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M O N TH L Y REVIEW
O f Credit and Business Conditions
F E D E R A L

R E S E R V E

V ol. 26

AUGUST

M O N E Y

B A N K

1,

M A R K E T

O F

1944

IN

N E W

Y O R K

N o. 8

JU LY

While the final results of the Fifth War Loan drive are not mercial banks during this period may have been at least 6
available as this Review goes to press, it is clear that the billion dollars, including the direct purchases of perhaps Va
Treasury has succeeded in raising an amount of funds sub­ billion dollars of securities from the Treasury for the invest­
stantially greater than in any preceding War Loan. Data in ment of a part of the banks’ time deposits. These heavy pur­
the daily Treasury statements suggest that the total amount chases of outstanding securities by the banks, of course, con­
raised in the Fifth War Loan will prove to be approximately tributed large amounts to the funds available to other inves­
as great as the sum of sales during the Third War Loan tors to cover subscriptions placed in the Fifth War Loan drive.
In addition, reporting mem­
drive plus the sales of ap­
ber
banks’ loans on Govern­
proximately 3 billion dollars
Adjusted Demand Deposits of Weekly Reporting
ment
securities increased by
of securities to commercial
Member Banks
approximately
1,900 million
banks following that drive.
dollars
during
the
same period
The working balance of the
(May
31
July
12).
Approxi­
Treasury was at record levels
mately 600 million dollars of
by the middle of July, close
this increase represented loans
to 22 V2 billion dollars, and
subsequently was reduced only
to security brokers and deal­
moderately during the latter
ers and about 1,300 million
part of the month.
dollars represented loans to
It appears, however, that
other borrowers. In many
cases, it was evident that the
although there were no direct
banks made a real effort to
offerings of securities for sub­
avoid the making of loans to
scription by commercial banks
finance speculative subscrip­
in the Fifth War Loan, with
tions, in accordance with the
the exception of relatively
small amounts—perhaps 750
request of the Treasury before
million dollars—for the par­ Source: Board of Governors of the Federal Reserve System.
the drive. But in some cases
tial investment of time de­
and some areas there were
posits, total bank purchases of
indications that loans were
Government securities during June and July, exclusive of made without close scrutiny and were not limited, as requested,
Treasury bills, will prove to have been at least as large as in to the financing of subscriptions which might reasonably be
the months of September and October last year (Third War expected to be paid, within a few months, out of anticipated
Loan), when the banks were permitted to make direct sub­ income of the subscribers—not by the sale of the securities
scriptions for two security issues of IV2 billion dollars each. purchased and pledged as collateral for the loan.
Reflecting exceptionally heavy purchases of securities from
Despite this evidence that a large volume of bank credit was
other investors, directly or through the market, holdings of involved in the huge amount of subscriptions received during
Government securities (other than Treasury bills) at weekly the Fifth War Loan, it is also clear that the net absorption of
reporting member banks increased by more than 3J/2 billion Government securities by nonbank investors, exclusive of those
dollars between the end of May and July 12. If other com­ financed by bank credit, was larger than in any preceding War
mercial banks bought securities in proportionate amounts, Loan with the possible exception of the Third. This can be
total additions to Government security holdings of all com­ considered a very substantial accomplishment in view of the




B illio ns
of dol I a rs

58

MONTHLY REVIEW, AUGUST 1, 1944

fact that prewar accumulations of idle funds available for
investment were probably largely exhausted during the early
War Loans.
As the accompanying chart indicates, the Fifth War Loan
was successful in absorbing a large part of the growth in
demand deposits of the reporting member banks during the
period since the Fourth War Loan. "Adjusted” demand de­
posits in reporting New York City banks, which had increased
by 2,485 million dollars between February 16 and June 14,
declined more than 2,200 million dollars by July 12. In one
hundred other principal cities throughout the country, such
deposits in the reporting member banks increased by 3,235
million dollars between February 16 and June 14, and then
dropped 2,530 million dollars between June 14 and July 12.
A review of the whole period since the United States
entered the war indicates that a considerable degree of suc­
cess has been achieved in diverting to the use of the Govern­
ment, for the financing of the war, the funds that have accu­
mulated in private hands between Treasury financing opera­
tions, and thus in retarding the growth in the deposit accounts
of individuals, corporations, and others. Between the mid­
dle of 1942 and the end of that year (just after the First War
Loan drive) adjusted demand deposits of weekly reporting
member banks showed a net increase of approximately 2%
billion dollars, an average of nearly 460 million dollars a
month. Between the end of 1942 and the end of the Second
War Loan drive, the net increase amounted to about 1.3 billion
dollars, an average of about 325 million dollars a month. Since
that time, up to the low point on July 12 in connection with
the Fifth War Loan, the average monthly rate of increase has
been reduced to a little over 200 million dollars a month.
It is true that, in addition, there has been a growth in time
deposits which in general has only been checked, not reversed,
during War Loan drives. This growth has been at an accel­
erating rate since 1942, and during the first half of 1944
averaged nearly 100 million dollars a month. However, there
are indications that the increase in such deposits represents
to a large extent real savings, and consequently involves less
threat of inflationary pressure than the growth in demand
deposits.
W a r F i n a n c i n g i n F is c a l Y e a r 1943-44
A comparison of the record of war financing during the
fiscal year which ended on June 30, 1944 with that of the
preceding fiscal year gives further evidence of the degree of
progress in efforts to finance the war in noninflationary ways.
In the past fiscal year, net Government receipts from income
and other taxes and other revenues covered 46 per cent of
total Government expenditures (including net expenditures
of Government corporations), compared with 28 per cent in
the year ended June 30, 1943. Of the excess of expenditures
over receipts, 65 per cent was covered in the past year by net
sales of Government securities to nonbank investors, compared
with 50 per cent in the preceding year. Nearly 9Vi per cent
additional was covered by security purchases by Government




