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MONTHLY REVIEW
O f Credit and Business Conditions
FEDERAL
V o lum e 33

RESERVE
M A Y

BANK

OF

NEW

YORK

1 95 1

No. 5

MONEY MARKET IN APRIL

April was the second month of adaptation to the freer
market conditions resulting from the recent agreement between
the Treasury and the Federal Reserve System concerning poli­
cies of debt management and credit control. In general, the
money market was easy, and the transitional phase of funda­
mental readjustment in the Government bond market pro­
ceeded in an orderly manner. Toward the end of April, there
was some strengthening in the tone and breadth of the Gov­
ernment security market.
In March substantial purchases of Government securities
by Treasury investment accounts and the Federal Reserve
System had provided a cushioning influence. These purchases,
along with some other factors, caused substantial increases
in bank reserves which largely offset the tightening effects
of increased Treasury deposits at the Reserve Banks (follow­
ing the tax date) and of other more or less routine transactions.
In April there were virtually no market purchases of Govern­
ment securities for Treasury accounts, and no net purchases by
the System Account after the second statement week; in the
final week, the System made moderate net sales. Bank reserves,
nonetheless, increased during the month, chiefly because of
large net Treasury disbursements through the first half of the
month, and later because of the midmonth rise in "float”
(checks credited to member bank reserve accounts which have
not yet actually been collected by the Federal Reserve Banks).
About three quarters of the rise in bank reserves that occurred
during the first three statement weeks was, however, elimi­
nated during the final week, chiefly by the customary end-ofmonth reduction in float and by the Systems net sales and
redemptions of Government securities. Most of the remaining
increase went into their excess reserves, which were available
to meet both expected further calls upon member bank deposits
held for the Treasury and other reserve drains. There was
some contraction of credit by the weekly reporting commercial
banks during the month; the business loans of the reporting
New York City banks fell off steadily.
On April 12, the Secretary of the Treasury announced the
results of an optional conversion that had been offered from
March 26 to April 6 to holders of the restricted IVz per cent




bonds of June and December 1967-72. Holders of these bonds
were permitted to exchange them for a new type of 2% per
cent nonmarketable bond, maturing in 1980 and callable after
March 1975. The conversion exceeded expectations, as roughly
13.6 billion of the 19.7 billion dollars of these restricted bonds
originally outstanding were exchanged into the new bond
(about 5.6 billion dollars of the exchange were made by
Treasury investment accounts and the Federal Open Market
Account).
G o v e r n m e n t Se c u r it y M a r k e t

Government security prices changed very little early in
April, while the books for the conversion issue remained open.
During this period, liquidation of restricted bonds was sizable,
partly reflecting a widely held view that lower prices would
prevail once the influence of the exchange offering was re­
moved. Following expiration of the offering, which resulted
in taking about 8 billion dollars of nonbank-held debt out of
the long-term market, downward price movements did develop.
General knowledge of the potential availability of sizable
amounts of bonds from larger institutional investors (anxious
to obtain funds to meet other commitments which they have
apparently been unable to reduce) and the occurrence of
price reductions caused some smaller speculative and other
holders to attempt a precautionary liquidation of parts of their
holdings. At the same time, other investors in a position to
buy bonds withdrew their bids temporarily pending the clari­
fication of current supply and demand forces.
Thus, restricted bond prices moved down from 1 22/32 to
more than 2 points between April 9 and 19, corresponding to a
CONTENTS
Money Market in April............................................

61

The Dollar Position of Latin America................. 63
Recent Price Developments.................................... 67
Unemployment Statistics........................................ 69
Department Store Trade..........................................

71

62

MONTHLY REVIEW, M AY 1951

rise in yields of from Vs per cent to 3/16 per cent, on the basis
of a comparatively light volume of offerings, mostly in small
lots. The restricted bonds of 1967-72, of which roughly 6 bil­
lion still remained outstanding, had been quoted at 99 2/32
(bid) while the books remained open for the conversion. Their
prices subsequently fell to 97 2/32 for the June series, and to
97 4/32 for those of December, on April 19; but prices rose
after that date. Following some two-way movement toward the
close of the month, both issues closed on April 30 at 97 12/32.
This adjustment of prices and yields of restricted Treasury
bonds (technically modified in some measure by a switchover,
for bonds selling below par, to quotations based on calculated
yield to maturity, rather than to call date) was about as exten­
sive as that occurring in March. But in contrast the volume of
Federal Reserve bond purchases was sharply diminished, and
as already noted the System’s total holdings of Government
securities were unchanged in the third statement week, and
declined thereafter.
W ith prices ranging between 97 and 98, the restricted
bonds began to look attractive to pension funds, personal trust
accounts, some savings banks, and others, and particularly to
those who had liquidated earlier in the year at higher prices.
Increased interest in restricted bonds consequently was accom­
panied by a moderate recovery of prices. Liquidation by
the larger life insurance companies and savings banks did
occur in some volume late in the month, when both restricted
and eligible bonds were sold as buyers appeared in the market,
and offerings were placed at rising prices without Federal
Reserve intervention. The accompanying chart shows the
fluctuations in the prices of two eligible and two ineligible
bonds. The decline in prices of longer-term eligible issues
during April was much less pronounced than that in the
restricted issues, while the subsequent increases were some­
what larger. The price of the 2 Vz per cent bank-eligible bonds
of 1967-72, for example, fell briefly to 99 20/32 (bid), but
was quoted at 100 6/32 on the 30th. Yields on a maturity
date basis for the two restricted issues shown on the chart were
2.65 per cent for the longer and 2.49 for the shorter, at the
close of business on April 30; those for the eligible bonds,
still calculated on a call date basis, were 2.47 per cent for the
longer and 2.09 for the shorter. At the beginning of March,
these yields, computed on the same basis, averaged about *4 of
1 per cent lower.
Uncertainty in the market for intermediate and long-term
Treasury securities contributed to an active demand for short­
term issues. Yields on Treasury bills and notes consequently
declined after the middle of the month. In part, this demand
represented a permanent shift of short-term funds formerly
employed in the long-term market and in part a temporary
shift as long-term investors attempted to safeguard their
funds until there had been further clarification of price pros­
pects in the long market. Business corporations also continued




Closing Bid Prices of Selected Treasury Bonds,
March and April 1951*

* Saturdays, Sundays, and Good Friday (when no trading occurred) are
omitted.

to accumulate short-term Treasury securities as a means of
temporarily investing funds set aside to meet growing Federal
income tax liabilities. And commercial banks were also in
this market during the month seeking employment of reserves
made available for a short time by the ebb and flow of
funds through the money market. The combination of these
demands was partly met early in the month through sub­
stantial sales by the customers of Chicago banks who had
accumulated bills toward the end of March in order to mini­
mize their tax liabilities under the April 1 Cook County,
Illinois, personal property tax. Subsequent demand was largely
satisfied by System sales, and the redemption of bills held by
the System Account. Near the end of April, short-term yields
became somewhat firmer, accompanying a moderate tightening
of the money market and an increase in member bank borrow­
ing at the Reserve Banks.
M e m b e r B a n k R eserves

Federal Reserve System purchases of Government securities,
related mainly to the Treasury’s conversion offering, helped
to ease member bank reserve positions in the first part of
April. But the changes in the banks’ reserve positions during
the course of the month were determined principally by
routine money market transactions. These provided the banks
with reserve funds on balance through the first three weeks
of the month. As shown in the accompanying table, there
were two major sources of reserves, one following the other.
Treasury operations, which resulted in net disbursements of
funds out of its deposits with the Reserve Banks, accounted
for 655 million dollars in the first two weeks. When the

63

FEDERAL RESERVE BANK OF NEW YORK

movement of Treasury funds was subsequently reversed, its
place was taken by a sharp midmonth expansion of float in
the third week (318 million dollars). The reserves supplied
from these and other sources over the three weeks as a whole
more than offset the cash drains from other transactions,
notably an increase in public demands for currency for circu­
lation purposes.
On balance over these three weeks, regular money market
transactions, including a reported reduction of required
reserves in the week ended April 11, furnished the banks
with about 580 million dollars of free reserve funds, and
Federal Reserve purchases (concentrated in the period ended
April 6) added another 480 million dollars. Thus, more than
1 billion dollars of funds was supplied to the member banks,
who reduced their borrowing from the Reserve Banks by
360 million dollars and built up their excess reserves by 700
million dollars. Excess reserves reached 1.1 billion dollars
on April 18, the highest volume since early in the year.
Presumably the banks maintained excess reserves at this high
level in anticipation of subsequent losses of funds, including
heavy withdrawals from the Treasury’s accounts with the
commercial banks. Actually, almost 1.9 billion dollars of these
deposits were called during the month. The spacing-out of
the flow of funds from the banks to the Treasury’s account at
the Reserve Banks, made possible by the new procedure in
March of crediting corporation tax payments to Treasury
accounts in the banks on which these checks were drawn,
had two principal results. An extreme convergence of drains
upon bank reserves was avoided in March, but the banks had
to be prepared for heavy Treasury calls thereafter.
A cash drain on reserves during the week ended April 25
failed to produce over-all tightness because the banks met
their losses by drawing on their excess reserves. As shown
in the table, the decrease in excess reserves, largely attributable
to reduced float and System sales and redemptions of Govern­
ment securities, amounted to nearly 450 million dollars.

