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The current cyclical expansion in business, now in
its 40th month, is one of the longest in this country’s
history. It is exceeded in duration only by w artim e
upswings and by the long, slow recovery from the
abnorm ally low level reached by the economy in
1933. The advance since the recession low of Feb­
ru ary 1961 has been m arked by several pauses and,
compared against earlier expectations for the Soaring
Sixties, appears less than spectacular. Nevertheless,
its extended duration invites comparison with other
cyclical expansions in U nited States business history.
The Business Cycle A lte rn a tin g u p w ard and
downward movements in the level of business ac­
tivity, commonly called the business cycle, have long
commanded the attention of economists. In this
country, perhaps no other economic phenomenon has
been studied so intensively. The National Bureau
of Economic Research (N B E R ), established in 1920,
has been the recognized leader in this field of study.
It has dissected, in m assive statistical detail, every
cyclical movement in the country’s history in an
effort to isolate the factors underlying the wavelike
movements in business.
Despite this intensive study, current knowledge of
the cycle remains disappointingly inconclusive in
some important respects. One of these relates to the
duration of upward and downward sw ings in busi­
ness. Indeed, some economists object to the use of
the term “cycle” on the ground that it implies a de­
gree of regularity in the alternating sw ings that ex ­
perience does not support. A ccordingly, they prefer
the term “business fluctuations” to the more precise
“business cycles.” Y et others point out, not incor­
rectly, that monumental research efforts over two
generations have yet to demonstrate that the economy
inevitably generates alternating ups and downs.
Rather, the evidence of such alternations is em pirical,
in the broader sense of the word—or perhaps better,
historical. In the past, what has gone up has also
come down, as if in response to some economic
gravitational principle that remains unfathomed.
W hether this is in fact an absolute economic principle
or something that can be modified through institu­
tional adjustm ents rem ains problematical.

In any event, the N B E R , along with m any other
economists, retains both the idea and the terminology
of the cycle. Geoffrey H. Moore, the N B E R ’s A s­
sociate Director of Research, wrote re cen tly: “The
business cycle is not dead . . . . It is not the same . . .
cycle we have known in the past. [I t ] is like an
automobile. E very new model is different, with
bigger fins . . ., automatic transm ission, safety belts,
and a smoother ride. But a car is still a car. W hat
we know about . . . business cycles should be taken
into account in any calculations of the short-run
future of the economy.” Y et Moore points out that
“current developments can fall outside the range of
previous experience” and w arns against ascribing
the characteristics of past cycles to current business
movements. The following comparisons should be
interpreted in the light of that caveat.
Past Experience S in ce W o rld W a r I th is co u n try
has experienced ten complete cyclical expansions.
The present upsw ing is the eleventh. The lower chart
on page 4 shows the dates of each and of the business
declines that preceded them. B y far the longest of
these expansions was the one em bracing W orld
W ar II. It began in Jun e 1938, following a sharp
13-month recession, and ran 80 months. The ex ­
pansion of 1949-53, which covered the period of the
Korean hostilities, lasted 45 months. The average
duration of the ten completed expansions is just
over 35 months.
Of the eight completed peacetime expansions, the
50-month upturn of the m id-1930’s was longest.
N ext comes the 37-month surge in 1945-48, which
exceeded by two months the 1954-57 advance.
Shortest of the eight was the 10-month upswing in
1919-20. This movement, and the sharp 7-month
contraction that preceded it, m arked the transition
from w artim e to peacetime activity and is not alto­
gether comparable with the others. It is interesting
that sim ilar transitional swings, though w idely ex ­
pected, did not develop following W orld W a r II.
The average duration of the eight completed peace­
time expansions is 2 8 ^ months. O m itting the un­
usual 1919-20 upturn, this average is raised to 31
months. Thus, from the standpoint of duration, the

current expansion is already well ahead of the average
for the period.

months of contraction, w hereas the 1950’s saw 98
months of expansion against only 22 of contraction.

