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F E D E R A L R E S E R VE B A N K OF R I C H M O N D DE C E MB E R 1963 r, F ifth District firms are sewing up a grow in g share o f the nation’s $10 billion-a-year apparel business. ucts. Such items include outenvear and underwear District producers are also increasing their output cluded in the $ 10-billion estimate o f annual value. O n o f other cut and stitched fabric products, valued na the other hand, some items o f knitted apparel, such as tionally at $3 billion a year. The business environ ment here has proved particularly conducive to this hosiery, caps, and gloves, are excluded type o f activity. The region ’s favorable factors in shipped from knitting mills. These, however, are in C om m erce Departm ent’s apparel source o f the $ 10-billion figure. from industry the report, clude a vigorous and extensive textile industry, a Thus, the purpose o f the statistics and to some e x suitable labor supply, and proxim ity to large market tent the degree o f industrial integration determine areas. O ver the past decade and a half, apparel and whether the product o f a particular firm will be related products have contributed im portantly to the counted as apparel proper (G ro u p 2 3 ) or as textile expansion o f D istrict m anufacturing, adding nearly mill products (G ro u p 2 2 ). In the regular monthly 80,000 new jobs. District firms now em ploy some estimates o f m anufacturers’ sales, inventories, and 10 % o f the country’s apparel industry production workers against only 5 % in 1947, and if recent orders, the textile and apparel categories are com bined outright. F or the purpose o f measuring p ro trends endure, this industry will continue to grow duction, employm ent, hours, and payrolls, data fo r as a source o f District employment and income. textiles and apparel are maintained separately. Industry Classification In the C o m m e rce D e partment’s industrial classification code, apparel and related products fall chiefly in “ G roup 2 3 ." The distinctive operations that characterize firms in this group are best described by the terms “ cut” and B e cause o f these com plexities, the data must be in terpreted with caution, especially in making com parisons. Unless a notation to the contrary appears, the statistics presented in this article refer to G roup 23, the apparel industry proper. “ sew .” Materials usually consist o f purchased textile Employment fabrics, leather, plastic, or fur. Group 23 includes three types o f firms. First, the so-called “ regular” plants are equipped to p erform all operations from designing garments and purchasing materials through been impressive in the D istrict’s apparel industry. Em ploym ent has risen from 62,000 to 137,000, a gain o f 120% . The number o f w orkers increased every year except 1954 and 1958, advancing by 5,000 or cutting, sewing, finishing, and selling. Second, “ co n more in 1950, 1952, 1955, 1956, 1960, and 1961, tract” plants, as the name implies, produce under contract using patterns and materials supplied and ow ned by others, thus avoiding the risks involved in designing, purchasing, and product distribution. and by twice that amount in 1953, 1959, and 1962. The third group consists o f “ apparel job b ers” who number o f job s in textiles has remained practically buy the materials, design the product, farm out the unchanged. Trends G ro w th sin ce 1947 has D uring this 15-year period, total nonfarm em ploy ment in the District has increased one-third, and factory em ploym ent has risen one-fifth, while the cutting and sewing to contract plants, and sell the T he state patterns which produced this strong D is finished apparel. Custom tailors are not included. trict trend have varied considerably. In M aryland, T hey are classified as retailers unless they specialize makers o f apparel and related products are largely in repairs and alterations, which are considered per concentrated in and around sonal services. employm ent was stable at 25,000 fo r several years Classification Problems B eca u se o f clo se con nections between apparel and textile products, it is not always possible to draw a sharp line between the two. Classifications based on production organiza Baltimore. M aryland after W o rld W a r II, rose to a peak o f 26,000 in 1953, then declined gradually to a postwar low o f 22,000 in 1958. R ecovery in the past two years has now raised the figure to a little over 24,000. The nation’s Capital, unlike most large cities, which are tion may not be pertinent