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1
MONTHLY REVIEW, JANUARY 1961
T h e B u s in e s s S itu a tio n
The sluggish pace of economic activity in recent months
has continued to be evident in most of the current indica
tors reported during December. It has also had its effect
on spending plans indicated in the recently published re
sults of two surveys taken early in the fourth quarter.
These point to mild reductions in businessmen’s plans for
fixed investment during the second half of 1960 and the
first quarter of 1961 as well as to reductions in consumers’
near-term intentions to purchase durable goods. This hesi
tant attitude on the part of two important groups of
spenders is one of the factors causing the current weak
ness in durable goods sales at both the manufacturing and
the retail levels. It is echoed in the prevalent cautious
views of many business analysts who foresee only small
gains in sales and a continued squeeze on profits in 1961.
In combination, these factors seem to have caused a fur
ther scaling-down of desired inventory levels, leading to
some additional declines in industrial production and
nonagricultural employment.
S P E N D IN G P L A N S A N D S A L E S
The latest quarterly survey of businessmen’s capital
spending plans and actual outlays, taken by the Com
merce Department and the Securities and Exchange Com
mission in October and early November, shows that
plant and equipment spending in the third quarter de
clined to a seasonally adjusted annual rate of $35.9 bil
lion. This was $0.4 billion below the peak rate reached
in the second quarter of 1960 and $1.6 billion less than
planned outlays indicated in a similar survey made in the
second quarter (see Chart I). Fourth-quarter outlays were
estimated to have been trimmed by another $0.3 billion.
If actual outlays match these estimates, the decline in
capital spending during the second half of the year will
have been relatively moderate—somewhat less than a third
of the drop occurring in the two quarters following the
1957 peak. Total 1960 outlays of $35.7 billion would
be almost 10 per cent above the 1959 level but would
fall short of the 13 per cent gain anticipated at the begin
ning of the year.
The dip in capital spending is expected to continue,
at a somewhat accelerated rate, in the first quarter of
1961, when outlays are scheduled to decline to a $34.9
billion rate. This expectation is generally consistent with
the results of a survey of capital appropriations by large
manufacturing firms, taken in the third quarter by the
National Industrial Conference Board. The declines shown
by this survey, both in new appropriations (spending plans
approved by top-level management) and in backlogs of
appropriations, were interpreted as implying a 5 to 10
per cent reduction in outlays in subsequent months.
The sag in capital spending plans appears to be paral
leled by some curtailment in consumer intentions to pur
chase certain durable goods. In the October survey made
by the Census Bureau for Ihe Federal Reserve System,
the proportion of consumers planning to buy automobiles
(new or used) and various appliances within the next six
months was substantially (10-20 per cent) below October
1959. While plans to buy cars and television sets rose
from July to October, the rise may well have been less
than seasonal. These results must be interpreted with
some caution, since quarter-to-quarter fluctuations are
not always closely associated with current movements in
retail sales and the year-to-year decline may be exagger
ated by the sharp peak in plans in October 1959. It may
be significant, however, that the percentage of consumers
planning durable goods purchases stood above the yearago level in January and April of 1960, was about equal
in July, and fell below in October.
Chcirl I
PUNT AND EQUIPMENT OUTLAYS
Seasonally .adjusted annual rates
Billions of dollars
Billions of dollars
* Periods particularly affected by th» steel strike.
Sources: United States Department of Commerce and Securities and
Exchange Commission.
FEDERAL RESERVE BANK OF NEW YORK
S
This scaling-down of businesses’ and consumers’
Chart II
planned purchases for final use may already have been
CURRENT ECONOMIC MEASURES
Seasonally adjusted
a factor in sales reductions in some sectors, but has
Billions of dollars
Billions of dollar*
------------------------------------------,------- x ------------------- ,19
19
|
not resulted in any sharp declines. At the retail level,
18
18
sales in November (seasonally adjusted) remained virtu
Retail sales
ally unchanged at the improved October rate (see Chart
17
17
J L i J j - L l j J .l j - 1 , 1,1 1 1..1.I.L .1..1.1-1 T
II). A small decline in sales at durable goods outlets was
Billions of dollars
Billions of dollars
30
oo
offset by a similar rise at nondurable goods stores, accord
54 —
54
ing to the advance report. The pace of new car sales im
Manufacturers*
inventories ,
proved slightly (after adjustment for the number of trad
52 —
— 52
ing days) on the good October performance and set a new
50
50
1 1 1 1 II I I I
11 it 1 1 M 11 r
record for November. Although the proportion of sales
Per cent
Per cent
attributable to 1960 models—at bargain prices—was re
...............
__
1
110 110
duced from the preceding month, an increase in the pro
— 100
100
portion of sales of compact cars and continued price
1 ^Industrial production
I 1957=100 , ,
t
t
i
reductions for used cars may have held down the dollar
90 i i J j j J L i.. .L l l i i 1 i i J . . L L U I 1 1 L L L 90
Millions of persons
Millions of persons
volume of total car sales. Incomplete data available for
54
54
December suggest that auto sales were dropping some
52 *
Nonagricultural employmentv
what; department store sales, however, were apparently
50
registering approximately their customary seasonal upsurge.
H j J J L L .LI. L l J 1,1 i L L I . J ! 1 1. 1 1 I ! I 1 1 r
Billions of dollars
Billions of dollars
Manufacturers’ sales, on the other hand, have declined
420
420
gradually but steadily to a November level almost 6 per
400
400
Personal income ^
cent below their April peak, with 70 per cent of this de
380
380
cline recorded in the durable goods sector. New orders
l l l I i i 1 i i 1 i i
I I I 1 1 I 1 1 1 1 1 360
360have also moved down somewhat for the second consecu
1958
1959
1960
tive month, reaching a new low for the year. These declines
* Payroll survey.
presumably reflect, however, the continued downward
Note: A laska and Hawaii included in employment and in retail sales
since January 1p60.
movement in business purchasing for inventories as well as
Sources: Board of Governors of the Federal Reserve System; United States
Departments of Commerce and Labor.
declines in final demand. Total business inventories were
liquidated at an increased pace in October, with the major
reductions occurring in durable goods manufacturers’
stocks of purchased materials and goods in process. De subsequently dipping, in part because of the holidays.
clines continued at the manufacturing level in November. Automobile production schedules appeared to be down
somewhat more than seasonally in December.
