The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
MONTHLY REVIEW
O f Credit and Business Conditions
FEDERAL
V o l.
27
RESERVE
BANK
JANUARY
OF
NEW
YORK
1945
No. 1
MONEY MARKET IN DECEMBER
The principal developments in the money market during
December were related to the Sixth War Loan drive, although
fourth quarter payments of corporation income taxes and
other Government transactions, and the holiday trade also
were factors of some consequence. The influence of the War
Loan was reflected in reduced demands for currency, in shifts
of funds between individual banks and between New York
City and other parts of the country, in a substantial reduction
in reserve requirements of member banks and some increase
in their aggregate excess reserves, and in heavy sales of out
standing Government securities by nonbank investors and
correspondingly heavy purchases by the banks.
Despite the record holiday trade, the demand for currency
in December was substantially less than a year previous, the
net increase in currency outstanding amounting to about 300
million dollars compared with close to 500 million in Decem
ber 1943. Undoubtedly the use of previously accumulated
currency to pay for War bonds during the drive partially
explains this apparent contradiction. Fairly sizable amounts
of currency have been received by the commercial banks from
subscribers during each War Loan drive and either returned
to the Federal Reserve Banks, and thus retired from circula
tion, or used to meet current demands for currency for other
purposes; in either case the effect has been to reduce the net
increase in the amount of currency outstanding in months
in which there have been War Loan drives, as the accom
panying chart indicates. Another important factor influenc
ing the rate of increase in currency outstanding has been the
use of currency to meet quarterly payments of individual
income taxes. It will be noted that particularly large reduc
tions in the flow of currency into circulation have occurred
in months when income tax dates coincided with War Loan
drives. The tax date influence was a diminishing one in 1944
and was absent in December, since the due date for payment of
the fourth instalment of 1944 individual income taxes was post
poned from December 15, 1944 to January 15, 1945. The
new factor in the situation in December 1944 apparently
was the spending of accumulated currency for holiday mer
chandise as well as the use of currency to pay for War bonds.
Reports from the stores indicate large scale spending on
luxury items, and preliminary figures indicate a substantially
larger volume o f Christmas trade than in any previous year.
If this tendency to spend hitherto hoarded currency is con
firmed it may be a force of considerable significance.
Although the demands for currency have not been as large
as had been anticipated, the reserve position of New York
City banks was not eased as much during the War Loan
drive as might have been expected. Reserve requirements of
all member banks were reduced by almost 900 million dol
lars between November 29 and December 20 through the
shift of deposits from private accounts to Government War
Loan accounts, but many member banks, especially in New
York City, entered the War Loan period with substantial
indebtedness to the Reserve Bank, and were unable to pay
off their indebtedness in full during the drive, while other
banks added to their excess reserves. The reserve position
o f some New York banks remained fairly tight, partly because
of large scale shifts of funds between banks and between
New York and other parts of the country, and partly because
o f heavy sales of securities to them by savings banks, insurEstimated Month-to-Month Changes in Currency
Outstanding*
* M oney in circulation outside the Treasury and the Federal Reserve Banks,
adjusted by Federal Reserve Bank o f New York to exclude estimated changes
in vault cash held by weekly reporting member banks; December 1944
preliminary.
(A pril 15 was also a tax date in 1944 but not in 1943.)
MONTHLY REVIEW, JANUARY 1945
2
ance companies, and other corporations to raise additional
funds for subscription to Sixth War Loan securities and to
cover corporation income tax payments on December 15.
While the outflow of funds from New York to other parts
o f the country during the War Loan drive was not as heavy
as in some previous War Loan periods, it was nevertheless
substantial, amounting to more than 750 million dollars in
the four weeks ended December 20. This outflow included
payments for a large volume of Government securities sold in
the New York market in connection with the drive, as well
as transfers of corporation funds to other parts of the country
to cover income tax payments, so that transfers of deposits
to pay for subscriptions to Sixth War Loan securities in other
districts probably were not a major factor.
The New York banks also sustained some net loss of funds
through Government transactions. An unusually large per
centage of corporation income taxes due December 15 was
paid with Treasury Savings notes, but cash payments never
theless were substantial, and the Treasury made heavy with
drawals of W ar Loan deposits in the period up to December
and changes in Reserve Bank portfolios, the extent to which
bank credit financed Sixth War Loan subscriptions has been
somewhat greater, in relation to sales, than in the preceding
drive. Some measure of success in eliminating speculative
subscriptions financed largely with bank loans was achieved
this time, and total loans on Government securities extended
by the weekly reporting member banks rose by slightly less
than 1,700 million dollars in the six weeks ended December
20, compared with more than 1,900 in the corresponding
period which included the Fifth War Loan (six weeks ended
July 12). The increase in loans to borrowers other than
brokers and dealers was approximately 130 million dollars
less in the Sixth drive than in the Fifth, and the increase in
loans to brokers and dealers was nearly 100 million less.
Moreover, loans to security brokers and dealers reached a
peak earlier in the course of the Fifth Loan than in this one,
and some liquidation had occurred by July 12; at the peak
on June 28, the rise in brokers and dealers’ loans was nearly
200 million dollars greater than was reached at any point
in the Sixth campaign.
16.