to distributive activities. big apparel markets, has but a small share o f the F or example, some items o f knitted apparel are apparel industry. included officially in “ G roup 22,” textile mill p rod dustry has roughly paralleled that o f the District as G row th in V irgin ia’s apparel in a whole. Em ploym ent has doubled since 1947, rising from 13,000 to 27,000. In W est V irginia, where manufacturers concentrate on metals and chemicals, only 4,300 are em ployed in the production o f ap parel. Interestingly enough, the 300 represent all the grow th that has occurred since 1947. Plant Location and Size A c c o r d in g to cu rren t directories of m anufacturing establishments, there are 900 apparel plants in the Fifth District. A s the map shows, these plants are fairly well scattered. M a ry land has 275 plants located in the city of Baltim ore and in 20 out o f 24 counties. T here are 10 plants siderably larger in V irginia than in either o f its in the D istrict of Columbia. V irgin ia lists 109 plants located in 19 independent cities and 32 counties. Tw enty-seven plants are operating in 17 neighbors to the south, and was one-fou rth larger in W est V irginia M aryland than in N orth and South Carolina com District states with 300 plants in 69 counties, and A pparel production has grow n most rapidly in the Carolinas. In 1947, the apparel industry was con counties. N orth Carolina tops all bined. In a decade and a half this activity has grow n 180 plants in 43 counties are listed fo r South C aro in the Carolinas to one and a half times the com lina. T here are about twice as many apparel plants bined apparel industries o f the other three District states. T h e industry in both states experienced sub in the Carolinas as there were 15 years ago. stantial grow th in every year o f this period. D uring these 15 years, apparel employment actually quad rupled, rising from 11,000 to 45,000 in N orth Carolina and from 9,000 to 36,000 in South Carolina. T he results o f these trends over the past ten years are shown in the bar chart at the foot o f page 3. This chart emphasizes grow th in the relative importance o f apparel m anufacturing as a source of em ploy ment. It shows that in all Fifth District states e x Considered together, em ploym ent statistics and the number of establishments reveal significant geo graphical differences in plant size. M aryland’ s 275 plants are comparatively small, averaging 88 em ploy ees per plant. T he typical V irginia factory employs 250, nearly three times the M aryland figure. T he average W e st V irginia plant falls in between with 160 workers. T he comparable figures are 151 fo r N orth Carolina and 198 fo r South Carolina. cept WTest V irginia, the apparel industry now ac National counts for a share of total factory employment greater national apparel industry, the number o f job s rose than the national average. only one-eighth between 1947 and the present, and Comparisons DISTRIBUTION GEOGRAPHICAL COMPARISONS APPAREL AS % OF TOTAL FACTORY EMPLOYMENT Per Cent 15.0 10.0 fij and Prospects In the OF APPAREL PLANTS Trends in Productivity A p p a re l fa c to r y m an - hours have risen 13 % , one percentage point more than employm ent, since 1947. O ver the same period the apparel com ponent of, the industrial production index rose 68 % . A gain in output five times the size o f the additional labor input shows a sizable im provem ent in productivity, but one well below the average fo r all m anufacturing industries. F or total m anufacturing, the rise in man-hours since 1947 amounted to only 10% against an 88% increase in production, an increment in output nearly nine times the increase in labor input. ' NVfg. 5th Ditt. - -V There are a number o f reasons fo r the apparel in zmmnyt dustry’s slower growth in productivity with respect A to labor. A pparel is mass-produced, but opportunities A p p o r s l Sth K i t . WME to produce more efficiently through longer runs o f identical items using highly automated equipment are quite limited. Style is such an im portant factor that patterns and fabrics must be changed frequently. :. IP s ^ihs=ass:i=: ' ' : : .'...: ' ' ' ■‘ ' Cutting is a highly skilled operation and material ■ ■ - costs are sharply influenced by the cutter’ s acquired ability to lay his patterns in a way that minimizes ^ s w S »4 »« ia t 50 1955 waste. M uch has been done to im prove machines, to 1960 i *»I ♦*.«I*-*.