus to technological improvements
which increase efficiency and reduce costs.
While most of the technical improvements of
the post-war period are of the type designed to
cut costs of production or to permit utilization
of substitute materials, there have also been
some in the way of new consumer products.
Televised radios, automatic dishwashers, and
related home appliances are illustrations in
point. Such products find easy markets in a
period of high employment, high wages, and
high profits.
Changing Technology and
Capital Requirements
The multiplicity of technical changes taking
place throughout American industries calls for
heavy investments of capital. The amount of
capital required in each instance varies, of
course, with the nature of the technical im
provement and the particular stage in its devel
opment. Every technological change usually
goes through three fairly well-defined stages.
The first is the laboratory, or experimental
stage; the second is the pilot plant or trial-run
stage; and the third is the commercial stage.
In the initial stage, the idea is checked against
previous experience in the field to avoid unnec
essary pitfalls, and usually a laboratory or
small-scale working model is built to test the
practicality of the idea. In the pilot plant or
trial-run stage, a working model of the machine
or process is built and checked for the influence
of change in size upon results. If unusually
heavy costs are involved or if results are too in
definite, a larger semi-commercial model may
be constructed before full production is at
tempted. This has the advantage of removing
the “bugs” and developing the “know how” be
fore full-scale capital is tied up. In the com
mercial plant stage, the full-scale plant is con
structed and its operation is turned over to
straight operating personnel with a minimum of
supervision by laboratory technicians and ex
perimental engineers.
Ordinarily, capital requirements increase with
each stage in the development of a new process.
The technical innovations already referred to
are in various stages of development. For ex
ample, the first carload of rolled bars made
from continuously cast steel billets has already
been made; several models of the American
adaptation of the Swiss Sulzer loom are now in
a commercial plant undergoing trial runs under
everyday factory operating conditions, but most
of the commercial applications of atomic energy
are still in the experimental or laboratory stage.
Manufacturing plants spent over $7 billion in
1947 for new plant and equipment, and expen
ditures this year are running somewhat higher.
Approximately half of these expenditures are
for modernization of equipment. Although it is
generally believed that post-war industrial ex
pansion programs are approaching completion,
the process of modernization is a continuous
one. Technology is always changing.
The economically useful life of machinery
and equipment varies greatly from one industry
to another. Rates of obsolescence are very high
in such industries as chemicals, machine tools,
and petroleum. In automobile and some of the
other mass production metal fabricating indus
tries, some concerns have been known to buy
equipment with a life expectancy of as low as
one to two years. Substantial improvements in
design take place so rapidly that in buying the
machinery the manufacturer plans to write oif
its entire cost in two years or less. However,
rates of obsolescence have been much lower in
some of the older industries like textiles and
leather.
Long life of the equipment in some branches
of the textile industries has had a demoralizing
effect upon competition. During the thirties,
when there was an abundance of idle capacity,
it was difficult to retire permanently some old
equipment which was bought for a song at bank
ruptcies and was put back into production at
much lower capital costs to menace the produc
ers with modern equipment. However, we may
not see a repetition of these developments in
view of the revolutionary changes on the hori
zon in textile technology.
Effects of Technological Developments
Changing technology is one of the principal
factors influencing the long-time growth of in
dustries, and recent developments indicate that
the historic balance among all industries in their
competition for the consumers’ dollar is due for
a major upset. The long-time growth of an in
dustry, as measured by the physical volume of
its output, is usually characterized by four fairly
well-defined stages. First is an experimental
period during which the enterprisers stumble
through numerous elementary improvements in
both the process and the product. It is a pioneer
ing stage in which markets have to be devel
oped, costs are high, and many enterprisers fail
to make the grade. It has been characterized as
the “shirt losing” period. The second is a period
of rapid progress in which major defects in the
product have been eliminated, the process has
been materially improved, and unit costs are
reduced as market acceptance is obtained for
the product. The third is a period of diminished
rate of growth. Technical progress slackens be
cause additional improvements in either process
or product are more difficult to make. Demand
continues to grow, but at a slower pace because
the cream of the market has already been
skimmed and an increased proportion of the
total output is in the nature of a replacement
demand. The fourth, or final period, is one of
stability or decline. Continued improvements
in the process or product occur less frequently
and are more in the nature of minor refinements.
