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MONTHLY REVIEW
of Credit and Business Conditions
S e c o n d

F e d e r a l

R e s e r v e

D is t r ic t

F ed era l R eserv e B a n k , N ew Y o rk

D e c e m b e r 1 ,1 9 4 2

Money Market in November

than commercial banks— individuals, trust funds, cor­
porations, insurance companies, savings institutions, pub­

W a r finance and banking were keyed to the expanded

lic bodies, etc.— to the m axim um possible extent. There

war effort in November, with the announcement by the

are no restrictions upon the amounts of the new securities

Secretary of the Treasury of a drive fo r the sale of

which m ay be purchased by these classes of investors dur­

$9,000,000,000 o f Government war obligations, during

ing the periods fo r which the subscription books are kept

December.

open. The widest possible participation by individuals and

and

This amount, together with tax revenues

receipts

during

January

from

the

sale

of

T ax

organizations of all kinds is sought.

I t is by m axim um

Savings notes, W a r Savings bonds, and Treasury bills,

purchases of Government securities out of current income

will serve to cover Government expenditures fo r both

and

December

financing o f war expenditures can be held at a minim um

and

January.

Consequently,

no

further

accumulated

funds

that the

necessity

fo r

bank

large-scale Treasury financing w ill be necessary until

and the attendant danger of an excessive expansion in

February.

bank deposits and in the aggregate money supply can

Three issues o f new securities are being offered under

be avoided.

I t is in the common interest of all to see

2 y 2 per cent bonds m aturing

that funds spent by the Government in the prosecution

in 1968 and callable on and after December 15, 1963 (not

of the war represent fu n ds previously drawn out of the

the December p rogram :

ten

pool of consumer spending power and do

years) ; 1 % per cent bonds due in 1 9 4 8 ;

not involve net additions to it, especially

and %

in view o f the diminishing supplies of

available

to

commercial banks

fo r

per cent one-year certificates of
A s in the case of the two

goods available to consumers because of

previous lim ited “ t a p ” offerings of 2 y 2

the diversion of productive facilities and

indebtedness.

per cent bonds, in M ay and A u gu st, sub­

supplies to war purposes.

scription

their savings and investing them in Gov­

books will

be

open

on these

issues fo r extended periods so fa r as non­

ernment

banking

investors

only

V ictory

Fund

are

concerned.

Committees,

with

The

securities,

make

a

B y increasing

consumers

personal

can

contribution

not
to

the war effort, and reduce the danger of

their

large groups of volunteer workers drawn

inflationary pressure on prices, but at the

largely from the securities and banking

same time make financial provision for

fields, will carry on an intensive sales

themselves and their dependents against

campaign on all three offerings, as well

the day of readjustm ent to peace-time con­

as Savings bonds of Series F and G, and

ditions. Reduced spending now will pro­

T a x Savings notes o f Series A

and C.

vide money to spend when the war is over

Thus they will be able to offer a well diver­

and a larger volume of consumer goods is

sified assortment of Government securi­

again available.
W h ile the sales campaign will be aimed

ties, to meet various needs of various types

prim arily at obtaining subscriptions from

of investors.
P rim ary emphasis is placed upon the

investors other than commercial banks,

sale of war obligations to investors other

the banks also are being called upon to

FO R

V IC T O R Y




★

B uy

U n it e d

S t a t e s

W a r

S a v i n g s

B o n d s

a n d

S t a m p s

90

MONTHLY REVIEW , DECEMBER 1, 1942

play their part.

The Secretary o f the Treasury has an­

the securities issued in December can be lim ited to the

nounced that offerings of the 1 % per cent bonds and the

amounts the banks are readily prepared to make, and

% per cent certificates of indebtedness, in the amount of

these funds, together with Treasury receipts from quar­

$2,000,000,000 each, will be made to commercial banks as

terly income tax collections, undoubtedly will be paid

a part of the December program.

out rapidly by the Government.

In the case of bank

Treasury withdrawals

subscriptions, the books will be kept open only fo r a brief

of deposits credited to W a r Loan accounts in paym ent

period, and subscriptions in excess of $100,000 w ill be

fo r securities sold in December w ill be made only as the

allotted on a pro rata basis.

In addition to making p a y ­

funds are needed to meet Government disbursements.

ments for their own subscriptions, the banks will also

Moreover,

have to be prepared to meet the paym ents drawn on

Reserve System fo r meeting any tem porary periods of

them fo r subscriptions by their customers.

strain upon bank reserves that m ay occur during the

W h ile the

means

are

available

through

the

Federal

payments w ill be spread out to some extent during the

course o f the month.

month of December, and the banks will not be called upon

banks have excess reserves which m ay be drawn against,

A side from the fact that many

to meet paym ents for the entire $9,000,000,000 or more of

the System has been contributing heavily to the mainte­

securities on a single date, the operation is of such m agni­

nance o f bank reserves through open market operations,

tude that it will be necessary fo r the banks to consider

and in addition the Reserve Banks stand ready to assist

carefully the methods by which they are to make the p a y ­

member banks in meeting any needs fo r reserves which

ments.