Postw ar I vs. Postw ar II C om parison of these
expansions m ay be more meaningful if the move­
ments between 1929 and 1945, a period of ex ­
traordinary conditions, are omitted. In this case,
the comparison becomes one between the post-W orld
W ar I period, taken as ending w ith the 1929 crash,
and the post-W orld W ar II period. A s noted
earlier, these periods differ in that the sharp swing
of 1918-20 was not repeated after W orld W ar II.
Other differences and sim ilarities are also noteworthy.
The lower chart on page 4 shows four completed
expansions in each period. It is readily apparent that
the four post-W orld W ar II movements were con­
siderably longer, averaging 2>S/ 2 months against a
20-month average for those of the earlier period.
Om itting the short 1919-20 advance and the 1949-53
(K o rea) upswing, the averages are 3 2 / months for
the post-W orld W ar II period and 2 3 ^ months in
the earlier years. A veraging in the current expan­
sion at its present age would add nearly two months
to the post-W orld W ar II average.
S im ilarly, post-W orld W a r II contractions have
been shorter than those following W orld W ar I. The
three recessions between 1920 and the 1929 crash
averaged 15 months in duration while the five since
1945 averaged only 10 months. The decade of
the 1920’s, long considered the Golden A ge of busi­
ness, produced 71 months of expansion against 49

Magnitude of Swings D ata in the tab le on p age 5
show the cyclical sw ings in industrial production and
GNP (for later cycles o n ly) over the period since
1920. These data show that, with respect to the
relative levels from which business expansions began,
the two postwar periods are roughly sim ilar. B usi­
ness declines in each period were relatively mild,
except those preceding the 1921-23 and the 1945-48
expansions. In each of the exceptions, industrial
production fell about one third. The average decline
for the other two recessions of the 1920’s w as 12%,
while the average drop for the three recessions be­
tween November 1948 and M ay 1960 was 10^4%.
The course of trough-to-peak increases in indus­
trial production in the two periods is shown in the
charts on this page. The 1945-48 cycle is omitted
because of sharp industrial production sw ings related
to the transition from w ar to peace. Despite their
shorter duration, the expansions of the 1920’s gen­
erated, on the average, 40% increases in industrial
output against 29% increases in the post-W orld W ar
II expansions. M easuring the increases from the
peak of one expansion to the peak of the next, how­
ever, the difference between the periods was not
great, especially if allowance is made for the effects
of W orld W ar II and the Korean episode. Gen­
erally, cyclical movements in industrial production
in the 1920’s involved somewhat deeper declines and

% of Trough V alue


more rapid trough-to-peak advances, but the pace
of secular increase was about the same in the
two periods.


Chronic Depression and W orld W a r II T he e x ­
pansions of 1933-37 and 1938-45 were among the
longest in U nited States history. Both w ere domi­
nated by unusual circum stances: the first, by an
atmosphere of chronic depression; the second by
feverish production for the nation’s largest and most
sustained w ar effort.
The upturn that began in 1933 followed the worst
business depression in modern history. Recovery
was m arked by drastic institutional changes in fi­
nancial and economic arrangem ents both domestically
and internationally. In this country, crises between
1929 and 1933 reduced both industrial production
and personal income by about one half. U nder
stim ulus of extensive Federal Government activity,
recovery proceeded at rates which, statistically, ap­
pear relatively rapid. The total trough-to-peak gain,
for exam ple, w as 120% for industrial production and
76% for personal income. But despite this, the 1929
peak in industrial production was not regained until
December 1936 and at the 1937 peak industrial



Number of Months


output w as only about 6% above the peak of eight
years earlier.
Government activity, directed first toward re­
arm am ent and then toward w ar, was the dominant
factor in the 1938-45 expansion. The 1937-38 de­
cline, while severe, was considerably less so than its
immediate predecessor. It reduced industrial pro­
duction by about 32% and personal income by 11%.
In the ensuing 80 months of expansion, industrial
production rose 183% and personal income gained
157% . The record w artim e levels of industrial pro­
duction were not reached again until late 1950.
The Current Expansion In stitu tio n a l ch an ges
significantly affecting the economy’s behavior in­
tervened between the 1920’s and the post-W orld
W ar II period. Consequently, comparisons of re­
cent expansions w ith those of a generation ago, while
instructive, are perhaps not as meaningful in studying
current movements as comparisons between recent
cycles. A ccordingly, the rem ainder of this article
compares some aspects of the current expansion with
other post-W orld W a r II upswings.
The current expansion follows one of the mildest
recessions on record and consequently began from