Additional output can be obtained only at in
creased advertising and promotional expenses
and substitute products are likely to cut in on
the market.
While every industry goes through these
stages of economic life, it sometimes happens
that a major improvement in technology of a
revolutionary nature gives the industry a new
lease on life and causes the entire cycle to re
peat, as it did in the glass container industry
shortly after the introduction of automatic bot
tle blowing machines at the turn of the century.
Similar developments may take place in chemi
Page 121
■4
cals or textiles or food processing or aircraft.
When a new industry is pushing ahead rapidly
in its second stage of growth or when an old
industry undergoes a rejuvenation by reason of
a significant improvement in technology, the
effects fan out through all sectors of the econo
my. New capital is required, and existing jobs
are replaced by new employment opportunities.
Closely related industries find the competitive
going more difficult, and remotely related in
dustries may be affected by the market stam
pede for the new products or existing products
available at greatly reduced prices.
Technological changes exert great influence
on our standards of living and modes of life.
Our diets have been greatly affected by new
methods of food preservation, modes of travel
have been revolutionized by the automobile and
the airplane, new controls over sound and light
waves are completely changing the arts of en
tertainment, and important medical discoveries
are prolonging the span of life so that the age
composition of the population is undergoing
substantial change. “Mr. Average Man” is older
than he was a generation or two ago.
Recent discoveries of the close family rela
tionship between matter and energy have opened
up entirely new fields for exploration. It does
not take much imagination to suppose that past
accomplishments will be completely overshad
owed in such areas as control over disease,
generation and transmission of power, and more
economical utilization of our natural resources.
Today’s dreams, like wireless transmission of
power or 1,000-miles-an-hour air schedules, may
be tomorrow’s realities. In the words of Lewis
Mumford: “. . . however far modern science and
techniques have fallen short of their inherent
possibilities, they have taught mankind at least
one lesson: nothing is impossible.”
*
%
4
4
Page 122
BUSINESS
STATISTICS
Production
Production Workers in Pennsylvania
Factories
Philadelphia Federal Reserve District
Adjusted for seasonal variation
Not adjusted
Per cent change
Indexes: 1923-25=100
Aug. July Aug. Aug. 1948 1948 Aug. July Aug.
1948 1948 1947
from
from 1948 1948 1947
8
Mo. Year mos.
ago ago 1947
INDUSTRIAL PRODUCTION.
MANUFACTURING...................
Durable goods.............................
Consumers’ goods.....................
Metal products............................
Textile products..........................
Transportation equipment....
Food products..............................
Tobacco and products..............
Build;ng materials......................
Chemicals and products...........
Leather and products................
Paper and printing.....................
Individual Lines
Pig iron..........................................
Steel............................................
Iron castings.................................
Steel castings...............................
Electrical apparatus..................
Motor vehicles.............................
Automobile parts and bodies..
Locomotives and cars................
Shipbuilding.................................
Silk and rayon.............................
Woolens and worsteds...............
Cotton products..........................
Carpets and rugs.........................
Hosiery..........................................
Underwear....................................
Cement..........................................
Brick...............................................
Lumber and products................
Bread and bakery products...
Slaughtering, meat packing.. .
Sugar refining...............................
Canning and preserving...........
Cigars.............................................
Paper and wood pulp................
Printing and publishing...........
Shoes..............................................
Leather, goat and kid...............
Explosives.....................................
Paints and varnishes.................
Petroleum products...................
Coke, by-product........................
COAL MINING............................
Anthracite.....................................
Bituminous...................................
CRUDE OIL...................................
ELECTRIC POWER—Output.
Sales, total....................................
Sales, to industries.....................
BUILDING CONTRACTS
TOTAL AWARDS!...................
Residential!..................................
Nonresidential!...........................