W e e k ly Changes in F actors T ending to Increase or D ecrease
M em ber B ank R eserves, Ap ril 1951

(In millions of dollars; ( + ) denotes increase
(— ) decrease, in excess reserves)
Four
weeks
ended
April 11 April 18 April 25 April 25

Statement weeks ended
Factor

April 4

Routine transactions

-10 0
0
82

+317
— 56
- 28
+ 21
+ 2

-2 1 6
+318
+ 9
- 38
+ 46

- 59
-3 3 5
+ 35
- 25
4

+381
- 74
- 84
- 42
- 38

+ 15.5

Treasury operations*................
Federal Reserve float................
Currency in circulation............
Gold and foreign account........
Other deposits, etc....................

+254

+ 119

-3 8 8

+140

+308
-3 4 5

+ 172
- 34

+ 21

0

-1 4 6
+ 36

+334
-3 2 2

-

+339
1
-

Federal Reserve transactions

Government securities..............
Discounts and advances...........
Total...................................

37

+138

+ 21

-110

+ 12

118

+392

+141

-4 9 8

+153

5

+ 92

-

+

54

+10 4

+113

+4&4

+104

-4 4 4

+257

Total reserves....................................

+

Effect o f change in required, reserves.

—

Excess reserves ..................................

37

* Includes changes in Treasury currency and cash.
Note: Because of rounding, figures do not necessarily add to totals shown.

New York City member bank reserve positions were sub­
jected to the same influences that affected the positions of
all member banks, except at the beginning of the month when
a heavy transfer of funds, chiefly to Chicago, occurred. This
outflow reflected mainly the sale and redemption of Treasury
bills by Chicago banks and their customers with the passing
of the April 1 personal property tax date, referred to above.
New York City banks and nonbank investors took up a
large part of these sales and of the new bills issued to replace
the maturing bills. However, heavy System purchases of
Treasury bonds in the New York market at that time and
substantial net cash operating disbursements of the Treasury
in the New York area financed the bulk of these and other
losses of reserves. The New York money market remained
easy in this first week and through most of the month, only
becoming tight after the 25 th. The volume of transactions
in Federal funds was small, and rates on these funds remained
well below one per cent until near the end of the month.

THE DOLLAR POSITION OF LATIN AMERICA

The current Latin American dollar position takes on special
interest against the background of the recent meeting of PanAmerican foreign ministers in Washington, where important
economic questions of common interest were discussed.
Latin Americas dollar position improved considerably dur­
ing 1950; as shown in Table I (next page), total gold and
dollar holdings of the republics rose by 406 million dollars
during the year. The area thus participated to the extent of
11 per cent in the 1950 increase of the gold and dollar reserves
of all foreign countries. The growth in Latin Americas
reserves continued and reinforced a trend that had started in
1949 when the postwar drain on the areas gold and dollar
holdings came to an end. However, the 1950 increase took




place entirely during the second half of the year. There was a
loss of reserves in the first half, but it was very moderate, while
the rise in the second half was much larger than in the corre­
sponding months of 1949.
The individual Latin American republics participated very
unequally in the 1950 increase. Argentina gained more than
100 million, Mexico 71 million,1 Cuba 67 million, Uruguay
86 million, and Brazil 33 million, while Venezuela lost 61 mil­
lion and Colombia 11 million. In Brazil and Mexico very large
accumulations during the second half of 1950 more than made
up for sizable reserve losses during the first six months.
1 Data as to Mexican gold holdings are available only through
November.

64

MONTHLY REVIEW, MAY 1951

Gross

Table I
Gold and D ollar H oldings o f the Latin A m erican R epublics

(In millions of dollars)
Holdings as of

Increase or decrease during

Country
Dec. 31,
1950p
Argentina...................
Bolivia........................
Brazil..........................
Chile...........................
Colombia....................
Cuba...........................
Mexico.......................
Peru............................
Uruguay.....................
Venezuela...................
OtherJ .......................
Total...............

518
43
543

120

127
530
338*
91
322
455
375
3,462

Dec. 31,
1949

Julv-Dec.
1950p

417
37
510

+ 64
+ 6

138
463
267
81
236
516
290

+ 18
+ 5
7
+115
+ 13
+ 67
- 35
+ 66

-1 6
+73
-4 3
- 3
+19
-2 7

3,056

+412

-

101

+ 10 1

Jan.-June
1950

July-Dee.
1949

+36

0
-6 8
+ 1

+22

6

+
+
+
+
+
+
+
+
+
+

23

1

77

1

40

6

72

8

17f
5
7

+255

p Preliminary.
* Gold holdings as of November 30,1950; dollar holdings as of December 31,1950.
t Changes in Uruguayan dollar holdings in July-December of 1949 are included
in “Other” and not under Uruguay.
% Includes Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala,
Haiti, Honduras, Nicaragua, Panama, and Paraguay.
Note: Data exclude dollar currency holdings of the public in various countries,
notably Cuba and Panama.
Source: Board of Governors of the Federal Reserve System.

More than half of the year’s rise in the area's total gold and
dollar holdings represented net additions to its gold reserves.
Of the 225 million dollar increase in gold, Uruguay and Mexico
accounted for the greater part. The gold holdings of the Bank
of Mexico, which stood at 52 million dollars in December 1949,
had risen to 133 million by the end of November 1950, and ac­
cording to all indications have increased even faster since that
date. Uruguay continued during 1950 its policy of converting a
major part of its foreign exchange accumulations into gold,
and acquired an amount valued at 66 million dollars, thus rais­
ing its gold reserve by over one third. Argentina’s gold
reserves did not increase during 1950; however, that country
had purchased 50 million dollars of gold at the end of 1949,
and acquired an additional 72 million early in 1951. Cuba
pursued an opposite policy: the new national bank sold 28
million of the country’s gold holdings, and invested the pro­
ceeds in short-term earning assets in the United States.
Fa v o r a b l e T r e n d i n A r e a ' s In t e r n a t i o n a l
T r a n s a c t io n s

The continued improvement in Latin America’s gold and
dollar position in 1950 reflected certain favorable trends in
the aggregate international transactions of Latin American
republics with the United States. Among these the most
striking was the achievement of an export surplus with this
country for the first time since the end of the war (see
Table II), a development discussed below. Other factors of
importance were the continued receipt of dollars by the Latin
American republics from ECA "offshore” purchases,2 disburse­
ments by international agencies, and capital transfers from
third areas, particularly Europe. The export surplus with the