agencies and trust funds during the fiscal year 1943-44, com­
pared with a little less than 6 V2 per cent in the preceding
year. (Most of the funds so invested represent tax collec­
tions by the Federal Government and by the States to support
old age and unemployment benefits; such taxes are largely
excluded from the reported net receipts of the Treasury.) It
should be noted, however, that the last fiscal year included all
of two War Loan drives, and a considerable part of a third
which was still in progress as the year closed, so that investors
were afforded an opportunity to invest their funds as fully as
they wished right up to the end of the year.
Government expenditures, receipts, and net expenditures,
as well as the increase in the interest-bearing public debt, and
the sources of funds for the absorption of such debt, are sum­
marized in the following table. Despite a substantial
(In billions of dollars)
Fiscal years ended June 30
1943

1944

Total Government expenditures*....................................
Net Treasury receipts.........................................................

79.7
22.3

95.3
44.2

Excess of expenditures...........................................

57.4

51.1

Net absorption of Government securities by
Nonbank investors.........................................................
U. S. Government agencies and trust funds...............

28.7
3 .7

3 3 .4f
4 .8 f

32.4

3 8 .2f

2 6.0
4 .6

1 5.7 f
7 .7

30.6

2 3 .4f

63.0

61.6

Commercial banks...................................................
Federal Reserve Banks...................................................

Increase in interest-bearing debt
(direct and guaranteed)............................................

* Including net expenditures of Government corporations,
t Preliminary estimates.

further increase in expenditures, the Government deficit in the
6 b illion dollars less than in the
preceding year, owing to the fact that net Treasury receipts
were nearly double those of the fiscal year 1943. The increase
in the public debt was substantially greater than net expendi­
tures in both years, but especially in the later year, reflecting
large increases in the Treasury’s working balance as the result
of War Loan drives. Despite the great increase in tax collec­
tions, the volume of securities absorbed outside the commer­
cial banks and Federal Reserve Banks was larger in the fiscal
year 1944 than the preceding year, accounting for about 62
per cent of the total funds borrowed. The Federal Reserve
Banks purchased at least 3 billion dollars more Government
securities in the fiscal year 1944 than in the preceding year,
as they continued putting funds into the market to offset drains
on the reserves of member banks which the member banks
were no longer able to meet, in any substantial part, by draw­
ing upon idle funds. The commercial banks increased their
holdings of Government securities about 16 billion dollars in
fiscal year 1944, a reduction of 10 billion dollars from the
preceding year.
Unquestionably bank absorption of Government securities
is still a substantial factor in war financing, but it has become
a much smaller factor than in the earlier part of the war period.
last fiscal year was m ore than

FEDERAL RESERVE BANK OF NEW YORK
M em ber Ba n k R eserves

and

Federal R eserve C redit

The shift of demand deposits from private accounts to
Government War Loan accounts during the Fifth War Loan
drive was of such magnitude as to permit the retirement of
nearly 800 million dollars of Federal Reserve credit between
June 21 and July 19, and at the same time an increase in
excess reserves of member banks from around 700 or 800
million dollars early in June to around IVi billion in the four
weeks ended July 19. Member bank borrowings from the
Federal Reserve Banks were largely repaid during this period
and the Government security holdings of the Reserve Banks
were reduced by approximately 625 million dollars. The bulk
of the reduction was in Treasury bills, reflecting in part the
repurchase of such bills by banks which had previously sold
them to the Reserve Banks to obtain needed reserves, and in
part increased purchases by member banks of new issues of
bills after their reserve positions became easier, so that Reserve
Bank maturities were not replaced in full in some weeks.
In the week ended July 19, however, part of the reduction
in Reserve Bank holdings of Government securities was in
Treasury notes and bonds, reflecting the development of a
strong market for Government securities after the close of the
subscription books for the marketable securities offered in
the drive. The active demand at that time apparently
originated largely from banks in various parts of the country
which had substantial excess reserves. It resulted not only in
some reduction in Reserve Bank security holdings, but also in
reductions of 214 million dollars in reporting member bank
loans to Government security holders and 176 million in other
loans on Government securities, and in some sales of Treasury
certificates and notes by the New York City banks. Other
reporting banks showed substantial increases in holdings of
Treasury bonds and some increase in Treasury notes in that
week.
During the remainder of the month, activity in the Govern­
ment security market subsided. Prices, which had been quite
strong around the middle of the month, eased slightly for a
few days and then became firm in a quiet market. Excess
reserves diminished somewhat, reflecting chiefly the effects
of Treasury withdrawals and disbursements of funds from
War Loan accounts which resulted in the beginning of a
renewed increase in private deposits and reserve requirements
of member banks, and some banks again found it necessary
to sell Treasury bills to obtain additional reserves.
FIFTH WAR LOAN DRIVE

On the official closing date of the Fifth War Loan drive,
July 8, the Treasury announced that the goal of 16 billion
dollars had been exceeded by 650 million dollars. Figures
shown in daily Treasury statements indicate that the final total
for the drive will be well over 20 billion dollars, including
sales of marketable issues that had not been tabulated on
July 8 and all Savings bonds and notes processed at the
Reserve Banks during the month of July. This indicated