Paralleling the movement in production was a further
E F F E C T S O N P R O D U C T IO N A N D E M P L O Y M E N T
curtailment in nonagricultural employment which declined
Reflecting the pressures associated with some weakness in November by about 100,000 persons (seasonally ad
in final sales and with inventory liquidation, industrial justed) to 52.9 million (see Chart II), according to the
production slackened once again in November after payroll survey taken in the middle of the month by the
remaining about unchanged between September and Bureau of Labor Statistics. About 60 per cent of this
October (see Chart II). The seasonally adjusted total reduction was in manufacturing, where cutbacks were wide
index slipped from 107 to 105 per cent of the 1957 base, spread, but employment in all other major sectors except
as output of metals, textiles, and construction materials services and government also declined. Between July and
continued to decline, automobile assemblies were cut back November of 1960 nonfarm employment fell by about
sharply after a rise in October, and production of some 450,000, or 60 per cent of the drop during the same
other consumer goods—including apparel, appliances, and months of 1957 which marked the early part of the
television sets—was reduced. Output of business equip 1957-58 recession (peaks in employment occurred in
ment rose slightly from the strike-curtailed October level. July of both 1957 and 1960). The major difference lay
More recent indicators show the rate of steel production in the greater expansion of hiring by State and local gov
remaining about level from mid-November to mid- ernments during the recent period. On the other hand,
December at slightly below 50 per cent of capacity but the Census household survey taken in early November
4
MONTHLY REVIEW, JANUARY 1961
showed a rise in both farm and nonfarm employment, the in transfer payments. While November was the first month
latter primarily because of the temporary hiring of elec since February 1960 in which personal income failed to
tion workers. Total employment rose almost 1 per cent, rise, corporate profits began to fall in the second quarter,
and unemployment was reduced slightly on a seasonally and in the third declined further to a seasonally adjusted
adjusted basis. The minor decline in the seasonally ad annual rate of $41.5 billion, $7. 3 billion below the firstjusted unemployment rate to 6.3 per cent from 6.4 per quarter peak. This decline resulted in part from reduced
cent in October does not appear to constitute a significant profit margins, as sharpened competition led to scattered
turning point in employment developments, particularly price declines and some costs continued to creep up. It
in view of the further rise in unemployment insurance also reflected a smaller volume of sales in some industries.
claims in early December.
In contrast to the slackness of domestic demand in the
Although manufacturing employment and the average industrial sector, the number of private housing starts in
number of hours worked declined, personal income in November maintained the improved October rate. United
November maintained the October level of $409.5 billion States exports, after rising about 6 per cent in October
(seasonally adjusted annual rate). Reductions of $0.4 bil and carrying the trade surplus to the highest level in over
lion in wages and salaries and $0.1 billion in business and three years, remained approximately steady in November
professional income were offset by a further increase at a seasonally adjusted annual rate of $20.4 billion.
T h e M on ey M arket in t h e Fourth Q u arter
Bank reserve positions eased further during the fourth
quarter, as the Federal Reserve System more than met
seasonal and other reserve needs through sizable purchases
of Government securities and the liberalization of reserve
requirements. Bank credit expanded substantially over the
quarter and, with this expansion concentrated until late in
the quarter in the acquisition of Government securities,
bank liquidity positions were improved. Some reserve
pressures were in evidence at times in the central money
market, particularly during October and early November,
but over the balance of the period Federal funds were
generally in comfortable supply, trading at rates well
below the 3 per cent discount rate through the end of
December.
By December, too, a much more confident mood had
emerged in the securities markets, following a period of
cautious hesitation in October and November, when in
vestors failed to find in the welter of economic data and
comment a single clear configuration upon which action
could be based. While business news continued to show
some slack in the economy, there was press speculation
that the cyclical low in interest rates, and perhaps even in the
economy as a whole, had been passed. Meanwhile, the stock
market seesawed to reach a two-year low and then a fourmonth peak. In the background throughout the OctoberNovember period was the concern over the balance-ofpayments situation — heightened by the flurry of gold
prices in the London market—which brought new doubts
to the market over the lengths to which monetary ease
might proceed. Very much in the forefront was the Presi
dential election, bringing political uncertainties to a peak
in early November.
In this setting, prices of fixed-income securities moved
inconclusively within narrow bounds. Institutional inves
tors generally held to the sidelines in the corporate market,
where a heavy volume of new offerings was floated. Market
congestion frequently developed, leading to higher yield
levels on new issues and to sjmdicate terminations and
higher yields on slow-moving recent issues. This conges
tion also weakened the market for Treasury bonds, where
rates had fallen further from earlier peaks, as the resulting
yield advantage prompted some switching into corporates.
In the market for Treasury bills, rates fluctuated within a
relatively narrow range, with the rate on three-month bills
descending briefly to 2.07 per cent in late October but
rebounding sharply before declining again to close the
year at 2.20 per cent.
The strengthening of confidence in December extended
to the markets for both long- and short-term fixed-income
securities. Business indicators reinforced a growing con
sensus that a business upturn was at least some months
away, while the reduced gold outflow and declining interest
rates in Europe led some market participants to take a
more confident view of the balance-of-payments situation.
A 5 per cent rate on a utility is sue finally broke the ice of
investor resistance in the corporate bond market, and de
FEDERAL RESERVE BANK OF NEW YORK
STOCK AND BOND YIELDS
Per cent
Per cent
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1958
1959
1960
Note: Latest data plotted: week ended December 23,1960.
Sources: Aaa corporate bonds: Moody’s Investors Service; Treasury issues:
Board of Governors of the Federal Reserve System; dividend/price ratio;
Standard & Poor's Corporation.
mand soon spread to other corporate and Treasury issues.
At the same time, reserves released through changes in
Regulation D brought good bank demand, absorbing the
corporate bill sales in preparation for the December tax
and dividend date so that the usual year-end rise in rates
did not occur. With bank loans over the quarter rising
less than seasonally and bank liquidity positions consider
ably improved, some bank demand reached also into the
market for intermediate-term Treasury issues to raise
prices there as well. By the end of the year, firm confi
dence ruled most markets, bolstered by the smooth passage
through the December period of heavy liquidity needs and
by the breather in new corporate offerings. (See chart.)
M EM BER BANK R ESER V ES
With the Federal Reserve System providing ample re
serves for seasonal and other needs, bank reserve positions
reflected increased ease during the fourth quarter. Total
reserves rose more than seasonally over the three months,
increasing by $550 million from September to December.