On November 20 this bank issued a circular to

m ay arise, by purchasing Treasury bills at a fixed rate

all banks in the D istrict calling their attention to the

and by making advances to them at low rates o f interest.

advantages of qualifying as special depositaries of the
F

Government, so that they w ill be able to make paym ents
for their own subscriptions and for those of their cus­

in a n c in g of

W

E

ar

x p e n d it u r e s in

N ovem ber

D u rin g Novem ber there was an absence of m ajor new

tomers by crediting a “ W a r Loan D eposit A cc o u n t’ ’ on

security offerings by the Government.

their books to whatever extent seems necessary or desir­

made available through revenue receipts, the T rea su ry ’s

able, instead of making cash paym ents in fu ll.

heavy cash requirements were largely met by withdrawals

B eyond funds

from W a r Loan deposit accounts, by receipts from cur­
U se

of

W

ar

L o a n D e p o s it A

ccounts

Use o f the book credit method of paym ent fo r new
issues of

Government securities provides

an effective

mechanism fo r smoothing the im pact of Government
financial operations upon the banks.

rent sales o f W a r Savings bonds and T ax Savings notes,
by net receipts from weekly Treasury bill offerings, and
by the net proceeds o f the Treasury certificate sale on
Novem ber 2.

To the extent that

The G overnm ent’s W a r Loan deposits in the banks,

the book credit method of paym ent is utilized— in con­

which

nection either with customers’ subscriptions or subscrip­

$3,800,000,000 during the third week o f October, as a

had

been

built

up

to

a

level

in

excess

of

tions for banks’ own portfolio— bank reserves are not

result o f book credit paym ents on the Treasury note and

immediately affected by paym ents for new Government

bond issues sold during October, amounted to approxi­

security issues.

m ately $3,400,000,000 at the beginning o f November. The

A s the calls fo r repaym ent of the W a r

Loan deposits are issued, banks tend to lose reserve

%

funds, but, inasmuch as the calls are made to provide

had been offered late in October, yielded the Treasury,

per cent one-year certificates o f indebtedness, which

the Government with money to meet expenses, there is

on November 2, $530,000,000 in excess o f the amount

a compensating

needed to pay off the m aturing issue of % per cent certifi­

volume

deposited with banks.

of

Government checks being

I t is true that W a r Loan account

cates.

Thus, the necessity fo r issuing calls against the

withdrawals and receipts of Government checks m ay not

W a r Loan account deposits was obviated during the first

balance up closely in the case o f particular banking insti­

few days of the month.

tutions, but fo r the banks taken as a whole, except when

ber 23, however, withdrawals from W a r Loan deposit

Between Novem ber 5 and Novem ­

Treasury deposits with the Federal Reserve Banks are

accounts provided the m ajor part of the T rea su ry ’s cash

tem porarily increasing or decreasing, the return flow of

requirem ents; calls fo r repaym ent reached an aggregate

funds to the banks from the Treasury is equal to the

of $2,125,000,000.

flow of funds to the Treasury.

bills, in the amount o f $500 ,000 ,00 0 each, provided an

B y making adequate use of this procedure, the banks

The fo u r weekly offerings of Treasury

aggregate of $600 ,000 ,00 0 above the amounts needed to

can prevent the concentration o f two m onths’ Treasury

pay off m aturing issues.

financing in one from causing any unusual disturbances

notes supplemented these sources o f Treasury receipts,

to their reserve positions.

especially toward the end o f the month.




Im m ediate cash paym ents fo r

Sales o f Savings bonds and Tax

FEDERAL RESERVE BAN K OF N EW YO R K
M

em ber

B

a n k

E

xcess

R

91
Money Rates in New York

eserves

Nov. 29, 1941 Oct. 31, 1942 Nov. 28, 1942

Between October 21 and November 25, excess reserves
of all member banks showed a net increase, and in central
reserve N ew Y o rk C ity banks were maintained in sub­
stantial volume.

The outflow of funds from New Y o rk

to other parts of the country, in considerably diminished
volume as compared with the previous month, was more
than counterbalanced by further heavy Reserve Bank
purchases of Government securities, and excess reserves
at these banks amounted to $550 ,000 ,00 0 on November
25 as compared with $520,000,000 on October 21.
all

member

banks,

excess

reserves

advanced

For
from

$2,350,000,000 on October 21 to $2,520,000,000 on N o ­
vember 25. The increase in currency circulation through­
out the country amounted to $650,000,000 over the five

Stock Exchange call loans....................
Stock Exchange 90 day loans..............
Prime commercial paper— 4 to 6 months
Bills— 90 day unindorsed.....................
Average yield on taxable Treasury notes
(3-5 years)..........................................
Average yield on tax exempt Treasury
bonds (not callable within 12 years).
Average yield on taxable Treasurybonds
(not callable within 12 years)..........
Average rate on latest Treasury bill sale
91 day issue.......................................
Reserve Bank discount rates:
On advances to member banks se­
cured by Government obligations
callable or maturing in one year

1

1

*1H
X
Vfe

1
*1K

H-%

T
/6

0.94

1.28

1.28

1.92

2.05

2.09

2.24

2.33

2.36

0.267

0.373

0.370

X

X

On other advances to member banks
secured by Government obliga­
tions, and on rediscounts..............
Reserve Bank bujdng rate for 90 day
indorsed bills......................................