Public works and utilities!___
110p
111p
11bp
106p
135
79p
124p
124p
121
46p
181p
75p
121
112
114
118
109
139 r
80
120
134
106
48
183
87 r
120r
108r
109
113
101 r
132
72 r
141 r
126
108r
46 r
174r
90
121
— 1
- 2
- 3
- 3
- 3
- 2
+ 3
- 7
+14
- 3
- 1
-14
0
+ 2 + 2
+ 2 + 3
4- 1 4- 4
4- 5 4- 3
+ 2 +1
+ 9 + 9
-12 - 1
- 2 - 3
+ 12 4- 2
+ 1 + 9
+ 4 + 7
-17 4- 3
0 - 1
116
117
95
106
181
35
113r
126 r
69
54
188r
31r
110
63 r
113
112
91
124
181
54
143
56
+ 3
+ 4
+ 4
-15
0
-36
-22
+17
— 1
+ 9
+ 7
-10
+19
+16
- 8
+ 3
- 3
+1
0*
0
-21
0
+13
+ 4
- 1
-17
-17
- 6
+ 8
+ 4
+ 3
+ 3
+ 3
+ 2
+ 1
100
87
201p
122
98
126
75p
75p
113
121
243p
176p
78
74
107p
282
501
519
353
99
79
238
107
99
125
84 r
90r
114r
129
244
172
67
63
96
290
493
493
328
201
108r
94
127
90
90
120
111
233r
171
76
72
104
279
481
473
333
+ 3
- 7
+37
+94
- 4
+n
+ 1
+ 3
+ 2
- 1
- 8
- 3
+ 3
- 2
-13
- 6
- 4
+ 5
— 2*
+1
+n
-15
+14
- 1
+ 1
-11
-17
- 1
- 6
0
4* 2
+16
+ 17
+11
- 3
+ 2
+ 5
+ B
218
131
221
474
290
151
347
489
143
68
150
370
-25
-13
-36
- 3
111
65
93
85
94
77p 84
72r
37p 38
42
120p 117
101 r
95
93
80
131
150r 142
70p 75
68r
55
57
56
28
26
27
99
111
* Unadjusted for seasonal variation.
t 3-month moving daily average centered at 3rd month.
nip 107
112p 110
0
- 2
- 4
- 1
-33
-10
+ 6
4-16
4- 7
+13
-14
+26
+15
+ 5
+17
+ 1
Harrisburg..........
Lancaster............
Philadelphia....
Trenton...............
Wilkes-Barre....
Williamsport....
Wilmington........
York.....................
Fac1tory
emplo yment
Fac1 ory
payi oils
Buil ding
perrnits
va ue
141
74p
119p
128p
129
53p
182p
76p
118
136
74
117
122
115
52
181
79r
117
138
68r
134r
131
116r
52 r
175r
92
118
102
119
92
101
201
29
105
65
104r
115r
66
49
198r
32 r
105
63 r
99
114
88
119
200
45
134
56
90
92
83
79p 78
74r
34p 33
38
nip 108
94 r
81
78
70
122 125r 132
88p 87
85 r
57
55
59
30
29
29
+10
+ 6
+ 5
-17
- 5
+ 3
+ 6
- 2
+ 2
+ 5
+16
+ 8
+ 7
+ 1
+ 1
+ 3
-10
0
+ 8
+10
+ 8
88
75
222p
131
98
122
81p
72p
113
123
244p
173p
77
74
loop
282
476
493
364
90
80
187
116
95
121
78r
79 r
112r
120
245
169
65
63
84
290
458
463
335
88
95
225
115r
94
123
97
87
120
114
234r
168
75
72
98
279
457
449
343
+52
+94
4-48
+28
+59
+41
+76
+48
211
147
204
412
267
171
319
420
139
76
138
322
p—Preliminary,
r—Revised.
Re ail
sales
July
1948
Aug.
1947
July
1948
Aug.
1947
July
1948
Aug.
1947
July
1948
Aug.