Borrowings at the “discount window” continued to decline,
and free reserves averaged $578 million compared with
$252 million during the previous quarter.
Over the quarter, System open market purchases and
changes in reserve requirements and vault cash eligibility
5
provided member banks with sufficient reserves to offset
substantial drains from operating factors and to meet the
additional reserve needs associated with expanded bank
credit and deposits. The principal drain on reserves was
the seasonal expansion in currency in circulation, which
aggregated $1.2 billion over the thirteen-week period
ended December 28. Another $850 million reserve drain
stemmed from further gold losses, which were heaviest
in early November and lessened in December. Reserves
were also absorbed by a rise of some $650 million in re
quired reserves, most of it coming at the time of increased
bank lending around the December tax date. System
purchases of securities were concentrated in October and
November, while most of the December reserve need
was met through the vault cash and reserve requirement
changes. Over the thirteen-week period as a whole, System
outright holdings of Government securities rose by about
$275 million.
In addition, reserves totaling about $1.5 billion were
supplied to member banks through the changes in Regula
tion D. Effective November 24, member banks were per
mitted to count all vault cash, rather than previously
prescribed percentages, toward satisfying reserve require
ments. At the same time, reserve requirements for country
banks, which held vault cash equivalent to about AVi per
cent of their net demand deposits (compared with a lVi
per cent ratio held by all other banks) and thus benefited
most from the vault-cash liberalization, were increased from
11 per cent to 12 per cent, making their net gain from
the Regulation D changes about $500 million. Effective
December 1, reserve requirements for central reserve city
banks were reduced from 17 Vi per cent to 16 Vi per cent,
the level in effect for reserve city banks.
Over the first half of the quarter, with much of the in
creased reserve availability still reflecting the vault-cash
liberalization of early September, excess reserves remained
concentrated at the country banks and the money market
banks came under occasional pressures, particularly in
the early weeks of October and of November. The money
market was generally easier over the rest of the quarter,
however, as the further addition to reserves through
changes in Regulation D evidently reached the money
market centers more readily than in September. The effec
tive rate on Federal funds was generally between
and
3 per cent during the first half of the quarter, except for
a brief period after mid-October when it went to as low
as
per cent, and remained at 2 per cent or lower on
most days after the middle of November. Correspondingly,
rates on new and renewal loans to Government securities
dealers by major New York City banks rose through midNovember to a range of 33A -4V\ per cent and moved
i
MONTHLY REVIEW, JANUARY 1961
Table I
Change* in Factor* Tending to Increase or Decrease Member
Bank Reserves, December I960
In millions of dollars; ( + ) denotes increase,
(—) decrease in excess reserves
Daily averages—week ended
Factor
Operating transactions
Treasury operations*..................................
Federal Reserve float.................................
Currency in circulation..............................
Gold and foreign account...........................
Other deposits, etc.....................................
Total
......................................
Deo.
7
Dec.
14
Dec.
28
Dec.
21
- 11
- 175
- 84
+ 22
- 78
+
+
-
- 326
- 193
- 186
- 16
-
40
—
-
53
1
+
-
+
1
-
Net
changes
+
+
—
—
+
85
21
21
89
30
— 41
+ 940
— 557
— 77
+ 31
+ 789
+
25
+ 295
- 371
+ 24
— 64
+ 104
— 661
+ 112
10
1
+
4
— 25 — 64
+
1 — 1
1
+
+
1
1
+ ~ 4
+
+
41
215
316
125
177
+
+
74
879
136
135
256
Direct Federal Reserve credit transactions
Government securities:
Direct market purchases or sales.............
Held under repurchase agreements..........
Loans, discounts, and advances:
Member bank borrowings.......................
Other.........
..................................
Bankers’ acceptances:
Bought outright.....................................
Under repurchase agreements.................
Total...........................................
—
- 257
Member bank reserves
With Federal Reserve Banks...................... - 583
Cash allowed as reserves t .......................... - 177
1
5
31
- 341
+
21
— 608
- 224
+ 236
+ 448
+ 72
+
-
46
59
— 313
+ 72
+ 520
- 478
— 13
— 26
— 241
— 246
+
42
— 39
— 487
74
747
673
49
708
659
-
Total reservest.................................................
Effect of change in roquired reserves!............
- 760
+ 266
+
-
12
8
Excess reserve* f ...............................................
- 494
+
4
Daily average level of member bank:
Borrowings from Reserve Banks.................
Exeess reserves t ........................................
Free reserves t ............................................
60
701
641
70
705
635
63*
715*
652 J
Note: Beoause of rounding, figures do not necessarily add to totals.
* Includes ohanges in Treasury eurreaoy and eash.
t These figures are estimated.
{ Average for four weeks ended December 28, 1060.
irregularly lower during the remainder of the quarter to a
range of 3-3% per cent.
B A N K C R E D IT A N D R E L A T E D D E V E L O P M E N T S
With reserve availability rising and total bank loans
about unchanged for the first two months of the quarter—
compared with increases in most other recent years and a
net decline in the downturn period of 1957—the banks
put a large portion of their surplus funds into investments,
particularly Treasury issues. Total bank credit, in con
sequence, rose by $2.7 billion for the two months, com
pared with an average increase of $1.8 billion in like
periods of recent years. Data for weekly reporting banks
through December 21 suggest that bank credit also rose
more than seasonally in the final month of the year,
sparked by a sizable increase in business and securities
loans around the December tax date. For the quarter as
a whole, bank loans to business were not so strong as
usual, reflecting especially the weak October performance.
Business borrowing from banks, however, was an in
adequate measure of total business demand for short-term
credit, as the widening spread between bank lending rates
and other short-term money rates diverted business bor
rowing into other channels. The outstanding volume of
commercial paper continued its sustained rise, expanding
by some $540 million in October and November to reach
new record levels, while bankers’ acceptances outstanding
rose by about $200 million over the two months to reach
and then surpass the previous record set in 1929. Finance
companies in particular stepped up their borrowing through
bond issues and directly placed paper, reducing their in
debtedness to the banks through the quarter until the
December tax and dividend period, when the maturity of
a large volume of their paper placed with corporations
brought a sharp though temporary rise in their borrowing
from the banks.
The banks’ real estate loans., however, continued to
reflect weakness in that sector, the $0.1 billion rise dur
ing October-November being smaller than in any recent
year but 1957. The behavior of consumer loans, mean
while, was maintained at roughly the pace of recent years.