*-*.»v ■****** '* V*tef*■ < * ’ 5 IN INC ID MAN- ‘ H it most o f this increase occurred after 1961. T he con trast in this respect, between the F ifth District and the nation shows up clearly in the chart o f em ploy ment trends on page 4. F or comparison, over the past 15 years total nonfarm employment increased about one-third in both the District and in the nation as a whole. F actory jobs rose on e-fifth locally com pared to one-tenth nationally, with smaller gains in nondurables than in manufacturing generally. ■ ■■■ ■ -i - --------- •: : r : ; T he trends and relationships reflected in these data are subject to com plex influences. A s population in creases, as m ore purchasing pow er is generated, and as needs and desires change with respect to clothing, the size and com position o f responds accordingly. Recent the clothing market trends are toward r: greater specialization in clothing. Items o f apparel are being designed increasingly to meet the needs o f particular activities and occasions. Thus, there is a trend tow ard larger as well as more numerous wardrobes suggesting a further rise in employment. O n the other hand, automation and the possibility o f accelerating the substitution o f machine-hours fo r man-hours are subjects o f lively discussion these days. A utom ation, however, depends on the nature o f the product and on the kind o f operations required to produce it. 4 ••• >•' . specialize and sim plify operations, and to m ove goods PROFITS AND in process more efficiently through the plant. N ever theless, further im provem ents in productivity rest largely on the ability o f individual workers to en hance acquired skills. T he panels o f each new pattern must be matched to the cloth and cut. T he parts o f each garment must be aligned and stitched. 6.0 Value Added D ata on valu e ad d ed by m an ufacture considered in conjunction with man-hours 1 Profits ofter Taxes sms*:***! V • C ap ital O utlays it? C ap ital O utlays 1950 1< ‘ Data for 1948 Unavailable. uctivity. M an-hours and value added, shown in the chart opposite, indicate that while productivity has advanced notably in apparel, the increase has been only about on e-fourth that for all manufacturing. Profits and New Investment P ro fit rates in the apparel industry in the early postwar years ranged from one-half to tw o-thirds o f profit rates in '4 other m anufacturing industries. W h en m anufacturing profits relative to sales began to decline in the early 1950’s, apparel profits fell more than proportionately and have remained between 1 .0 % and 1 .6 % o f sales throughout the past decade. As the chart above shows, profits rates earned in apparel production provide some added inform ation on trends in p ro ductivity. Value added represents a statistical meas ure o f value bestowed on a processed g ood by an in dustrial operation as distinct from value already present in its purchased components. Since 1947 value added in the m anufacture o f ap parel has risen 5 8 % . Since man-hours also rose, the gain in value added per m an-hour was smaller, amounting to 3 5 % . H ere the contrast with m anufac have remained relatively low. A pparel producers have also lagged somewhat be hind other manufacturers with respect to capital ou t lays. W hereas capital outlays by m anufacturing in dustries as a whole have varied over the past decade between 2 .6 % and 3 .6 % o f sales, apparel outlays have m oved between 0 .6 % and 1 .2 % . Apparel, like textiles, is a highly com petitive in turing in general is sharp indeed. Total value added dustry with a narrow margin o f profit. A lthough by all m anufacturing activity has risen a sharp 142% apparel manufacturers lack the conditions that foster since 1947. Since factory man-hours remained vir rapid automation, they will probably continue to tually unchanged and prices rose only moderately, thrive just by saving an inch o f cloth here and a sec most o f the 142% ond o f production time there. resulted from increased p rod 5 Yo un g ste rs using b a rrel staves for skis h a v e no the West V i r g i n ia resorts—at D av is and H elvetia used to ha n g out "C lo sed for the w in te r" signs n ow doubt been s w o o p in g d o w n sn o w y slopes in m o u n a n d n e a r M o r g a n t o w n a n d B e c k le y —fall w ithin the stay taino u s regio ns of this a r e a for m a n y a y e a r , but Fifth District. skiing a s a n o r g a n iz e d sport is a rela tive n e w c o m e r open all year. The d evelo p m en t of the $ 1 ,0 0 0 , 0 0 0 ski a r e a at Hot Sprin gs ha s brought new Since District residents no longer h a v e to ta k e w in tertim e prosperity to Bath County, V irg in ia . At