In the latest six-week period, however, Government security
holdings of the weekly reporting member banks, other than
Treasury bills, increased by almost 334 billion dollars, nearly
200 million more than in the earlier period. Furthermore,
the Reserve Banks purchased an unusually large volume of
securities during the Sixth War Loan period, partly to main
tain reasonably stable market conditions by absorbing some
of the securities which were in heavy supply (chiefly certifi
cates), and partly to furnish member banks with needed
reserves. In the six weeks ended December 20, Reserve
Bank holdings of Treasury certificates and notes increased
by about 1,140 million dollars, compared with an increase
of 240 million in Treasury securities other than bills in the
six weeks ended July 12. For the banking system as a whole,
including Federal Reserve Banks as well as all member and
nonmember commercial banks, it may be estimated that the
expansion in holdings of Government securities and in loans
on such securities in connection with the Sixth War Loan
aggregated more than 9 billion dollars.
In these circumstances the New York City banks were
unable to exercise their options to repurchase Treasury bills
from the Reserve Bank in any such volume as in previous
War Loan drives. Much the same situation seems to have
prevailed in other principal cities, as weekly reporting mem
ber banks in 101 cities showed an increase of only 563 mil
lion dollars in their Treasury bill holdings in the six weeks
ended December 20, compared with 1,324 million in the six
weeks ended July 12 (the Fifth War Loan period). The
two factors chiefly responsible were, first, the large volume of
selling of other securities by nonbank investors which the
banks were called upon to absorb and, second, an excess of
Treasury cash receipts over disbursements of nearly one bil
lion dollars in the two weeks ended December 20. As a
result of the suspension of Treasury withdrawals of funds
from War Loan deposit accounts in the latter part of the
month, however, Government disbursements exceeded receipts
in the last week of the month and the reserve position of
member banks became somewhat easier. A large part of the
remaining member bank indebtedness at the Reserve Banks
was repaid by the year end, some banks repurchased addi
tional Treasury bills from the Reserve Banks, and excess
reserves of all member banks rose to 1,400 million on Decem
ber 27, compared with 900 million before the War Loan
drive.
B a n k C redit
in t h e
Six t h W
ar
Lo a n
Bank credit played a substantial part in the large sales total
reached in the Sixth War Loan drive. By extensive purchases
of outstanding Government securities, the banks have made
substantial amounts of funds available to nonbank investors
for subscription to the new issues offered in the drive. Judg
ing from changes in the Government security holdings and
loans of the weekly reporting member banks in 101 cities
Considerable change has occurred in the type of securities
acquired by the banks during the Sixth War Loan in contrast
to preceding ones, of which the Fifth may be considered
more or less typical. In the six weeks ended December 20,
the weekly reporting member banks increased their holdings
of Treasury certificates and notes (which must be considered
together because of the refunding on December 1 of a matur
ing certificate with a 13-month note issue) by 2,100 million
dollars, compared with 2,500 million in the six weeks ended
July 12. During the recent period, however, these banks
absorbed more than 1.6 billion dollars of Government bonds,
or 600 million more than in the corresponding six weeks of
the Fifth War Loan campaign. Part— perhaps as much as
150 to 200 million dollars— of the increase in bond holdings
of reporting banks over the period of this War Loan may be
FEDERAL RESERVE BANK OF NEW YORK
attributed to the fact that the provisions for direct bank sub
scriptions to restricted drive issues for the investment of time
deposits were liberalized. (For all commercial banks, these
subscriptions amounted to about one billion dollars, com
pared with three quarters of a billion in the Fifth drive.)
But for the most part the increased bank purchases of Treasury
bonds during the Sixth War Loan appear to reflect accelera
tion of a gradually developing trend toward the purchase of
longer term, higher yielding securities. This is the counter
part of a developing trend at other investing institutions,
such as savings banks, which have shown an increasing ten
dency to sell Treasury bonds acquired in previous drives in
order to take advantage of market premiums and to raise
additional funds for the purchase of new issues at par. The
undesirable aspects of these trends are obvious.
S IX T H W A R LO AN
Despite a goal 2 billion dollars lower thaQ for the Fifth
drive, it appears that the final total for the Sixth War Loan
exceeded the 20.6 billion record established in the preceding
drive. According to a Treasury Department announcement,
subscriptions to the Sixth drive securities tabulated through
December 22 compared as follows with the respective goals:
In billions of dollars
Investor class)
Individuals
Series E Savings b o n d s .......................
Other securities......................................
Per cent
of goal
achieved
Goal
Sales
2 .5
2 .5
2 .1
2 .9
84
116
100
T o t a l ...................................................
5 .0
5 .0
Corporations and other investors...........
9 .0
15.4
171
Total for all investors...........................
14.0
2 0.4
146
Although subscriptions to marketable issues were accepted
only during the period November 20-December 16, sales of the
nonmarketable securities (Savings bonds and Savings notes)
from November 1 through December 30 were counted toward
the drive. Sales of the nonmarketable issues during the last
week o f December probably raised the drive total to at least
21 billion dollars and carried Series E Savings bond sales above
their quota.
It is estimated that final drive totals will show sales to indi
viduals of about 5.6 billion dollars; this would be 112 per
cent of the quota but would represent a decline of around
0.8 billion from the corresponding total for the Fifth drive,
about equally divided between sales of Series E Savings bonds
and other securities. Subscriptions by corporations and other
investors are likely to amount to 15.6 billion dollars, which
would be 173 per cent of the quota and 1.3 billion more than
in the preceding drive.