Expansion of the banks’ securities holdings, which be
gan during the summer after a steady runoff since early
1959, continued during the fourth quarter. The rise was
concentrated in October, when banks subscribed heavily
to the newly offered June 1961 tax anticipation bills.
Holdings of Governments declined slightly in November
but appear to have risen substantially in December, on the
basis of weekly reporting bank data through December 21.
The continuing absorption of securities and particularly
of short-term Treasury issues brought some further im
provement in commercial bank liquidity positions during
the fourth quarter. By mid-December, loan-deposit ratios
at New York City weekly reporting banks stood at 65.9
per cent, compared with 66.1 per cent at the end of Sep
tember, and were 59.2 per cemt at banks outside New
York, compared with 60.3 per cent at the end of Septem
ber. Over the same period, the ratio of selected shorMerm
liquid assets (including Treasury notes and bonds matur
ing within one year) to deposits had risen from 14.9 to
18.8 per cent at the New York City banks and from 10.8
per cent to 14.0 per cent at banks outside New York City.
By December, with their liquidity positions thus enhanced,
banks were extending their purchases of Government secu
rities into the medium-term range, thus contributing one
more element to the strength developing in that segment
of the market.
The uneven increase in total bank credit over the first
two months of the quarter was only partially reflected
in the daily average money supply, which rose more than
seasonally in October but declined slightly in November,
so that for the two months as a whole the rise in the
FEDERAL RESERVE BANK OF NEW YORK
7
along with relatively comfortable corporate liquidity posi
tions, helped the market’s smooth passage through the
period of corporate bill sales before the December tax and
dividend dates. The released reserves also facilitated the
banks’ provision of a large volume of loans to Government
securities dealers around the tax date, when a sizable vol
ume of the dealers’ repurchase-agreement borrowing from
corporations matured. The market’s performance rein
forced the shift from caution toward confidence, and was
reflected in an average issuing rate on the six-month bill
of 2.333 per cent, a new low, on December 23 and in the
maintenance of the three-month bill rate at around the
2 Y8-2 V4 per cent level, in contrast to the usual year-end
rise. Over the quarter as a whole, the three-month bill
G O V E R N M E N T S E C U R IT IE S M A R K E T
rate was down 10 basis points to close at 2.20 per cent.
In the Government bond market, as noted earlier, a
In the Treasury bill market during the quarter, a suc
cession of temporary influences set off brief rate move hesitant atmosphere persisted through virtually all of Octo
ments within rather narrow bounds. Early in the period ber and November. A flurry of price rises did occur in late
the Treasury’s financing operation—in which $3 billion, October—reflecting news of low housing starts in Septem
net, of new money was raised through sales of June 1961 ber, the stock market’s decline to a two-year low, and the
tax anticipation bills and the partial roll-over of maturing initial interpretation of greater ease given changes in
one-year bills—provided the center of attention. Dealer Regulation D—and several very brief rallies developed in
inventory liquidation preparatory to the offering, and some November. But for most of these two months, prices
apprehension over the amount of new money to be raised, drifted downward. The underlying uncertainties were com
carried rates upward until October 11, when a strong pounded at the beginning of the quarter by the recent
showing in the roll-over auction and the lightened dealer addition to the supply of longer maturities resulting from
inventories brought a reversal in market sentiment which September’s advance refunding, by congestion in the cor
carried rates back down. Later, the amendment of Regu porate bond market, and by investor disposition to await
lation D and the Treasury’s November refunding (in which a large $250 million utility issue offered October 25.
The economic outlook continued clouded during No
maturing issues were exchanged for $9.1 billion of 15month 3V4 per cent notes and $1.2 billion of 5 Vi-year 33A vember, with news of still-sluggish business performance
per cent bonds) influenced the market. Both the initial offset first by a sustained rally in stock prices and then by
psychological impact of the October 26 Regulation D a wave of press speculation that the business and interest
announcement and the build-up in dealer inventories in rate cycles might have already passed their lows. While this
anticipation of a strong demand arising on swaps out of uncertainty contributed to investor reluctance in both cor
rights to the refunding strengthened the market, and the porate and Treasury bond markets, the corporate market
three-month bill rate declined on October 28 to 2.07 per was also the scene of heavy new offerings, and the conse
cent, the lowest level in two years. The market then weak quent congestion and rise in yields in that market prompt
ened once more, however, as the 3J4 per cent rate on ed some switching out of Governments into the higher
the 15-month Treasury note offered in the refunding ap yielding corporates. By the end of November, yields on
parently proved attractive to many investors who might most long-term Treasuries were back up to a 3.95-4.10
otherwise have swapped into bills, and as reassessment of per cent range from the 3.70-3.95 per cent levels prevail
the Regulation D changes convinced some observers that ing at the end of September.
seasonal System demand for bills might be reduced.
The Treasury’s November offering of 4 per cent bonds
As it developed, the changes in Regulation D were a of 1969 at a price of IOOV2 , to holders of about $750
strengthening influence, helping to halt the seasonal rate million of Series F and G Savings bonds maturing in 1961,
rise in mid-November and contributing to a downward drew exchange subscriptions for $147 million and had
movement thereafter. The released reserves reached the little effect on the market.
money and Treasury bill markets with far greater dispatch
Toward the end of November a combination of bearish
than had those released by the September vault-cash liber business news, more favorable market appraisals of
alization and contributed to the good bank demand which, balance-of-payments prospects, and expectations of con
money supply fell $0.6 trillion short of the normal seasonal
expansion. This was due in part to the unseasonally high
level of Treasury deposits and to the rise in time and
savings deposits, which have become increasingly attrac
tive against the background of declines in most other short
term rates. Indeed, the $5.0 billion rise in time deposits
(seasonally adjusted) at commercial banks during the sixmonth period ended November 30—representing an an
nual rate of growth of about 14 per cent—was the greatest
in the postwar period. For similar reasons, in the Treas
ury’s Savings bond program sales surpassed redemptions
(at issue price) in November for the first time since August
1955.
I
MONTHLY REVIEW, JANUARY 1961
tinuing ease ahead began to bring the market outlook into
clearer focus. By early December these accumulating
signs finally brought institutional investors off the side
lines in the corporate bond market at the higher—near
5 per cent—yields that were reached. Caution gave way
to confidence, and strength in Treasury bills and in cor
porate bonds was communicated to all sectors of the
Treasury bond market. With the increasing volume of
surplus bank funds and the scarcity of some short issues,
bank demand spilled into the intermediate area and prices
moved upward. At the year’s end, the sharp December
increases had carried prices of intermediate-term issues
to about Vs to % point higher than their end-of-September
levels and prices of longer maturities some Vs to 1
point higher.