Skiing is on h an d fu ll of sp ills to g ive a id as to w e ll as th rills , but rescue units are sk iers h a vin g tro u b le on the tra ils . to Fifth District states, d a ting only from the w in te r distant trips, or eve n spen d more th an a w e e k end D avis, West V i r g i n ia , o vern ig ht tourist a c c o m m o d a - of 1952. N o w , only 11 y e a r s later, n e w a n d im a w a y from home, to visit resorts e q u ip p e d for ski- tions h a v e in crea sed from one hotel a nd one motel prov ed facilities for this a n d a v a riety of other w i n ing, e n th u sia sm for the sport is mounting r a p i d l y in 1957, w h e n ski fa cilities w e r e o pened, to 2 hotels, y e a r , a n d the n u m b e r of cold w e a t h e r sports fa n s ter sports a re and increa sing ea c h sea so n, the tally of ski resort guests lan d , at Hot W a s h in g to n , a ccessible near O akland Sp rin g s and n ear V ir g in ia , and at W a y n e s v i l le in North C a r o li n a . in M a r y W in che ster Blow ing Rock and Motels bu sin ess at B low ing is fast Rock beco m in g and big h a v e a choice of s e v e ra l w in te r resort spots in the Four of busin ess. 3 motels, a n d 25 h o u sek eep in g cab in s w h ich ac- W a y n e s v i l le and Skiing en thusiasts id e a l m o u n ta in terrain of W est V i r g i n ia . ski ^ \ \ w h ic h co m m od a te from 1,200 to 1,500 people. W inte r for the 1 9 63-64 w in te r months m a y w e ll top that trad e is a lso brisker at retail stores a n d other serv- for last y e a r . 'ce es ta b lish m e n ts a d ja c e n t a g e tourist s p en d s a b ou t $ 5 0 for food a n d lodging, comm unities, in p a rt icu la r at restau ran ts, grocery ski e q u ip m e n t rentals, g rou n d fees, a n d retail p u r a nd ch a se s during a tw o - d a y w e e k end. in resort areas and A cco rd in g to one estim ate, the a v e r w v sporting goods stores, and g asoline service of w in te r sports—still a r e la tive ly n e w ven ture for stations. resorts south people The promotion visited facilities. With District resorts e q u ip p e d two a d d itio n a l areas with open ski this of the M as o n -D ix o n Line—ha s thus a l r e a d y d e v e lo p e d into a multimillion d o lla r bu si ness in the Fifth District. A trestle r a ilw a y ski lift, w ith 66 on e -p asse n g er cars, gives sk iers rides up the 3,00 0 -fo o t-lo n g m ain slope at Hot S p rin g s. R ig h t— S kie rs' b rig ht togs ad d notes of color to the sta rk b e a u ty of a b lack an d w h ite w in te r scene in M a ry la n d 's A lle g h e n y M o u n tain s. Technique cla sse s fo r sk ie rs of a ll sorts, m ake in e xp e rie n ce no b a r I A fte r hours in fro sty out-of-do ors a ir , w in te r guests at B low Rock w elcom e a chance to r 'la x in a co m fo rtab le ski lod g e. FOREIGN DEPOSITS The build-up o f foreign and BANK RESERVES deposits in Am erican the form o f demand deposits than otherwise. O n the banks affects dom estic money and credit in various other hand, if banks in this country are offerin g rel ways. A s frequently noted in the press, such deposits atively high rates on time deposits, larger amounts are closely linked with the nation's gold stock and are likely to be held in that form . can be the medium through which gold flows out o f Shifts between alternative form s o f investments may cause com plications for mem ber bank reserves. the country. G old losses, in turn, affect bank reserves and, unless offset by Federal Reserve action, can have important restrictive effects on bank credit and the money supply. A part from their potential effects on the gold stock, foreign deposits also can influence both the distribution and volume o f bank reserves. A ccordin gly, they present a problem, albeit a rela tively m inor one, fo r monetary policy. Origin of Foreign Deposits F o re ig n e rs h old d e F or example, a shift from demand to time deposits reduces required reserves and— unless offset— enables the banks affected to expand loans or investments. Similarly, a shift o f deposits between banks subject to different reserve requirements increases or decreases required reserves and with them the volum e o f bank credit. Such effects can easily be offset, however, by day-to-day open market operations and present no problem for m onetary authorities. posits with banks in this country chiefly to facilitate their international transactions. Changes in the v o l ume o f foreign deposits depend on the net balance Official Foreign Holders In a d d ition to their o f transactions