1

1

1

X

X

X

* Nominal.

weeks, drawing down member bank reserve balances

the $600,000,000 increase in total bills outstanding.

correspondingly, and reserve requirements fo r all mem­

setting these increases, New Y o rk C ity banks reduced

Off­

These factors tending

their holdings of Treasury notes by $245,000,000, and

to reduce excess reserves were, however, more than com­

over the same period sold $83,000,000 of Treasury bonds.

ber banks advanced $270,000,000.

pensated fo r by a reduction in Treasury deposits with

In addition, there was a sharp decline of $101,000,000 in

the Federal Reserve Banks and by Reserve Bank pu r­

their holdings o f other securities, chiefly m unicipal and

chases of Government securities.

local housing authority obligations.

Government security

Outside New York,

holdings of the twelve Federal Reserve Banks showed a

reporting member banks added $311,000,000 to their

net increase of $618,000,000 over the five weeks, through

holdings of Government securities; their portfolios of

enlarged holdings of Treasury notes, bonds, and certifi­

certificates o f indebtedness rose by

cates o f indebtedness.

Treasury bills by $151,000,000.

On the other hand, Treasury bill

holdings were reduced by $104,000,000, principally as a

$218,000,000

and

On the other hand, hold­

ings o f Treasury notes and bonds declined $28,000,000

result of resales to banks o f bills which had been pu r­

and $33,000,000, respectively.

chased from them by the Reserve Banks under resale

$31,000,000.

Other securities declined

D u rin g the fo u r weeks, October 21 to November 18,

agreements.

total loans of the New Y o rk C ity banks were reduced by
$101,000,000. There was a net contraction of $39,000,000

Member Bank Credit

in the volume o f commercial, industrial, and agricultural

Compared with other recent periods, the $191,000,000
increase in total loans and investments of the weekly
reporting member banks in 101 cities during the four
weeks ended Novem ber 18 was relatively small.

This

was due prim arily to the fact that during the period the
Treasury

raised

only

$1,100,000,000

of

new

money

through the sale of public marketable issues and, as a
result, member banks added relatively fewer Government
securities to their investment portfolios than had been
the case in most recent months.

In the 100 cities outside

New Y o rk total loans and investments o f the reporting
member banks rose $212,000,000, while in New Y o rk C ity
they declined $21,000,000.
In New Y o rk C ity holdings o f Government securities
of the weekly reporting member banks rose $181,000,000.
This was accounted fo r by an increase o f $166,000,000 in
certificates o f indebtedness, comprising prim arily pu r­

loans and of $47,000,000 in loans to security brokers and
dealers.

In the 100 cities outside New Y o rk the reduction

in loans amounted to $68,000,000.

The largest declines

were $19,000,000 in commercial, industrial, and agricul­
tural loans and $25,000,000 in the “ all oth er” loan classi­
fication which includes consumer credit.
U . S. Government deposits at the reporting member
banks,

which

had

been

built

up

$1,979,000,000

to

$3,103,000,000 during the preceding fou r w eeks’ period,
were sharply reduced during the fou r weeks ended N o­
vember 18.

In N ew Y o rk C ity such deposits declined

$714,000,000, and in the 100 other cities $689,000,000.
D u rin g the same period adjusted demand deposits rose
$485,000,000 in New Y o rk C ity and $782 ,000 ,00 0 in the
100 other cities.

War Financing

chases o f the Novem ber 2 issue, and a $346,000,000 in­

In contrast to the fou r to six billion dollar totals o f

crease in Treasury bills, which amounted to over h alf

other recent months, net public borrowings of the Treas­




M ONTHLY REVIEW , DECEMBER 1, 1942

92

u ry in November amounted to only about $2,600,000,000.

than 21,000,000 workers participating in these payroll

Government expenditures were met to a large extent by

allotment plans.

drawing down balances accumulated from securities sold

program, discussed earlier in this Review, the W a r Sav­

during October.

The distribution of November borrow­

A s a part o f the December financing

ings staff will intensify its drive during the coming month
to add more workers to those already covered.

ing was as fo llo w s:

A bo u t $600,000,000 in “ new m o n ey ” was raised from

$700,000,00 0— W a r Savings bonds (estimated)

the sale

o f Treasury bills during Novem ber as new

800.000.000— T ax Savings notes (estimated net
receipts)

issues o f $500,000,000 weekly replaced maturities of

600.000.000— Treasury bills (net receipts)

$350,000,000.

530.000.000— % per cent certificates of indebted­
ness (net)

at about $800,000,000 fo r the month, as compared with
slightly over $920,000,000 in each of the two preceding

I t was estimated, on the basis of the D a ily Treasury
Statement fo r November 27, that the Treasury received
somewhat more than $700,000,000 from the sale of W a r
Savings bonds during N ovem ber; this compared with a
quota fo r the month o f $800,000,000 and with sales for
October reported at $814,000,000. In the Second Federal
Reserve D istrict, an estimated $110,000,000 of W a r Sav­
ings bonds were sold during November by agencies other
than post offices; during the previous month these sales
totaled $125,000,000.

Decreased sales, other than under

the payroll deduction plan, of the Series E bonds appar­
ently accounted fo r the m ajor part of this month-to-

months and about $400,000,000 m onthly during M ayA u gu st.