1947
+1
+1
0
+ 1
0
+ 2
+ 3
— 1
— 3
+ 3
- 1
0
+ 8
+ 1
+ 6
0
+
+
+
+
+
+
+
3
1
1
3
2
4
7
+ 5
+18
+ 9
+15
+17
+10
+22
+16
+ 13
+456
+109
+ 3
0
+253
- 8
- 21
-12
+13
+ 7
+ 9
+14
- 1
+13
+ 5
0
+ 1
- 2
+ 2
+
+
+
—
- 2
+ 2
0
+ 3
+11
+11
+15
+11
+83
+21
+21
-12
+71
+38
+14
-42
+ 3
- 8
-90
-16
3
5
6
2
+ 65
+ 15
- 59
- 1
+180
+ 6
+ 1
+ 4
+ 5
* Area not restricted to the corporate limits of cities given here.
+18
+17
+ 6
De bits
July
1948
- 1
- 5
+17
- 8
- 8
-17
Employ
ment
109r
110
Local Business Conditions*
Percentage
change—
August 1948
from month
and year ago
Summary Estimates—August 1948
Aug.
1947
1-20
-20
120
-16
1 8
- 148
H1 5
H 121
-14
- -28
+21
+22
Durable goods industries.
Nondurable goods
Weekly
Payrolls
1,101,000 $57,289,000
626,700 36.002.000
474,300
21.287.000
Weekly
Man-Hours
Worked
43.468.000
25.031.000
18.437.000
Changes in Major Industry Groups
Employment
Payrolls
Per cent
cha age
fro m
Per cent
Aug.
Aug.
chs nge
1948
fr :>m
1948
In
In
dex July Aug. dex July Aug.
1948 1947
1948 1947
Indexes
(1939 average =100)
All manufacturing..................
Durable goods industries. .
Nondurable goods
industries............................
Food...........................................
Tobacco.....................................
Textiles......................................
Apparel......................................
Lumber......................................
Furniture and lumber prods.
Paper..........................................
Printing and publishing....
Chemicals.................................
Petroleum and coal prods.. .
Rubber......................................
Leather......................................
Stone, clay and glass.............
Iron and steel..........................
Nonferrous metals..................
Machinery (excl. electrical).
Electrical machinery.............
Transportation equip.
(excl. auto)...........................
Automobiles and equipment.
Other manufacturing............
128
155
+i
+i
105
126
99
85
93
96
94
118
136
123
157
144
86
136
141
137
209
227
+i
+i
+5
+1
+3
+3
+3
-1
0
0
+2
0
0
+3
+2
+1
0
+1
233
146
131
+1
-2
0
0
0
298
343
+5
+6
+n
+n
0
2
3
6
1
6
0
- 2
0
+ 3
+ 6
- 9
- 9
+1
0
-11
+ 4
+ i
244
251
219
220
235
215
223
266
276
269
326
292
177
303
312
291
455
488
+2
-4
+6
+3
+5
+5
+2
+3
+2
+3
+3
+3
+1
+7
+9
+6
+3
+4
+n
+ 5
+ 1
+19
+12
+14
+ 7
+10
+ 7
+12
+23
- 7
- 4
+12
+13
+ 2
+15
+ 6
+14
-18
- 3
458
305
258
+8
0
+4
+29
-21
+ 3
+
+
Average Earnings and Working Time
August 1948
Per cent change
from year ago
WeekJy
Earni □gs
Hour ly
Earni DgS
Weekly
Hours
Aver
Aver
Aver
Ch’ge age Ch’ge age Ch’ge
age
All manufacturing... . $52.03 +10 $1,318 +10 39.5
+ 1
Durable goods indus.. 57.45 +10 1.438 + 9 39.9
+ 1
Nondurable goods
industries................... 44.88 +10 1.155 +11 38.9
0
Food................... :.. . . 44.63 + 7
1.083 + 8 41.2
- 1
Tobacco.......................... 29.10 + 4
.761 + 3 38.2
+ 1
Textiles........................... 46.12 +13 1.186 +13 38.9
0
Apparel........................... 35.63 +13
.962 +12 37.0
+ 1
Lumber........................... 41.75 + 7 1.031 +13 40.5
- 5
Furniture and lumber
products..................... 43.74 + 8 1.029 + 7 42.5
+ 1
Paper............................... 48.83 +12 1.127 +11 43.3
+ 1
Printing & publishing. 57.29 + 7
1.501 + 8 38.2
- 1
Chemicals............. ..