between foreigners and Am ericans. choices am ong investments in the United States, foreign holders o f dollar credits have yet an I f, fo r example, foreigners receive more dollars from other alternative. T hey may convert their dollars Am ericans than they spend here, their deposits in into their ow n or any other national currency by crease. If the reverse is true, they decline. Thus “ selling” their dollar deposits, o ften to their central foreign deposits are linked with the nation's balance banks. Such sales involve a transfer o f deposits at United States banks from foreign private holders to o f payments. The build-up o f these deposits since 1950 has been largely a by-product o f the sizable deficits in our balance o f payments over this period. Reserve Availability and Distribution W hen there is a net transfer of deposits from Am ericans to foreigners, the total of bank reserves is not neces sarily affected. N orm ally, foreigners hold their new deposits, at least tem porarily, with com m ercial banks and the total of bank reserves remains unchanged. T he transfer, however, may involve a shift of deposits and reserves between groups of banks that use re serves with varying intensity. H ence excess re serves and the volum e o f bank credit and m oney may be affected. F oreigners acquiring new dollars do not usually hold all o f such funds in demand deposit balances. A part may be invested in time deposits or in a variety foreign central banks. Since central banks frequently hold a part o f their dollar deposits at the Federal Reserve rather than at com m ercial banks, this may result in a shift o f deposits and reserves from the com m ercial banking system to the Federal Reserve. In the process, com m ercial banks experience a net reduction in total reserves. Conversely, a purchase o f United States dollars by private holders fro m their central banks usually results in a transfer o f deposits from the Federal R eserve to com m ercial banks and an increase in com m ercial bank reserves. Such shifts are am ong the mechanisms through which foreign deposits exert an immediate impact on bank reserves. F oreign central banks and other official institutions — like private individuals— often use some o f their deposits W h en to purchase U nited States investments. they do so, reserve losses resulting from o f United States securities or in private obligations. M any choose such alternatives in order to earn in the shift o f terest while at the same time remaining liquid. The ers to foreign official holders are offset since such deposits from foreign private hold rate o f return on alternative investments in relation purchases shift deposits and reserves back to com to the degree o f liquidity they provide is the deter mining factor in choosing am ong appropriate form s mercial banks. This is not the case, however, when in which to hold dollar credits. If short-term rates are open to private foreign holders. Gold purchases in relatively high foreigners are likely to hold less in volve a transfer o f deposit credit at the Federal Digitized for8 FRASER foreign official institutions buy gold, an option not Reserve from foreign holders to the U. S. Treasury and bank reserves are not restored. T he net effects o f foreign deposit shifts to and posits ( d ) decline on the books o f the member bank. T hus a shift o f foreign deposits from com m ercial banks to the Federal R eserve, taken by itself, will re from foreign central banks may be reflected in the volume o f deposits held by these banks with the F ed eral Reserve System. A n increase in these deposits duce the level o f bank reserves. usually implies a reduction in bank reserves and vice Suppose, as shown in panel II, a foreign central bank buys T reasury gold with funds transferred to the Federal Reserve from a com m ercial bank. F oreign versa. It is fo r this reason that “ F oreign Deposits demand deposits (a ) and reserves ( b ) decrease on the at the Federal R eserve" are watched by the money books o f the member bank; and foreign deposits ( c ) managers as one o f several factors affecting reserves. increase while member bank reserves ( d ) decline at the Federal Reserve. W h en the foreign central bank Some Illustrations T h e m an n er in w h ich fo re ig n deposit shifts affect bank reserves can be explained draws dow n its balance at the Federal R eserve to pay the Treasury fo r the gold, foreign deposits ( e ) then more decline and T reasury deposits ( f ) clearly balance sheet with the entries on use of page the 