relatively higher levels than other recent upturns. In
the 1960-61 decline, for example, industrial produc­
tion fell less than 6% , compared with reductions of
8 ^ % , 9% , and 14% in the three preceding reces­
sions. Sim ilarly, GNP in the first quarter of 1961
was less than 1% below the previous cyclical peak,
while for the three earlier recessions the comparable
decline averaged about 2 l 2 c
/ /o. Personal income
actually rose during the 1960-61 recession but re­
corded sm all declines in the other recessions.
T he left-hand chart on page 3 shows industrial
production thus far in the current upturn increasing
at about the same pace as in the 1954-57 and 1958-60
upswings, but at a considerably slower rate than in the
1949-53 expansion. The upper chart on page 4, which
shows the com parative behavior of GNP, tells much
the same story. D ata in the table on this page show
that total gains in both series thus far in the present
advance compare favorably w ith gains in the last twro
expansions. Thus the fact that the current expansion
began from relatively higher levels of activity does
not appear to have retarded its comparative advance.
P artly due to the same fact, the previous cyclical
peaks were equaled sooner than in earlier expansions.
The prerecession peak in industrial production before
the current expansion was passed in the fifth month
after the trough, while the prerecession high in GNP
was exceeded in the first quarter after the trough.
In the 1949-53 advance, the previous cyclical peak
in industrial output w as topped in the sixth month of
recovery and the prerecession high in GNP was
passed in the second quarter. It required eight
months of recovery in 1954-57 and ten months in
1958-60 to pass earlier industrial production peaks,
wrhile in each case earlier highs in GNP wrere topped
in the second quarter after the trough.

Through the first quarter this year, gains in the
current expansion had raised industrial production
17% and GNP 21% above prerecession peak levels.
B y comparison, industrial production in the 1954-57
expansion rose 9% above its previous cyclical peak
and in 1958-60 it advanced 7 ^ % . GNP in these
expansions reached levels 22% and 1 2 ^2 % , re­
spectively, above earlier cyclical peaks. Peak-topeak increases in the 1949-53 upsw ing w ere much
larger than in any recent expansion, approxim ately
38% for both industrial production and GNP.
Concluding Comment S tu d y of e a rlie r c y c lic a l
experience affords no sure means for predicting the
life of the current business expansion. Y et it points
up some interesting characteristics of the present
cyclical movement. The current expansion appears,
in perspective, as part of a new business cycle pattern
that has developed in the postwar period and that
features longer expansions, shorter contractions, and
less pronounced sw ings than earlier cycles. In this
light, the relatively long life of the current advance
does not appear unusual. The upward movement
since 1961 has thus far proceeded at about the same
pace as the two im m ediately preceding expansions
but it is still w ell behind the 1949-53 expansion, both
in duration and intensity.
B ut historical comparisons should not be made
without reference to basic differences in the environ­
ment against which expansions proceed. In this con­
nection, the current expansion differs in important
respects from its recent predecessors. Perhaps the
most notable difference is provided by the recent cut
in Federal income taxes, which could well provide
m ajor reinforcement to the factors m aking for
longevity in the current expansion.
B iS


, ’« 8 f:



Per Cent Decline in
Preceding Contraction

-............... .



Gross National


















Per Cent Increase

Gross National






Peak Value as Per Cent
of Previous Peak






Gross Natio




























































1Based on NBER reference dates.
♦Current dollars.
fD a ta not available on basis comparable with later figures.

 1964 industrial production and first quarter 1964 GNP.
{B ased on April Governors of the Federal Reserve System; U. S. Department of Commerce.
Sources: Board of
Federal Reserve Bank of St. Louis

State Pier 16, the new bulk-handling
m inal, is equipped with two of the
gantry cranes.

