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M O N T H L Y REVIEW
O f Credit and Business Conditions
F E D E R A L
V o l.
R E S E R V E
26
B A N K
JUNE
M O N E Y
1,
O F
N E W
Y O R K
1 944
M A R K E T IN
No. 6
M A Y
During the past month a large amount of Federal Reserve
rise in the volume of currency outstanding paralleled fairly
credit was again required by member banks to offset their losses
closely the growth in industrial production and the accompany
of reserve funds, chiefly due to the continued increase in cur
ing increase in wage payments.
rency circulation, and to maintain their reserves at the levels
industrial activity and payrolls since the latter part of last
required by the volume of
their deposits.
Reserve credit outstanding in
year, the volume of currency
Principal Factors Affecting Member Bank Reserves,
Changes since December 30, 1942*
Total Federal
Despite the leveling off in
outstanding has continued to
Billions
of dollars
rise at much the same rate
creased by more than 1 billion
as in 1943.
dollars in the four weeks from
growth in currency outstand
This continued
April 26 to May 24, and on
ing, which has its parallel in
the latter date was 3 billion
practically all parts of the
dollars greater than at the low
world, suggests a growing use
point of the year on Febru
of currency in avoidance of
ary 9, at the conclusion of the
Fourth War Loan drive. The
taxation and for illicit trans
increase during the past year
time restrictions and regula
has been approximately 8 bil
tions, as well as for accumu
lion dollars.
The factors responsible for
lations of individual savings
the heavy demand for Federal
able alternatives such as in
Reserve credit in May were
vestment in interest bearing
the same as those that have
been operative for a number
Government securities or de
posits in banks.
of months. These factors and
Another persistent, but much
less important, factor affect
actions in violation of war
in cash despite more favor
their relative magnitude are
illustrated by the accompany
ing bank reserves has been
ing chart, which also shows
the growth in foreign deposits
the principal method by which
the demands have been met—
* Cumulative weekly data.
Sources: Board of Governors of the Federal Reserve System and Federal
Reserve Bank of New York.
Federal Reserve Bank purchases of Government securities.
As
and earmarked gold in the
Federal Reserve Banks. Heavy
payments for strategic materials obtained in foreign countries
the chart indicates, the one dominant factor which is responsi
for the war program and payments for the maintenance of our
ble for the greater part of member bank needs for additional
armed forces abroad, in the absence of the offsetting exports
reserve funds is the persistent public demand for currency.
which characterized our peacetime international trade, have
During the period of rapid expansion of war production, the
resulted in a fairly steady accumulation of dollars by a number
S
*
a c k
d
e
F I F T H
r ft ta
W A R
c A
-
B u y M O R E Than B e fo r e
L O A N
D R I V E
O P E N S
J U N E
1 2
•*
42
MONTHLY REVIEW, JUNE 1, 1944
of foreign countries during the period of our participation in
the war. Considerable amounts of these dollars have been con
Open Market Account, the type and amount depending on con
ditions in the Government security market, but on the whole,
verted into gold, while smaller amounts have been invested in
such purchases have constituted a relatively small part of the
United States Government securities and other amounts have
total extensions of Federal Reserve credit since the end of 1942.
been deposited in foreign central bank or government accounts
In the four weeks ended May 24, 1944, for example, purchases
in the Federal Reserve Banks.
Foreign purchases of gold in
of Treasury bills accounted for 859 million of the total acquisi
this country during the war period and the accumulation of
dollar claims by foreigners are discussed in more detail else
tions of 991 million dollars of Government securities by the
Reserve Banks.
where in this Review.
The third principal factor, and the one which is responsible
As the result of these operations, a large part of the available
supply of Treasury bills has gradually come to rest in the
for a major part of the fluctuations (as distinguished from
Federal Reserve System.
growth) in the demand for Federal Reserve credit, is the irregu
about 58 per cent of all outstanding Treasury bills in contrast
At the end of April, the System held
lar increase in required reserves of member banks which has
to 32 per cent in June 1943.
accompanied the wartime growth in their deposits.
side the Federal Reserve System fell from about 8.1 billion
As the
The amount of bills held out
chart indicates, member bank reserve requirements have been
dollars last June to approximately 5.5 billion at the end of
subject to wide swings since the early part of 1943, reflecting
the shifts of deposits from private accounts to Government
April 1944. Holdings of Treasury bills by weekly reporting
member banks, both in New York City and in other principal
War Loan accounts (which are secured by collateral but require
no reserve) during War Loan drives, and the subsequent use
cities throughout the country, have fallen in recent weeks to
the lowest levels since September 1942 (when the total avail
of Government deposits to meet war and other expenditures of
able supply was only about Al/z billion dollars compared with
the Government, which results in renewed growth in private
more than 13 billion now).
deposits and in the required reserves of the banks.
During 1941 and 1942, a considerable part of the drain on
supply needed Federal Reserve credit through purchases of
Treasury bills from the banks consequently has tended to
member bank reserves caused by these factors was met by the
become progressively more limited in recent months.
use of idle funds in the banks.
Partly as a means of increasing the available supply, and
partly as a means of providing the Treasury with additional
Excess reserves of member
banks were drawn down from nearly 7 billion dollars at the
The possibility of continuing to
beginning of 1941 to approximately 2 billion in the early part
funds to supplement the funds obtained in the War Loan drives
of 1943. Subsequently, excess reserves were reduced more
slowly, to about 1 billion at the end of 1943, and thus far in
and through current revenues, the Treasury increased its weekly
offerings of bills by 200 million dollars to 1.2 billion dollars
1944 have fluctuated between a maximum of a little over l l/ l
billion dollars and a minimum of approximately 600 million.