59

total compares with 16.7 billion for the Fourth War Loan, and
would be much the largest amount raised in any drive. Even
after allowance for the substantial volume of bank credit
obtained, directly through bank loans, or indirectly through
sales of other securities in the market, the net absorption of
Government securities by nonbanking investors during the
months of June and July will compare favorably with any of
the preceding War Loans.
The over-all success of the Fifth War Loan drive was due
largely to the substantial purchases of market issues by institu­
tional investors. The Treasury’s daily statement indicates that
through July 27 the Treasury raised about 15.3 billion dollars
from the sale of marketable issues of bonds, notes, and certifi­
cates of indebtedness. More than 1 billion dollars of this total,
however, probably reflects sales to Government agencies and
trust funds, and to commercial banks under the Savings deposit
formula, and these sales will not be included in the drive
totals. Even so, the final figures for sales of marketable issues
during the drive will be substantially above the 10.3 billion
dollars sold in the Fourth drive and probably well in excess of
any previous drive.
The daily statement shows that sales of Savings notes by
July 27 had already reached 2.5 billion dollars, indicating that
the final figures will exceed the Fourth drive total of 2.2 billion
by a substantial margin. On the other hand, sales to in­
dividuals probably will not exceed the Fourth drive by as wide
a margin as sales to other nonbanking investors. Sales of
Savings bonds, which are largely purchased by individuals,
amounted to 3.6 billion dollars through July 27, and although
the final figures will include bonds processed through the end
of the month, it is questionable whether the final total will
reach the 4.2 billion dollars of Savings bonds credited to the
Fourth drive.
REDEMPTION OF SERIES E SAVINGS BONDS

The rate of redemption of Savings bonds, measured by the
ratio of redemptions to the volume of bonds outstanding, has
shown remarkably little change during the past year, following
a rapid increase in the closing months of 1942 and early
months of 1943. The dollar value of bonds redeemed, par­
ticularly Series E bonds, has, of course, increased considerably
but the increase in redemptions has not been out of proportion
to the rapid growth in the amount of bonds outstanding. In
the Second Federal Reserve District, the rate of redemption
appears to have been below that of the country as a whole.
Because of the irregularity of monthly data, the present study
has been based on quarterly figures. Furthermore, the dis­
cussion has been limited to Series E Savings bonds, as these
bonds account for all but about 10 per cent of all Savings bonds
redeemed in the country.
Through the third quarter of 1942 the volume of Series E
bonds redeemed in any quarter averaged about IVz per cent
of the amount outstanding at the beginning of the quarter.
In absolute amounts, redemptions never exceeded 60 million

60

MONTHLY REVIEW, AUGUST 1, 1944
Redem ptions o f Series E Savings B onds as P er Cent o f

dollars a quarter during that period. During the last quarter
of 1942 and the first quarter of 1943, however, the rate of
redemption increased rapidly, but since that time the rate has
leveled off at about 3^/2 per cent. (See accompanying chart.)
In the Second Federal Reserve District, also, the rate of
redemption has tended to flatten out during the past year.
Although figures on the amount of Savings bonds outstanding
in this District are not available, a rough estimate may be
constructed by cumulating net sales in the District since the
N EW

Y O R K

C IT Y A S T H E

second quarter of 1941, when such bonds were first sold, and
adding a small allowance for the accrual of redemption values.
On this basis, it appears that redemptions in each quarter of the
past year have been running at a little more than IVi per cent
of outstandings at the beginning of the quarter, compared with
roughly 3 Vi per cent for the country. The somewhat lower
rate for the District reflects the fact that while sales in the
New York District have been accounting for about 14 per cent
of total sales, redemptions in the District have been running
at about 12 per cent of all redemptions.
Figures quoted from time to time on the ratio of redemp­
tions to sales of War Savings bonds have tended to give a dis­
torted impression of the rapidity of the growth in redemptions.
Since there is a heavy concentration of sales in War Loan drive
periods, and redemptions tend to be larger in months between
drives and around income tax payment dates, the ratio of re­
demptions to sales shows extremely wide fluctuations from
month to month. In nondrive months the ratio tends to be so
high as to give the impression that redemptions are rapidly
overtaking sales, while in drive months the ratio falls to rela­
tively low levels. For this year as a whole, it appears unlikely
that redemptions will exceed 25 per cent of sales, although the
percentages in some months have been considerably higher.
The ratio of redemptions to sales naturally rises as the
volume of War Savings bonds outstanding grows, but the ratio
to the amount outstanding is the more significant figure in
gauging any changes in the rate of redemption.
C O R P O R A T E C A P IT A L

O F T H E U N IT E D

The last fifty or sixty years have been characterized by
growth of the corporate form of enterprise, and one of the
most important of the numerous changes associated with such
growth has been the spread of the multiple unit system in
production and distribution. Originally, executive offices of
corporations were usually located at the premises of the main
plant. As the size of corporations grew, however, and as the
various establishments—scattered over the entire country or
even located abroad—increased in number, many corporations
established administrative headquarters entirely separate from
their production facilities. New York City attracted a large
proportion of such administrative offices. W ith the concen­
tration in the City of executive offices of corporations which
employ millions of wage earners in all parts of the country,
the strategic importance of New York in the economic life
of this country is self-evident.
Historically, the position of New York City as the leading
1 This study is based upon a more extensive analysis made by this
bank. Copies of the more detailed study may be obtained upon
request.




STA TES1

financial center of the country contributed much toward
attracting headquarters of corporations. In the nineties, the
financial interests of the City participated actively in the
organization of industrial corporations of nation-wide impor­
tance. After the first large corporations had made New York
their operational headquarters, those that were formed later
also found it convenient to establish executive offices here.
Few corporations, however, would maintain their head offices
in the City for purely historical reasons, and new ones would
not locate here if New York did not offer distinct and im­
portant advantages. In addition to predominance in the field
of commercial and investment banking, the City’s principal
advantages are its leading position in wholesale and foreign
trade and its excellent transportation and communication facili­
ties. The concentration of publishing and advertising in New
York, the existence in the City of numerous specialized market
research organizations, credit rating services, and various other
business services, and the availability of numerous leading law
and accounting firms have made it convenient for large cor­
porations to have their administrative offices here.