pier at North Charleston Ter­
State Ports Authority's 5 0 -ton

Located at the head of the A shley-Cooper Rivtay, Charleston harbor is
but seven and one-half m iles from the open sea.
Itasily accessible to ocean­
going vessels by w a y of w ell-defined channels antopen to traffic all y e a r.
The Port of Charleston is linked to 100 m ajor w orldts by 88 steam ship lines,
over half of w hich follow reg ular call schedules, ice 1950 the num ber of
ships calling at the port to load and d ischarge caihas more than doubled,
the valu e of w aterborne foreign trade has n early tri|, w hile tonnage has risen
by about two thirds. The greater increase in valu an in tonnage reflects a
grow ing concentration of trade in high valu e cargch as textiles, m achinery,
and other m anufactured items.
M odernized and expand ed facilities, coupled i increased ind u strializa­
tion in South C aro lin a an d other a re a s of the Soust, are prim e stimuli to
shipping activity. Port facilities and services a re , irn, a m ajor factor in the
Palmetto State's industrial growth. A recent State-ts Authority publication
credits reactivation of state ports, principal am ong ch is the Port of C h arle s­
ton, with attracting "Fully a third of the new induslhat has located in South
C a ro lin a since the end of W orld W ar II. . . ."

W ood pulp is stored at State Pier 8 for later shipment to the United
Kingdom. This product com prises approxim ately one fourth of foreign
export tonnage handled at the Port of Charleston.

W ool slated for shipment to textile m ills in South C aro lin a and other
points in the Southeast is unloaded at Colum bus Street Term inal. C h arles­
ton is now the nation's foremost wool-importing center.

Textiles m anufactured in South C a ro lin a are exported to m any
countries, w ith best customers including M exico, C a n a d a ,
and the Union of South A frica.

Columbus Street Term inal has been extensively m odernized and ex­
panded. Pier 8, now C harleston's longest pier, is operated as a public
terminal, w hile Pier 9 is leased to a private fruit importer.

North Charleston Term inal is the m ain port term inal operated te
Ports Authority. Tobacco, soybeans, chem icals, w ool, and heav^chinery a re am ong the varied commodities handled at this locat


Loans to finance the higher education of young
A m ericans have become a significant new outlet for
funds for m any commercial banks. Banks have long
made loans to parents to finance the education of
their children but only in recent years have special
program s been developed for m aking this kind of
loan. The purpose of this article is to describe
various types of higher education loan programs
available at some commercial banks and to trace their
grow th in recent years.
Contributing Factors S e v e ral develo pm ents have
contributed to the recent growth in bank loans to
finance higher education. Foremost, perhaps, has
been the large increase in the number of young people
attending college. The college age population is in ­
creasing rapidly and at the same time the percentage
of this population attending college has risen. In
1960, about 22% of the young people of college age
attended college, as compared with about 15% in
1950, and it is estim ated that by 1970 the figure w ill
be near 29% . The number of students enrolled in
colleges rose by almost 50% in the decade of the
1950’s and is expected to double in the 1960’s.
The skyrocketing cost of college education also
has contributed to the grow th of educational loans.
A t m any schools, the cost of a year’s education has
more than doubled since W orld W ar II and cur­
rently is risin g at a rate close to 5% per year. Trans-J
lated into dollars, this means that parents w ill havi
to pay well in excess of $3,000 to send their offsprin
to some private colleges next year. Although th
cost of attending m any good schools is no more tha:
half this amount, tuition and livin g costs at all school]
have risen sharply in recent years.
F in ally, the public has shown an increased w illin g­
ness to borrow for educational purposes and moife
and more banks are vigorously developing this
tentially important outlet for loan funds. Indeed, t
development of special educational loans is simpfly
an extension of the kind of instalment lending tHat
has become firm ly established at m any commercial

jbanks. For m any years A m ericans have financed
he purchase of high-priced durable goods through
?instalm ent loans. A college education, while not alogether comparable with consumer durables, is an
nvestment in human capital that adds significantly
o the earning capacity of its recipient.
A great m any students receive financial assistance
in the form of scholarships, and others are able to
borrow at low cost from college loan funds. In ad­
dition, the Federal Government has provided scholar­
ship and loan funds under the National Defense
Education Act. But funds from these sources m ay
not be available to many students because of special
eligibility requirem ents, such as scholastic achieve­
ment, proved financial need, or special fields of study.
Commercial banks have developed special loan
program s to meet the grow ing demand for credit
to finance the costs of higher education. T he de­
velopment of such program s has been stim ulated by
various state student loan guaran ty program s and by
U nited Student A id Funds, Incorporated, a private,
nonprofit organization that endorses loans to students
to meet educational expenses. In addition, many
banks have developed their own special education
loan programs.
State Loan G uaranty Plans A n um ber of sta te s
have established special authorities for the purpose of
guaranteeing bank loans to students for educational
purposes. The oldest such authority in existence is
the M assachusetts H igher Education A ssistance Cor­
poration, which was organized in 1956. Since that
date, program s have been established in a dozen or
more states and there is every indication that more
states w ill follow in the future.
The accom panying table provides some information
as to the number and scope of state loan guaranty
programs. The data in the table, however, are sub­
ject to certain lim itations. F igures showing the
number and dollar amounts of loans represent, for
the most part, cum ulative totals from the beginning of
the various program s to the most recent date for
which information w as available. For this reason,
the older program s, such as those in M assachusetts