During this period the remaining excess reserves frequently
ply of bills is somewhat in excess of the average weekly rate of
have not been located at the points of greatest need, and it has
been necessary to meet most of the demands for reserve funds
by extensions of Federal Reserve credit, chiefly through pur
chases of Government securities by the Reserve Banks, although
there has recently been an increase in bank borrowing from the
beginning with the issue of May 11.
This increase in the sup
demand for Federal Reserve credit over extended periods and
should, if continued, permit member banks to increase moder
ately the amount of Treasury bills at their disposal for use in
adjusting their reserve positions.
During the first three weeks,
however, the increased issues of Treasury bills resulted in no
Reserve Banks.
The major part of the Reserve Bank acquisitions of Govern
increase in holdings by member banks in the principal cities, as
purchases of new bills by the banks were more than offset by
sales of bills previously held, owing to the combined effect of
ment securities since the end of 1942— 7.5 billion dollars out
heavy demands for currency by their customers, substantial
of a total of 8.0 billion— has taken the form of purchases of
increases in reserve requirements, and, in the case of individual
Treasury bills.
banks, losses of funds through transfers to other institutions or
A large portion of the total has been acquired
through direct sales of Treasury bills by member banks to the
localities.
Federal Reserve Banks to obtain needed reserves, the member
There has been a noteworthy increase recently in the number
banks retaining an option to repurchase the bills at any time
of member banks which have obtained needed reserves by bor
before maturity. Because of the persistent demand for currency
rowing from their Federal Reserve Banks— a method which for
and other factors affecting the reserves of the banks, however,
considerable portions of the bills sold in that manner were not
a long period had fallen into disuse and which the banks had
shown some reluctance to revive. A few small banks used the
repurchased, but remained in the Federal Reserve Banks to
borrowing method intermittently throughout the years of huge
Other sizable amounts of Treasury bills were pur
accumulations of excess reserves by the banking system as a
chased in the market from dealers and others for the System
whole, but even after excess reserves had largely disappeared
Open Market Account.
From time to time other types of
most banks refrained from using that method of obtaining
Government securities have been purchased by the System
reserve funds. A revival of borrowing has been spreading gradu
maturity.
FEDERAL RESERVE BANK OF NEW YORK
ally, however, beginning with some of the banks in New York
City, and during the past month the number of important bank
ing institutions in this District which borrowed at the Reserve
Bank, at least for brief periods, was the largest in a number of
years. For the country as a whole, total member bank borrow
ings rose on May 24 to 227 million dollars, the largest amount
in nearly eleven years.
This figure compares with approxi
43
In both New York and the 100 other centers, the total
volume of loans declined further, principally as the result of
a continued contraction in commercial, industrial, and agri
cultural loans.
Total deposits of the member banks in 101 cities continued
to decrease, since the contraction in the Government accounts
outweighed the expansion in adjusted demand and time de
mately 90 million four weeks earlier, and a minimum for the
posits, combined.
year to date of 22 million on February 9.
billion dollars since the close of the last War Loan drive.
Demands for Federal Reserve credit may be expected to con
tinue in substantial volume until the Fifth War Loan drive gets
F OREIGN PURCHASES OF GOLD
The latter have, however, increased 4.2
well under way, owing in part to the continued accumulation
One of the most significant wartime developments arising
of deposits in private accounts and the accompanying increase
out of this country’s balance of international payments has
in member bank reserve requirements, and to the continued
securities (June 2 6 ), however, heavy payments for the securi
been the increasing tendency on the part of foreign central
banks and governments to purchase gold to be earmarked
for their accounts in this country and, in some cases, ex
ties may be expected to result in a large shift of deposits to
ported subsequently.
War Loan accounts and an accompanying large reduction in
lies not so much in the amounts being purchased— the
member bank reserve requirements, which should permit the
volume thus far has not been large relative to other items in
our wartime international balance of payments— but in the
demand for currency. After the issue date for Fifth War Loan
retirement of some Federal Reserve credit called into use before
that date.
So long as war activities continue on the present
scale, however, a generally upward trend in the volume of
The significance of this development
fact that the foreign buying has brought about a sustained
’ outflow” of gold for the first time since 1933.
Federal Reserve credit in use may be expected, with only inter
It will be recalled that, owing first to the prewar political
mittent irregularities caused by War Loan drives and, even
crises in Europe and then to the Allies’ need for American
more temporarily, by changes in the volume of Treasury
deposits in the Reserve Banks. The magnitude of the increase
of foreign gold occurred in the years before and immediately
will depend mainly upon the demand for currency and upon
after the outbreak of war.
the amount of bank credit required to supplement public
1938 through the first few months of 1941 about 9 billion
war supplies after the war began, an unprecedented inflow
From the beginning of August
absorption of Government securities in financing the war
dollars of foreign gold was acquired by the United States.
program; the extent to which the public accumulates currency
the early part of 1941, however, not only had the German
By
not needed for actual circulation will be an especially impor
occupation of large parts of Europe brought to a halt shipments
tant factor in determining the needs of the banks for Federal
from those European countries which previously had been large
sellers of gold, but the British gold reserves had been virtually
Reserve credit.