United States enabled the Latin American republics to reduce
their total deficit on goods and services with this country by
three fifths, in spite of the fact that remittances of earnings
to United States investors rose sharply.
The great rise in remittances on investment account seems
to have been due to the increased profitability in 1950 of
petroleum and mining operations, as well as of the sugar
industry. This reflected in large measure the world recovery
from the 1949 recession, and the increase in food and raw
material prices following the outbreak of the Korean war. In
addition, the greater availability of dollars induced the ex­
change control authorities in a number of countries, particularly
Brazil, to remit current and past investment earnings more
promptly.
Dollar receipts from other foreign areas and from interna­
tional lending institutions remained very sizable in 1950,
although they were less than in 1949. ECA offshore purchases
in Latin America aggregated 192.6 million dollars, GARIOA3
outlays 19-8 million, and International Bank disbursements
45.4 million. In addition, considerable foreign capital, particu­
larly from Europe, is known to have been transferred to such
Latin American countries as Uruguay and Mexico.
The receipt of dollars from third areas was particularly im­
portant during 1950 in enabling the Latin American countries
to build up their dollar and gold reserves, because the inflow
of private long-term capital from the United States was sharply
curtailed during the year, falling from 456 million dollars in
1949 to 179 million. This sharp decline, which seems to have
been particularly marked during the first half of the year,
reflected mainly the virtual completion in 1949 of the huge
oil investment program carried out by United States corpora­
tions in Venezuela. In this connection it should be noted that
oil investments have accounted for almost 50 per cent of United
States direct investments in Latin America since the Second
World War.
The most noteworthy development in the movement of
short-term capital was the large outflow from the United
States to Latin America during the second half of 1950. This
seems to have been due to a speculative movement of funds
to Mexico in anticipation of a revaluation of the peso, and to
the uneasiness engendered by the outbreak of the Korean war
which led to the transfer of some funds from the United States
(like the above-noted European funds) to Latin American
countries, notably Mexico and Uruguay. It is also significant
that Latin Americans, who had reduced their short-term dollar
assets in the United States during the first half of 1950, subse­
quently increased them very sharply as a result of the high
dollar receipts from exports to this country.
Another important indication of the improvement in the
dollar position of Latin American countries has been the work-

2 That is, purchases made outside the United States by European
3 Purchases by the United States Defense Department for "Governcountfifs using ECA funcls,
meat and Relief in Occupied Areas”,




FEDERAL RESERVE BANK OF NEW YORK
Table II

International Transactions of the Latin American Republics
with the United States
(Net balances in millions of dollars; ( + ) := excess of receipts from the
United States; (— ) rz: excess of payments to the United States)
Second half
I ten

1950

1950

1949

Goods and services:
Merchandise trade.....................................
Transportation...........................................
Travel.........................................................
Miscellaneous services...............................
Investment income....................................

+251
- 34
+ 24
- 48
-3 4 3

- 17
- 33
+ 32
- 32
-2 0 9

+368
- 36
+ 61
- 75
-5 8 9

-2 0 2

Total...............................................

-1 5 0

-2 5 9

-2 7 1

-6 5 7

+

+ 11

7

+ 8
+ 16

+ 18

Unilateral transfers:*
United States private...............................
United States Government......................
Total...............................................
Long-term capital movements:
United States private...............................
United States Government.......................
Latin American..........................................
Total...............................................

+ 26

+ 16
+ 31

+ 24

+ 36

+ 47

-

+

+109
12
14

+185
20
+ 5

+

+179
+ 34
- 32

+456
+ 39
4

+ 107

+210

+181

+491

Gold and short-term capital:
Net purchases of gold............................... -1 2 7
Net movement of United States short­
term capital to (+ ) or from (—)
Latin American republics:
Private................................................ + 73
Government....................................... - 14
Net movement of Latin American short­
term capital to the United States........ -2 1 5
Total...............................................
Transfer of dollar funds to Latin American
republics from other foreign areas and
from international lending institutions,
and errors and omissions..........................

+ 10

- 65
+ 62
- 62
-3 9 0

-283

+308

-1 3 1

-1 5 8

t

+ 6
- 36

-

-112

-1 3 6
-3 2 8

Changes

in

Ex p o r t s

and

Im p o r t s

the case of nearly every country the improvement in the
trade balance with the United States was achieved through an
increase in exports rather than a reduction in imports. This
was particularly notable in the case of the coffee, cocoa, and
wool exporting countries (see Table IV , next page). The
marked rise in coffee prices in the fall of 1949 was not fully
reflected in export values until 1950. The average price of
coffee in 1950 was 60 per cent higher than in 1949, which
accounts for the rise in the value of coffee exports from 780
In

Table III
Latin American Trade with the United States
(In millions of dollars; ( + )=export balance; (— ) =rimport balance)

-434

-

16

+311

+382

91
f

Second half
Country

+553

* Donations, gifts, etc.
t Less than $500,000.
Source: Department of Commerce, Survey of Current Business, June 1950 and
March 1951. All data used are United States statistics.

ing off of sizable backlogs of commercial indebtedness during
the year. Payments on outstanding draft collections are being
made promptly by most Latin American countries at the pres­
ent time. In the case of Brazil, the percentage of drafts paid
promptly has increased strikingly from 1.0 to 58.6 per cent
during 1950.4 It is also noteworthy that Latin American out­
standing letters of credit almost doubled during the second
half of 1950, owing to the great increase in import orders
placed in the United States and to a marked shift from draft
to letter of credit financing, which reflected the re-emergence
of a sellers’ market in the United States for a number of ex­
port items.
The striking reversal of the merchandise trade balance with
the United States has already been noted. In four years a Latin
American import surplus of over 1.5 billion dollars (1947)
has been transformed into an export surplus of 368 million
(1950). This achievement of an export surplus by Latin
America as a whole had been foreshadowed in 1949 when
most of the countries of the area had re-established their pre­
war positive balances with the United States (see Table III).
During 1950 even Argentina, which has not normally had a
4 These percentages take into account the revision in promptness
periods (as used for statistical reporting purposes) that was made
in October 1950.




favorable balance with the United States, achieved such a
surplus, and Uruguay, Chile, and Brazil increased their favor­
able balances strikingly, while the negative balances of Mexico
and Venezuela were substantially curtailed. Cuba seems to
have had a trade deficit with the United States in 1950, on the
basis of preliminary data that, however, are usually subject
to considerable later adjustments.

-2 1 2

-2 8 6

65

Argentina:
Exports...................
Imports...................
Balance...................
Bolivia:
Exports...................
Imports...................
Balance...................
Brazil:
Exports...................
Imports...................
Balance...................
Chile:
Exports...................
Imports...................
Balance...................
Colombia:
Exports...................
Imports...................
Balance...................
Cuba:
Exports...................
Balance...................
Mexico:
Exports...................
Imports...................
Balance...................
Peru:
Exports...................
Imports...................
Balance...................
Uruguay:
Exports...................
Imports...................
Balance...................
Venezuela:
Exports...................
Imports...................
Balance...................
All Latin American
republics:*
Exports...................
Imports...................
Balance...................

1950

102.8
+

69.7
33.1

48.5

20.3

+

24.1
14.8
9.3

1 1 .0

14.2

447.5
220.4
+ 227.1

318.6
144.1
+ 174.5

86.0

1949

1948

+

206.1
144.6
61.5

97.5
130.8
- 33.3

_

+

34.4
20.5
13.9

48.5
36.2
12.3

+

48.8
35.7
13.1

551.8
382.9
+ 168.9

+

513.9
497.3
16.6

68.8

-

25.2
+

1950

1949

714.5
353.6
+ 360.9

+

179. <
>
380.9

201.0

+

34.3
51.7

—

52.7
66.9
14.2

+

159.6
71.7
87.9

+

152.5
142.6
9.9

+

179.1
105.5
73.6

+

191.1
112.7
78.4

+

132.9
75.3
57.6

+

313.1
233.3
79.8

+

241.5
175.9
65.6

+

236.5
197.3
39.2

—

168.5
189.0
20.5

_

405.6
460.4
54.8

+

387.5
380.3
7.2

_

-

103.7
209.8
106.1

_

317.7
515.7
198.0

_

243.5
468.2
224.7

—

18.4
36.4
18.0

_

48.5
72.8
24.3

_

+

28.9
14.1
14.8

106.1
40.2
+ 65.9

—

145.2
227.5
82.3

322.0
398.4
76.4

212.6

_

265.7
53.1

_

171.2
287.8
116.6

_

28.7
40.6
11.9

+

24.7
42.1

66.8

163.1

_

201.8

38.7

1.732.0
1.481.0
-1- 251.0

-

1,217.0
1,234.0
17.0

_

3 ,084.0
2 716.0
4- 368.0

375.0
441.0

66.0

_

246.2
521.5
275.3

86.1

45.9

_

34.9
66.5
31.6

+

54.0
34.7
19.3

_

57.7
60.2
2.5

_

278.1
518.4
240.3

_

270.8
516.6
245.8

40.2

2 .503.0

2 705.0
_ 202.0

2 ,644.0
3 ,162.0
518.0

* Includes also Costa Rica, Dominican Republic, Ecuador, El Salvador, Guate­
mala, Haiti, Honduras, Nicaragua, Panama, and Paraguay. These totals for
the Latin American republics as a whole are those used in the merchandise
trade balances in Table II; they differ from the sums of the country totals
because of various adjustments.
Note: “Exports” are exports to United States, “imports” are imports from
United States.
Source: Department of Commerce, Foreign Commerce Weekly, various issues.
All data used are United States statistics.