FEDERAL RESERVE BANK OF NEW YORK
Ex e c u t iv e O ffices Located

in

N e w Y or k C ity

Corporations with executive offices located in New York
City differ widely in character. Some are holding companies
with subsidiaries operating on an independent or semi-inde­
pendent basis. In such cases, the work of the New York office
is devoted almost exclusively to financial activities and the
staffs are relatively small. Other cases, however, include cor­
porations with nation-wide activities which are managed from
headquarters located in New York. These executive head­
quarters include not only financial offices but also sales, pro­
motional, purchasing, and engineering departments and, in
addition, administrative offices of domestic and, in many cases,
foreign subsidiaries.
Data available for a sample of large corporations indicate
that headquarters of a substantial proportion of those with
nation-wide activities are located in New York City. Of the
1,872 nonfinancial corporations which in 1937 had securities
listed on a national securities exchange, 383 or more than one
fifth had their principal executive offices in this City (Table
I).1 However, the degree of concentration of executive offices
in New York, as shown by this sample, varies from industry
to industry. It is significant that the City’s share is relatively
high for consumers’ industries. Eleven of the country’s 21
administrative offices in the tobacco group, and 19 of the 60
corporations in the textile group, are located here. Among
the producers’ goods industries, on the other hand, the nonferrous metals industry is the only one in which nearly half
of all listed corporations have executive offices in New York
City. Head offices of only four of the 53 corporations in the
iron and steel group, and of only 38 of the 356 corporations
in the machinery and transportation equipment industries,
may be found here. In the relatively new and expanding chem­
ical industry, administrative offices of 29 of the 76 corpora­
tions surveyed are located in the City. These differences indi­
cate that heavy industries tend to locate their administrative
offices near production facilities, whereas light industries, in
which contact with large distributors and the ultimate con­
sumer is so important, gain distinct advantages by locating in
New York. In the merchandising field, New York City is
clearly leading. Within this group, 33 of the 84 corporations
that operate chain stores maintain their executive offices in
the City. For service industries, New York is the home of
more than half of the corporations included in the sample.
Chicago, the only city other than New York in which a
large number of main offices of corporations of nation-wide
importance are located, has about 140 executive offices of
listed corporations, only one third of the number for New
York City. Each of seven other cities has more than fifty
such offices, largely of local corporations; only a few of the
offices are those of firms of really nation-wide importance.
* Based on data of the Securities and Exchange Commission which
exclude railroads and most corporations in the communications field.
In the industries covered, the corporations included in the sample
account for substantially more than half of the aggregate assets.




61
Table I

N um ber of Principal E x ecu tive Offices of
L isted C orporations in 1 9 3 7 , b y Selected In d u stry G roups

Industry groups
M in in g ...........................................................................
Manufacturing, to ta l...............................................
F o od...........................................................................
Tobacco products.......................................
Textiles and textile products...............................
Chemicals.................................................................
Iron and steel..........................................................
Nonferrous m etals.............................
Machinery and tools..............................................
Transportation equipm ent...................................
Merchandising.............................................................
Transportation and communication*.....................
Service industries........................................................
Public utilities ............................................................
A ll nonfinancial corporations...................................

United States

New Y ork C ity

313
1,054

32
202

178
53
44
168
l,8 7 2 f

57
16
24
28
3831

100
21
60
76
53
37
192
164

19
11
19
29
4
18
23
15

Source: Securities and Exchange Commission, Statistics of American Listed Cor­
porations, Part I, Table 36, and tabulations of the S. E. C.
* Excludes railways and other common carriers, and most telephone, telegraph,
cable, and broadcasting companies.
t In addition to above groups, total includes agricultural, real estate, construc­
tion, and miscellaneous corporations.

The leadership of New York is even more striking if the
assets of the corporations with New York executive offices
are considered (Table II). The share of New York City
increases with the size of assets. Of the 32 corporations with
assets in excess of half a billion dollars, 20 were managed
from New York headquarters.
The concentration of corporate activities in New York City
provides employment to a large number of the City’s residents
and commuters. According to the New York State Depart­
ment of Labor, about a thousand administrative offices located
in the City employed 62,000 persons in September 1942,
mainly in a clerical capacity. Employment in executive and
other administrative offices of corporations exceeded that in
all banks and trust companies in the City. As a source of
clerical employment, administrative offices were outranked
only by insurance companies. In addition, industries which
derive a major part of their business from servicing these
offices offer numerous jobs. It is impossible to estimate even
approximately the volume of employment in the City’s law,
accounting, and engineering firms, advertising agencies, trade
associations, printing offices, and commercial banks and trust
companies which is dependent on the presence in New York
City of a large number of corporate headquarters.
T able II
N u m b er o f Principal E x ecu tive Offices of
L isted Corporations in 1 9 3 7 , b y Size o f A s s e ts *

Assets f
(In millions of dollars)

5— 5 0 ........................................................................
50— 100........................................................................
100— 200........................................................................
200— 500........................................................................

United States New Y ork C ity

912
731
125
76
56
32

90
201
42
28
14
20

1,9371

398#

Source: Securities and Exchange Commission, Statistics of American Listed Cor­
porations, P art I, Table 37, and tabulations of the S. E . C.
* Includes, in addition to corporations included in Table I, a few miscellaneous
financial corporations other than banks and insurance companies.
t Inclusive of lower and exclusive of upper limits,
j Includes 5 companies w ith unknown assets.
# Includes 3 companies with unknown assets.