and New Y ork, appear much larger than those begun
more recently. M oreover, information is not avail­
able for program s in several states, and some newly
established program s m ay not be included. Conse­
quently, the figures do not represent total loans under
all p ro gram s; they are sim ply the totals for individual
state programs.
Although the various state plans differ in detail,
all have certain common characteristics. In almost
all cases, some enabling legislation wT enacted by
the state legislature, although in some instances the
guaran ty funds are provided by the state while in
others they are obtained from contributions of indi­
viduals, businesses, and private foundations. Gen­
erally, the loans are made by commercial banks and
in m any states bankers associations actively sponsor
the programs.
In almost all of the state programs, the loan is
made on the student’s signature, but in some states
the parent or guardian m ust acknowledge or approve
the loan if the student is below some specified age.
Borrow ers usually are required to be residents of the
state enrolled in an approved educational institution.
The m axim um amount that m ay be borrowed in
any year ranges from $500 to $1,500 in various states,
w hile the m axim um total loan lim it for any student
runs from $1,500 to $7,500. Repaym ent begins after
graduation and the m axim um term thereafter m ay be
from three to six years. In most programs, interest
charges range from 4}/2% to 6% simple interest per
year while the student is in school, although in New
Y ork the H igher Education A ssistance Corporation
bears all of the interest costs while the student is in
school. In some states, interest rates remain the

same after graduation, but in others interest costs
rise as the interim notes are converted into an instal­
ment note.
For the most part, the state authority sim ply gu ar­
antees repaym ent of part or all of approved educa­
tional loans by commercial banks, although in some
instances the authority itself makes some loans to
students. The guaranty usually covers 80% to 100%
of the unpaid loan balance. Some program s require
the lending bank to remit to the guaranteeing au ­
thority a guaranty fee based on the amount of the
original loan and on the renewal note.
United Student Aid Funds, Incorporated T h is
private nonprofit corporation was organized in Indi­
ana in 1961 and was so successful in its first year that
it extended its operations to other states in 1962. A s
the accom panying table shows, by the end of F ebruary
1964 U S A F had extended its operations to 49
states. On that date it had endorsed more than
42,000 loans for students in 607 colleges, in an
amount in excess of $23 million. But even more im­
pressive than the present scope of U S A F ’s operations
is the rate at which they have grown. For example,
in the short period between June 30, 1963, and
February 28, 1964, the number of loans endorsed in­
creased from ju st under 17,000 to almost 42,500,
while the dollar volume jumped from $8.4 million
to $23.1 million.
U S A F raises and invests funds which form the
reserves against its endorsement of loans to students
for educational purposes. A portion of the funds used
come from the deposit of reserve funds by partici­
pating colleges and universities, but additional re­
serves are raised by voluntary state committees. In

From start of
program to

Num ber of

Am ount of loar


M aine H igher Education A ssistance Foundation ..............................
M assachusetts H igher Education Assistance Corporation .......... ........








M ichigan H igher Education A ssistance Authority .........................



N ew H am pshire Higher Education Assistance Foundation ..........




N ew Jersey Higher Education Assistance Authority ....................




N ew York H igher Education A ssistance Corporation ....................




North C aro lin a Bankers' Student Loan Plan ...................................
(College Foundation, Inc.-Banks lend to Foundation
w hich m akes loans to students)





Ja n u a ry

V irg in ia State Education Assistance Authority ...................................


















Rhode Island Higher Education Assistance Corporation


O hio H igher Education A ssistan ce Commission ..............................