O T H E R S E C U R IT IE S M A R K E T S
In the corporate bond market, the volume of new issues
was quite heavy and corporate bond yields rose over the
first two months of the quarter before leveling-off in
December. New tax-exempt offerings, on the other hand,
were moderate and yields were relatively steady.
In the corporate market, about $1,500 million in new
bonds was offered during the quarter, slightly above the
level of the previous quarter and appreciably more than
the $950 million offered during the fourth quarter of 1959.
This brought total new offerings to $4.7 billion for 1960,
compared with $3.4 billion in 1959. Over the first two
months of the quarter, the large supply of unsold recent
offerings and the heavy schedule of new offerings had a
restraining influence on buying interest, forcing yields up
on succeeding new issues and bringing substantial price
concessions upon the termination of offering syndicates.
Investor resistance finally thawed in early December, when
a 5 per cent yield on a utility bond brought a quick sellout;
in the climate of increasing confidence and with fewer new
offerings ahead, demand quickly spread to other issues.
Average yields on seasoned Aaa-rated bonds, which had
risen from 4.27 to 4.33 per cent over the first two months
of the quarter in Moody’s index, moved to 4.35 per cent
at the year’s close.
In the market for tax-exempt issues, the pressure of
heavy new offerings built up during the third quarter was
relieved considerably, as only $1,200 million in new bonds
was offered during the fourth quarter compared with
some $1,650 million during the third quarter and $1,300
million in the last quarter of 1959. For the year, taxexempt issues totaled $6.4 billion, down somewhat
from the $6.6 billion 1959 total. Despite this relatively
light volume, new offerings—a number of them quite
closely priced—met mixed receptions and the advertised
inventory of dealers’ tax-exempt offerings remained at
relatively high levels through December. Average yields
on seasoned Aaa-rated bonds went from 3.18 per cent at
the beginning of the quarter to 3.14 per cent at the end of
November and 3.11 per cent at the year’s close.
In the market for short-tenn paper, activity continued
at record high levels, with rates fluctuating quite narrowly
in line with Treasury bill rates. A decline in commercial
paper rates over the quarter, interrupted by a brief upward
movement in November, left the offered rate on prime 4to 6-month paper at 3V& per cent, down Ya of a percentage
point from the end-of-September level. Rates on finance
company paper were adjusted upward in mid-November
and downward in December, bringing the offered rate on
60- to 89-day paper to 2s/s per cent, down Ya per cent
in the quarter. Rates on bankers’ acceptances, buoyed by
record demand from foreign central banks, remained un
changed until mid-December, when a V6 per cent reduc
tion occurred, making the bid rate on prime 90-day paper
3 per cent.
Table II
Short-Term Interest Rates
Date
1960
Average issuing rate
on new Treasury bills Bankers’ acceptances Commercial paper
90-day unendorsed
4- to 6-month
bid rate
offered rate
3-month 6-month
Sales finance
company paper
60- to 89-day
offered rate
Sept. 26
2.286
2.729
3X
3X
3
Oct.
Oct.
Oct.
Oct.
Oct.
3
10
17
24
31
2.473
2.698
2.406
2.129
2.127
2.925
3.079
2.806
2.569
2.453
SX
3X
SX
3X
SX
SX
SX
sx
SX
sx
3
2X
3
2H-3*
2-2%*
Nov. 7
Nov. 14
Nov. 21
Nov. 28
2.390
2.624
2.396
2.326
2.572
2.825
2.749
2.640
3X
SX
SX
3X
3X
sx
3X
sx
2X
2X
2X
m
Dec.
Dec.
Dec.
Dec.
Dec.
2.328
2.334
2.222
2.148
2.234
2.663
2.621
2.392
2.333
2.429
3X
3
3
3
3
sx
sx
SX
SX
SX
2X
2%
2H
2X
2H
5
12
19
23 f
30 f
* Upper rate applies to maturities in 1961.
t Because of the holidays on December 26 and J anuary 2, the Treasury bill auctions were held
on December 23 and 30.
FEDERAL RESERVE BANK OF NEW YORE
9
F o reig n E x ch a n g e M a r k e ts D uring 1 9 6 0
The year 1960 was one of rapid evolution in the foreign
exchange markets. As the world adjusted more fully to
the decisive steps toward freedom of exchange transactions
taken in Western Europe at the end of 1958, new influ
ences affecting exchange rate movements of the princi
pal currencies emerged. While major shifts in balanceof-payments positions on trade and service accounts
continued to play a basic role in determining the strength
and weakness of various currencies, such shifts were fre
quently overshadowed by the emergence of capital move
ments as a decisive factor affecting exchange markets.
The increased size and volatility of short-term capital
movements, in particular, posed major problems for the
monetary authorities of the countries most directly con
cerned. Such difficulties, however, were almost universally
recognized as the logical consequence of the freedom of
exchange transactions the world had so long been striving
to achieve, and methods to cope with these difficulties
began to evolve. Partly because of these efforts, the
basic stability of the world exchange rate structure was
preserved in 1960 without major setbacks in the field of
exchange liberalization.
The increased influence of capital transfers on exchange
markets makes the task of interpreting exchange rate
movements more difficult. The variety and relative
strength of the forces underlying capital movements are
often harder to identify than the factors accounting for
shifting trade patterns. Moreover, statistical reporting on
international capital movements has not kept pace with
their growing role in the exchange markets.
Conceptually, one can distinguish at least four types of
private capital movements, each differently motivated.
Direct investment in plant and equipment and the purchase
of foreign bonds and stocks, for example, respond for
the most part to gradual changes in the investment climate
and economic prospects of specific countries and, there
fore, generally affect longer run trends rather than shortrun variations in exchange rates. Nevertheless, they may
play a dominant role at any given time. Short-run specu
lative capital transfers, on the other hand, are induced
by anticipated changes in the quotations of particular
currencies and, therefore, can exert intense short-run pres
sures on exchange markets, even in the face of compre
hensive official controls on exchange transactions. Still
another type of capital movement is that associated
with trade financing. Such flows vary with the volume
of world trade as well as with payment terms. During
periods of strains on particular currencies, however, the
speeding or slowing-up of commercial payments may in
tensify and become part of the above-mentioned specula
tive capital movements—the so-called “leads and lags”.