M E M B E R B A N K CRED IT
In order to meet increases in reserve requirements, asso
ciated with the continuing shift of deposits from War Loan
accounts to private deposits, and to offset the sustained out
flow of currency into circulation, member banks in recent
weeks have been large sellers of Government securities, princi
pally Treasury bills. During the five-week period from April
19 through May 24, the weekly reporting member banks in
exhausted by the large scale liquidation prior to the inaugura
tion of the lend-lease program. As a result, such gold as was
shipped to the United States after the early part of 1941 was
limited principally to new production.
The shift from an inward to an outward movement was
not completed, however, until foreign monetary authorities
began to buy gold here. The foreign buying first became
apparent around the middle of 1941, and by November 1941
New York City sold 492 million dollars of bills, reducing
the purchases had reached sufficient proportions to cause a re
duction in our monetary gold stock— the first sizable monthly
their holdings to 780 million, the lowest level since Sep
decline since 1937.
tember 1942.
In addition, these banks made small net sales
a moderate rate through the end of 1942, when conversions
of Treasury notes, certificates of indebtedness, and guaran
of dollar exchange into gold were stepped up substantially.
Foreign purchases of gold continued at
teed issues, which were offset in part by purchases of Treas
From the October 1941 peak the United States gold stock
ury bonds.
Bill holdings of the reporting banks in 100
has declined nearly IV2 billion dollars, or about 6 V2 per cent.
cities outside New York decreased 364 million dollars be
After gold acquired through domestic production is taken
tween April 19 and May 17, to 1,628 million, again the lowest
into account, the indicated loss of gold to foreign countries has
level since September 1942.
amounted to around 1.7 billion dollars, or at an average monthly
Holdings of certificates, Treas
ury bonds, and guaranteed issues declined moderately, while
holdings of notes increased.
rate of about 55 million dollars.
It should be emphasized, however, that despite our loss of
MONTHLY REVIEW, JUNE 1, 1944
44
Increase in U. S. Gold Stock and in Reported Net Liability to
Foreigners,* Cumulative since December 1934
Secondly, most of the gold buying countries had experienced
serious drains on their gold reserves in previous years. This
can be seen from an examination of published figures on
Billions
o f d o lla rs
foreign gold reserves, although, since the data cover gold
held at home as well as abroad, they do not necessarily reflect
only the amounts acquired in the United States.
Argentina,
for example, had been obliged to liquidate a large part of its
gold reserve between 1928 and 1934.
According to the 1943
Annual Report of the Argentine central bank, that bank’s
total gold holdings at the end of 1943 amounted to 939
million dollars, an amount more than twice that held in
August 1939- When allowance is made for the change in
the dollar value of gold in 1934, however, the present hold
ings are still below the 1928 level.
The largest percentage
increase in Latin American gold reserves in recent years has
occurred in Brazil’s total holdings, which have risen more
than 600 per cent since 1939 to around 250 million dollars.
However, Brazil had lost virtually all of its gold reserves in
* Reported net liability to foreigners includes changes in foreign deposits
and holdings of American marketable securities, and changes in American
deposits abroad and holdings of foreign securities.
Source: Federal R eserve Bulletin.
1930 and the recent acquisitions have merely restored the
gold stock to about the equivalent of the volume held in 1929.
Gold holdings of Chile and Uruguay, which have been in
gold since October 1941, this country’s gold reserves at pres
creased substantially in recent months, also are about equal
ent are far larger in relation to its net liability to foreigners,
to the highs reached in the 1920’s, while the gold resources
arising out of foreign deposits and investments in this country,
of Mexico, Venezuela, and Colombia are at all-time highs,
than they were when the war began.
As can be seen from the
owing in part to the fact that even in the predepression years
accompanying chart, the United States’ current holdings of
these countries did not hold sizable reserves in gold.
The gold reserves of all the Latin American republics at
gold are still 4.8 billion dollars above the level prevailing at
the beginning of the war in 1939.
However, this country’s
reported net liability to foreigners on capital account ( through
increases in foreign deposits in this country and changes in
foreign holdings of American marketable securities and in
the end of March 1944 may be estimated as in the neighbor
hood of 2.1 billion dollars.
As can be seen from the accom
panying table, this is about triple the amount held in August
1939; nevertheless, it is only about 25 per cent above the
American deposits abroad and holdings of foreign securities)
is only about 2.5 billion dollars higher. Therefore, our gold
Monetary Gold Reserves*
(In millions of dollars)
reserves in relation to the net liability to foreigners on capital
Change
account are now 2.3 billion dollars more than they were
before the war, when we had experienced the largest inflow
of foreign gold in the history of the country. The gold stock
of the United States is still over 21 billion dollars, or about
three fifths of the total monetary gold stock of the world.
As to the motives for the foreign buying of gold, most of
the countries which have been the chief buyers of gold have
two characteristics in common. In the first place, all have been
accumulating substantial amounts of dollar exchange in re
cent years.
This has been chiefly the result of our large scale
expenditures abroad for the purchase of strategic materials
and other war purposes, combined with the inability of foreign
countries to fulfill their demand for American civilian goods
because of our restricted production of these goods and limited
shipping facilities.
Furthermore, most countries have had
large increases in their currency circulation during the war
Country
Aug. 1939
United States.............
16,646
22,624
Estimated total foreign
(Excl. U.S.S.R.)........