62

MONTHLY REVIEW, AUGUST 1, 1944
R e ce n t C hanges

No clear-cut trend, either toward or away from New York
City, is revealed by a comparison of the location in 1925 and
in 1942 of executive offices of a representative sample of 416
large nonfinancial corporations.1 Of 23 corporations which
relocated their headquarters between 1925 and 1942, New
York City’s gains balanced losses. The sample includes 41
corporations which were formed between 1925 and 1942; 15
of them chose New York City for their headquarters. Six of
the 13 firms which liquidated or went into receivership had
their principal offices in New York City.
1Our sample covers all nonfinancial corporations (excluding rail­
ways and public utilities) included in Poor’s index of stock prices in
1925, and in Standard and Poor’s index in 1942.

T H E

P O S IT IO N

O F

T H E

N E W

Y O R K

Continuance of the movement toward concentration in
production and trade increases the importance of the larger
organizations, many of which, as pointed out above, are
already located in New York City. In recent years, a number
of independent corporations that had executive offices else­
where have been absorbed by corporations with headquarters
in this City.
On the whole, it may be concluded that New York City
is fully maintaining its position as the corporate capital of
the nation; the various factors which have attracted executive
offices to the City show no sign of losing their weight. Other
factors favoring the location of administrative offices here are
further specialization of industry and the probable expansion
of foreign trade after the war.

IN D U S T R IA L

The industries of the New York industrial region have taken
a leading part in supplying our armed forces with the imple­
ments of war. According to the records of the War Pro­
duction Board, the New York region in the period from June
1940 to March 1944 received war supply contracts valued at
over 27 billion dollars, a figure well in excess of that for any
other region. The nearest competitors are the Chicago and
Detroit regions, which received contracts valued at 19-6 and
19.5 billion dollars, respectively. These figures are for prime
contracts, and do not give any indication of geographic dis­
tribution of subcontracts.
The industrial regions of the War Production Board do not
conform to the geographical outlines of the Federal Reserve
districts. All of New York State, for example, is included
in the New York Federal Reserve District, while only those
counties of the State that are industrially important are part
of the New York industrial region of the War Production
Board. Another illustration is the inclusion of Detroit in the
Chicago Federal Reserve District, whereas the War Produc­
tion Board has set up separate industrial regions for Detroit
and Chicago. If the comparison of war supply contracts is

R E G IO N

IN

W A R

P R O D U C T IO N

made on the basis of Federal Reserve districts, Chicago takes
the lead with New York in second place.
War supply contracts have, on the whole, been widely dis­
tributed among the industrial regions. Certain exceptions
to this rule may result in temporary hardships when the time
for contract termination arrives; for example, difficulties are
likely to result from the dominance of aircraft contracts in
San Francisco and Kansas City, ship construction in Seattle,
and ordnance production in Denver and Minneapolis. To
what extent such situations may prove critical depends upon
a number of factors, among which the volume of orders out­
standing and scale of operations at the time of contract ter­
mination are probably the most important.
Position of the N ew Y ork M etropolitan A rea
in

W ar Production

The New York Metropolitan area is the most important
center of war production in the United States. From June 1940
through March 1944 its industries received war contracts
valued at 16.5 billion dollars, or 60 per cent of all war con-

D istribu tion o f M a jo r W a r Supply C ontracts
by Leading U rban Industrial A reas

June 1940— March 1944
P er cent of to ta l

I n m illions of dollars
U rb a n in d u strial area
N e w Y o rk M e tro p o lita n a r e a ....................................
N e w Jersey p o r t io n * .................................................
N e w Y o r k p o r tio n * ...................................................
D e t r o i t ................................................................................
Loa A n g eles.......................................................................
C h ica g o ...............................................................................
C le v e la n d ...........................................................................
B u ffa lo ................................................................................
S e a ttle -T a c o m a ...............................................................
B o s to n .................................................................................
San F ran c isco -O aklan d ................................................
St. L o u is .............................................................................
D a lla s -F t. W o r t h ............................................................
TCpmsns C i t y ......................................................................
M in n .-S t. P a u l .................................................................

A irc ra ft

Ships

Ordnance A ll other

T o ta l

A irc ra ft

Ships

Ordnance

A ll other

T o ta l

16,462.1

5,989.9

1,903.0

5,914.9

100.0

3.509.5
2,480.4

2,654.3

1,325.7
> 577 3

991.6
1,662.7

3,210.8
2.704.1

109.0
100.0

38.8
33.4

14.7
7.8

11.0
22.4

35.5
36.4

3.872.0
6.987.1
1.625.6
959.7
2,986.3
1,881.9
182.4
3 .4
354.7
1,913.3
1,269.8
4 7.2

^ 6 3 7 .0
1,287.9
150.8
1,100.1
97 6
1,180.0
1,231.9
2,474.3
8 0.8

4,324.3
253.0
2,315.1
765.8
293.1
34.7
316.3
7 6.0
1,441.4
7 6 .8
394.7
9 15.5

4.032.1
687.6
2,969.2
1,413.4
509.5
260.6
1,424.4
430.5
369.2
8 2 .8
238.9
278.3

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

30.1
7 5.8
2 3 .0
2 2.6
7 6 .8
56.1
5 .8
0 .1
15.8
9 2 .3
6 6.0
3 .7

5 .0
14.0
2 .1
2 6 .0
2 .5
35.1
39.0
82.9
3 .6
0 .0
1.1
2 .4

3 3.6
2 .8
3 2.8
18.1
7 .6
1 .0
1 0.0
2 .6
6 4.2
3 .7
20.5
72.0

3 1.3
7 .4
4 2.1
3 3.3
13.1
7 .8
4 5 .2
14.4
16.4
4 .0
12.4
21.9

9,037.6
7.424.5
12,865.4
9.215.6
7.060.7
4.239.0
3,886.5
3.357.2
3.155.0
2.984.2
2.246.1
2,072.9
1.925.0
1.272.1