Some short-term capital movements, finally, arise from in
terest rate differentials between international financial cen
ters and are not necessarily speculative in character. It is
this last type of transfer which seems to have increased
considerably in volume and in importance as an exchange
market factor since the widespread restoration of external
convertibility two years ago. Convertibility has indeed
opened the door for the re-emergence of an “international
money market”.
The United States dollar was one of the currencies most
directly affected by short-term capital movements during
1960. Despite a striking improvement in the country’s
trade surplus from about $1 billion in 1959 to an estimated
$4 billion or more in 1960, the United States balance-ofpayments deficit declined only moderately from the 1959
deficit of $3.8 billion, according to present estimates. A
substantial offset to the improvement in the trade balance
was provided by an increased outflow of short-term capi
tal, a good part of which cannot be traced readily as to its
composition and destination but is reflected in a negative
figure for the “errors and omissions” item in United States
balance-of-payments statistics. Nevertheless, the available
evidence suggests a fairly dose relationship between the
size and timing of the outflow of funds from the United
States and the differentials between short-term interest
rates here and abroad. Movements in relative interest
rates reflected, of course, divergent cyclical developments
in the economies of the United States and other major
industrial countries.1 The slackening of domestic business
activity and the concurrent relaxation of credit restraint
have tended to reduce interest rates here. In contrast,
the boom in most Western European countries and Japan
continued, albeit at an apparently abated pace, and credit
policies remained relatively restrictive until late in the
year. As a result, an interest incentive to move funds
abroad existed during much of 1960.
The “excess supply” of dollars in the world’s exchange
markets, corresponding to the United States balance-ofpayments deficit, pressed the dollar toward the official
1 Recent economic and financial developments abroad were surveyed
in the Monthly Review for December I960, p. 216.
II
MONTHLY REVIEW, JANUARY 1961
EXCHANGE RATES IN 1960
Monthly overages of noon buying rates; cents por unit of foreign currency
Cents
282.00
Cents
20.408
France
20.255
280.00
20.104 J .J.. 1—L I- L . L L - L . L i .
278.00
par voluo of currency.
Note: Except for Canada, outside boundaries represent official support levels*
Source: Board of Governors of the Federal Reserve System.
support limits of foreign central banks for much of the
year. This fact is reflected in the accompanying chart
in the quotations of the major foreign currencies above par
and the frequency with which the quotations were at the
point where foreign central banks were required (under
International Monetary Fund rules) to act as residual
buyers of surplus dollars being offered in the market. The
chart also shows, however, some improvement in dollar
quotations toward the year end.
Developments during 1960 affecting the pound sterling
were in certain important respects die obverse of the posi
tion of the United States dollar. Despite a substantial
weakening in the trade balance of Great Britain and the
overseas sterling area, die sterling quotation in the ex
change markets tended upward during most of the year.
This trend 'became particularly pronounced after midyear,
following an increase in the British bank rate from 5 to
6 per cent in June and a reduction in the discount rates of
the Federal Reserve Banks from 4 to 3 per cent in two
steps in June and August. (Earlier, the pound had shown
occasional weakness—declining to the year’s low of
$2.7982 in mid-January and falling again after the
collapse of the summit meeting in mid-May.) Following
the increase in the incentive to move funds to London—
this incentive vis-zi-vis New York reached nearly 3.5 per
cent on an uncovered and almost 1.7 per cent on a
covered basis at midyear—there was clear evidence of
sizable movements into sterling securities from both the
United States and the European Continent. Funds also
moved to London in October and November for die pur
chase of gold. Sterling then strengthened, reaching a high
for the year (and a high since April 1959) of $2.8177 in
early November. Meanwhile, however, the British authori
ties had become concerned over the possible adverse con
sequences to the sterling area and the international finan
cial mechanism of an excessive inflow of short-term funds.
“External considerations” were therefore the predominant
factor in the two bank rate reductions in October and
December which brought die rate back to 5 per cent.
Sterling dropped substantially toward the year end, closing
at $2.8034.
The forward quotations for sterling adjusted consider
ably but not completely to the changing relationship be
tween spot exchange rates and relative interest rates during
the year. Thus, the forward discounts on three- and sixmonth sterling widened to 170 and 240 points by midJuly (the largest spreads from die spot quotation since
August 1958), following die pronounced increase in the
New York-London interest differential. A covered arbi
trage interest differential in favor of London, however,
remained throughout the latter part of the year, and
the forward discounts on sterling fluctuated somewhat
erratically.
Among Continental currencies the German mark was
especially strong, reflecting a balance-of-payments sur
plus based in part on a merchandise surplus and NATO
troop receipts but also on sizable short-term capital in
flows.2 Capital inflows also pushed up the Swiss franc
rate after the first quarter of the year, reflecting in part
the repatriation of Swiss funds previously invested abroad
and in part the familiar phenomenon of foreign funds
transferred to Switzerland during periods of increased
international tensions such as developed following the
collapse of the summit meeting in May. Political factors
also showed up quite clearly in the temporary weakness
of the Belgian franc during July and August following
the Congo crisis and, to a lesser extent, in the reaction
of the French franc to domestic political uncertainties and
difficulties in Algeria at the beginning and close of the
year. Generally, however, these currencies remained
strong.
The Canadian dollar, after advancing to a high of
$1.05% in early March primarily on the strength of
2 See Monthly Review, December I960, p. 206.
FEDERAL RESERVE BANK OF NEW YORK
11
Canadian bond flotations in New York, dropped sharply
to just over $1.01 in late May as commercial interests
on both sides of the border appeared to feel that the
Canadian currency was overpriced.3 This downward
trend was reversed temporarily by a return flow of capital
funds and several new bond flotations, only to give way
once again to erratically lower quotations as the market
reacted to officially expressed concern over the prospects
for the Canadian economy. Late in December, along
with tax concessions to domestic enterprises designed to
stimulate the economy, the Government announced in
creased taxes on foreign investments with a view to curb
ing excessive inflows of capital; as a consequence, the
Canadian dollar quotation fell sharply, reaching a low
for the year of just under $1.00J4 on December 28—
the lowest since early 1956. At the year end, the quota
tion was $1.00%.