10,800
Estimated total
Latin America...........
Argentina...............
Brazil.....................
Chile......................
El Salvador............
Guatemala.............
Peru.......................
Uruguay.................
Other countries
Switzerland............
Turkey...................
June 1941
Mar. 1944f
Aug. 1939 June 1941
to
to
Mar. 1944f Mar. 1944f
21,429 (Apr.)
+4,783
-1,195
8,200
11,900
+1,100
+3,700
710
845
2,100
+1,390
+1,255
431
4
35
30
20
4
7
8
29
20
68
52
t
+
+
+
+
+
+
+
+
+
+
+
+
+
9
193
25
61
13
4
+
171
13
9
60
+
43
229
465
74
t
355
587
30
4
62
30
18
5
7
11
59
20
108
40
939 (Dec. ’43)
13 (Feb.)
255 (Feb.)
55 (Feb.)
79
18 (Feb.)
11 (Feb.)
19 (Dec. ’42)
230
33
117 (Nov. ’43)
100
42 (Dec. ’41)
192
528
97
85 (Sept. ’43)
421
993
171 (Jan.)
+
+
+
+
+
+
+
508
9
220
25
59
14
4
11
201
13
49
48
—
66
406
141
_
+
+
+
+
+
+
+
+
8
period which require corresponding increases in their required
monetary reserves, except where legal reserve requirements
have been modified or suspended.
* The individual countries listed here in general represent those which
publish figures regularly on their total gold reserves,
t Or date for which latest data are available,
j Published figure for total gold reserves not available.
45
FEDERAL RESERVE BANK OF NEW YORK
1929 level, after adjustment for the 1934 change in dollar
value.
Published figures also indicate large increases in Swiss and
Swedish holdings during the last few years, following heavy
losses before and immediately after the start of hostilities.
Swiss holdings, at 993 million dollars, were at a record level
S EC U R ITY M AR K E TS
The major portion of the trading in Government securities
during May consisted of switching operations by investors who
were adjusting their portfolios in anticipation of the Fifth War
Loan drive. In addition, there was a moderate volume of out
right predrive selling by nonbanking investors, particularly by
at the end of last March, but the Swedish gold stock, at 421
savings banks and to a lesser extent by insurance companies,
million, was only moderately above the level prevailing before
but such selling for the most part was readily absorbed by the
the war.
market.
Turkish gold reserves also have increased consider
On the whole, these adjustments were accomplished
ably, the holdings as of last January being 141 million dollars
with only relatively small changes in the yields on Govern
above the level in August 1939.
ment securities.
On the other hand, gold
stocks of our European Allies, some of whom sustained heavy
Yields on taxable Treasury bonds showed almost no change
losses in the early part of the war period, are presumably
for the month despite a moderate volume of selling by savings
still below prewar levels.
It seems clear that the current acquisitions of gold repre
sent chiefly a desire on the part of many foreign monetary
authorities to utilize the wartime— and therefore perhaps
banks and insurance companies.
corporate demand for the intermediate obligations.
temporary— accumulation of dollars to recoup gold reserves
other hand, yields on the longer term tax-exempt bonds tended
lost in the prewar and early war years.
Legal prohibitions
or limitations of the holding of central bank reserves in the
form of dollars or other foreign currencies undoubtedly have
Changes in yields on most
issues of short and intermediate tax-exempt bonds were mixed,
although in the early part of May there was a fairly strong
On the
to decline, in contrast to the experience in March and April
when a considerable rise occurred.
In order to adjust their
reserve positions, many commercial banks sold certificates of
also been a factor in gold purchases here by some countries.
indebtedness as well as Treasury bills during May, and yields
Political considerations may have been a factor in a few
on some certificates tended to rise slightly.
instances.
purchases absorbed a portion of these sales.
In general, the world-wide demand for gold con
System Account
stitutes an answer to the fears or a denial of the expectations
Although the volume of trading on the New York Stock
expressed a few years ago that the use of gold for monetary
Exchange continued to be relatively light throughout May,
reserves was about to be abandoned by many countries.
stock prices made moderate advances.
Standard and Poor’s
From the point of view of our balance of international
index of 90 combined stocks rose 3 Vi per cent through May
payments, and under existing world conditions, the present
29, to a level only slightly below the 1944 high of March 17.
program of gold buying may be regarded as a moderate, but
Small increases in prices of domestic corporate bonds were
salutary, redistribution of the world’s gold supply which had
for the most part confined to medium and lower grade rail and
previously accumulated in this country.
industrial issues.
The movement of
gold away from the United States therefore can be considered
Moody’s index of Baa bond yields declined
further from 3.66 per cent to 3.60 per cent on May 29, while
as a corrective— at least for the time being— of previous un
the index of yields on Aaa corporate bonds showed no change.
settling factors in our balance of international payments, and
should facilitate the establishment and maintenance of stability
As measured by Standard and Poor’s index, yields on munici
pal bonds declined slightly from 1.88 per cent on April 26 to
in the exchange values of foreign currencies after the war.
1.85 per cent on May 24, following a rise in yields in April.