66

MONTHLY REVIEW, MAY 1951

million dollars to 1,045 million while the volume of shipments
was declining. Equally striking was the 35 per cent increase in
the price of wool, which was a major factor in the doubling
of the value of Argentine and Uruguayan export shipments to
the United States. As for cocoa, the 49 per cent price rise
particularly benefited Ecuador and the Dominican Republic.
On the other hand, copper and tin exports to the United
States declined substantially. The prices of these metals
reached a postwar low in the early part of the year, and the
substantial price rise after the outbreak of hostilities in Korea
was not fully reflected in the value of export shipments during
the remainder of 1950, A considerable improvement in the
exports of the mineral-producing countries may be expected,
however, in early 1951, because the prices of the most impor­
tant minerals at the end of 1950 were substantially higher
than their averages during that year and the physical volume
of shipments was apparently increasing.
Aggregate imports of the Latin American republics from the
United States remained virtually unchanged in 1950, as com­
pared with 1949. Individual countries, however, show notable
divergencies. In those countries that do not employ exchange
Table IV
M ajor Latin American Exports to and Imports^ from the United States and
Changes in Their Prices
(20 Latin American republics only)

Commodity

Value of shipments in
millions of dollars

Percentagei change in
ited States
average UrL
wholesalle prices
Year 1949 May 1950
to Dec.
to
1950
year 1950

1950

1949

Coffee: Total...........................
Brazil.......................................

1,045
567
267

780
429
204

+60

+ 17

Sugar: Total.............................
Cuba........................................

330
325

321
316

+ 6

+ 11

Cocoa: Total............................
Brazil.......................................
Ecuador...................................
Dominican Republic..............

83
42

54
33
5

+49

+21

12

Wool: Total.............................
Argentina...............................
Uruguay..................................

190
95
85

94
44
43

+35

+82

Copper: Total..........................
Chile........................................

149
114

155
114

+ 10

+23

Tin: Total................................
Bolivia.....................................

27
26

39
39

-

3

+88

Lead: Total..............................
Peru.........................................
Mexico....................................

73
13
55

66

-1 4

+45

14
40

Petroleum: Total.....................
Venezuela................................

303
248

280
244

+ 18

+ 9

645
139
330
209

701
230
264
226

—

—

Exports to United States:

R ecen t T rend

14

6

Imports from United States:
Machinery..................................
Iron and steel products.............
Vehicles and parts.....................
Chemicals and related products.
Semimanufactured goods*........
Finished manufactured goods*..

-

-

—
—

—
—

—

-

—

2
2

+ 15
+ 10

* Percentage change in indexes of average unit value of United States exports.
Source: United States Department of Commerce; International Monetary Fund,
International Financial Statistics; trade sources (petroleum prices). All data
used are United States statistics.




controls or quantitative import restrictions on a significant scale
there was considerable inventory accumulation by importers
following the outbreak of the Korean war; this was particu­
larly true in Cuba and Mexico. In Brazil and Colombia, the
exchange and import control authorities embarked on a policy
of encouraging the building up of stockpiles of those com­
modities that might become scarce.
In the other Latin American countries, however, imports
from the United States during 1950 were barely maintained,
and in the case of Venezuela and Chile were sharply reduced
in spite of the Korean war. The decline in Chilean imports
from the United States reflects the recent de facto devaluations
of the Chilean peso and the tightening of import and exchange
controls. In Venezuela the already-noted reduction of new
foreign oil investments was accompanied by a sharp decrease
in the importation of capital goods from the United States,
which was accentuated by the liquidation of large stocks of
surplus materials that the oil companies had accumulated in
prior years and by increasingly sharp competition from Cana­
dian and German exporters.
European sales of machinery and iron and steel products
are reported to have risen substantially in other parts of Latin
America, too, owing both to the difficulty of securing prompt
shipments from the United States and to lower European
price quotations. This development is reflected in the decline
in 1950 in machinery and iron and steel shipments from the
United States to Latin America, a decline occurring despite the
desire of Latin America to build up stocks of these goods.
in

"T erm s

of

T rade”

The price rise in the United States since June 1950 and its
effects on the relation between prices received by the Latin
American republics for exports to the United States and those
paid by them for imports from the United States were the
subject of much debate at the recent conference of Pan-Amer­
ican foreign ministers. It is significant that the most vigorous
statements were made by the representatives of the mineralproducing countries, whose exports in 1950 did not fully
reflect the improvement in their terms of trade that has taken
place during recent months. However, the trend of prices of
most mineral products exported from Latin America has been
so sharply upward since June 1950 that a substantial increase
in the value of these exports may have been under way for the
past several months, although the trade data that may verify
this supposition have not yet been assembled. Moreover, the
sharp increases in the prices of these mineral products and of
cocoa and wool since the outbreak of the Korean war, follow­
ing the no less striking rise in coffee prices in 1949, have
more than offset so far the rise in the prices of United States
exports of semimanufactured and finished goods. Even the
relatively moderate increases in the prices of sugar and petro­

FEDERAL KESERVE BANK OF NEW YORK

leum do not compare unfavorably with the rise in United
States export prices (see Table IV).
The current Latin American preoccupation with the terms
of trade with the United States reflects fears that developments
during the Second World War and the postwar years may be
repeated. It will be recalled that during the war Latin American
countries accumulated sizable gold and dollar holdings, largely
because of their inability to secure imports. However, when
machinery and other equipment essential to their economic
development became freely available after 1947, these com­
modities had to be imported at substantially higher prices
because of the postwar inflation in the United States. The
Latin American republics are understandably anxious to avoid

67

a repetition of this experience and to secure as far as possible
an even flow of the materials and equipment needed for their
continued economic growth.
If present trends continue, many of the republics may soon
have accumulated a cushion of international reserves that
they consider appropriate for their needs. Consequently, they
may decide to relax further their import and exchange con­
trols rather than continue to build up gold and dollar reserves.
If not too greatly hampered by United States restrictions upon
exports resulting from the expanding defense program here,
some further increases in this country’s exports to Latin
America may take the place of a continuation in the recent
rapid rise in Latin American gold and dollar balances.