In Latin America, stabilization policies in Argentina,
Chile, and Peru resulted in steady quotations for the
currencies of these countries in 1960, following long
periods of rapid depreciation. The Brazilian cruzeiro,
heavily supported by the authorities, also maintained its
value despite fluctuations during the year. The Venezuelan
authorities imposed exchange controls in November in
order to protect the official bolivar quotation from strong
adverse pressures and also instituted a second (free) ex
change market, in which the bolivar depreciated.
Other developments during the year included the estab
lishment in August of a new parity of 9 Turkish lire to
the dollar, compared with a previous par value of 2.80;
a depreciation of the Philippine peso combined with a
liberalization of exchange controls; and the announcement
of a revaluation of the Russian ruble, effective at the be
ginning of 1961. In terms of its theoretical gold content,
the new ruble is worth $1.11 in contrast to $0.25 under the
previous official rate. However, the change was accom
panied by a simultaneous internal exchange of ten old
rubles for one new, with corresponding alterations in all
domestic prices, wages, and debts. Thus, the move actually
represented a devaluation of the former official rate
(4 rubles=$l) to nearly the previous tourist rate (10 rubles=
$1), which was merged with the new general rate. In any
case, so long as the ruble remains primarily an internal
3 Since the Canadian authorities do not undertake to keep the value
of the Canadian dollar within any specified limits, its range of varia accounting unit rather than an internationally traded cur
tions is theoretically unlimited. In practice, however, it has fluctuated rency, the change will have no practical significance for the
from a low of $0.9319 (June 1951) to a high of $1.0617 (August
exchange markets.
1957) in relation to the United States dollar over the past decade.
P o stw a r E m p lo y m en t F lu ctu a tio n s in th e S e c o n d D istr ic t
data which can be used for measuring the volume of
activity in the District are quite limited. For this reason,
the present analysis of economic fluctuations in the Second
Federal Reserve District is largely based on employment
statistics. These tend to move in the same direction as a
region’s over-all activity, even though the amplitude of
their swings is normally less than are the variations in
output.
Chart I indicates the lesser magnitude of cyclical down
turns in employment in the District as compared with the
nation as a whole. The differential shows up not only with
respect to total nonagricultural employment, but usually
also for each of the main component sectors of employ
ment except for wholesale and retail trade. The difference
D IS T R IC T E M P L O Y M E N T P A T T E R N S
was most marked in the recession of 1948-49, but District
While a wide range of comprehensive indicators of declines in employment were also milder in the downturns
economic activity is available at the national level, the of 1953-54 and 1957-58.
Three sectors of nonfarm employment—finance, insur
1 The Second District includes all of New York State, twelve
primarily industrial counties of northern New Jersey (Sussex, Passaic,
ance, and real estate; services and miscellaneous industries;
Bergen, Hudson, Essex, Warren, Morris, Union, Hunterdon, Somerset,
and government—are not shown in Chart I because, in
Middlesex, and Monmouth), and Fairfield County, Connecticut.
Fluctuations in economic activity in the Second Federal
Reserve District during the postwar period have broadly
paralleled those in the nation, but there have been some
significant differences between the national and the District
patterns.1 In general, the contractions in the District have
been slightly less severe than those in the nation while
recoveries and expansions have been considerably less
vigorous than those for the country as a whole. The broad
economic pattern that the District has followed in the post
war period can be characterized as one of a milder cycle
superimposed on a somewhat slower growth trend than
that experienced by the nation.
12
MONTHLY REVIEW, JANUARY 1961
Chart I
POSTWAR RECESSIONS IN THE UNITED STATES AND IN THE SECOND DISTRICT
PERCENTAGE CHANGE IN EMPLOYMENT, PEAK TO TROUGH
X//\ United States
**
Percent
Second District
&
< |#
Per cent
rasan
0
~5
-10
-10
-15
- —15
-2 0
-25
Nonagricultural
employment
Manufacturing
Public utilities/
transportation,
and
communication
-20
Wholesale
trade
Retail trade
J—25
Note: Data refer to the percentage drop from the peak date to the trough date of each specific series.
Sources: United States, New York, New Jersey, and Connecticut Departments of Labor.
both the District and the nation, they have been largely
free from cyclical swings in the whole of the postwar
period. The steady growth of these sectors even during
periods of general recessions has in fact been one of the
reasons why the amplitude of postwar cycles in both
District and national employment has been held to com
paratively modest proportions. Currently about one third
of both national and District employment is in these three
sectors.
Looking at the opposite side of the coin, Chart II indi
cates that the postwar expansions have been considerably
less vigorous in the District than the nation. Between the
cyclical trough of 1949 and the peak of 1953, nonfarm
employment grew by nearly 18 per cent in the nation in
comparison with only around 12 per cent in the District.
In the recovery of 1954-57, the District’s rate of addition
to nonfarm payrolls was only about half that of the nation.
In the upswing from the spring of 1958 to mid-1960,2
the District performed somewhat more vigorously, relative
to the nation, but still lagged behind the nation’s perform
ance. Over this two-year expansion period, District non
farm employment grew by about 5 per cent in comparison
with the nation’s addition of 7 per cent.
While the amplitude of cyclical fluctuations in the Dis
trict has been less pronounced than in the country as a
whole, the duration of recession periods has been some
what longer than for the nation. Again measuring by
the behavior of nonagricultural employment, the 194849 decline lasted twelve months in the District as com
pared with eleven months in the nation; the recession of
1953-54 persisted for sixteen months in the District, com
pared with thirteen months in the nation; and the 1957-58
downturn continued for twelve months in the District, com
pared with nine months nationally. The typical pattern
for most component sectors of employment, as well as for
nonfarm employment as a whole, has been to turn down
in the District from one to several months before their
national counterparts and to lag behind them by similarly
varying periods on the upturn. As a result, most of the
declines in particular sectors of employment in the Dis
trict have also been longer than those of the nation. This
tendency of the District to lag behind the nation on the
upturns and lead it into the downturns has meant not only
longer recessions for the District, but also shorter periods
of revival and prosperity. Thus, the upswing of 1949-53
lasted forty-three months in the District as compared with
forty-five months in the nation; the expansion of 1954-57
2 Although total nonfarm employment has edged down slightly persisted for only thirty-two months in the District, com
since May I960 in the District and July in the nation, it is not yet
pared with thirty-seven months in the nation; and the
clear that these months will be established as "cyclical highs”.
13
FEDERAL RESERVE BANK OF NEW YORK
upswing beginning in 1958 continued for twenty-six
months in the District, compared with twenty-eight months
nationally. Employment totals in both the District and
the nation, as noted earlier, reached peaks around the
middle of 1960 and have edged downward slightly since
then.