E xcept during the quarterly tax months, these

sales have usually been offset to only a relatively small
degree b y redemptions in paym ent of taxes or fo r cash.
The 7 Per cent certificates of indebtedness due N o ­
/g
vember 1, 1943 were offered in the amount o f approxi­
m ately $2,000,000,000 on October 26, but paym ent was
not made until the date of issue on Novem ber 2.
the $2,035,000,000

raised from

this financing,

Of

about

$1,500,000,000 provided fo r the redem ption on N ovem ­
ber 2 o f m aturing y 2 per cent certificates.

Subscrip­

tions to the new issue totaled $3,105,000,000, o f which
$1,616,000,000 were entered in the Second Federal R e­

month decline in the D istrict total.
Irregular fluctuations from one m onth to another in
sales of W a r Savings bonds principally reflect changes
in the volume o f sales on single subscriptions.

Sales o f T a x Savings notes are estimated

These

fluctuations conceal a remarkably steady rise in the
amounts sold under the payroll deduction plan.

As

shown in the accom panying diagram, the m onthly total
of deductions from salaries and wages fo r the purchase
of W a r Savings bonds had increased from $5,000,000 last
December to $287,000,000 in October. The October figure
represented nearly 8 per cent of the pa y of the more

serve District.

A s in the case of the Treasury bond and

note issues offered on October 8, subscriptions from all
subscribers other than banks which accept dem and de­
posits (totaling $667 ,000 ,00 0) were allotted in fu ll.
scriptions o f $25,000

or less from

Sub­

commercial banks

(am ounting to $ 64,000,000 ) were also allotted in fu ll,
while the remaining bank subscriptions were allotted on
a 55 per cent basis. Allotm ents in the Second Federal R e­
serve D istrict ($ 1 ,0 9 6 ,0 0 0 ,0 0 0 ) amounted to 54 per cent
of the total fo r the country as compared with 40 per
cent on the September certificate issue.

ML N
IL IO S
O OLA S
F OL R

Security Markets
D u rin g most o f November, as in other recent months,
the

Government

security

market

on

the

whole

was

characterized by general price steadiness and light trad­
ing activity.

Substantial purchases of Government se­

curities b y the Federal Reserve Banks again contributed
to the stability o f prices.

U p to the time o f the an­

nouncement on Novem ber 20 o f the T rea su ry ’s December
financing program , prices o f
practically no movement.

Treasury bonds showed

Thereafter some decline oc­

curred in the premiums on the longer term Treasury
bonds (callable in 1952 or la te r ), affected by the forth ­
194
-1

1942

Aggregate Dollar Amount Deducted for Purchases of War SaTixvgs
Bonds Under Payroll Savings Plans, as Reported by U. S. Treasury




coming issue o f 2 y 2 per cent bonds o f 1963-68.

The

shorter term Treasury bonds and Treasury notes re­
mained fa irly steady throughout the month.

Y ield s on

FEDERAL RESERVE B AN K OF N EW YO R K

93

the fou r issues of certificates of indebtedness now out­
standing tended downwards as the month progressed;
the average rate at which new Treasury bill offerings
were sold continued slightly below the % per cent bu y­
ing rate of the Federal Reserve Banks.
M unicipal bond prices, which had been rising steadily
since early this year, leveled off in November.

The aver­

age yield on prime municipal bonds computed by Stand­
ard and P o o r’s Corporation held steady at 2.20 per cent
between October 21 and November 25.

Prices of high

grade domestic corporation bonds were generally little
changed in November, follow ing a slight firming tend­
ency in October.
The rise in stock prices which started last M a y con­
tinued on through November 9, when prices, as meas­
ured by the Standard and P o o r’s index of 90 stocks,
reached the highest point since October, 1941.

This high

point in prices was accompanied by the heaviest turn­
over for any day this year.

Index of Production and Trade in the United States (Federal
Reserve Bank of New York index expressed as a percentage of
estimated Ion? term trend and adjusted for seasonal variation)

F ro m this high level stock

prices drifted gradually lower during the rest of N ovem ­
ber and, at the end o f the month, their general level

repairs; nevertheless, the mills operated at nearly fu ll
rated capacity.

Electric power production appears to

was slightly lower than that at the end of October.

have reached a new record level in November, the daily

New Security Issues

the month averaged about the same as in October, while

output of crude petroleum during the first three weeks of
the m ining o f bituminous coal appears to have fallen off
Corporate and municipal new security financing de­
clined still further during Novem ber to about $34,000,000,
a new low level fo r recent years.

Corporate issues

amounted to only $12,000,000, as compared with the low
previous average of $58,000,000 fo r July-O ctober.

A s in

the preceding month, only a negligible amount of funds
was raised fo r new capital purposes during November.
M unicipal awards aggregated about $22,000,000.
The bulk of the corporate total was accounted fo r by
the private sale to institutional investors of $11,000,000
Champion Paper and Fibre

Com pany first mortgage

3 % per cent bonds due in 1957.

The largest municipal

slightly.

A fte r reaching their fa ll peak in October, load­

ings of railw ay freight declined somewhat in the early
weeks o f November.
E a r ly in Novem ber the W a r Production B oard an­
nounced a new plan— known as the Controlled Materials
Plan— designed to control the flow of critical materials
into war production. The present priority system, includ­
ing the Production Requirements Plan, w ill be gradually
replaced.