RECENT PRICE DEVELOPMENTS

The rise in prices, which began in the spring of 1950 and
was sharply intensified after the outbreak of hostilities in
Korea, began to show some signs of leveling off during the
past two or three months. Movements of the various price
indexes during the first seven months of the Korean campaign
had been nearly uniformly upward, but recently crosscurrents
have begun to develop. In fact, there have been declines in
numerous wholesale and primary market prices, but so far
these price reductions have offset only a very minor portion of
the previous increases. The general level of wholesale prices
is still 20 per cent higher than it was a year ago, while primary
market prices of a selected group of basic commodities have
risen 50 per cent in the past year. Consumers’ prices, which
traditionally lag both in their response to basic price move­
ments and in the availability of statistical data, were reported
to have been 10 per cent higher in March than a year earlier.
Despite the recent slackening of some price movements, the
underlying inflationary pressures are still strong, and the long­
term problem still one of combating inflation.
The daily experience of many consumers and businessmen,
moreover, may be in conflict with changes shown by the price
indexes. More often than not, housewives in their daily
shopping notice that some prices are still rising, and business­
men who need to replenish their inventories find that they
must pay higher prices to do so. At the retail level, most
prices are still close to their all-time peaks. The latest published
index of consumers’ prices, for March 15, set an all-time record.
Retail food prices have leveled off since mid-February, but
are still 15 per cent above a year earlier and 11 per cent
higher than just before the outbreak of Korean hostilities.
Some consumer resistance to higher-priced cuts of meat has
been noted by retailers, but at the same time some kinds of
meat are not generally available to consumers at ceiling prices.
The wave of anticipatory buying by consumers early this
year was short-lived, and somewhat less spectacular than the
similar buying spurt last summer. Anticipated shortages of




hard and soft goods did not materialize, and production and
deliveries outstripped declining sales volume. Nevertheless,
markdowns and special promotions have not generally been
necessary to move most types of goods. In the case of tele;vision receivers and a few other items, however, there have
been fairly widespread price cuts at retail, caused in most
cases by the accumulation of uncomfortably large inventories
by distributors and manufacturers.
In general, living costs other than food prices continued to
rise through the middle of March, though more gradually than
earlier. For some items, such as new passenger cars and carpets,
price rises have been officially sanctioned to offset increased
production costs.
The over-all level of wholesale prices showed very little
change in recent weeks. The National Association of PurchasIndexes of W holesale and Primary Prices
Percentalie change

Peak since

Index

June 20, 1950
Date

Index

Latest
index
(April 24)

June'20,
1950 to
peak

Peak"to
latestjdate

(1926 average= 1 )0 per cent)
C
All wholesale....................

Mar. 20

183.9

183.6

+16.8

- 0.2

Farm products............... Mar. 20
Feb. 13
Livestock................... Apr. 24

204.6
195.5
273.8

202.4
189.9
273.8

+ 22.8
+ 16.4
+ 22.2

- 1.1
-2 .9

Feb. 13
Feb. 13

190.1
277.5

188.0
276.8

+17.3
+15.1

- 1.1
-0 .3

Mar. 27
Mar. 13

172.3
185.1

171.8
184.1

+15.8
+35.2

-0 .3
-0 .5

Mar. 13

139.0

138.3

+ 4.6

-0 .5

Mar. 6
Feb. 27

190.7
227.9

189.6
227.5

+10.9
+12.4

- 0.6
- 0.2

Mar. 6

148.7

144.0

+30.2

-3 .2

+48.3

- 4 .5

All commodities other
than farm products
and foods...................
Textile products........
Fuel and lighting ma­
terials ......................
Metals and metal pro­
ducts.......................
Building materials. . . .
Chemicals and allied
products..................

0

(August 1939 = 100 per cent)
Primary market prices of
28 basic commodities... Feb. 16

391.0

Source: U. S. Bureau of Labor Statistics.

373.3

68

MONTHLY REVIEW, M AY 1951

mg Agents reported that its members encountered fewer price
increases in March than in any previous month since April
1950. The upward pressure on prices of many items was
relieved somewhat as new orders were reduced sharply, the
NAPA stated, and firms tried to cancel or defer delivery of
goods ordered earlier but now in plentiful supply. The BLS
weekly index of wholesale prices in mid-April was approxi­
mately the same at it had been in mid-February. The pre­
ceding table shows that during February and March of this
year prices of all major commodity groups, except livestock,
rose to the highest point since the invasion of South Korea. The
sharpest advance between the outbreak of war and the recent
peak was registered in the textile and chemical groups, which
rose about one third. Larger than average price increases
were also reported for farm products and foods. The smallest
rise was that in the fuel and lighting materials group, which
has increased less than 5 per cent since last June. All major
commodity groups, except livestock, participated in the decline
from their February-March peaks. However, in most cases the
change has been very slight, and only two groups, grains
and chemicals, have declined as much as 3 per cent. In general,
prices of farm products and foods have declined more than
industrial commodities, but the preceding rise was likewise
sharper for agricultural prices.
As usual, the widest fluctuations in prices have occurred at
the primary market level. By mid-February a selected group
of 28 basic commodities, for which spot prices in primary
markets are compiled daily by the Bureau of Labor Statistics,
had risen an average of 48 per cent above its pre-Korean
level. Since that time, declines have averaged about 5 per
cent. The sharpest gains occurred in raw industrial materials,
particularly imported products. Advances in the prices of
farm products and foodstuffs included in this compilation were
generally not as sharp as those of other categories, in contrast
to the behavior of the more comprehensive wholesale price
indexes.
At their peaks, prices of burlap, tin, and wool tops had
more than doubled, while rubber and tallow prices had more
than tripled since the start of Korean hostilities. By the
end of January, however, 23 of the 28 commodities had
already reached or passed their peaks. During April, only
one of the 28 commodities, steers, moved upward to a new
record. Five others remained at their highest levels—copper,
lead, and zinc, whose administered prices have been stable
since last fall, and, like cotton and rosin, are currently at
their ceiling prices. The other basic commodities have all
declined from their peaks, some substantially. Prices of 10
of the 28 commodities had dropped more than 10 per cent by
April 20, including rubber and tin, which are both nearly
one-fourth below the peak quotations.
In recent weeks, however, there have been relatively few
fluctuations in the quoted prices of raw industrial materials.




Since mid-March, 10 of the 16 industrial commodities pricecj
daily by the BLS have remained stable. This stability does
not reflect lack of demand; rather, it is the combined effect
of ceiling price regulations and lack of trading. The demand
for metals continues unabated; scrap prices, gray markets,
and conversion deals indicate that many fabricators would
willingly pay higher prices to obtain supplies. Prices of
most metals, however, have been maintained at the same
level since early last fall, several months before ceilings were
imposed. Other commodities for which quotations have re­
mained unchanged in recent weeks—cotton, hides, wool tops,
rosin, and burlap—are likewise at their ceiling prices, but
in a number of cases trading at these prices has been nominal
or nonexistent. Some ceilings, notably that of burlap, are out
of line with world prices.
The only declines among the selected industrial prices
since mid-March occurred in print cloth, silk, flaxseed, shellac,
rubber, and tin. The sharp drop in rubber and tin prices from
their peaks was largely the result of modifications in Govern­
ment stockpiling activity. Responsibility for importing both
of these strategic commodities has been taken over by the
Government in order to curb further speculative price in­
creases. The decline in print cloth prices was shared by
various other rayon and cotton fabrics. Weakness occurred
during March and April in the secondary market for certain
textiles, as converters and other firms which had become
overstocked with fabrics tried to reduce their inventories.
Although prices of raw cotton and wool tops remained at
their ceilings, futures prices declined during the past month.
Food Prices
(M id-June 1950 = 100 per cent*)

Per cent

Per cent

* For foodstuffs at primary markets (Tuesday dates), June 20, 1950 ~ 100 ;
for wholesale food prices (weekly indexes), week ended June 20, 1950 — 100;
and for retail food prices (semimonthly indexes, with month-end indexes based
on sample surveys), June 15, 1950 = 100.
Source: U. S. Bureau of Labor Statistics; converted to a mid-June 1950
base by the Federal Reserve Bank of New York.