Based upon preliminary calculations, it appears that the net
absorption o f Government securities by nonbank investors
during November and December was nearly the same as dur
ing last June and July, the period of the Fifth War Loan. A
slightly smaller amount of commercial bank credit was em
3
ployed than during the Fifth drive, but more Federal Reserve
credit, mainly in the form of purchases of Government obliga
tions, was required to absorb securities sold by nonbank
investors and to provide member banks with the reserve funds
they needed.
Owing to book credit payments for War Loan securities,
the Treasury’s War Loan account balance had risen to 20
billion dollars by December 28, an increase of about 14 bil
lion over the low point reached toward the end of November.
As no calls were made in the closing days of December the
balance probably reached about 20.2 billion dollars by Decem
ber 30. This amount would be within about 700 million of
the peak reached in the Fifth drive.
According to press reports, Sixth War Loan subscriptions
credited to New York State amounted to 6.5 billion dollars on
December 28, thus exceeding by a substantial margin both the
original goal o f 4.2 billion and the recently revised one of
5.3 billion. The goal o f 800 million dollars for sales to indi
viduals was exceeded, although Series E Savings bond sales had
not reached their quota by December 28.
B A N K C R E D IT E X P A N SIO N IN
W O R LD W A R S I A N D II
Commercial bank participation in the financing of the pres
ent war differs greatly from that of the first W orld War, not
only in extent, but also in character. During the four years
ended June 30, 1944, total loans and investments of all com
mercial banks increased 54.6 billion dollars, or 133 per cent,
compared with an increase in the four years ended June 30,
1919 of 14.2 billion, or 82 per cent. Of this increase, 95 per
cent took the form of investments in Government securities
and less than 7 per cent was in loans (securities other than
"Governments” declined), whereas in the first World War
62 per cent of the increase was in loans and only 30 per cent
was in Government securities. These differences are accounted
for mainly by three factors:
1. The vastly greater magnitude and cost of the present
war, and the consequent difficulty of financing as large
a part of the cost through taxes and sales of securities
to the public;
2. The change in war financing methods, which this time
avoided the "Borrow and Buy” feature of W orld War I;
3. The much larger part of war plant and production costs
financed directly by the Government this time, instead
of by bank loans to industry, as in the previous war.
In the four years ended June 30, 1944, the Government
spent 200. billion dollars for war purposes, or about eleven
times the war outlays of the four years ended June 30, 1919;
total expenditures amounted to 222 billion, compared with
less than 34 billion. In meeting these huge financial require
ments, the Treasury covered a somewhat larger proportion of
total expenditures through taxes in the second war than in
the first— 39 per cent as against 32 per cent. Although the
Treasury has succeeded in increasing the proportion of
4
MONTHLY REVIEW, JANUARY 1945
Government Financing in World Wars I and II
June 30,1915 to June 30,1919 compared with June 3 0 ,19401to June 30,1944
In billions
of dollars
Item
Per cent of
total expenditures
W orld
W ar I
W orld
W ar II
W orld
W ar I
W orld
W ar II
Financial requirements
Total expenditures..............................
Increase in working balance.............
Total funds raised............................
33.9
1.1
35.0
222.0
18.1
240.1
100.0
3 .2
103.2
100.0
8 .2
108.2
Source of funds
Taxes and other revenues..................
B orrow in g..............................................
Nonbank investors..........................
Commercial b an k s...........................
Federal Reserve B an ks..................
10.8
24.2
19.7
4 .3
0 .2
86.8
153.3
88.9
51.9
12.5
31.8
71.4
58.1
12.7
0 .6
39.1
69.1
40.1
2 3.4
5 .6
expenditures covered by tax receipts in this war, it has never
theless had to place greater relative reliance upon bank credit
in financing the current conflict than was necessary in the
earlier one. Of the total funds required to meet expenditures,
taxpayers and nonbank investors ( including Government
agencies and trust funds) have supplied 79 per cent during
the second war as against 90 per cent during the first.
Of the funds raised through borrowing, only 58 per cent
was contributed by nonbank investors in the present war
compared with 81 per cent in the preceding one. However,
it should be remembered that in the first W orld War the
practice of borrowing from banks to purchase Government
securities was much more common than in the present conflict,
thus inflating the apparent absorption of Treasury securities by
nonbank investors in that period. Excluding the increase in
bank loans on Government obligations during both wars, the
spread between the two periods is narrowed considerably,
purchasers other than banks accounting for 56 per cent of all
Treasury borrowing in the current conflict compared with
72 per cent in the preceding one. In other words, the com
paratively small scale o f credit financed purchases of Govern
ment securities by nonbank investors has been one factor in
the smaller proportion of Government expenditures covered
this time by taxes and the absorption of Treasury securities by
nonbank investors combined.
Bank loans on Government securities have been subject to
wide variation during the current war period, rising rapidly
during War Loan drives and falling between drives, so that
over an extended period there has been only a moderate
increase in their general level. The expansion between June
30, 1940 and June 30, 1944 as shown in the accompanying
table is greatly exaggerated because Government security
loans were at a relatively high level on June 30, 1944 which
fell in the middle of the Fifth War Loan drive. At the high
level on that date the dollar volume of Government security
loans exceeded that reached in World War I, but it was much
smaller relative either to the total increase in bank credit or
to the increase in the Federal debt. In contrast to the "Borrow
and Buy” slogan of the Liberty loans, credit purchases of
Government obligations by nonbank investors have been a
minor factor in financing World War II owing to a number
o f factors including (1 ) the discouragement of bank loans to
finance subscriptions except under restricted conditions, (2 )
the widespread adoption by individuals of the payroll deduc
tion plan of acquiring Government bonds, (3 ) the substantial
cash assets held by corporations at the outbreak of the war
together with their wartime accumulations of funds for tax
payments and other purposes, a large part of which has been
available for temporary investment in tax notes and other
short term securities, (4 ) the marked interwar growth of
institutional investors such as life insurance companies and
mutual savings banks, and (5 ) the growing importance of
Government agencies and trust funds as investors in Govern
ment securities.