The first materials to be allotted under the

new plan are steel, copper, and aluminum.
P RC N
E ET

offering was that of $4,258,000 C ity o f Detroit refunding
bonds, m aturing serially from 1944 to 1956, priced to
yield from 0.75 to 2.10 per cent.
Tem porary financing, not included in the above totals,
amounted to $62,000,000. The $55,500,000 Federal Inter­
mediate Credit B ank 0.70 and 0.80 per cent consolidated
debentures,

m aturing in June

and

September,

1943,

comprised the bulk of this total.

Production and Trade
Judging from prelim inary data, industrial activity in
November appears to have at least maintained the record
level reached in October.

W e ek ly estimates o f steel pro­

duction indicate that there was some reduction from the
record tonnage produced in the preceding month, pre­
sum ably owing to the closing down of some furnaces fo r




Indexes of Production of Transportation Equipment and Machinery,
Adjusted for Seasonal Variation (Board of Governors of the Federal
Reserve System data; 1935-39 average=100 per cent)

M ONTHLY REVIEW, DECEMBER 1, 1942

94
P

r o d u c t io n

and

T

rade

O

in

processing plants.

ctober

On the whole, m anufacturing work­

D u rin g October the m onthly index of production and

ing forces were 1 % per cent larger than in September.

trade computed at this bank rose one point to a record

Factory payrolls in the State rose 3y 2 per cent in the

high of 121 per cent of estimated long term trend, as is

same period.

indicated on an accom panying chart.

during the month by shipyards and plants m anufactur­

The index stood

Large numbers o f workers were hired

Industrial

ing aircraft, tanks, and electrical goods, but employment

production moved into new high ground in October, and

in most consumers’ goods plants was unchanged or some­

retail trade in general was slightly above the September

what lower than in September.

level, when seasonal factors are considered.

1941, factory em ployment was

eleven points above the level a year earlier.

E videncing the mounting production of war goods, the

Compared with October,

6y 2

per cent higher, while

payrolls were 31 per cent greater, reflecting a rise of

component index of output of producers’ durable goods

2 2 y 2 per cent in average weekly earnings during the

advanced seven points further in October. The continued

year.

rise in this index has been due very largely to the increas­

A s the accom panying diagram shows, Upstate New

ing activity of the m achinery and transportation equip­

Y o rk has benefited much more from the defense pro­

ment industries in which the production of war goods is

gram and war production than has New Y o rk

so h ighly centered.

The rapid advances which these

A lthough the em ployment gains in the U pstate region

industrial grouj)s have made since the inauguration of

have tended to taper off in the past year, during October

City.

working forces there were 8 per cent larger than a year
1941

1942

October August

Sept.

previous, while in New Y o rk C ity the year-to-year gain
October

was only 3 y 2 per cent.

The various Upstate industrial

areas are for the most part well fitted to do war work,

Indexes of Production and Trade*

(100 = estimated long term trend)
Index of Production and Trade...............

110

120

120p

121p

but N ew Y o rk C ity is handicapped by the predominance

Production.............................................

116

128

128p

130p

o f consum ers’ nondurable goods production, by

Producers' goods— total....................
Producers’ durable goods..............
Producers’ nondurable goods........
Consumers’ goods— total..................
Consumers’ durable goods............
Consumers’ nondurable goods. . . .

160
191
126

128
138
118

88
39
104

103
95
105

162p
194p
126p
87p
36p
103p

166p
201p
126p
86p
37p
102p

Durable goods— total........................
Nondurable goods— total..................

125
111

146
113

148p
113p

153p
112p

Primary distribution.............................
Distribution to consumer.....................
Miscellaneous services..........................

116
94
103

135
91
129

137p
89p
128p

139p
90p
129p

109

118

118

119

Cost of Living, Bureau of Labor Statistics

(100 —1935-39 average)............................

the city.

O ut o f 27,200 New Y o rk C ity factories listed

by the 1939 Census o f M anufactures, 26,400 or 97 per
cent employed fewer than 100 persons, and 46 per cent
employed not more than five workers.

(100 = 1926 average).................................

126

140

142p

cent o f the total volume of war orders awarded up to
A u gu st, 1942, although in 1939 it produced over 7 per
cent of the n ation ’s manufactures.

A t the present time

69
90

71
87

69
85

p Preliminary.

on production

of

civilian goods are seriously affecting the c ity ’s industries.

Velocity of Demand Deposits*

(100 = 1935-39 average)
New York City.........................................
Outside New York City...........................

A s a result of

these factors, New Y o rk C ity received only about 2 per

material shortages and restrictions

Wage Rates

high

costs, and by the relatively small size of most plants in

A ccording to the U nited States E m ploym ent Service,
60
81

P RC N
E ET

* Adjusted for seasonal variation.

the National defense program in the summer of 1940 are
shown on an accom panying chart.

D u rin g October the

output of producers’ nondurable goods, and o f con­
sum ers’

goods— both

durable

and

nondurable— was

m aintained at approxim ately the September level.
In retail trade, sales by department stores, m ail order
houses, and variety chain store systems, after allowance
for seasonal factors, were somewhat higher in October
than in September, whereas grocery chain store sales
declined slightly.