FEDERAL RESERVE BANK OF NEW YORK

Wool futures responded to the temporary cessation of Govern­
ment stockpiling and the scaling down of military orders,
but later recovered much of their losses. Cotton futures
reacted mainly to improved crop prospects.
In the foodstuffs group, declines were general in the past
two months, with only 2 of the 11 commodities included
in the BLS basic commodity index—cocoa and cottonseed oil
—remaining stable at ceiling prices. Declines in this group
were generally moderate, and in the latter part of April, there
was a tendency for prices of basic foodstuffs to advance
slightly. Prices of steers rose to a new record on April 23,
and hog prices also were slightly higher than in the first
half of April. Wheat and corn prices, which were depressed
in February and early March by reports of large crops and
by transportation difficulties, showed greater strength in the
latter part of April following reports of damage to wheat
crops by bad weather and insects. On the other hand, barley
prices dropped in April to a point even lower than when the
Korean war began. The movements of the foodstuffs group
as a whole are shown on the accompanying chart.
Both the increases and the subsequent declines in prices of
basic foodstuffs were greater than in the more comprehensive
wholesale price index, while the changes at retail were much
more moderate than those in either of the other indexes. The
smaller net advance in retail prices indicates in part that
processing and distribution costs have apparently not risen
as rapidly as the basic prices of the commodities themselves,
and at the same time reflects the traditional tendency for
retail prices to lag behind basic markets.
Price movements in recent months have been increasingly
subject to the regulations of the Office of Price Stabilization.
The general freeze of nonagricultural prices ordered on Janu­
ary 26 was a temporary measure to help hold the line against
inflation until more effective controls could be worked out.
It has been supplemented on the one hand by specific price
ceilings for individual commodities, such as cotton, hides, and
steel scrap, and on the other hand by margin pricing regulations
for retailers and distributors, intended to correct some of the
inequities of a general freeze and to restore some of the
flexibility of the pricing system. The latest major develop­
ment has been the issuance of a general manufacturers’ ceiling

69

price regulation designed to adjust most factory prices to
their pre-Korean levels plus the increases in prices of raw
materials through the end of 1950 and the increases in labor
and other direct costs through March 15, 1951. As most of
the major pricing regulations are not yet fully in force, it
is still too early to judge their effects.
Perhaps the most important factor in the price declines
this spring was the easing of buying pressure by consumers,
business, and Government stockpiling. Consumers failed to
maintain their spending at the high January and February
levels, as immediate needs were satisfied, as war news improved,
as ample dealer stocks belied the prospect of immediate short­
ages, and as the imposition of price controls gave assurance
to many that the rapid rise in prices would be checked.
Dealers and fabricators who had placed sizable orders in
anticipation of production cutbacks and shortages found
deliveries much prompter than they had expected, and stocks
piled up in many lines. Controls on inventories and production
also reduced industrial demand for raw materials, as did
temporary suspension or reduction of Government stockpiling
programs. Some price declines, however, were largely seasonal
in nature.
It would be premature to draw broad conclusions from
the recent easing of inflationary price developments. Con­
sumers’ incomes are likely to rise and the output of some
types of consumers’ goods must eventually decline because
of expanding defense production, so that pressure on prices
is likely to be renewed. The Federal Government, which
seasonally collected far more money than it spent during the
first quarter of 1951, will soon reverse the process as it begins
spending at an accelerated rate for defense. Large-scale plans
by business for plant and equipment expansion will compete
for materials with consumer goods and defense production.
To such pressures, price controls are not the sole answer.
An effective program of taxation and credit control along
with price and wage stabilization can, however, materially
check the inflationary wage-price spiral and help to prevent
the inflation from feeding upon itself, although some cumu­
lative upward pressure upon prices may still be exerted by
the combined effects of increased purchasing power and the
probable reduction in output of consumer goods.

UNEMPLOYMENT STATISTICS1

The series on the level of unemployment moves inversely
with the general business cycle, declining in periods of pros­
perity and high output and rising in periods of recession.
Apart from relatively large swings of a seasonal nature, changes
in unemployment roughly coincide with the fluctuations of the
over-all cycle. At critical turning points, the unemployment
series does not appear either to precede or lag behind signifi­
cantly.




In recent months, the usefulness of this series has not been
primarily for its general cyclical implications, but rather as a
measure of one source of manpower that can be called upon
to meet defense requirements. During the 1949 business
recession unemployment rose sharply and reached a peak esti­
mated at 4.7 million in February 1950, It has been declining
1 This is the third in a series of articles describing various items in
the table of Business Indicators.

70

MONTHLY REVIEW, M AY 1951

ment is inevitable in a society where workers are free to move
from one job to another. Therefore, it seems doubtful that
more than 1.5 million additional workers, at best, could be
recruited for an intensified defense program from those pres­
ently reported as unemployed. (The lowest level of unemploy­
ment reported during World War II was 440,000 in October
1944, when the civilian labor force was 12 per cent smaller
than at the present time.)
The unemployment estimates used in the table are compiled
by the Bureau of the Census on the basis of personal interviews
with a selected sample of about 25,000 households throughout
the country during the calendar week containing the 8th day
of the month. From this survey, estimates are made for the
entire population over 14 years of age residing within the
continental United States, except those in institutions (i.e., in­
mates of penal and mental institutions, homes for the aged or
infirm, etc.). The Bureau of the Census releases current esti­
mates in a Monthly Report on the Labor Force, and these are
Source: U. S. Bureau of the Census.
not ordinarily revised. This series is also available in a number
since that time; in March of this year only 2.1 million workers of other publications, including the Federal Reserve Bulletin
were unemployed. A certain amount of "frictional” unemploy­ and the Survey of Current Business which provide data for
Unemployment
(M onthly, March 1940-March 1951)

Millions

Business Indicators
Percentage change
Item
Unit
Production and trade

1950

1951
March

February

January

221

221

March

Latest month Latest month
from previous from year
earlier
month

UNITED STATES

Industrial production*................................................................
Electric power output*................................................................
Ton-miles of railway freight*.....................................................
Manufacturers’ sales*..................................................................
Manufacturers’ inventories*.......................................................
Manufacturers’ new orders, total..............................................
Manufacturers’ new orders, durable goods...............................
Retail sales*.................................................................................
Residential construction contracts*...........................................
Nonresidential construction contracts*.....................................
Prices, Wages, and employment
Basic commodity pricesf............................................................
Wholesale pricesf.........................................................................
Consumers’ pricesf**..................................................................
Personal income* (annual rate)..................................................
Composite index of wages and salaries*....................................
Nonagricultural employment*....................................................
Manufacturing employment*......................................................
Average hours worked per week, manufacturing!...................
Unemployment.............................................................................
Banking and finance

Total investments of all commercial banks..............................
Total loans of all commercial banks..........................................
Total demand'deposits adjusted................................................
Currency outside the Treasury and Federal Reserve Banks*. .
Bank debits* (U. S. outside New York City)..........................
Velocity of demand deposits* (U. S. outside New York City).
Consumer instalment credit outstanding!................................

1935-39= 100
1935-39= 100
1935-39= 100
billions of $
billions of $
billions of $
billions of $
billions of $
1923-25= 100
1923-25= 100

222 p

Aug. 1939 = 100
1926= 100
1935-39= 100
billions of $
1939= 100
thousands
thousands
hours
thousands

380.9
184.O
p
184.5

millions of $
millions of $
millions of $
millions of $
billions of $
1935-39= 100
millions of $

323

202p

23.4p
36.4p
29.3 p
16.3 p
12.4 p
298p
305p

322
187p
22.7
35.5
25.5
13.2
13.0
311
334

318
208
23.2
34.9
27.7
13.9
13.3
312
350

millions of $
millions of $
millions of $

11 .1

278
274

#
#
+ 8
+ 3
+ 3
+ 15
+23
- 5
- 4
- 9

+
+
+
+
+
+
+
+
+
+

2

19
15
15
31
25
56
92

11

7
U

383.9
180.1
181.5
240.9
219
45,802r
15,834r
41.0
2,503

246.8
152.7
168.4
219.3
205
42,752
14,135
39.7
4,123

-

46,206p
16,025p
41. Ip
2,147

389.2r
183.6
183.8
241.O
p
220p
46,082
15,987
40.9
2,407

-11

+
+
+
+
+
+
+
+
-

71,320p
54,420p
88,990p
27,253
87.0
103.3
12,980p

71,470
53,540
90,620
27,145
84.4
100.5
13,075

72,340
52,710
91,590
27,222
87.8

76,650
43,650
83,200
27,124
69.5
88.3
11,077

#
+ 2
- 2
#
+ 3
+ 3
- 1

7
+ 25
+ 7
#
+ 25
+ 17
+ 17

8,489p
4,218p
2 ,240p

4,877
3,522
1,917

4,696
3,438
1,869

5,162
4,046

+74

1,12 0

+17

+ 64
+ 4

128
189
229
180.8
7,307.Ip
2,649.6
43.4
3.8

126
213
232
177.8
7,254.2
2,625.6r
46.4
3.9
115.2

116
168
243
165.5
6,919.0
2,420.7
40.3
3.0
105.lr

-

—
—

102.8

13,257

United States Government finance (other than borrowing)

Cash income.................................................................................
Cash outgo...................................................................................
National defense expenditures....................................................