2 1.6
31.1

3 6.4

11.6

16.1

3 5.9

* T h e N e w Jersey portion includes seven counties in N . E . N e w Jersey- -B erg en , Essex, Hudson, M idd lesex, M o rris , Passaic, and U n io n . T h e N e w Y o rk p ortio n includes
N e w Y o rk C ity , Nassau C o u n ty, and W estchester C o u n ty .




FEDERAL RESERVE BANK OP N*EW YORK

Value of War Supply Contracts in New York
Metropolitan Area*

4941.

1942

1943

1944

* Includes New York City, Nassau County, Westchester County, and seven
counties in New Jersey— Bergen, Essex, Hudson, Middlesex, Morris, Passaic,
and Union.
Data are cumulative from June 1940 through May 1944;
recessions at certain points are due to corrections for cancellations and con­
tract changes.

tracts in the entire New York industrial region. Contracts
awarded in the seven counties of Northern New Jersey
amounted to 9 billion dollars and contracts totaled nearly
IV i billion in New York City, Nassau County, and West­
chester County. The total value of all goods manufactured
in the Metropolitan area in 1939 was 7.0 billion dollars; the
war orders, therefore, are equal to approximately two years and
four months of peacetime production at the 1939 rate.
New York industries are playing a major role in each of
the principal fields of war production—aircraft, ships, and
ordnance and munitions. In fact, in each of these fields the
Metropolitan area holds second place in the value of war
supply contracts awarded. But in contrast to most other pro­
duction centers no one type of contract holds a dominant
position in the New York Metropolitan area, a fact that reflects
the diversified industrial character of the Metropolitan region.
Aircraft orders placed in the Metropolitan area from
June 1940 through March 1944, amounting to almost 6 bil­
lion dollars, represented only 36 per cent of the area’s total
war supply contracts. In Los Angeles, the only urban area that
exceeded New York’s record, aircraft orders reached a total
of approximately 7 billion dollars and accounted for 76 per
cent of total awards in that area. When the New York area
is compared with such important aircraft centers as Detroit
and Dallas-Fort Worth, New York’s output is seen to have
exceeded the combined production of these cities. (See ac­
companying table.)
The San Francisco-Oakland area is first in ship construction,




63

with orders aggregating 2.5 billion dollars or 83 per cent of
the area’s war business. In this field the New York Metro­
politan area has received orders valued at 1.9 billion dollars,
which account for only 12 per cent of the area’s total war orders.
Detroit holds a wide lead in the field of ordnance and muni­
tions. The value of such Detroit contracts is 4.3 billion dol­
lars as against 2.7 billion dollars for New York. The Detroit
contracts comprise 34 per cent of the city’s war business,
whereas in New York ordnance awards account for but 16
per cent of total contracts.
The distribution of contracts for aircraft, ships, and ordnance
in the New York Metropolitan area shows clearly that the in­
crease in activity here during the war period has been less de­
pendent upon the demand for a particular war product than is
the case in some other urban centers. The Dallas-Fort Worth
area has 92 per cent of its war business in aircraft, and, as
indicated above, the war contracts for the San FranciscoOakland District are primarily for the production of ships.
The closer approach to a balanced situation in New York
will probably aid in bringing about a more gradual and a
smoother industrial transition from war to peace than will be
possible in communities dominated by a single type of produc­
tion. The impressive fact concerning the area is that it is
an outstanding manufacturing center for war goods as well as
the leader in meeting the requirements of peace.

BUSINESSACTIVITYAND
MANPOWERSHORTAGES

During the second quarter of 1944 manpower shortages
continued to be one of the principal factors limiting industrial
production. The number of wage earners employed in fac­
tories is now almost one million less than a year ago. Some
industries have been able to offset recent declines in their
working forces by more intensive use of men and machinery;
in this group are the various fuel producing industries, which
have maintained output at a high level since the beginning of
1944. Crude petroleum production rose steadily from January
to June, reaching an all-time high of 4,560,000 barrels daily
in the latter month, and both bituminous and anthracite coal
output fluctuated around levels close to the peaks of early 1943.
Output of steel, however, which is urgently needed for the
accelerated tank production program, decreased 5 per cent
between March and June, as shortages of men in furnaces and
mills, shutdowns for repairs, and scattered strikes restricted
operations. A critical shortage of men in foundries and forge
shops threatened to hold up production of trucks and other
munitions items. Seasonally adjusted output of copper, re­
quired for the recently expanded heavy artillery program,
declined 10 per cent between March and June. Lumber
operations during the second quarter were affected both by
shortages of men and by lack of heavy trucks for hauling;
the adjusted index of production fell 11 per cent between
March and June. The War Production Board has tightened
restrictions on distribution of lumber, effective August 1, to