Another factor, probably more important than the limited
use of security loans in restricting the proportion of Treasury
security issues absorbed by the public, has been the predilec
tion of the public to accumulate large amounts of idle funds,
thus making it necessary for the banks to absorb an increased
proportion of the increase in the public debt. Large currency
hoards have been accumulated as savings, for tax avoidance,
and as a method of concealing black market transactions. In
addition, the public has built up large demand and time
deposits in banks.
There has been little expansion of loans other than security
loans during the current war period, the net increase amount
ing to only 600 million dollars, compared with 6.5 billion in
W orld War I. In contrast to the last war, the high degree of
economic mobilization attained during this conflict has
brought about a marked contraction in bank loans for nonwar
purposes. This curtailment has barely been offset by the
expansion o f loans to war contractors. The smaller demand
for business loans in this war is attributable largely to differ
ences in the methods of financing war production; a much
larger part has been financed by the Government, resulting in
increased Treasury borrowing and reduced business borrowing.
Thus the banks have financed war production more largely
through purchases of Government securities, and to a reduced
extent through loans to industries and purchases of corpo
rate securities. A major portion of the war production financ
ing has been accomplished through advance and progress
payments made by the Federal contracting agencies to war
contractors. At the same time, war plants have for the most
part been constructed at Government expense. Such wartime
Increases in Loans and Investments of
All Commercial Banks in World Wars I and II
June 23,1915 to June 30,1919 compared with June 30,1940 to June 30,1944
In billions
of dollars
Item
W orld
W ar I
W orld
W ar II
Per cent of
total loans
and investments
W orld
W ar I
W orld
W ar II
Secured b y Government obligations*
A ll other loa n s......................................
8 .8
2 .3
6 .5
3 .6
3 .0
0 .6
61.9
16.1
45.8
6 .6
5 .5
1.1
Total investm ents....................................
Government securities........................
Other securities....................................
5 .4
4 .3
1.1
5 1.0
5 1.9
-0 .9
38.1
30.4
7 .7
9 3 .4
9 5 .0
-1 .6
T otal loans and investm ents.................
14.2
54.6
100.0
100.0
* Estimated.
( —) Decrease.
5
FEDERAL RESERVE BANK OF NEW YORK
expansion of plant and equipment as has been undertaken by
private enterprise has been financed initially with available
business funds and paid for through charges to current
expense, made possible by the accelerated depreciation rates
allowed by law for war production facilities. Business, further
more, relied heavily on the commercial banks for working
capital in the last war, so that the increased industrial activity
induced by the war quickly led to an expansion of business
borrowing from the banks. In contrast, the larger corpora
tions entered upon the period of the second World War with
substantial cash balances accumulated out o f retained earnings
in preceding years.
One other factor in the smaller proportion of Treasury
borrowings supplied by nonbank investors or, conversely, in
the greater reliance of the Treasury on the banking system in
this war, may well be found within the banking system itself.
The existence of a huge volume of excess reserves at the outset
of the war led the banks actively to expand their earning
assets. The moderate decline, over the war period, in other
investments of the banks due to the retirement of debt by
States, municipalities, and some corporations, and the decline
in bank loans outside the large cities after 1941, created a need
for earnings and left Government securities as the only alter
native outlet for idle funds.
N EW C O R PO R A TE FIN AN CIN G
On the basis of preliminary calculations, which indicate
that new domestic corporate financing aggregated approxi
mately 3,065 million dollars during 1944, it is evident that
the market for new security issues has just completed its
most active year since 1936. In both 1942 and 1943 the
total was little more than one third that of the past year. New
capital accounted for 698 million dollars, or less than one
fourth of the total; this amount was nearly double the 1943
figure and slightly larger than the 1942 volume, but otherwise
was smaller than in any year since 1935 with the exception
of 1939.
As may be noted in the accompanying chart, the trend of
corporate financing was upward throughout the year owing
mainly to a rapid expansion of refunding operations; during
the fourth quarter the monthly volume of domestic corporate
issues was about on a par with that for the calendar year 1930,
and, what is even more striking, was actually in excess of the
monthly average rate during the decade of the twenties.
About half of the year’s new financing occurred during the
months of September, October, and November, partly as a
result of efforts of investment bankers and issuers to bring
offerings to the market in advance of the Sixth War Loan
drive. The October volume o f new financing, at 741 million
dollars, surpassed that of any month in more than 14 years
and included three issues in excess of 100 million of which the
180 million Commonwealth Edison Company refunding
operation (155 million offered to the public) represented the
largest single piece o f corporate financing consummated under
the provisions of the Securities Act of 1933 and was reported
Monthly Average Volume of Domestic Corporate Security
Issues for Refunding and for New Capital*
of'dollars
4001 —
—
V//ARefunding
H j N e w C apital
rrnji
/// -
------------------------------------------------------------------------------------------------------------------------------------------------V
Year
Quarter
Oluarier
1943
1944
* Figures fo r Decem ber in fourth quarter of 1944 estimated by Federal
Reserve Bank o f New York.