52.15 + 8 1.279 +12 40.8
- 8
Petrol. & coal prods... 63.28 +17 1.614 +15 39.2
+1
Rubber........................... 50.28 + 2 1.385 + 6 36.3
- 3
Leather........................... 35.26 + 5
.993 + 7 35.5
- 1
Stone, clay and glass. . 51.06 +11 1.245 +10 41.0
+1
Iron and steel............... 59.87 +12 1.500 + 9 39.9
+ 3
Nonferrous metals... . 55.46 +14 1.393 +10 39.8
+ 4
Machinery (excl. elec.) 55.33 +10 1.384 + 9 40.0
+1
Electrical machinery.. 60.00 + 5 1.535 + 6 39.1
- 1
Transportation equip.
(excl. auto)................ 59.89 +13 1.541 +13 38.9
0
Automobiles & equip.. 57.36 - 3
1.458 + 9 39.3
-12
Other manufacturing.. 41.07 + 6 1.124 + 8 36.5
- 2
Page 123
Distribution and Prices
Per cent change
Wholesale trade
Unadjusted for seasonal
variation
Augus 1948
fro m
Month Year
ago
ago
Sales
Total of all lines...................
Dry goods............................
Electrical supplies.............
Groceries...............................
Hardware.............................
Jewelry.................................
Paper.....................................
+ 6
+12
+23
- 5
+16
+ 7
+ 9
+n
- 1
+12
+10
+22
- 2
- 6
+
+
+
4
7
4
9
0
+ 8
0
Inventories
Paper.*...................................
—
+
+
—
+
0
3
4
7
3
6
+1
Per cent ch ange
Indexes: 1935-1939=100
RETAIL TRADE
Sales
Department stores—District........................
Philadelphia...............
Women’s apparel —District........................
Philadelphia...............
Augus t 1948
frc m
Aug. July Aug.
1948 1948 1947
Month Year
ago
ago
1948
from
+10
+ 8
+ 3
+ 3
0
Basic commodities
(Aug. 1939=100).. .
Wholesale
(1926=100)..............
Farm...........................
Food............................
Other..........................
Living costs
(1935-1939=100)
United States...........
Philadelphia.............
F ood.........................
Clothing..................
Fuels.........................
Ilousefurnishings. .
Other........................
Per ceiit chang efrom
Aug.
1948 Month Year Aug.
1939
ago
ago
317
- 3
+ 3
+217
169
191
190
153
0
- 2
+1
+1
+10
+ 5
+ 10
+12
+126
+213
+182
+ 91
175
175
213
194
119
143
203
150
0
+1
+1
0
+ 9
+10
+11
+ 7
+ 5
+ 2
+ 1
+12
+11
+ 8
+ 77
+ 78
+128
+ 96
+ 16
+ 48
+102
+ 49
207
161
157
148
193
157
183
182
243
213
237
266
226
192
186
201
214
205
216
258
- 5
- 6
-15
- 5
+ 2
+ I
- 8
-16
-23
140
126
74
156
278
194
96
121
61
138
121
70
155
298
175
101
162
61
147
135
88
155
285
172
109
147
85
+1
+1
171
185
169
+35*
+ 6*
+38
+45* 34
+45* 32
+15 265
43
48
239
25
30
192
257 r
231
218
224
0
+10
- 9
- 3
+ 4*
+12
+14
+ 3
+ 3
+ 6*
234
203
214
229
238
209
206
239
206
196
195
222
+
+
+13
+ 4
+10
+ 3
+ 6*
139
122
74
172
187
208
79
125
63
136
121
70
163
199
190
90
121
72
145
131
88
170
191
185
90
151
89
+ 2
+ 1
+ 6
+ 5
- 6
+10
-12
+ 3
-11
- 4
- 7
-16
+1
- 2
+13
-12
-18
-29
MISCELLANEOUS
Life insurance sales..........................................
Business liquidations
203
191
201
+ 6
Check payments...............................................
308
224r
-21*
-33*
+24
Inventories
+11
+16
+18
+47
216
179
188
187
288
240
245
239
+13
+13
FREIGHT-CAR LOADINGS
Total......................................................................
Merchandise and miscellaneous...................