64

MONTHLY REVIEW, AUGUST 1, 1944
Indexes o f B u siness

1943

1944

Index
Industrial production*, 1935-39 = 1 0 0 .........
(Board of Governors, Federal Reserve
System)
Munitions output, Nov. 1941 = 1 0 0. ..
(W ar Production Board)
Electric power output*, 1935-39=100........
(Federal Reserve Bank o f New York)
Ton-miles of railway freight*, 1935-39 =100
(Federal Reserve Bank of New York)
Sales of all retail stores*, 1935-39 =100. . . .
( Department of Commerce)
Factory employment
United States, 1939 = 1 0 0 .........................
(Bureau of Labor Statistics)
New York State, 1935-39 = 1 0 0 ................
( New York State Dept, of Labor)
Factory payrolls
United States, 1939 = 1 0 0 ..................
(Bureau of Labor Statistics)
New York State, 1935-39 = 1 0 0 ................
( New York State Dept, of Labor)
Income payments*, 1935-39 = 1 0 0 ..............
( Department of Commerce)
Wage rates, 1926 = 1 0 0 .....................
(Federal Reserve Bank of New York)
Cost of living, 1935-39 = 1 0 0 .................
(Bureau o f Labor Statistics)
Velocity of demand deposits*, 1935-39 =100
(Federal Reserve Bank o f New York)
New York C ity..........................
Outside New York City. ..........................
* Adjusted for seasonal variation.

June

Apr.

May

June

237

239

237

235p

97

113

ll4 p

190

202

198

218

243

234p

165

168

Y72p

169

161

159

158j>
148p

198p

159

152

149

317

318

318p

288

286

284

212

229

231p

153

162

163p

125

125

125

125p

71
75

73
76

66
72

88 p
87 p

283p

p Preliminary.

insure an adequate supply for packing, crating, military con­
struction, and other essential uses. Activity at cotton textile
mills in the second quarter continued the downward movement
in progress for about a year. For the quarter as a whole, the
Federal Reserve index of total industrial production averaged
237 (1935-39=100), compared with 243 in the first three
months of the year.
Lack of manpower has prevented any extensive reconver­
sion of industry even where plant facilities and raw materials
are available. Some relaxation of Government controls over
output was effected during July when the War Production
Board removed restrictions on the use of aluminum and mag­
nesium and granted permission to manufacturers to make
experimental models and to place orders for machine tools.
In contrast to the gradual decline in industrial production
during the second quarter, the volume of transportation and
trade was about the same as in the first three months of the
year. Ton-miles of railway freight, after allowance for seasonal
changes, remained at the level of the first quarter, while passenger-miles flown by domestic airlines continued to increase and
in May were equal to those in the peak month of April 1942.
The value of exports during May was the largest of any month
in history, and the value of imports was the highest since
October 1929. Seasonally adjusted sales of retail stores (in­
cluding department stores, grocery chains, variety chains, and
mail order houses), continued at high levels during the
second quarter.

DEPARTMENTSTORETRADE

The dollar volume of department store sales in this District
in July was approximately 5 per cent greater than in July 1943.




The index of sales, adjusted for variations in the number of
shopping days and for seasonal changes, rose moderately above
the level to which it had fallen in June, and was about the
same as the index for May. It was only 5 per cent below the
all-time high attained last March.
In the first six months of the year, sales of both department
and apparel stores in the District were 8 per cent greater than
during the first half of 1943. Among the six largest cities in
the District, Syracuse reported the greatest increase over a
year ago (14 per cent) in sales of department stores. The gain
in sales of New York City stores1 (11 per cent) also exceeded
the average for the District as a whole, but the increases in
Buffalo and Rochester were less than average. Decreases were
reported for Newark and Bridgeport. Sales in these last two
cities reached a peak in 1942, whereas for the four other
cities sales thus far this year indicate continuance of the
increase that has been in progress throughout the war period.
On the basis of sales in the first six months, the percentage
increases between 1939 and 1944 are estimated for the six
cities as follows: Syracuse, 80; Buffalo, 80; Rochester, 50;
New York, 45; Bridgeport, 40; Newark, 20. For Bridge­
port and Newark, the increases between 1939 and the peak
year 1942 were 57 and 25 per cent, respectively.
1
New York City department stores account for more than one
half of all department store sales in this District and apparel store
sales in the City comprise more than 60 per cent of the District’s total.
Indexes o f D epartm ent Store Sales and Stocks
Second Federal R eserve D istrict

1944

1943
Item
June

Apr.

May

June

1935-39 average—100
Sales (average daily), unadjusted.................
Sales (average daily), seasonally adjusted. .

122
131

136
138r

141r
149

131
141

1923-25 average =100
Stocks, unadjusted...........................................
Stocks, seasonally adjusted............................

104
109

112
111

118
116

113
118

r Revised.
D epartm en t and Apparel Store Sales and S tock s, Second Federal
R eserve D istrict, Percentage Change from the Preceding Y e ar

Net 1
Sales
Locality
June 1944
Department stores, Second District. . .
New York C ity ....................................
Northern New Jersey.........................

Stocks on
hand
Jan. through June 30, 1944
June 1944
+ 8
+11
+ 2
- 1
- 2
- 7
+16
+15
0
+ 5
- 3
+10
+ 1
+ 4
+14
+ 7
+ 7
+ 7
+ 9
+ 6
+ 6
+ 1
+ 6

+ 8
+ 8
+ 6
+ 7
- 3
-1 0
+19

Niagara Falls....................................
Rochester...........................................

+ 9
+12
+ 3
0
- 1
- 7
+13
+13
- 3
- 1
- 3
+ 4
— 5
_ 4
+ 9
+ 4
+ 9
+ 9
+12
+ 3
+ 3
+ 1
+ 2

Apparel stores (chiefly New York City)

+ 8

+ 8

+14-

Westchester and Fairfield Counties..
Bridgeport.........................................
Lower Hudson River Valley.............
Poughkeepsie....................................
Upper Hudson River Valley.............
Schenectady......................................
Central New York State....................
Mohawk River Valley....................
Utica...............................................
Northern New York State................
Southern New York State.................
Binghamton......................................
Western New York State..................