Source: Commercial and Financial Chronicle.
to be the largest public offering (other than to stockholders)
of corporate securities in history.
Nearly 90 per cent of the 1944 volume of new security
issues was accounted for by the railroads, public utilities, and
the group classified by The Commercial and Financial
Chronicle as "other industrial and manufacturing.” More than
half o f the total for the last named category represented new
capital but the bulk of the funds raised by the other two
groups was for refunding purposes.
The expansion in the volume of new corporate financing
during 1944 was probably the result of a number of favorable
factors. The maintenance, through Government financing
activities supported by the Federal Reserve System, of a low
level o f interest rates made refunding operations profitable;
and flotations were facilitated both by the plethora of funds
seeking investment and by an unusual degree of stability in
interest rates. The yields on highest grade corporate bonds
(those rated Aaa by Moody’s Investors Service) moved within
a very narrow range, close to their all-time low, while yields
on medium grade issues declined rather steadily, to successive
new low points, throughout the year. The profitableness of
recent refundings at lower interest rates is indicated by the
fact that several companies floated issues to redeem bonds
which had originally been issued no more than six to eight
years ago and which could be called for redemption only at a
substantial premium. Another factor in some cases was a
further improvement in the earnings and financial condition
of the borrowers which enabled refunding operations, or flota
tions for new money, to be undertaken. It appears that
security issues to raise new capital for reconversion to peacetime operations accounted for only a small part o f the total.
The increased activity in recent months in the market for
new security issues does not seem to have exhausted the possi
bilities for further corporate financing even for the near future.
According to current reports, a number o f large scale opera
tions are planned for early 1945.
6
MONTHLY REVIEW, JANUARY 1945
P O S T W A R E M P LO Y M E N T PROBLEM S
SECOND F E D E R A L RE SER V E D ISTR IC T
In the postwar period the ability to absorb the large ilumber of workers released from war work and from the armed
forces will vary from State to State. Postwar capacity to
provide employment does not necessarily depend on actual
employment levels in the various States. Comparisons of the
probable number of persons released from war activities with
the volume of prewar employment are, however, a convenient
starting point for analysis.
The postwar employment problem may not be as severe
in New York State as for many other regions in the country
where there has been a large net in-migration during the war
period, or where employment will be seriously affected by cut
backs in one major industry. The State as a whole, according
to the Bureau of the Census, experienced a net out-migration
between April 1940 and November 1943 of 222,970 persons,
1.6 per cent of the 1940 population. The relative stability
of the population in this period is in sharp contrast to the
rapid increases which occurred between 1920 and 1930, when
population in the State was growing at a faster rate than for
the country as a whole, and to the changes between 1930
and 1940, when population in the State grew at the same
rate as in the entire country. By November 1943 New York
had 256,000 persons fewer than it would have had if the rate
o f change of the last prewar decade had been continued. The
State of California, on the other hand, had 1.2 millions more
than would have been expected at the prewar rate of increase.
The only industrial area in New York to show a gain in
population was the Buffalo-Niagara Falls area, and the increase
there fell short of the average for all metropolitan counties.
Although the number of wage earners in New York State
factories expanded about 50 per cent between 1940 and 1943,
not including the expansion in Government arsenals, navy
yards, etc., most have been employed in industries which are
manufacturing products similar to those produced in prewar
years; only a few of the large employers are strictly war
industries. The sharp rise in employment in the metals and
machinery industries, including iron and steel, nonferrous
Employment by Industry in New York State, 1940 and 1943
In thoiisands
of pe:rsons
1940
1943
Per cent
change
M anufacturing......................................................
Metals and m achinery......................................
A pparel...............................................................
All other..............................................................
C onstruction..........................................................
Public utilities.......................................................
Wholesale and retail tra d e .................................
Finance, insurance, real estate..........................
S ervice.....................................................................
Other ......................................................................
1,403
333
334
736
137
266
831
312
365
15
2,088
810
388
890
108
272
797
292
374
11
+ 49
+ 14 3
+ 16
+ 21
- 21
+
2
4
6
+
2
- 27
A ll industries.................................................
3,329
3,942
+ 18
Industry
Source: New Y ork State Department of Labor data on employment covered by
unemployment insurance; excludes those engaged b y firms employing less than 4
persons, self-employed, employees of non-profitmaking enterprises, and workers
engaged in Government, agriculture, and railroads.
metals, transportation equipment ( especially aircraft and
parts), shipbuilding, and machinery, was responsible for most
of the increase. Most other manufacturing industries in the
State showed relatively small changes from the 1940 level
with the exception of those manufacturing rubber products
and certain chemical and mineral products. The Bureau of
Labor Statistics has attempted to measure the hypothetical
number of persons to be demobilized in various States from
war work and the armed services. Estimates for New York
State indicate that the expansion above 1940 levels in those
munitions industries where the rise was dependent upon warinduced demands amounted to roughly 533,000 workers, in
cluding Government arsenals, navy yards, etc. About 880,000
men from the State will be demobilized from the armed
services (assuming a postwar military force for the country
of 2.5 millions), so that there will be a possible 1.4 million
persons to place in new jobs after the war. This number
represents 28 per cent of total employment in New York
State in 1940. There will be, in addition, a certain number
of civilians now employed by Government agencies and
working in the State, who will be seeking new work once
their war emergency jobs are completed.