Employment and Payrolls
D u rin g October continued increases in em ployment
at New Y o rk State factories producing war goods more
than offset seasonal layoffs by canneries and other food




Factory Employment in New York City and Upstate New York,
Without Adjustment for Seasonal Variation (1935-39
average=100 per cent)

95

FEDERAL RESERVE B A N K OP N EW YO R K

New Y o rk C ity now has approxim ately 200,000 unem­
Percentage change 1942
Year of production compared with
1942
record
Production output
Production
1941
of major (through
in
Production
1941)
crops*
record year

ployed— a decided contrast to most other industrial areas
where labor shortages either are imminent or already
exist.
In the U nited States as a whole, the number of persons
at work in October was estimated by the Bureau o f the
Census at 52,400,000, the same as in September, but a
gain of 2,200,000 from October, 1941.

The year-to-year

increase was about evenly divided between agricultural
and nonagricultural pursuits.

U nem ploym ent declined

Cotton (1,000 bales of 500 lbs.)
Tobacco (1,000,000 lbs.).........
Potatoes (1,000,000 bu.)..........
Oats (1,000,000 bu.)................
Wheat (1,000,000 bu.)............
Corn (1,000,000 bu.)................
Sugar beets (1,000 tons)..........
Hay, tame (1,000,000 tons). . .
Peanuts (1,000,000 lbs.)..........
Soybeans (1,000,000 bu.)........

13,329
1,436
380
1,370
984
3,185
12,784
92
2,811
210

1937
1939
1928
1920
1915
1920
1940
1940
1940
1941

+24.1
+13.9
+ 6.1
+16.5
+ 4.0
+19.2
+24.0
+12.2
+90.3
+96.3

-2 9 .6
-2 3 .4
- 9.5
- 5.1
- 2.5
+ 3.7
+ 4.0
+ 8.2
+60.6
+96.3

further to an estimated 1,600,000 persons, the lowest
level in recent years.

Despite large withdrawals fo r the

♦Preliminary estimates based on conditions as of November 1; U. S. De­
partment of Agriculture.

armed forces, the total labor force has remained at ap­
proxim ately the year earlier level through the entrance
into the labor force of m any housewives, students, and
others not norm ally or form erly employed.

I t is interest­

ing to note that although the number o f men in the total
labor force was 1,400,000 less than in October, 1941, this
decrease was almost entirely offset by the increasing

this y e a r ’s crop o f soybeans and peanuts, the production
of which has been stim ulated sharply as sources of vege­
table oils, is nearly twice as large as in 1941.
The average living costs o f wage earners and lower
salaried workers in urban centers rose 1 per cent further
between September 15 and October 15, according to the
B ureau o f Labor Statistics index. This increase was due

number o f women workers.

largely to advances in retail food prices which occurred
late in September and early in October, prior to the action

Commodity Prices

of the Office of Price A dm inistration bringing under
W holesale

commodity prices were relatively stable

control an additional 30 per cent of fam ily food ex­

during November, although the B ureau of Labor Sta­

penditures.

tistics comprehensive weekly index of prices went up

September 1 advanced only fractionally between m id-

slightly. This increase reflected advances in the prices of

September and mid-October, while those placed under

some agricultural products, particularly corn, certain

control on October 5, as well as the remaining items not

Retail prices o f foods under control before

permitted upward adjustm ents in price ceilings, and

under regulation, increased nearly 6 per cent in this

higher prices on tobacco products and alcohol, due to the

period.

addition to prevailing quotations of new Federal excise
taxes.

Prices for wool and hogs tended to show declines

for the month.

In response to the heavy seasonal market­

ings of this y e a r ’s record pig crop, hog quotations reached
the lowest levels since March.

Building
In New Y o rk and Northern New Jersey the volume o f
contracts awarded fo r factory construction during the
first ten months o f the year was almost one-fifth greater

Based on conditions as of November 1, the Departm ent
of A griculture confirmed its earlier estimates of a record
output this year fo r agriculture as a whole.

I t was indi­

than fo r the whole o f 1941, according to the reports of
M L N
IL IO S
O OLAS
F OL R

cated that the 1942 production o f corn, hay, fru its, com­
mercial vegetables, oilseed, sugar crops, livestock, poultry,
milk, and eggs would be unprecedented. The 1942 cotton
crop was placed at 13,329,000 bales, based on conditions
as of November 1.

This estimate, while 2,585,000 bales

larger than last y e a r ’s harvest, is about 700,000 less than
the forecast of two months earlier, owing among other
factors to excessive rain fall and labor shortage.
The

accom panying

table

shows

the

Federal

Crop

Reporting B o a r d ’s estimates of the 1942 output o f ten
m ajor crops which in 1940 were the source of about 60
per cent of the cash agricultural income from all crops.
The production of five of the ten crops is expected to be
at record levels this year, wT
hile increases over the 1941
levels are indicated fo r all of the items. The estimate o f




Annual Value of Construction Contract Awards in New York State
and Northern New Jersey (F. W . Dodge Corporation data)

M ONTHLY REVIEW, DECEMBER 1, 1942

96

D u rin g the last two

September level to reach 115 per cent of the 1923-25

years the volume of contracts awarded fo r such purposes

average, and were only slightly below the relatively high

the F . W .

Dodge

Corporation.

has reached record levels as a direct result of the war

level of September, 1941.

construction program. A s the accom panying chart shows,

three weeks of November, indicate that sales in this

Estim ates based on the first

the increase during these years represents the m ajor

month rose by about the usual seasonal amount over the

plant expansion undertaken in this area during the

October average. This b a n k ’s seasonally adjusted indexes

period from 1925 to 1942.

