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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

2



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 WT
est 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

zm n
m yt

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 tef*< ’
*.«
v ****** * ■
*

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

sm
s*:***!

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

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-

\ \

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

^

for last y e a r .

'ce es ta b lish m e n ts

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

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

8



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
-

_____ I
_____I_____ I_____I_____ I_____ I_____I---5 _____ 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

M em ber Bank
Liabilities

Assets

— 100
— 100
+100

(g) Treasury
deposits

Federa

+100

(f) Treasury
deposits

III

(c) Foreign
deposits

(e) Foreign
deposits

— 100

Liabilities

Assets

(d) Member bank
reserves

(h) Gold Certifi­
cates

(d) Foreign dem and
deposits
— 100

-1 0 0

— 100

(b) Reserves

-1 0 0

Reserve

M em ber Bank
Liabilities

Assets

(a) Foreign dem and
deposits
— 100

Assets

(d) Foreign
deposits

— 100

(c) Member bank
reserves

Liabilities

+100

(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.


10


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.

12


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,