The growth of manufacturing employment and the with
drawal of men into the armed services took place partly at
the expense of other lines of employment, such as construction
and trade, which otherwise might have increased considerably.
The expansion of activity in these groups after the war may
contribute substantially to the employment of the workers who
will be seeking new jobs. Increased activity after the war in
those manufacturing industries which have been operating
close to prewar levels also may absorb a number of workers.
Another large group may leave the labor force entirely, since
they have taken jobs only for the duration of the war. These
include workers and service men of school age, a number of
women who will want to return to their homes, and persons
in the 65 and over age group who have deferred retirement
or have been reemployed after retirement.
In twenty-two States the proportion of the number of per
sons to be demobilized from the armed forces and manufac
turing industries to total employment in 1940 is greater than
that for New York. Among these are New Jersey and Con
necticut, portions of which are in the Second Federal Reserve
District. Bureau of Labor Statistics estimates indicate that
290,000 service men and 331,000 manufacturing employees,
representing 40 per cent of 1940 employment, may be demo
bilized in New Jersey. An estimated 311,000 persons are
expected to be demobilized in Connecticut. This represents
46 per cent of 1940 employment and is the second largest
proportion to be affected in any State. Most industrial areas in
these States that are included in the Second District showed
sharp rises in employment between 1940 and 1943; factory
employment in Paterson rose 60 per cent; in Newark, 40 per
cent; and in the Bridgeport area, 83 per cent. A concentra
FEDERAL RESERVE BANK OF NEW YORK
tion of aircraft and ship contracts was responsible for most
D E P A R T M E N T STORE T R A D E
of the expansion in the first two areas, while ordnance and
Department stores in the Second Federal Reserve District
sold almost 125 million dollars of merchandise during Decem
ber; this dollar volume was approximately 14 per cent above
the previous peak in December 1942 and about 15 per cent
above the corresponding 1943 month.1 Christmas shopping
followed the pattern established in 1943; early shopping, espe
cially for men and women in the armed forces, threw part of
the holiday trade into October and November, and the Decem
ber increase over those months was not as great as in prewar
years. December again accounted for 57 per cent of the com
bined November-December sales, compared with a range of
60 to 62 per cent from 1924 to 1942. Consumer spending in
department stores of this District amounted to more than 800
million dollars in 1944, an increase of 11 per cent over 1943.
This unprecedented buying exceeded that of 1939 by almost
50 per cent.
aircraft factories employed a large proportion of the number
in the Bridgeport area. In both New Jersey and Connecti
cut population has expanded more rapidly since 1940 than
it did during the previous decade as a result of civilian inmigration, amounting to 4 and 8 per cent, respectively, of
the 1940 civilian population.
Although many plants manufacturing war materials still
require additional workers to meet recently revised produc
tion requirements, data for the first eleven months of 1944
indicate for the country as a whole and for New York State
a gradual decline in the numbers engaged in manufacturing
to a level about 9 per cent below the 1943 average.
Most
major industries are operating with fewer employees than they
had a year ago, owing to increased per capita production in
war industries, completion, cutbacks and cancellation of war
contracts, changes in the munitions program, the continued
Department and Apparel Store Sales and Stocks, Second Federal
Reserve District, Percentage Change from the Preceding Year
withdrawal of men into the armed services, and a gradual with
Net Sales
Locality
drawal of women from the labor force.
N ov. 1944
The major population centers of the country, such as New
York City, which offer more varied potentialities for employ
ment than the smaller cities, may attract a large number of
those seeking work in the postwar period and thereby create
special employment problems for these centers.
Workers
now engaged in war jobs in the Bridgeport area and in
northern New Jersey are within commuting distance o f New
York City (in fact, many New York City residents are now
commuting to war jobs in those areas), and after the war
may again seek employment in the City’s industries.
Indexes of Business
1944
1943
Index
Industrial production*, 1 93 5-39= 100.........
( Board of Governors, Federal Reserve
System)
Munitions output, 1943 = 100 r ......................
{War Production Board)
Electric power output*, 1935-39 =100. . . . .
(Federal Reserve Bank of New York)
Ton-miles of railway freight*, 1935-39 =100
(Federal Reserve Bank o f New York)
Sales of all retail stores*, 1935-39 = 1 0 0 .. . .
(Department of Commerce)
Factory employment
United States, 1939 = 1 0 0 ...........................
(Bureau of Labor Statistics)
New Y ork State, 1935-39 = 1 0 0 ................
(N ew York State Dept, o f Labor)
Factory payrolls
United States, 1939 = 1 0 0 ...........................
(Bureau of Labor Statistics)
New Y ork State, 1935-39 = 1 0 0 .................
(N ew York State Dept, o f Labor)
Income payments*, 193 5 -3 9= 1 0 0 ................
(Department o f Commerce)
W age rates, 1926 = 1 0 0 ....................................
(Federal Reserve Bank o f New York)
Cost of living, 1935-39 = 1 0 0 .........................
(Bureau o f Labor Statistics)
V elocity of demand deposits*, 1935-39 =100
(Federal Reserve Bank of New York)
New Y ork C it y .............................................
Outside New Y ork C it y ..............................
* Adjusted for seasonal variation.
N ov.
Sept.
Oct.
Nov.
247
230r
232
232p
117
110
111
HOp
200
195
193
195 p
216
217
223p
173
175
180p
171
156
155
153p
161
146
146
U 5p
Department stores, Second D istrict. . .