10. hypothetical Suppose, fo r example, as illustrated in panel I, that a foreign individual sells dollar deposits held at a member bank to his central bank, which in turn deposits the funds with a Federal R eserve Bank. The individual draws a check payable to the foreign central bank. T he fo r eign central bank then deposits the check in a Federal R eserve Bank, increasing foreign deposits there ( a ) . W hen the check clears, member bank reserves at the rise. T he T reas ury then draws dow n its account at the Federal R e serve ( g ) to retire gold certificates (h ) from the Federal Reserve. T he net effect is a decline in F ed eral R eserve gold certificate holdings and a reduction in member bank reserves. Finally, the purchase or sale o f governm ent securi ties in the open market by foreign official holders can affect the level o f member bank reserves. Suppose, for example, as in panel III, that a foreign central bank purchases a U . S. T reasury bill from a govern Federal Reserve decline by a like amount ( b ) , and ment security dealer by drawing dow n its deposit at member bank reserves ( c ) and foreign demand de the Federal Reserve. T h e dealer deposits the check in his demand deposit at a mem ber bank ( a ) , and when the check clears this bank’ s reserves increase, li. S. BALANCE OF PAYMENTS $ Billion ( b ) and ( c ) , while foreign deposits at the Federal R eserve ( d ) fall. Foreign Deposit Build-up A c c o m p a n y in g the $27 billion deficit in the United States balance o f pay + 25 - ments since 1950 has been an $18.5 billion build-up in short-term liabilities to foreigners and net sales o f + 20 ~ gold of $8.5 billion. F oreign ow ned deposits at A m eri can banks alone have m ore than doubled since 1950, rising from $5 billion at the beginning o f 1950 to + 15 $11.5 billion at m id -1963. A b ou t $7 billion of the total represented demand deposits, and about $4.5 billion time deposits. + 10 - M ost o f the $11.5 billion o f foreign deposits is ow ned by foreign com m ercial banks, central banks, governments, and international organizations. At BALAN CE OF PAYMENTS m id-year they held $9.3 billion o f the total, while the Surplus remainder was held by other foreign interests. ■■ Deficits A lthough there is no readily available breakdown between demand and time deposits owned by foreig n ers prior to M ay 1963, it is probable that in recent - 5 _____ I_____i_____ |_____ i_____I_____ I_____ I_____I_____ I_____I_____ I_____ I_____I---'50 '52 '54 '56 '58 '60 '62 Source: Note: U. S. U. S. Balance first six Department of Commerce Treasury, Federal Reserve System of Payment figures for 1963 cover the months. months the time deposit com ponent has grow n more rapidly than the demand deposit com ponent. Increas es in time deposit interest rates since January 1962 provide foreigners with greater incentive than form - 9 I Fed eral Reserve M em ber Bank Liabilities Assets (b) Member bank reserves (a) Foreign deposits II Liabilities Assets (c) Reserves — 100 -(-100 Federal Reserve (h) Gold Certifi cates III M em ber Bank Liabilities Assets — 100 Federa Liabilities Assets (c) Foreign deposits +100 (d) Member bank reserves — 100 (e) Foreign deposits — 100 (f) Treasury deposits +100 (g) Treasury deposits — 100 (b) Reserves -1 0 0 Reserve (a) Foreign dem and deposits — 100 M em ber Bank Liabilities Assets (d) Foreign dem and deposits — 100 -1 0 0 Assets (d) Foreign deposits — 100 (c) Member bank reserves +100 Liabilities (b) Reserves + 100 (a) Domestic dem and deposits +100 erly to hold dollar credits in the form o f time de posits. T he increases in interest rates have also re a larger proportion o f dollar accruals into their own currencies. T his shifted large amounts o f d ol duced the incentive fo r foreign governments to pur chase gold with their dollar credits. converting some to gold after accumulating needed T he chart 011 page 9 points up the relationship between the balance o f payments deficit, the growth o f foreign deposits and other form s o f short-term liabilities, and sales o f gold by the U . S. Treasury. Between 1950 and 1957 the country’s balance o f payments deficits were relatively small, averaging about $1.3 billion a year. D uring this period total short-term liabilities to foreigners doubled while foreign deposits increased about 5 0 % . A t the same lars to foreign central banks, which, in turn, began dollar reserves. Other Factors Affecting Reserves F o re ig n d e posits are only one o f several factors affecting bank r e s e rv e s in this c o u n tr y . O th