In fact, the 1941 total and

of department store sales and stocks are shown on the

the estimated total fo r 1942 are about equal to the total

accom panying chart from 1939 through October, 1942.

volume of factory building contracts awarded during the

Stocks on hand, which evidenced a fa irly steady gain

fourteen year period from 1927 through 1940.

from 1939 through M ay, 1941, rose rapidly to a record

Roughly

three quarters of such contracts awarded during 1941

high level in Ju ly, 1942, but in each month since they

and the first ten months of 1942 were Government con­

have shown a decline.

tracts fo r war plant construction.

however, is still 67 per cent above M ay, 1941.

The index fo r October, 1942,

The movement of contract awards fo r residential build­

Large year-to-year gains in sales during October were

ing in this area presents a strikingly different picture.

made in practically all localities in this D istrict, and for

A lth ou gh the volume of such contracts increased some­

the first ten months of this year, total sales of the report­

what after 1934, it never approached the record level of

ing department stores in the Second Federal Reserve

the twenties and since 1939 it has fallen off almost 50

D istrict were 7 per cent higher than in the correspond­

per cent.

ing ten months of 1941.

D u rin g 1942 the volume of awards fo r private
pri­

Figures received from a lim ited number of depart­

m arily to restrictions on nonessential building and the

ment stores in this District indicate that at the end of

shortage of certain building materials.

The volume of

October outstanding orders fo r merchandise purchased

awards fo r public residential building, though consider­

by the stores, to be delivered to them at a later date, were

residential building

has

declined sharply

owing

ably higher than in 1941, has not been large enough to

about 8 per cent below October, 1941, but were slightly

offset the fa ll in private building.

higher than in either A u gu st or September, 1942.

A ll o f the decline in

residential building during 1942 has occurred in the
Percentage changes from a year earlier

Metropolitan New Y o rk and Northern New Jersey area.
In contrast, the volume o f contracts fo r such projects

Department stores

Net Sales

awarded in Upstate New Y o rk during the first ten months
October,
1942

o f 1942 was two-thirds greater than in the corresponding

Stock on
hand,
Jan.through October 31,
October, 1942
1942

period of 1941.
New York City.....................................
Northern New Jersey...........................

All department stores................

Total department store sales in this D istrict during
October showed more than the usual advance over the
PERCENT

+ 6
+ 4
+ 6
+12
+14
+ 4
+ 7
- 1
- 8
+12
+25
+ 8
- 4
+ 9
+ 6
H
12
-12
-13
1-36
+ 9

+16

+ 7

+22

Apparel stores............................

Department Store Trade

+18
+ 8
+12
+20
+21
+15
+17
+ 8
- 1
+22
+38
+17
+13
+17
+15
+10
+18
+21
+48
+13

+16

+ 6

+ 8

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

+26
+19
+21
+10
+ 11
+ 1
- 3
—
+11
+36
+ 4
+15
—
+17
+18
+11
+16

Indexes of Department Store Sales and Stocks, Second Federal Reserve Distriot
(1923-25 average = 100)
1941

1942

October

Indexes of Sales and Stocks of Reporting Department Stores in the
Second Federal Reserve District, Adjusted for Seasonal Variation
(1923-25 average=100 per cent)




August

Sept.

October

Sales (average daily), unadjusted...............
Sales (average daily), seasonally adjusted..

112
99r

93
123

120
112

130
115

Stocks, unadjusted........................................
Stocks, seasonally adjusted r . ....................

128
116

162
165

161
156

158
145

r Revised.

FEDERAL RESERVE B AN K OF N E W

YORK

M O N THLY REVIEW , DECEMBER 1, 1942

General Business and Financial Conditions in the United States

(S u m m arized b y th e B o ard of G overnors o f th e F e d eral R eserve S ystem )
I N D U S T R IA L o u tp u t expanded fu rth e r in O ctober a n d th e first h a lf of N ovem ber.
R e ta il foo d prices continu ed to advance w hile prices of other com m odities generally
show ed little change. D istrib u tio n o f com m odities to consum ers w as m ain tain e d in
larg e volum e.
P r o d u c t io n

Index of Physical Volume of Industrial Produc­
tion, Adjusted for Seasonal Variation (193539 average=100 per cent)