M A N U F A C T U R IN G
IN D U S T R IE S IN
N E W
Y O R K
C IT Y
More than one fourth of New York City’s gainfully em
ployed residents are employed in manufacturing establish
the value added by manufacture. From 1899 to 1939, however,
the share of New York City in the country’s total number of
ments.
wage earners engaged in manufacturing decreased from 8.4 to
Although manufacturing is not New York’s dominant
industry, developments in that field must be one of the im
6.5 per cent (according to Census of Manufactures data). At
portant considerations in any analysis dealing with the eco
the same time, the percentage of the population of the United
nomic future of the City. Some light on the postwar problems
Comparison of Five Leading Manufacturing Cities
of the United States, 1939
(Dollar figures in millions)
of the City's manufacturing industries may be afforded by an
examination of changes that have occurred in the position of
New York as the leading manufacturing city of the country,
City
Number of
manufacturing
wage earners
Value of
products
Value
added by
manufacture
New York City.........................
Chicago.......................................
Philadelphia...............................
Detroit........................................
512,666
347,839
196,356
182,373
112,092
$ 4,109
2,843
1,418
1,583
882
$ 1,871
1,280
652
650
434
and by an analysis of the structure of the City’s manufacturing
industries in 1939.
New York in 1939 had nearly one and one-half times as
many manufacturing wage earners as Chicago, its nearest com
petitor.
( See accompanying table.)
A lead of about the same
magnitude is indicated, also, by the value of products and by
Source: U. S. Bureau of the Census, Census of the United States, 1940, M anu
factures, I, pp. 264, 496, 718, 806, 900.
MONTHLY REVIEW, JUNE 1, 1944
46
States living in New York City increased from 4.5 to 5.7
per cent.
Until the end of World War I the decline was only in rela
tion to changes in the United States as a whole; the actual
number of manufacturing wage earners employed in New York
City increased continuously. After 1919, however, the number
of workers in manufacturing declined irregularly. Even in
prosperity years, it never reached the level of 1919. In 1939
wage earners and salaried employees (including factory em
ployees not directly engaged in manufacturing) numbered
about 690,000 persons. Substantial increases during recent
war years have raised the number to more than one million
persons, a figure higher than in 1919.
The factors mentioned most frequently as those responsible
for the relative decline until 1939 are the shifting of the center
of population to the West, a tendency to locate industrial
establishments on the fringe of rather than in the midst of
large cities, the decline of foreign trade and of the supply of
cheap immigrant labor, and a higher level of wages and cost
of living than exists in many other communities. Undoubtedly,
each of these adverse factors affects to a varying degree the
competitive position of the different industries of the City.
But some of these factors, and other disadvantages, can be
found in many other manufacturing centers. While the dis
advantages are outweighed in other industrial centers by
proximity of raw materials, cheap electric power, and good
railroad connections, very different compensating advantages
are offered by New York City: proximity to wholesale markets,
extensive financial facilities, diversified labor force. Industries
that find conditions in New York City particularly favorable are
those which manufacture nonstandardized products, very
sensitive to changes in style. In such industries, success de
pends on promotional effort, rapid distribution, and ingenuity
in material and design of products, rather than on low
unit costs.
Distribution of W a ge Earners in Manufacturing Industries, 1939*
St r u c t u r e o f N e w Y o r k C i t y ’ s
M a n u f a c t u r i n g In d u s t r y
ing industries will be in a better position than those of many
war boom areas because their reconversion problems are rela
tively small, because they did not experience an inflow of war
workers, and because their present high level of employment is
due to fuller utilization of existing facilities, rather than to the
addition of new plants. Once this reconversion is completed
New York City’s manufacturers will face the same problems as
the rest of the country. During the last few decades, total em
ployment in the nation’s manufacturing industries tended to
level off in spite of the rapid increase in the volume of output.
The increase in productivity which caused these divergent
trends in output and employment reflects technological and
managerial progress, which will certainly continue or even be
accentuated after the war.
New York City’s manufacturing industries are primarily
those producing consumers’ nondurable goods, as indicated by
the accompanying chart. The real strength and nation-wide
importance of the City’s industries lie in this field, which
in 1939 employed four out of five of New York’s manufactur
ing wage earners. At that time, more than one tenth of the
entire country’s workers in consumers’ nondurable goods manu
factures were employed in New York City.
Less than 1 per cent of the country’s wage earners in primary
manufacturing, such as refining of metals and petroleum,
worked in New York. In the field of producers’ and con
sumers’ durable goods industries (including metal products,
machinery, and furniture), the City’s position was somewhat
stronger; about 3-5 per cent of the nation’s workers in these
industries were employed in the City’s factories. One of the
strong elements in the City’s economic structure is the diversi
fication of New York City’s durable goods industries; this is
particularly true in comparison with other important manufac
turing centers that depend primarily on one single large dur
able goods industry. In past decades, employment in New
UNITED STATES
percent
* Based on data from U .
States, 1940, M anufactures.
S.
NEWYORK CITY
Bureau of the Census, Census of the United
York City fluctuated less than in the country as a whole be
cause durable goods industries, where cyclical swings are par
ticularly pronounced, are relatively unimportant in the City.
O utlook
New York City has been affected by the war to a lesser
degree than most other industrial areas. In the early months,
it was little affected by the first wave of war orders, which
were channeled to regions with large war plants. When full
employment of resources was approached, and large corpora
tions increasingly met the bottlenecks of dwindling labor
supply and limited plant facilities by subcontracting, the small
establishments of New York City began to benefit more largely
by the war production boom.