+ 2
- 3
+13
+ 8
+16
—
+11
+ 7
+ 7
+11
+ 5

FEDERAL RESERVE BANK OF NEW YORK
MONTHLY REVIEW, AUGUST 1, 1944

General Business and Financial Conditions in the United States
(Summarized by the Board of Governors of the Federal Reserve System)
and production at factories continued to decline slightly in June; output of
minerals was maintained in record volume. Retail trade and commodity prices showed
little change in June and the early part of July.

E

MPLOYMENT

In d u s t r i a l Pr o d u c t i o n

Index of P h ysical V o lu m e o f Industrial Production,
A d ju ste d for Seasonal V ariation , 1 9 3 5 -3 9 A v e r ­
age = 1 0 0 P er C ent (G roups shown are e x ­
pressed in term s o f points in the total index)

The Board’s seasonally adjusted index of industrial production was 235 per cent of the
1935-39 average in June as compared with 237 in May and 243 in the first quarter.
Steel production declined 4 per cent from the rate in May, reflecting partly manpower
shortages. Output of nonferrous metals dropped 8 per cent, largely owing to the continued
planned curtailment of aluminum and magnesium production. The lifting on July 15 of
some of the restrictions on use of these metals was the initial step in a program to prepare
for limited reconversion to peacetime output. Activity in the machinery and transportation
equipment industries in June was maintained at the level of the preceding month. Increasing
emphasis was reported on output of heavy artillery and artillery shells and of tanks. Lumber
production continued to decline and was approximately 10 per cent below June 1943.
Production of nondurable goods was maintained in June. Meatpacking activity declined
further from the exceptionally high level in the first quarter, but output of most other food
products continued to rise seasonally. Refinery output of gasoline advanced further and
reached the earlier record level of December 1941. Activity in cotton textile mills and in
the chemical and rubber industries showed little change in June.
Mine production of metals and coal was maintained in large volume and crude petroleum
production continued to rise to new record levels.
D is t r ib u t io n

Indexes o f V a lu e o f D epartm en t Store Sales and
S toc k s, A d ju ste d for Seasonal Variation
( 1 9 3 5 - 3 9 a v e r a g e s 1 0 0 per cen t)
Billions ordc

Department store sales declined more than seasonally in June, following a considerable
increase in May, and the Board’s index was 175 per cent of the 1935-39 average as com­
pared with 183 in May and an average of 177 in the first four months of this year. Value
of sales in the first half of 1944 was 7 per cent greater than in the first half of 1943. In
the early part of July sales were 9 per cent larger than a year ago.
Railroad freight carloadings showed little change in June and the first three weeks of
July after allowance for seasonal movements.
C o m m o d i t y P r ic e s

Legislation extending Federal price controls for one year was enacted June 30; certain
restrictive provisions were relaxed, especially those relating to prices of cotton products.
Prices of most commodities in wholesale and retail markets have recently shown little change.
A g r ic u l t u r e

W ell over a billion bushels of wheat and almost 3 billion bushels of corn were in
prospect on July 1. This is an improvement over June 1 prospects and aggregate crop pro­
duction in 1944 may be about the same as in 1943 and larger than any year prior to 1942.
The number of chickens raised this year was 19 per cent smaller than last year; the
spring pig crop was 24 per cent smaller and the fall crop may be a third smaller than in
1943. Marketings of cattle, however, have been normal in relationship to the numbers
and unless marketings are increased during the rest of this year no material reduction of
the large numbers of cattle on farms will occur.
B a n k C r e d it
M em ber B ank R eserves. Breakdow n betw een R e­
quired and E x cess R eserves P a rtly E stim ated
(L a te st figures are for Ju ly 1 9 )

M em ber B anks in Leading C ities. D em and D eposits
(A d ju ste d ) Exclude U . S . G overn m ent and In ter­
bank D ep osits and Collection Item s. G overn ­
m en t Securities Include D irect and G uaran­
teed Issu es (L a te s t figures are for July 1 2 )




As payments for securities purchased during the Fifth Drive transferred funds from
private deposits to reserve-exempt Government accounts, the average level of required reserves
at all member banks declined by close to 1 Va billion dollars. Reserve balances were reduced
by about 800 million dollars and excess reserves rose by around 400 million. Reserve funds
were absorbed through declines in Reserve Bank holdings of Government securities, by a
moderate increase in currency, and by temporary increases in Treasury deposits at the Reserve
Banks. Over the four weeks ended July 12, money in circulation rose by 230 million dollars,
which is a smaller rate of growth than prevailed in recent months, reflecting the influence of
the war loan drive.
During the Fifth Drive, between June 14 and July 12, Government security holdings
at reporting member banks in 101 leading cities increased by 4.7 billion dollars. Additions
to bank holdings resulted from purchases of securities from investors who were adjusting
their positions prior to subscriptions during the drive, from increased purchases of Treasury
bills, and from subscriptions to new securities in limited amounts.
Loans for purchasing and carrying Government securities increased by 1.8 billion dollars
over the Fifth War Loan, an increase larger than that of any other drive. Of the total
amount advanced by banks in 101 cities, loans to brokers and dealers accounted for 500
million and loans to others for 1.3 billion.
Accompanying purchases of securities during the Fifth Drive, adjusted demand deposits
declined by 4.7 billion dollars at banks in 101 cities. Government deposits at these same
banks increased by 10.5 billion dollars. The difference reflected the effect of the increase
in bank loans and investments.