e r s in c lu d e currency in circulation, Federal R eserve float— the credit given to member banks at the Federal R e serve fo r checks not yet collected— member bank vault cash holdings, Treasury balances at the Federal time gold outflow s totaled less than $2 billion. In this Reserve, the gold stock, and miscellaneous other fa c period was being tors. In addition, member bank reserves are deliber eliminated as foreigners built up stocks o f dollars. ately influenced by the Federal Reserve through its the so-called “ dollar shortage” Since 1957 the deficits have increased, averaging policy actions. Generally speaking, the Federal R e more than $3 billion a year. Foreigners have contin serve keeps abreast o f the effects on reserves o f the ued to build up their deposits and other short-term dollar holdings but the rate o f accumulation has slack various factors which are beyond its control and ened. Total short-term liabilities to foreigners in tivities accordingly. creased about tw o-thirds between tailors its reserve-creating or reserve-destroying ac 1958 and 1962, W h en foreign deposits are considered in the broad while the deposit com ponent rose less than 5 0 % . In context o f all the various factors affecting reserves, the same period, sales o f it can be seen that they are o f relatively m inor im to foreign governm ents gold by the Treasury increased substantially, am ounting to $ 6.8 billion. Foreigners by this time portance. Nevertheless, they must be considered along with other factors in day-to-day open market had built up their reserves o f dollar operations assets to a com fortable level and felt freer to convert objectives. Digitized for10 FRASER short-term in order to achieve desired policy THE FIFTH DISTRICT Figures currently em erging fro m various statis tical assembly lines clearly show continued progress January 1962, also show local rates consistently be in most sectors o f September, the latest month fo r which these data F ifth D istrict business. M ore recent evidence— the far less comprehensive “ sea sonally unadjusted” kind gleaned from business news, statements o f industry spokesmen, and various other sources— suggests that the uptrend is still in force as N ovem ber ends and Decem ber begins. T here is strength in the D istrict’s m ajor manu facturing industries, in construction, service enter prises, trade, mining, and most other activities. low the national except in W e st V irginia. are available, unem ployment equalled 7 .5 % In o f the W est V irginia labor force and ranged from 2 .5 % to 4 .0 % in other D istrict states com pared to 4 .8 % fo r the nation as a whole. Seasonally adjusted factory man-hours, by virtue o f the strongest gain since M ay, also reached a new high in O ctober. P rogress was not universal, h ow ever, as somewhat m ixed conditions resulted in a o f the nation and to District levels in previous years. small decline in durable goods man-hours partially offsetting a healthy rise in nondurables. Industries Comprehensive indicators reflect continued grow th as reporting man-hour reductions included nonelectrical bank debits remain close to the peak while nonfarm job s and factory m an-hours stand at all-time highs. machinery, lumber, cigarettes, and to a lesser extent, Unem ploym ent remains low com pared to the rest T he one clear exception is agriculture, where receipts from flue-cured tobacco sales continue to run some 9 % low er than a year ago. A few other d e v e lo p m e n ts — lo w e r a v e ra g e lev els o f c o n fabricated metals, fo o d , and printing. A dvances were most vigorous in textiles, apparel, transportation equipment, and prim ary metals. Business is particu larly rosy fo r District furniture makers, preparing to wind up a second record-shattering year, and al- tract awards and automobile registrations, and un evenness in retail trade, for instance— temper the gen eral aura o f strength. W h ile it is premature to as sess the significance of these developments, it may be noted that similar spotty evidences o f weakness have, on earlier occasions, disappeared. Jobs and M an-Hours Set Records In O c to b e r, seasonally adjusted nonfarm employment rose 0 .3 % to a new high. Jobs increased in both durable and nondurable goods factories and in all nonm anu facturing sectors except services where a slight de cline occurred. O ctober employment figures set reccords in durable goods manufacturing, in contract construction, in trade, in finance, insurance, and real estate establishments, and in government. T he sharp