During the transition period, New York City’s manufactur
The outlook for manufacturing industries in New York City
must be viewed against the background of a general shift in
urban employment opportunities from manufacturing to sec
ondary activities, such as distribution and various service in
dustries. If the relative share of manufacturing in the eco
nomic life of the metropolis is to be maintained, the demand
for its. products must increase constantly or new industries must
be attracted.
47
FEDERAL RESERVE BANK OF NEW YORK
Measures o f A ctivity in Textile Manufacturing*
The predominance in the City of consumers’ nondurable
goods industries is a valuable asset for the postwar period. If
this country succeeds in maintaining, after the war, high levels
of employment and consumption, demand for nondurable
goods cannot fail to expand, and New York City is well
equipped to supply the country with a wide variety of such
products. In the earlier part of the postwar period, foreign de
mand for consumers’ goods might be an additional factor,
Thousands
o f running b ales
Colton Consumption
50
45
40
1
35
30
2 5 L.—
/
Thousands
of pounds
Wooi Consumption
though the accent will probably be on cheapness of such prod
ucts rather than on style and quality.
As a whole, the manu
facturing industries of New York City depend more directly
on the volume of expenditures of consumers than do the
manufacturing industries in large centers where producers’
goods are the most important products.
BUSINESS A C T IV IT Y IN A P R IL
Fluctuations in total industrial activity have been small in
recent months, and suggest that output as a whole has passed
its wartime peak; significant increases in the next few months
are likely to be confined to those industries vital to the war
production program and to civilian needs.
During April addi
tional cutbacks were made in the production of small arms
* Data for cotton and wool are daily averages, by months, adjusted for sea
sonal variation by the Federal Reserve Bank of New York. Adjusted index
for rayon deliveries is that of the Board of Governors of the Federal Reserve
System. Plotted on ratio scale to show proportionate changes.
ammunition and explosives, in accordance with the program
announced last December, and output of aluminum was further
been so seriously affected as that in cotton textiles.
curtailed.
Emphasis has shifted to output of landing craft,
sumption of wool, in the first quarter of this year, averaged 3
Mill con
which showed an increase of 35 per cent in April, to the heavy
per cent less than a year ago, reflecting primarily the sharp
shell program, and to the production of farm machinery, which
decline in military demand for wool fabrics since mid-194 3
in April exceeded the highest rate of output attained in any
which has enabled many mills to convert to light weight civilian
peacetime year.
fabrics.
Reflecting the high level of output in these
Rayon deliveries for the first four months of 1944
industries, steel production in April reached a rate of more
were 5 per cent higher than a year ago, chiefly because of the
than 252,300 tons daily.
expanding need for rayon cord in synthetic rubber tires.
Manpower shortages have limited operations in such im
Indexes of Business
portant industries as copper, lumber, and cotton textiles. Daily
average copper production declined 9 per cent on a seasonally
adjusted basis during April, and lumber output decreased
slightly for the fourth consecutive month. In the cotton tex
tile industry consumption of cotton by the mills has fallen off
sharply since last summer, as indicated by the accompanying
chart; for the first four months of 1944 it averaged 11 per cent
less than a year ago. Since late 1942 the number of workers
in cotton textiles has been declining, as large numbers have
been drafted for the armed forces and many more have left
the industry for higher paid jobs in shipbuilding and aircraft
plants.
The rate of labor separations was still high in March
1944— 8.19 per hundred workers compared with 7.27 for all
manufacturing— although it had declined from the peak of
9.59 per hundred reached in March 1943.
In an effort to halt
the decline in cotton textile output, the War Manpower Com
mission has ordered the industry on a 48-hour week effective
May 14, 1944; producers of cotton yarn have been directed to
maintain the highest rate of production reached in any quarter
of 1943; and revisions in price ceilings of cotton goods are
under consideration.
Output in other branches of textile manufacturing has not
1943
1944
Index
Industrial production*, 1935-39 = 100........
{Board of Governors, Federal Reserve
System)
Munitions output, Nov. 1941 = 100...........
{W ar Production Board)
Electric power output*, 1935-39 = 100. . . .
(Federal Reserve Bank o f New York)
Ton-miles of railway freight*, 1935-39 = 100
{Federal Reserve Bank of New York)
Sales of all retail stores*, 1935-39 = 100. . .
{Department of Commerce)
Factory employment
United States, 1939 = 100..........................
{Bureau of Labor Statistics)
New York State, 1935-39 = 100...............
{New York State Dept, oj Labor)
Factory payrolls
United States, 1939 = 100.........................
{Bureau of Labor Statistics)
New York State, 1935-39 = 100...............
{New York State Dept, of Labor)
Income payments*, 1935-39 = 100..............
{Department o f Commerce)
Wage rates, 1926 = 100..................................
{Federal Reserve Bank of New York)
Cost of living, 1935-39 = 100........................
{Bureau of Labor Statistics)
Velocity of demand deposits*, 1935-39 =100
{Federal Reserve Bank o f New York)
New York C ity .............................................
Outside New York City..............................
*Adjusted for seasonal variation.
Apr.
Feb.
Mar.
Apr.
237
245
242
240p
547
636r
667r
652p
183
201
201
202p
229
237
233p
159
177
178 p
168
166
164
161 p
160
157
155
152p
310
328
325p
289
300
299
208r
231r
230p
286p
loir-
160r
160p
124
124
124
125 p
88
87
79
82
73
76
84 r
89
p Preliminary.
r Revised.