U N D E R L Y IN G F A C T O R S
A number of factors appear to have contributed to the
relative mildness of the District’s cyclical swings, some of
them growing out of the area’s basic economic structure—
or “industry mix”—and others associated with specific
developments that tended to affect the District’s economy
in a countercyclical fashion. First, while about as large a
portion of the District’s nonfarm work force is engaged in
manufacturing as in the nation as a whole (see Chart III),
the District’s manufacturing industries are relatively more
heavily oriented toward the production of consumer goods.
Although present methods of classification rule out pre
cise estimates, it is probable that roughly 60 per cent
of the manufacturing employees in the District are now
employed in consumer goods industries as compared with
around 50 per cent in the nation as a whole. From a
cyclical point of view, this higher ratio is, of course,
favorable since, in any recession, producer goods are
typically much more severely hit than consumer goods.
Further, the District holds a cyclical advantage in terms
of the particular kinds of consumer and producer goods
which it manufactures. It is comparatively strong in the
production of consumer nondurable goods, such as apparel
and printed matter, and relatively weaker in the produc
tion of consumer durables, such as automobiles. Demand
for nondurables, being less readily postponable, generally
fluctuates less than for durables. Moreover, the District’s
producer-goods mix is such that it leans less heavily on
the production of the most cyclically sensitive of these
goods, such as iron and steel and heavy industrial
machinery.
In addition, a much larger proportion of the Second
District’s employment is in “white collar” jobs than in the
nation as a whole. According to Census Bureau estimates,
about 44 per cent of the nation’s workers hold “white
collar” jobs at present. In the District, it is estimated from
State-wide Census data, the “white collar” proportion is
more than 50 per cent. It is not obvious from the broad
classifications shown in Chart i n that this should be so,
but within manufacturing and some of the other groupings
in the chart the proportion of clerical, managerial, and
other “nonproduction” workers tends to run relatively
high in this District—at least partly reflecting the concen-
diart II
POSTWAR RECOVERIES IN THE UNITED STATES AND IN THE SECOND DISTRICT
PERCENTAGE CHANGE IN EMPLOYMENT, TROUGH TO PEAK
Second District
Contract
conttruction
Public utilities,
transportation,
and
—
communication
Wholesale
trade
Retail trade
Per cent
+35
+30
+25
+20
-+15
-+10
• +5
Note: Data refer to the percentage rise from the trough date to the peak date of each specific serifts.
Sources: United States, New York, New Jersey, and Connecticut Departments of Labor.____________
14
MONTHLY REVIEW, JANUARY 1961
tration of national headquarters of major business con
cerns and trade associations in the New York City area.
It is noteworthy in this connection that, according to a
recent study, some 25 per cent of the nation’s corporation
directors live in the New York City area.
The marked diversification of the District’s economy
has also been a factor cushioning its susceptibility to cycli
cal influences. In New York State alone, nearly all of the
more than 400 different types of manufacturing classifica
tions recognized by the United States Bureau of the Census
are represented. More significantly, manufacturing and
other activity tends to be distributed over the District in
such a way that workers laid off in one industry are often
able to find employment in other lines without major
changes in location. No singje industry, or small group of
industries, dominates the scene—either over the whole
District or over the various subregions within the District.
Thus, while some industries, of course, play relatively im
portant roles in certain areas—such as apparel production
and publishing in New York City, petrochemicals in
northern New Jersey, steel in the Buffalo area, and electri
cal equipment in and around Schenectady—there are few
large one-industry towns and areas, and this has undoubt
edly assisted the adjustment process when particular in
dustries are affected by secular or cyclical adversity.
Apart from these general factors, the timing of certain
specific developments appeals to have made some contri
bution to the mildness of the District’s cyclical swings.
Thus, in 1948, just prior to the onset of recession, the Port
of New York Authority took over Idlewild Airport from
New York City and began a $55 million development pro
gram. In the same year the United States Supreme Court
handed down a decision which forced the nation’s steel
producers to abandon the basing point pricing system.
This action caused many steel firms to open, or reopen,
facilities in the Northeast so as to be nearer to their mar
kets and thus to save on the transportation charges that
were now figured from the mill instead of Pittsburgh.
Buffalo, Syracuse, Watervliet, and Lackawanna in particu
lar received a stimulus directly from this source.
The recession of 1954 was blunted in some areas of the
District by large public expenditures for construction,
although total construction employment dropped sharply
in the District. Construction on the St. Lawrence Power
Project began in August 1954, the month the economy
reached its trough, while work on the St. Lawrence Seaway
began shortly thereafter. Eventually, more than $1 billion
was spent directly on these twin projects, and additional
millions were spent for harbor and dock facilities, housing,
public utilities, and industrial expansion—much of it in
New York State.
Finally, the District’s slower long-term growth rate and
comparative economic maturity also may have helped to
moderate its cyclical swings, while tending at the same
time to lengthen its recessions somewhat and shorten its
recovery periods. One factor that may tend to dampen
fluctuations in such “older” areas—which are often char
acterized by relatively high levels of personal income, sub
stantial backlogs of savings, and readier access to credit—
is the greater stability of consumer spending. At the same
time, the factors that produce slower long-run growth may,
as expansions mature, permit contractionary forces to
gain the upper hand more quickly while correspondingly
retarding the date when recovery sets in. As far as the
Second Federal Reserve District is concerned, however,
it remains a matter of conjecture to what extent such in
fluences have, in fact, affected the region’s cyclical pattern.
C O N C L U S IO N
Both favorable and unfavorable conclusions emerge
from the foregoing analysis. On the plus side, the relative
mildness of recent fluctuations in employment in this area
is heartening. Moreover, the forces apparently underlying
FEDERAL RESERVE BANK OF NEW YORK
this pattern suggest that it has been no mere chance
occurrence but is rooted in the basic make-up of the
District’s economy. On the less favorable side are the in
escapable facts that the District’s growth has not kept pace
with the national average and that its recessions have
tended to be longer. The available evidence, to be sure,
suggests no signs of serious or general stagnation in the
15
Second District economy. Indeed, the District has in many
respects shown an impressive capacity for adaptation to
changing conditions of technology and demand. Neverthe
less, the record reviewed here suggests the need for more
vigorous public and private action that will help to speed
up this adaptive process and lead to a fuller realization of
the District’s growth potential.
@FedFRASER