New Y ork C it y ....................................
Northern New Jersey.........................
Stocks on
hand
Jan. through N ov. 30, 1944
N ov. 1944
Niagara F a lls ....................................
R och ester...........................................
+14
+15
+16
+17
+ 8
+ 3
+17
+16
+11
+12
+10
+ 9
+ 6
+ 5
+10
+ 21
+18
+22
+16
+ 11
+10
+ 6
+12
+10
+ 12
+ 6
+ 5
+ 1
0
+16
+14
+ 2
+ 5
- 1
+10
+ 4
+ 4
+13
+13
+10
+ 11
+ 11
+ 7
+ 6
+ 3
+10
+
+
+
+
A pparel stores (chiefly New Y ork City)
+16
+ 11
+ 5
Westchester and Fairfield Counties.
B rid gep ort.........................................
Lower Hudson River V a lle y .............
Poughkeepsie....................................
Upper Hudson River V a lle y .............
Schenectady......................................
Central New Y ork S ta te ....................
M ohawk River V a lle y ....................
Syracuse.............................................
Northern New Y ork S ta te.................
Southern New Y ork S ta te.................
B ingham ton......................................
E lm ira.................................................
Western New Y ork S ta te..................
0
1
1
0
- 3
-1 4
+ 15
-
+ 3
+ 5
4«7
+ 1
+ 11
+
1
—
5
6
8
4
Indexes of Department Store Sales and Stocks
Second Federal Reserve District
1943
1944
Item
N ov.
Sept.
Oct.
N ov.
1935-39 average—100
Sales (average daily), unadjusted.................
Sales (average daily), seasonally adjusted. .
182r
144
158
149
173
152
207
164
1923-25 average =100
Stocks, unadjusted...........................................
Stocks, seasonally adjusted............................
132
114r
129
124
132
120
131
114
r Revised.
337
313
314p
304
289
287
221
233
235p
159
167
167 p
124
127
126
127 p
70
76
80
76
76
73
76
76
p Preliminary.
r Revised.
286p
The Second District ranks third among the twelve Federal
Reserve Districts in dollar volume of department store sales;
this District is in first place, however, when the comparison is
based on all stores selling department store type merchandise.
This is explained by the concentration of women’s ready-towear stores in New York City. In 1939 this District accounted
for 18 per cent of all department store type merchandise sold
1 December 1944 had one less shopping day than December 1943;
the year-to-year increase for average daily sales was about 2 0 per cent.
3
MONTTHLY REVIEW, JANUARY 1945
Dollar Volume and Percentage Distribution of Department Store Type Merchandise Sold in the Second Federal Reserve
District by Department, Apparel, Furniture, and Other Stores*
SELECTED TYPES OF MERCHANDISE
COATS, D R E S S E S , 8. SPORTSWEAR
T O IL E T A R T IC L E S & DRUG S U N D R IE S
m e n ’s
& b o v s ’ c l o t h in g
F U R N IT U R E
M EN ’S & BOYS’ F U R N IS H IN G S
W O M E N ’ S & C H IL D R E N ’S SHOES
M A JO R HOUSEHOLD APPLIAN C ES
ORY GOODS
s il v e r w a r e
, j Sw e l r y , & c a m e r a s
HO SIER Y
S T A T IO N E R Y & BOOKS
FLOOR COVERINGS
L IN G E R IE
M IL L IN E R Y
HOUSEWARES
F U RS
D R A P E R IE S & UPHOLSTERY
HANDBAGS
IN F A N T S ’ WEAR
C O R SETS & BRASSIERES
C H IN A 8. GLASSWARE
ISO
1#3# SALES IN MILLIONS OF DOLLARS'
* Estimated from 1939 Census o f Business data by Federal Reserve Bank o f N ew Y o rk ; “ other” stores exclude retailers primarily engaged in selling
merchandise o f types not largely sold by department stores.
in the United States; the District had 15 per cent of the
country’s total department store sales, 14 per cent of furniture
store sales, 22 per cent of apparel store sales, and 19 per cent of
all other stores’ sales of department store type of merchandise.2
In the last group, however, the percentage is influenced by the
large dollar volume of variety and drug store sales, District
figures for whidi were only 15 per cent of the country’s total.
The percentages for the "specialty” stores ranged from 20 to
50 per cent.
The accompanying chart shows the dollar volume and per
centage distribution of department store type merchandise sold
in department, apparel, furniture, and other stores at the time
of the last Census of Business (1939). Classified by type of
merchandise, department stores sell the largest proportion of
lingerie, draperies and upholstery, and infants’ wear; apparel
stores sell a major portion of women’s and men’s clothing;
furniture stores sell the greatest volume of furniture; and "spe
cialty” stores in the all other group account for large per
centages of home furnishings, accessories, furs, jewelry and
silverware, drugs, and stationery. In the women’s wear group,
department stores sell 27 per cent of total sales and apparel
stores, 40 per cent; in the men’s wear group, department stores
account for 18 per cent and apparel stores, 57 per cent; in the
home furnishings group, department stores represent 30 per
cent and furniture stores, 31 per cent. A comparison of the
segments of the bars on the accompanying chart shows the dis
tribution of the 1939 dollar volume of department, apparel,
and furniture store sales by type of merchandise.