In d u s tria l p ro d u ctio n continu ed to advance in O ctober an d th e B o a rd ’s seasonally
a d ju ste d index rose 3 p o in ts to 188 p er cent of th e 1935-1939 average. G ains in arm am en t
p ro d u ctio n accounted fo r m ost of th e increase, a n d it is estim a te d th a t c u rre n tly well
over 50 p e r cent of to ta l in d u stria l o u tp u t is fo r w ar purposes. I n lines p ro d u cin g du rab le
m an u fa ctu re s, a p p ro x im ately 80 p er cent of o u tp u t now consists of p ro d u cts essen tial to
the w ar effort.
S teel o u tp u t reached a new h ig h level in O ctober as p ro d u ctio n expanded to 100 per
cent of ra te d capacity . I n th e first h a lf of N ovem ber o u tp u t declined slig h tly to aroun d
99 p e r cent, reflectin g some shutdow ns fo r fu rn ac e re p a irs, according to tra d e rep o rts.
A c tiv ity in in d u stries pro d u cin g no ndu rab le goods declined less th a n seasonally in
O ctober. P ro d u c tio n of foods, especially cann ing , w as un usually larg e fo r th is tim e of
y e ar an d o u tp u t of tex tiles continu ed a t a h ig h level. M ineral pro duction , w hich usually
increases in O ctober, declined slig h tly th is y e ar ow ing chiefly to a decrease in coal p ro d u c­
tio n w hich h ad been m ain tain e d in larg e volum e th ro u g h o u t th e sum m er.
V alue of co n stru ctio n c o n trac ts aw ard ed in O ctober increased som ew hat over th a t
o f S eptem ber, according to re p o rts of th e F . W . D odge C o rporation. P u b licly financed
p ro je c ts continu ed to account fo r over 90 p e r cent of to ta l aw ards.
T he D e p artm en t o f Com m erce estim ates th a t, in th e th ird q u a rte r of 1942, expendi­
tu re s fo r new co n struction am o unted to 4.2 billio n do llars, of w hich 3.5 billion cam e
fro m pu blic fu n d s. F o r th e first nine m onths o f th is y e ar th e correspon din g figures
w ere 10.2 an d 7.7 billio n dollars. C o nstruction o f m ilita ry an d naval fa cilities a n d of
in d u stria l b u ild in g s accounted fo r th e b u lk o f th e expenditu res.
D

Stocks, Adjusted for Seasonal Variation
(1923-25 average = 100 per cent)

is t r ib u t io n

D e p artm en t store sales increased in O ctober a n d th e B o a rd ’s seasonally a d ju ste d
index rose to 129 p e r cent of th e 1923-1925 av erag e as com pared w ith 123 in S eptem ber
an d 130 in A u g u st. In th e first h a lf of N ovem ber sales in creased fu rth e r an d w ere 17 per
cent la rg e r th a n in th e correspon din g p erio d la s t y ear, reflectin g in p a rt price advances
of a b o u t 10 p e r cent.
R a ilro a d shipm ents o f fre ig h t w ere m ain tain e d in larg e volum e d u rin g O ctober a n d
declined seasonally in th e first h a lf o f N ovem ber.
Co m m o d it y P

r ic e s

R e ta il foo d prices continu ed to a d v a n c e ' sh a rp ly fro m th e m iddle of S eptem ber to
th e m iddle of O ctober an d fu rth e r increases are in d ica te d in N ovem ber. P rice s of m ost
other goods an d services increased slig h tly in th is perio d. I n th e e arly p a rt o f O ctober
m axim um price controls w ere estab lished fo r a nu m b er o f a d d itio n a l foods. M axim um
p rice levels fo r m any o th er foo d p ro d u cts have been raised , how ever, an d th e Office o f
P ric e A d m in istra tio n re p o rts on th e basis of a recen t survey th a t in num erous instances
sellers a re n o t com plying fu lly w ith th e re g u latio n s now in effect.
B

U. S. Bureau of Labor Statistics Indexes of the
Cost of Living (1935-39 average=
100 per cent)

U

Wednesday Figures of Estimated Excess Re­
serves of All Member Banks (Latest
figures are for November 11)




an k

C r e d it

E xcess reserves of m em ber banks w ere 2.5 billio n do llars in th e m iddle of N ovem ber,
a som ew hat h ig h er level th a n generally p rev ailed in th e p reced in g fo u r m onths. A t N ew
Y ork C ity b anks excess reserves am ounted to a b o u t 500 m illion dollars.
A d d itio n s to m em ber b an k reserve balances d u rin g th e fo u r w eeks ended N ovem ber 18
w ere th e n e t re su lt of a n increase of 500 m illion do llars in R eserve B an k holdings of
G overnm ent ob ligatio ns, w hich ap p ro x im ately covered th e continu ed heavy currency
d rain , a n d a decrease of 200 m illion in T rea su ry balances a t th e R eserve B anks.
H oldings of G overnm ent securities by re p o rtin g b an k s in 101 cities increased by 1.9
billio n dollars to 24 billio n d u rin g the fo u r w eeks ended N ovem ber 11. A lm ost h a lf of
th e increase occurred a t N ew Y ork C ity banks. T here w ere su b sta n tial increases in hold­
in g s of T rea su ry notes, bonds, an d certificates, an d a sm aller increase in T reasu ry bills,
w hile holdings of g u ara n tee d ob ligatio ns declined. T hese changes reflected new offer­
in g s an d re tirem e n ts by th e T rea su ry d u rin g th e perio d.
C om m ercial an d in d u stria l loans a t re p o rtin g m em ber b an k s in lead in g cities increased
som ew hat d u rin g th e first tw o w eeks of N ovem ber. B rokers loans in N ew Y ork C ity
increased aro u n d G overnm ent financing dates, b u t sub sequ en tly declined.
n it e d

S t a t e s G o v e r n m e n t S e c u r it y P

r ic e s

P rice s o f U n ite d S ta te s G overnm ent securities w ere ste ad y in th e fo u r weeks ended
N ovem ber 18. L ong term tax a b le bonds yielded 2.32 p e r cent, an d 3 m onth T reasu ry
bills sold a t a y ield of 0.37 p e r cent.