est gains, however, occurred in construction, mining, and the production o f nondurables. W ith employm ent rising, unemployment has re mained relatively low. W eek ly rates o f insured un employm ent in O ctober averaged 2 .3 % in M aryland, 1.4% in the District o f Columbia, 1.0% in Virginia, 3 .7 % in W est V irginia, 2 .5 % in N orth Carolina, and 2 .7 % in South Carolina, compared to 3 .1 % fo r the nation. L abor force estimates o f total unem ployment, available fo r all District states since 11 ample, the total value o f contracts rose steadily dur ing the early part o f the year and were, after nine months, 7 % higher this year than last. FIFTH DISTRICT HOUSING P R IV A T E PERM ITS (N ot S e a so n a lly A d justed ) These totals hide some conflicting trends. In the Units 30.000 category o f public works and utilities, where co n tracts are likely to have prolonged impact on the general econom y, award values rose 4 0 % in 1962, but 5 or more Fam ily 2-4 F am ily 1 Fam ily on the basis o f nine m onths’ data, dropped 17% this year. R eassuringly after two rather slow months, 25.000 these awards rose again in September. In view o f the 20,000 earlier weakness, however, the District econom y will " receive less support from this source a year or so hence unless these awards continue to rise. Nonresidential awards, largely new industrial and comm ercial buildings and expansions which include a good number o f sizable projects, follow ed a 15,000 somewhat different course. H ere award values de clined 4 % in 1962 then achieved year-to-year gains 10,000 averaging 18% over the first nine months o f 1963. A s with public works and utilities, M ay and June were the busiest months so far this year, and Septem 5 ,000 ber showed a good rise after tw o months of decline. 1 he trend in residential awards has continued upward over the past three years but, as the chart o f residential building permits shows, the strength 0 1959 1960 1961 1962 1963 though textiles face a web of uncertainties, demand is strong, prices firm, and production high. lies in m ultifam ily dwellings not in single fam ily houses. O n the basis o f nine m onths’ data, total residential awards are running 15% ahead o f last year. Single family dwellings have increased only slightly since 1960 and are still well below 1959 levels. Strong But Variable B ank d eb its reach ed the same record level in July and September, then settled back slightly in O ctober. O n a ten-month basis, this year’s debits exceed last year’s by 7.6% • District business failures increased in September although the trend over the year has been generally dow nw ard and failures in the first nine months were 10% low er this- year than last. T he trend in current liabilities o f business failures has also been dow nw ard this year, but the total fo r the first nine Although some fears have been expressed lest con struction o f apartment houses exceed potential de mand, there is little evidence that this is a significant danger as yet. Agriculture G ross retu rn s fro m D is trict fluecured tobacco sales are running about $70 million ( 9 % ) below last year. Despite this, markets in the Eastern N orth Carolina Belt recently closed with gross sales 2 % volum e higher than in with months was 3 .9 % higher than in 1962. N ew business incorporations were weaker than usual in A ugust and receipts o f District farm ers fo r nine months o f 1963 2% lower. Total 1962 com pared to a 1% cash September, but earlier strength produced a 1.2% were 5 % nine-month gain over last year. Follow in g five record months, new passenger car nationally. W ith cured tobacco cut 10 % , prospects fo r a return to registrations declined more than seasonally in A ugust farm income levels o f recent years remain uncertain. and September. W ith three quarters o f below prices 1962 due to 4 % more decline 1964 acreage allotments on flue- the year accounted for, 1963 is running 15% ahead o f 1962 and 4 0 % ahead of 1961. PH O TO CREDITS Construction C o n stru ctio n , on e o f the D istrict's most enduring sources o f strength, has recently de veloped a few uncertainties. Nevertheless, most measures of District building activity continue to show im provem ent, as the charts indicate. Digitized for12 FRASER F or e x C over—Friedm an-M arks, Inc., Richmond, V irg in ia; 6. & 7. The Hom estead, Hot Springs, V irg in ia ; Departm ent of Conservation and Developm ent, Raleigh, North C aro lin a ; Deep Creek Lake—G arrett Inc., O a klan d , M aryland. County, Promotion Council,
@FedFRASER