The segments of the circle in the chart show the distribu
tion among four principal types of stores of the total sales of
department store type merchandise in 1939, estimated at 2.2
billion dollars. In 1944 sales of department store type mer
chandise are estimated at close to 3 billion dollars. Because
of the variations in the trend of sales for the individual depart
ments over the war period, it is now estimated that 27 per
cent of department store type merchandise was sold in depart
ment stores in 1944, 23 per cent in apparel stores, 5 per cent
in furniture stores, and 45 per cent in the all other group.3
3
Changes in total sales of the various types of merchandise from
1939 to 1944 can be estimated roughly from the departmental sales
figures for department stores. Although the order of magnitude of
sales in the selected departments shown on the chart has changed con
siderably over the war period, the percentage distribution of the mer
2 Apparel stores in this study include men’s and boys’ clothing chandise sold by type of outlet apparently has not changed appreciably.
A discussion of department store sales over the war period was pre
stores, family clothing stores, and women’s ready-to-wear stores; "spe
sented in the August 1 , 1943 issue of this Review.
cialty” stores are included in the all other group.
FEDERAL RESERVE BANK OF NEW YORK
MONTHLY REVIEW, JANUARY 1945
General Business and Financial Conditions in the United States
(Summarized by the Board of Governors of the Federal Reserve System)
/^VUTPUT at factories and mines showed little change from October to November.
trade expanded further to new record levels.
Retail
In d u s t r ia l Pr o d u c t io n
Index o f P h y sica l V olu m e o f Industrial P rod u ction ,
A d ju s te d fo r Seasonal V aria tion , 1 935-39 A v e r
age = 100 P er C ent (G rou p s show n are
exp ressed in term s o f p oints in
the total in d ex)
Indexes of Value of Department Store Sales and
Stocks, Adjusted for Seasonal Variation
(1935-39 average^ 100 per cent)
Industrial output in November and the early part of December was maintained at
approximately the same level that had prevailed during the previous four months. Produc
tion of durable goods declined slightly in November, while output of other manufactured
goods, especially war supplies, increased somewhat further and mineral production was
maintained in large volume. Output of critical war equipment was larger in November
than in October but was still behind schedule, according to the War Production Board.
Activity in the durable goods industries, particularly machinery, transportation equip
ment, and lumber, continued to be limited in part by manpower shortages. Employment
in the transportation equipment industries has declined by about one fifth during the
past twelve months, but total output of aircraft, ships, and combat and motor vehicles
has declined by a much smaller amount owing to greater efficiency.
In most nondurable goods industries, production was somewhat greater in November
than in the previous month. Activity at explosive and small-arms ammunition plants
increased, reflecting enlarged war production schedules, and output in most other branches
of the chemical industry also expanded, reaching levels above those of a year ago. Produc
tion in the petroleum refining and rubber industries, chiefly for war uses, increased
somewhat in November.
Output of manufactured foods showed less decline than is usual for this season and
was as large as in November 1943. In the textile industry, output at woolen and worsted
mills continued to advance in October from the reduced level of operations prevailing
during the summer. Cotton consumption in November was above October and rayon
deliveries were at a new record level.
Mineral production was maintained in November. Coal output was one-fifth larger
than in November 1943 when operations were sharply reduced by a work stoppage. In
the early part of December, however, coal production was nearly 10 per cent less than
in the same period last year.
D is t r ib u t io n
Value of department store sales in November was 14 per cent above the exceptionally
high level last year, about the same year-to-year increase which prevailed in the previous
four months. In the first half of December, sales were about 20 per cent larger than
last year. All Federal Reserve Districts have shown large increases over last year in
pre-Christmas sales.
Railroad freight carloadings, adjusted for seasonal changes, were maintained at a
high level in November and the first two weeks of December. Shipments of most classes
of freight, however, were not quite as great as the exceptionally large movement of freight
during the same period last year.
C o m m o d it y Prices
Member Banks in Leading Cities. Demand Deposits
(Adjusted) Exclude U. S. Government and Inter
bank Deposits and Collection Items. Govern
ment Securities Include Direct and Guaran
teed Issues (Latest figures are for
December 13)
Changes in wholesale prices of agricultural and industrial products were mostly
upward in November and the early part of December. Retail prices of foods and various
other commodities were slightly higher in November than in October. During the past
year there has been a slight upward tendency in prices of most commodities, both in
wholesale and retail markets.
not Available Prior to February 8, 1939;
Certificates First Reported on April 15,
1942 (Latest figures are for
December 13)
Banking developments during the four weeks ended December 13 were largely
determined by the Sixth War Loan drive. Government deposits at weekly reporting
banks in 101 cities increased by approximately 8 billion dollars while adjusted demand
deposits of individuals and business were drawn down about 2.6 billions in payment for
securities purchased. The reporting banks added 3.7 billion dollars to their holdings of
Government securities and increased their loans by 1.7 billion.
As a result of the transfer of deposits of individuals and businesses to War Loan
accounts, reserves required by member banks declined about 700 million dollars from
the beginning of the drive through mid-December. In addition, reserve funds were
supplied to the banking system through the purchase by the Federal Reserve Banks of 640
million dollars of Government securities. These additional reserves were used in part
to reduce member bank borrowings at the Reserve Banks, which had risen to nearly 600
million dollars in the latter part of November, and to meet the demand for currency.
This demand, though slackened somewhat by the War Loan drive, amounted to 450 million
dollars for the four weeks ended December 13. Excess reserves increased by 300 million
dollars, principally at country banks.
B a n k Credit
@FedFRASER