187
280
175r
17.8
29.1
18.8
8.5

#
#
#
#
#
#
#

+20

54

20
10
12
8
8

13
4
48

+100

SECOND FEDERAL RESERVE DISTRICT
Electric power output* (New York and New Jersey).................
Residential construction contracts*..............................................
Nonresidential construction contracts*.........................................
Consumers’ pricesf** (New York City).......................................
Nonagricultural employment*........................................................
Manufacturing employment*.........................................................
Bank debits* (Second District excluding N. Y. C. and Albany) .
Velocity of demand deposits* (New York City)...........................
p Preliminary.

1935-39= 100
1923-25= 100
1923-25= 100
1935-39= 100
thousands
thousands
billions of $
billions of $
1935-39= 100

127
—
—

180.4
—

2,655.3p
49.7
3.8
126.7

110 .8

1
-11
- 1

#
+ 1
#
+14
+ 1
+14

r Revised.
* Adjusted for seasonal variation.
f Seasonal variations believed to be minor; no adjustment made.
** Revised series,
t
# Change of less than 0.5 per cent.
Source: A description of these series and their sources is available from the Domestic Research Division, Federal Keserve Bank of New York, on request.




+
+
+
+
+
+
+
+
+

9
14

22

9

6
10

23
25

21

FEDERAL RESERVE BANK OF NEW YORK

the most recent 13 months. Monthly figures have been pre­
pared from March 1940 to date. Annual estimates for 1929
to 1939, which are roughly comparable with this series, can
be found in the Statistical Abstract of the United States, pub­
lished by the Bureau of the Census.
Unemployment has been defined for statistical purposes in
a number of different ways. The concept of unemployment
used by the Bureau of the Census includes all persons who
did no work during the survey week and who were actively
looking for work, or who would have been looking for work
had they not been temporarily ill, or laid off for an indefinite
period, or convinced that no work was available in their line.
Persons who are retired or are too old to work, those perma­
nently unable to work because of disability, and seasonal
workers for whom the survey week fell in an "off” season are
not included, but are classified instead as 'not in the labor
force”, along with housewives and students. Also excluded
from the number of unemployed are persons with jobs but
not at work because of vacations, illness, industrial disputes,
bad weather, or layoffs with definite instructions to return to
work within 30 days, and persons who have new jobs to
which they are scheduled to report within 30 days, all of
whom are classified as "employed”. Persons who work as
little as one hour for pay or 15 hours as unpaid family workers
during the survey week are classified as 'employed”, even if
they are seeking other work.
The unemployment statistics of the Bureau of the Census
are not directly comparable with the figures for unemployment
compensation claims. Not all types of "unemployed” workers
are eligible for unemployment compensation, but on the other
hand some persons whom the Bureau of the Census would
define as "employed” or "not in the labor force” are eligible
for benefits.

71

The unemployment series reflects not only variations in the
number of persons employed, but also changes in the number
of persons in the civilian labor force. The civilian labor force
is influenced by the growth in the population of working age,
by seasonal and long-term changes in the number of students
in school and college, by changes in the size of the armed forces,
and by the proportion of women, youngsters, and older persons
who are employed or seeking work. Thus, in months when
large numbers of persons enter the labor force, it is possible
for the levels of both employment and unemployment to in­
crease simultaneously.
Seasonal factors have a strong influence on unemployment.
Because these factors are somewhat erratic and vary signifi­
cantly from year to year, no satisfactory seasonal adjustment
factors have as yet been published. Therefore, when appraising
unemployment statistics, it is well to bear in mind that certain
seasonal changes in unemployment normally occur each year.
Post-holiday layoffs usually cause a sharp rise in unemployment
each January. A further increase normally occurs in February.
Unemployment tends to decline during the spring months,
followed by steep increases in June and July, when students
and certain categories of farm laborers are seeking summer
work and graduates are looking for permanent jobs. Unem­
ployment generally drops again in the fall, after students have
returned to school and seasonal agricultural workers have with­
drawn from the labor market.
Since data on unemployment are based on a sample survey,
rather than a complete enumeration, monthly estimates are sub­
ject to sampling errors. The change In unemployment from any
one month to the next month, however, is likely to be relatively
more reliable than the estimated levels of unemployment from
which it is computed.

DEPARTMENT STORE TRADE

Department store sales in this District, which usually decline
after Easter, are estimated for April of this year at about 5
per cent above April 1950. This comparison is somewhat
affected by the later date of Easter last year (April 9)
although the sales performance of the first week in April
a year ago was relatively poor.
Preliminary reports indicate that sales of household dur­
ables, particularly furniture and bedding and television, came
back strongly during April. Sales of ready-to-wear apparel,
however, fell below expectations although the warmer weather
late in the month undoubtedly stimulated demand for the
spring apparel lines.
T h e Fir s t Q u a r t e r o f 1951
Department store trade during the first quarter of 1951
followed a pattern similar to that of last summer. For a
time consumers spent freely on a wide variety of goods, but,
when they realized that supplies were plentiful, buying sub­
sided. The year-to-year increase in the dollar volume of
department store sales in this District during the first quarter
amounted to almost 20 per cent, of which roughly half can




be attributed to the rise in retail prices from the first quarter
of 1950 to the first quarter of 1951.
The spectacular buying spree during January was not
generally anticipated. The stores were not adequately stocked
for demand of the magnitude which materialized, despite
relatively large year-end inventories. Nevertheless, the dollar
volume of sales during January surpassed the corresponding
1950 level by 30 per cent. Orders for additional merchandise
were quickly increased in order to satisfy this extraordinarily
strong demand for goods. However, during the first part of
February, the year-to-year increase in the dollar volume of
consumer purchases in the District’s department stores fell
sharply. Although the rate of increase turned moderately
upward during the latter half of February, department store
sales returned to more normal year-to-year relationships dur­
ing March, despite the stimulus of an early Easter. Sales
during March were but 10 per cent above those of March
1950.
The inventory position of department stores followed a
course completely opposite to that of sales. After the first
surprising days at the beginning of the year, additional

MONTHLY REVIEW, MAY 1951

72

Indexes of Department Store Sales and Stocks
Second Federal Reserve District
(1935-39 average — 100 per cent)

Department Store Sales and Stocks by Selected Types of
Merchandise, Second Federal Reserve District*
(Percentage change, first quarter 1950 to first quarter 1951)

1950

1951
Item

Feb.

Jan.

March

230
230

218
263

233
291

210 r

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

Women’s coats \^2A ~
onol suits
H s to c k s

March

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

306
299

273
281

240
273

237
232/*

219r

Women’s dresses
r Revised.
Men’s clo th in g
Household
textiles

Furniture and
b e d d in g
Domestic flo o r
coverings
M a jo r household
ap p lia n c e s
Television
(incl. radio-television
combinations)

+ 20

+40

+60

+80

+100

*120

+140

P rcen g ch n e,1 5 to 1 5
e ta e a g 9 0 9 1
* Changes in sales are for quarterly totals; changes in stocks as of March 31.

merchandise began arriving in quantities unprecedented for
the first-quarter season. By the end of March, the dollar
value of inventories on hand had returned to the peak of
November 1950, when department store stocks in this District
had reached an all-time high. Thus, as was the case last
summer, consumer demand, extremely sensitive to changes
in international tensions, surged strongly upward for a short
time and then weakened, leaving the stores heavily stocked.
The accompanying chart shows the first-quarter sales com­
parisons and the relative changes in end-of-quarter inventories
for some of the major merchandise departments. In only
two of the eight departments represented were the year-toyear increases in stocks (as of March 31) of smaller magnitude
than the preceding three-month gain in sales volume.
The moderate increases in stocks of women’s coats and
suits and dresses are indicative of the extreme caution em­
ployed by merchandisers in keeping inventories of these
commodities geared closely to current demand. Women’s
coats and suits sold very well during January and February
but slumped badly during March. Sales of women’s dresses,
however, recorded year-to-year gains in January, February,
and March of 14, 6, and 10 per cent, respectively. Consumer
demand for household textiles (towels, sheets and pillow cases,
blankets, etc.) during January was far in excess of the corres­
ponding 1950 figure as the traditional "white sales” coincided
with the general buying wave. During March, however, the
year-to-year increase had shrunk to only 5 per cent, with stocks
of these goods at the end of the quarter more than half again
as large as those of March 31, 1950. The relative increase
in the sales of men’s clothing also fell off sharply during