MONTHLY REVIEW, JUNE 1, 1944
48
Preliminary data for the first three weeks of May indicate
Estimates of annual sales by departmental groups for all
that electric power production declined more than is usual at
stores in the Second District have recently been completed by
this season of the year, and crude petroleum production was
this bank. Between 1939 and 1943 total sales rose from 546 to
about 2 per cent above the high level of April.
Carloadings
of railway freight were nearly 5 per cent greater than in the
previous month, and estimates of sales of department stores
(seasonally adjusted) indicate an increase of 4 per cent.
729 million dollars, an increase of 34 per cent.
As indicated
on the accompanying chart, almost half of the increase took
place in the womens and misses’ wear group, their sales increas
ing from 179 to 261 million dollars, or 46 per cent.
The
smallest percentage gain among the departmental groups
D E P A R T M E N T STORE T R AD E
occurred in homefurnishings. Sales for this group, after increas
Heavy demand for department store merchandise in May
was reflected in a sharp rise of the seasonally adjusted index
ing sharply in 1940 and 1941, declined in the following two
years; for the four-year period the gain amounted to only 20
of sales for this District, to a level estimated as only 5 per
per cent.
cent below the all-time high reached last March.
Compared
per cent;, small wares, 37 per cent; mens and boys’ wear, 21
with May 1943, total department store sales last month showed
per cent; and basement store, 25 per cent.1 The chart shows
a gain of about 20 per cent.
Increases in the other groups were piece goods, 50
Trade sources indicate that sub
the relative dollar volume of sales in the principal groups of
stantial gains were shown in sales of piece goods, dresses,
departments for each of the past five years and also the per
sportswear, infants wear, and homefurnishings. Declines were
centage distribution of total sales among these departmental
concentrated in the departments affected by the higher excise
groups.
taxes, thus continuing the sharp downward movement evident
in April when sales of these departments were about 20 per
cent below those in April last year; purchases during March,
in anticipation of the increased taxes, had been 80 per cent
1 A discussion of department store sales by individual departments
over the war period was presented in the August 1, 1943 issue of this
Revieiu. A table comparing estimated sales of 35 lines of merchan
dise in 1943 with sales in 1939 will be supplied on request.
greater than in March 1943.
Stocks on hand in the department stores declined 7 per cent
Department and Apparel Store Sales and Stocks, Second Federal
Reserve District, Percentage Change from the Preceding Year
during April; by the close of the month the seasonally adjusted
N e t Sales
index had dropped back to the level of June 1943 but was 12
per cent above the low of April 1943.
L ocality
Outstanding orders of
April 1944
the department stores, increasing slightly during April, were
D epartm ent stores, Second D istrict. . . .
17 per cent above those a year earlier.
Department Store Sales, 1939-43, Second Federal Reserve District*
M i I lions
of dol lars
800
P ercentages in d ic a te d is trib u tio n , by
d e p a rtm e n ta l groups, of year's sales.
700
6 00
500
Women's and
Misses'Wear
N ew Y o r k C i t v ..............................................
N crtbei n
erse y.................................
N e w a r k .........................................................
V, e‘-t < + .o rei ipkI Fairfield C o u n tie s. .
i ‘ i-( < t v •J ...........................................
T o v e i i t um r i-h er v u i:p y ...............
i
I ! ( \ .p ..........................................
1 i pet 1 i d '- n h :\ er \pM ev..................
A .b a i .v ...........................................................
J an .th rou gh
April 1944
1
+
+ 3
- 8
-1 1
- 4
- 8
+14
+11
- 8
- 2
-1 4
+ 7
+ 1
+ 5
+10
+ 6
+ 9
+ 9
+ 9
- 1
- 4
- 4
+
+
Centi a 1 a evv ' cv1 S *u ’ o ..........................
j\Ji bav k i ,u e r \ e y ........................
1 idea...........................................................
F\ racu.se........................................................
N n rl (1
\ \ \ 1
i i<e
..................
S cu ll t
\c\ \ ( t
i ( ...................
r :i « t i f i
..................
I1hi ira.........................................................
"\\ e^tein N ew ^ orx t i a i e .........................
F u ; a ! o ...........................................................
Nia^nia 1 a l l s ...........................................
iu cl e.-ter.....................................................
+ 4
A pparel stores (chiefly N e w Y o r k C ity)
0
Stocks on
hand
A pr. 30 , 1044
5
+12
7
1
- 4
- 4
- 8
+17
+15
0
+ 6
- 6
+ 9
+ 1
+ 4
+13
+ 8
+ 5
+ 5
+ 6
+ 4
+ 4
- 1
+ 4
+14
+ 8
+ 6
- 2
- 6
+ 15
-
+
+ 2
+ 4
+ 19
+11
+24
+14
—
+11
+11
+12
+13
+24
5
4 00
Piece Goods
3 00
Indexes of Department Store Sales and Stocks
Second Federal Reserve District
Small Wares
Mens and
Boys'Wear
Item
200
Apr.
Homefurnishings
100
Miscellaneous
Basement Store
0
1940
* Estimated by Federal Reserve Bank of New York.
1943
1942
1935-39 average — 100
Sales (average daily), unadjusted.................
Sales (average daily), seasonally adjusted ..
129
127
1923-25 average — 100
Stocks, unadjusted............................................
Stocks, seasonally adjusted...........................
100
99
r Revised.
1944
Feb.
Mar.
Apr.