Merchandise—l.c.l............................................
Ore........................................................................
Coke.....................................................................
Forest products.................................................
Grain and products..........................................
Livestock.............................................................
249
Aug. July Aug.
1948 1948 1947
mos.
1947
289
263
224
231
Source: U. S. Department of Commerce.
Prices
Not adjusted
Adjusted for seasonal variation
1948
from
8
mos.
1947
2
3
4
4
2*
r—Revised.
* Computed from unadjusted data.
Source: U. S. Bureau of Labor Statistics.
BANKING
STATISTICS
MEMBER BANK RESERVES AND RELATED FACTORS
Changea in—
Reporting member
hanks
(Millions $)
Sept.
22,
1948
Assets
Commercial loans.....................
Loans to brokers, etc...............
Other loans to carry secur.. ..
Loans on real estate................
Loans to banks.........................
Other loans.................................
544
16
12
88
6
272
+14
- 3
- 1
+ 3
+ 4
+ 5
+ 85
- 12
- 3
+ 9
+ 2
+ 56
Total gross...............................
Total net...................................
938
931
+22
+22
+137
+133
Government securities............
Other securities.........................
1378
282
+37
- 1
-107
+ 28
Total investments..................
1660
+36
- 79
Total loans & investments. .
Reserve with F. R. Bank....
Cash in vault.............................
Balances with other banks.. .
Other assets—net.....................
Liabilities
Demand deposits, adjusted. .
Time deposits............................
U. S. Government deposits...
Interbank deposits...................
Borrowings.................................
Other liabilities.........................
Four One
weeks year
+58
+28
+1
- 6
+ 54
+ 34
- 1
+ 6
- 1
2079
459
66
352
16
29
303
+46
+ 16
+ 5
+ 8
+ 5
+ 1
+
+
+
+
+
Page 124
23
36
37
23
16
3
Changes in w eeks ended—
Sept. 15 Sept. 22
Changes
in four
weeks
Sept. 1
Sept. 8
Sources of funds:
Reserve Bank credit extended in district............................
Commercial transfers (chiefly interdistrict).......................
Treasury operations...................................................................
+ 7
- 9
-25
-14
+11
+30
+25
-19
+31
- 8
+65
-21
+10
+48
+15
Total.............................................................................................
-27
+27
+37
+36
+73
Member* bank reserve deposits...............................................
“Other deposits” at Reserve Bank........................................
+ 3
-29
- 1
+10
+17
-10
+44
+ 3
- 9
+48
- 3
- 6
+80
- 1
Total.............................................................................................
-27
+27
+37
+36
+73
Uses of funds:
Federal Reserve
2591
519
44
100
50
Third Federal Reserve District
(Millions of dollars)
(Dollar figures in
millions)
Sept.
22,
1948
Changes in—
Four
weeks
One
year
Discounts and
advances........................ $ 24.5 $+ 3.0 $ + 20.4
Industrial loans................
- 1.2
.7
+ .2
-125.1
U. S. securities................. 1561.5
+28.6
Toted................................. $1586.7 $+31.8 $-105.9
Fed. Res. notes................ $1640.7 $ + 4.9 $- 17.3
+79.9
+ 81.7
Member bank deposits. .
911.6
+ 21.4
U. S. general account. . .
84.9
-82.4
+ 1.3
Foreign deposits...............
+ 1.9
29.9
2.0
— .8
Gold certificate reserves. 1080.4
-30.9
+187.8
+5.9%
Reserve ratio..................... 40.5%
-.8%
Member bank
reserves
(Daily averages;
dollar figures in
millions)
Re
Held quired
Ex
cess
Phila. banks
1947: Sept. 1-15
1948: Aug. 1-15..
Aug. 16-31. .
Sept. 1-15. .
$424
396
398
407
$419
392
393
399
$ 5
4
5
8
Country banks
1947: Sept. 1-15..
1948: Aug. 1-15..
Aug. 16-31. .
Sept. 1-15..
{394
416
413
428
$344
370
371
372
$50
46
42
56
Ratio
of
excess
to re
quired
i%
1
1
2
12
11
15
@FedFRASER