March, although the future demand for this merchandise may
be somewhat strengthened by the recent reduction in military
draft quotas.
Of the major homefurnishings departments, only domestic
floor coverings (principally rugs and carpets) retained, dur­
ing March, a large portion of the sales gains of the previous
two months. The prospect of shortages of raw wool may
have been an added inducement to consumers, although
judging from the amount of stocks on hand at the end of
the quarter current supplies appear to be ample. The March
sales volumes of furniture and bedding and major appliances
were barely ahead of March 1950 levels, while television
sales actually declined. This drop of almost 20 per cent in
the sales of television receivers represented the first year-toyear decrease for any month on record. (The slackened
consumer demand for television sets during March appears
to have been nationwide, according to preliminary data.) The
drastic change in the situation has been brought into sharp
focus by the recently announced price-cuts, at the manu­
facturer’s level, of several of the name-brand lines. This
action presumably indicates a heavy oversupply of sets at
other than retail levels and the disruption of production
schedules resulting from cutbacks in orders from retail dis­
tributors.
Department and Apparel Store Sales and Stocks, Second Federal Reserve
District, Percentage Change from the Preceding Year
Net f
sales
Locality
March 1951

Stocks on
Jan.through
hand
March 1951 Mar. 31, 1951

Department stores, Second District . ...

+ 10

+ 19

+30

New York City...................................
Northern New Jersey........... .............

+ 6
+ 13

+17
+23

+33
+29
+29
+ 12
+23
+24
+18

Westchester County............. .............
Fairfield County.................................
Bridgeport.......................................
Lower Hudson River Valley..............
Poughkeepsie...................................
Upper Hudson River Valley..............
Albany............................. ...............
Schenectady....................................
Central New York State...................
Mohawk River Valley...... .............

+ 11

+ 18
+13
+ 13
+13
+13
+14
+17

+22

+23

+22

+ 11

+23
+17
+17
+24
+30
+18

+ 10

+14

+14
+14
+ 14

Northern New York State.................
Southern New York State.................
Binghamton.....................................

+22
+21

Western New York State...................
Buffalo.............................................
Niagara Falls...................................
Rochester.........................................

+15
+16
+ 11
+ 15

Apparel stores (chiefly New York City).

+ 7

+19

+22

+21
+21

+20

+18

+21

+ 16
+29

+22

+23
+27
+24
+37
+19
+19

+21
+20

+24
+34
+ 11
+ 13
+ 8
+27
+28
+31
+33
+24

+ 14

+18

+21

NATIONAL SUMMARY OF BUSINESS CONDITIONS
(Summarized by the Board of Governors of the Federal Reserve System, May 1, 1951)

Economic activity and incomes were maintained at record
levels in March and early April. Retail sales showed a less
than seasonal rise. Wholesale commodity prices continued
to show little change, while consumer prices rose further.
Bank loans to business continued to rise somewhat, although
a decrease is usual at this season. Bond yields continued to
rise.

Em p l o y m e n t

Employment in nonagricultural establishments, seasonally
adjusted, continued to increase moderately in March, reflect­
ing mainly further gains in durable manufacturing industries
and in Government employment. Hours of work in manu­
facturing remained unchanged at 41 hours per week, slightly
below the 1950 year-end level, while hourly earnings con­
tinued the moderate increases of recent months. Unemploy­
I n d u s t r ia l P r o d u c t io n
ment at 2.1 million in March was 2 million below a year ago
The Boards seasonally adjusted industrial production index
was 222 per cent of the 1935-39 average in March, as com­ and at the lowest level for this month since 1945.
pared with 221 in January and February. Preliminary data
C o n s t r u c t io n
indicate little change for April. Output has increased 3 per
Value of contract awards for most types of private con­
cent in the past six months and is about 20 per cent higher struction rose less than seasonally in March. The number of
than a year ago.
housing units started totaled 93,000 as compared with 80,000
Steel output has been at new record levels since early in February and 117,000 in March 1950. The value of con­
March. Output of producers’ equipment and munitions has struction work put in place, reflecting earlier record awards
shown continued marked expansion, and on April 1 more and starts, rose to a new peak in March, after allowing for
stringent curbs were initiated on use of metals for consumer seasonal influences.
D is t r ib u t io n
goods. Over-all output of consumer durable goods was main­
Retail sales of housefurnishings have declined from the
tained at advanced levels in March partly because of very
high assembly rates for passenger cars. In April, car pro­ exceptionally high rates at the beginning of the year, and sales
duction has decreased to a rate about 5 per cent below average of apparel and automobiles have shown a less than seasonal
first-quarter levels; and output of household durable goods expansion since that time. Demand for foods and various
has apparently also been reduced owing in part to demand other goods has remained at advanced levels. Distributors’
stocks have increased further. Preliminary seasonally adjusted
influences.
the
the
Activity in the textile industries has decreased since Febru­ figuresofonApril value of department store stocks atthan begin­
ning
were about 12 per cent higher
ary partly reflecting labor disputes. Production of other non­ beginning of January and 30 per cent above year-ago at the
levels.
durable goods generally has continued at about the high
February rate. Crude petroleum output rose further during
C o m m o d it y P rices
March and early April, while production of coal, stocks of
Wholesale commodity prices have generally continued to
which are large, remained well below the January volume. show little change during the past month at a level 20 per
IN D U STR IA L PRODUCTION

Federal Reserve index. Monthly figures; latest figure shown is for March.




EMPLOYMENT IN NONAGRICULTURAL ESTABLISHMENTS

Bureau of Labor Statistics’ estimates adjusted for seasonal variation by
Federal Reserve. Proprietors and domestic servants are excluded. Midmonth
figui*es; latest shown are for March.

cent above a year ago. Prices of some materials which had
declined in March have strengthened during the past ten days.
Consumer prices advanced 0.4 per cent further in March,
reflecting chiefly increases in retail prices of apparel, house­
furnishings, and miscellaneous goods and services. Foods
showed little change for the first time since last November.
The all-items index was 10 per cent above a year ago, with
food prices 15 per cent higher.
B a n k C r e d it

a n d th e

M o n e y Su p p l y

Expansion in business loans slackened in late March and
the first half of April. These loans usually decline at this
time of year. Business loans declined slightly at New York
City banks, but increased somewhat further at banks in other
leading cities. Preliminary data collected in connection with
the voluntary credit restraint program indicate that borrowing
to finance defense contracts is much more important now
than it was last fall and that commodity loans are currently
being repaid. Retailers and wholesalers have been important
borrowers in recent weeks, as have textile manufacturers.
Real estate loans and bank holdings of corporate and muni­
cipal securities continued to increase moderately.
Average interest rates charged by commercial banks on
W HOLESALE COMMODITY PRICES

Bureau of Labor Statistics* indexes. Weekly figures; latest shown are for
week ended April 17.




short-term business loans rose from 2.84 per cent in the
first half of December to 3.02 per cent in the first half of
March.
Deposits and currency held by businesses and individuals
declined in the latter part of March, reflecting a seasonal
shift of funds to Government balances as a result of tax pay­
ments. In early April, however, the private money supply
increased as Government balances were reduced.
Member bank reserve balances increased somewhat further
in late March and early April. Federal Reserve purchases
of Treasury bonds during this period supplied reserve funds
to banks. The effect of these additional reserves was offset
only in part by an outflow of gold and an increase in Treasury
and other deposits at the Reserve Banks.
Se c u r it y M a r k e t s

Yields on long-term Treasury bonds increased during the
first three weeks of April. While yields on outstanding highgrade corporate bonds rose only slightly, there was a marked
increase in yields on new corporate issues. Prices of common
stocks advanced rapidly during the first two weeks of April
to the peak level of early February, and then declined slightly
during the third week.
LOANS AND INVESTMENTS AT MEMBER BANKS IN LEADING CITIES
OTHER THAN U. S. GOVERNMENT SECURITIES

Commercial loans include commercial, industrial, and agricultural loans.
Wednesday figures; latest shown are for April 18.