114
137r
138
157
136
139
119
124r
121
120
112
111
FEDERAL RESERVE BANK OF NEW YORK
MONTHLY REVIEW, JUNE 1, 1944
GeneralBusinessandFinancial ConditionsintheUnitedStates
(Summarized by the Board of Governors of the Federal Reserve System)
I NDUSTRIAL
production and employment at factories and mines declined somewhat further
in April, reflecting principally reduction in output of metal industries. The number of
industrial wage-earners was about 6 per cent or 800,000 less than in November 1943.
Industrial Production
1942
1944
Index of Physical Vo-lume of Industrial Produc
tion, Adjusted for Seasonal Variation, 1935-39
Average^ 100 Per Cent. (Groups shown
are expressed in terms of points in
the total index)
Indexes of Wholesale Prices Compiled by Bureau
of Labor Statistics (1926 average=100'
per cent; latest figures are for week
ended May 13)
The Board’s seasonally adjusted index of output in manufacturing and mining industries
was at 240 per cent of the 1935-39 average in April, as compared with 242 in March and
245 in February.
Small declines in output of metals and metal products continued to account for most
of the decrease in industrial production. Electric steel production decreased further in April
to a level 5 per cent below the same month last year. Production of most nonferrous
metals declined, reflecting partly planned curtailments and partly the effects of labor shortages
in mines and smelters. A further curtailment of aluminum production was announced in
May. Activity at plants producing munitions in the machinery and transportation equipment
industries declined somewhat in April. Production under the farm machinery program con
tinued to increase and was reported at a rate above the highest volume recorded in any
peacetime year.
Output of nondurable manufactured goods showed little change in April. Activity at
cotton mills was maintained at the level of recent months, approximately 15 per cent below
the peak level of April 1942. As a measure to increase production, a 48-hour work week
was ordered in the cotton textile industry, effective May 14.
The number of animals slaughtered continued at an exceptionally high level in April,
and effective May 3 most meat products were removed from rationing. Output of dairy
products continued to rise seasonally and supplies available for civilians increased.
Mineral production was maintained in large volume in April. Production of both
bituminous and anthracite coal for the year through May 6 was approximately 5 per cent
more than in the same period in 1943.
Crude petroleum production in April continued at a level about 12 per cent above a
year ago. Mine production of iron ore showed a large seasonal rise, reflecting the opening
on April 10 of the season for lake shipments.
D istribution
Department store sales declined in April and, after allowance for usual seasonal changes,
were about 10 per cent below the high level which prevailed in the first quarter of this year.
In the first half of May sales were maintained and were considerably larger than in the
corresponding period of 1943.
Carloadings of railroad freight in April and the first half of May were maintained in
large volume. Grain shipments continued to decline from the exceptionally high levels of
January and February. Ore loadings increased sharply in April and were 60 per cent greater
than a year ago.
Commodity Prices
Wholesale prices of most commodities showed little change from the middle of April to
the third week of May. Prices of farm products and foods were slightly lower, while
maximum prices of some industrial commodities were raised.
The cost of living index advanced one-half per cent from mid-March to mid-April,
reflecting higher retail prices for foods and furniture and increased excise taxes effective
April 1.
BTU.10X8OP00LLAR8
1
1
1
1
•
I
..T T .)
GOLD STOCK
l
\
__________________
Member Banks in Leading Cities. Demand De*
posits (Adjusted) Exclude U.S. Government and
Interbank Deposits and Collection Items.
Government Securities Include Direct
and Guaranteed Issues (Latest figures
are for May 17)
\
>
MONEY IN
3IRCULATI0N/
MEMBER BANK
✓
/
i
—
—
(939
v * 4- - '
/
i
*— i-L
SERVE BANK CR!•DIT
RE:
\
(940
1941
TRE,ASURY DEPOSITS
L.
1
1942
1943
1944
Member Bank Reserves and Related Items
(Latest figures are for May 17)
Ba n k Credit
From the end of the Fourth War Loan Drive in the second week of February through
the middle of May, demand deposits of individuals and businesses at weekly reporting banks
increased by about 3 billion dollars. Time deposits also increased appreciably. During the
same period war loan accounts at reporting banks declined by more than 6Ms billion dollars.
Holdings of U. S. Government securities by these banks declined by about 2 billion dollars
and loans contracted by more than IV2 billion dollars. A large part of the loan decline was
the liquidation of credits extended during the war loan drive. Loans to brokers and dealers
are now less than they were before the Fourth War Loan Drive and loans to others for
purchasing and carrying U. S. Government securities are down to about pre-drive levels.
During the same period commercial loans also declined rapidly.
Sales of U. S. Government securities by commercial banks were paralleled by equivalent
purchases by the Federal Reserve System. System holdings are now about 2 V2 billion dollars
larger than they were at the end of the Fourth War Loan Drive. These purchases were made
to supply member banks with reserve funds needed to meet a continued increase in currency
and the growth in required reserves which resulted from shifts of deposits from Treasury
war loan accounts to other accounts. Some of these needs have been met by a decline in
excess reserves. Sharp declines in excess reserves at the end of March and April were
associated with unexpectedly large tax receipts and the building up of Treasury balances at
Reserve Banks. Currency in circulation, which increased somewhat less rapidly during the
first quarter of 1944 than in the same period last year, renewed its rapid outflow late in April
and during early May. In the four weeks ended May 17 the currency outflow was over
500 million dollars.
@FedFRASER