June 30, 1963

December 31, 1963

February 28, 1964

Number of States , ..................................................








Number of


Num ber






Num ber of Loans ...................................................








 Amount of Loans ...................................................
Source: The Am erican Bankers Association; United Student
Federal Reserve Bank of St. Louis

A id Funds, Incorporated.

addition, foundations, businesses, and individuals
make contributions. The reserves maintained by
U S A F equal 8% or more of all outstanding loans.
Like the state guaranty programs, U S A F and p ar­
ticipating educational institutions make use of the
loan facilities of commercial banks in carryin g out the
program. A ny student at an approved college who
has completed his freshman year can qualify for
N orm ally, the loan process begins when the student
seeks financial assistance at his college. T he ap­
propriate college official provides him with the neces­
sary U S A F application forms and indicates on the
forms approval of the college. The student takes
these forms, together w ith a letter of introduction
from his college, to his local bank.
If the bank loan officer approves the loan, an in­
terim note is executed by the student and forwarded
to U S A F which endorses it and returns it to the bank.
The student m ay not borrow more than $1,000 per
year ($2,000 for graduate students) and a maxim um
of $4,000 in total. The interim notes m ature after
the student is scheduled to graduate, at which time
they are converted into a single payout note. The
latter is norm ally payable in monthly instalments
over a three-year period, but the term m ay be longer
if necessary to keep the monthly paym ents below
$100. The interim notes m ay not carry a rate in
excess of 6 % simple interest per year, and the m axi­
mum charge on the instalment note is $3.00 per
$100 per year.
The student signs the notes, but the signatures of
his parents m ay be required if he is a minor. In ap­
proving the loans, p rim ary consideration is given to
the applicant’s character, financial need, and ability
to perform college work. H is prospects are much
more important than his present financial situation.
These loans are designed to supplement, not replace,
normal loan facilities, and the bank need not approve
such loans when the applicant or his fam ily is eligible
for regular bank credit.
In the event of default, the bank is expected to
make a reasonable effort to collect. If such efforts
fail, U S A F pays the full amount owed to the bank.
Individual Bank Plans
L ittle inform atio n is
available as to the exact number of banks having their
own specialized college loan plans or the dollar volume
of loans made under these plans. A recent survey
made by the Am erican Bankers Association drew re­
sponses from 605 banks, of which 185, or about 31% ,
indicated they had formalized college loan plans.
These banks had about 31,000 loans outstanding at

the end of 1963, am ounting to approxim ately $62
million. Numerous other banks indicated that, while
they had no formal plan, they held a substantial num ­
ber of instalment loans that had been made to fi­
nance college education.
The individual bank plans differ from the loan
guaranty plans in several important respects. F irst,
the loan is usually made to the parent or guardian
rather than to the student, and much more importance
is attached to the financial capacity of the borrower.
Second, repaym ent begins shortly after the initial
funds are advanced rather than after the student
leaves college. Indeed, some banks include a savings
feature in the program whereby the parent accum u­
lates funds in a savings account by regular monthly
paym ents while the student is in high school. W hen
the student enrolls in college, the bank disburses
funds out of the savings account until it is exhausted
and then begins to advance its own funds to meet
the student’s college expenses.
Since the bank bears all of the credit risk in m aking
these loans, the interest cost m ay be greater than for
the guaranteed loans. There appear to be great
variations in the rates actually charged, however, with
charges ranging from $2.25 to $6.00 per $100 for a
one-year note repayable monthly. These charges,
which are made only on the amounts actually ad ­
vanced, must conform to local statute.
F in ally, terms on these loans usually are shorter
than those on guaranteed loans, although there m ay
be great variations in actual practice. A s mentioned
earlier, repaym ent begins shortly after the initial
funds are advanced and terms of most loans under
these program s do not exceed six years.
Sum m ary S p ecial p ro gram s developed to m eet
the grow ing demand for funds to finance college
training are further evidence of the flexibility of com­
m ercial banks in adapting to changing demands for
credit. They also reflect a grow ing acceptance of
the idea that a college education is not something to
be reserved for an elite few, but is rather to be con­
sidered the minimum educational preparation for a
useful and productive life. W ith such new credit
facilities, the extent of an individual’s education need
not be lim ited by his or his fam ily’s immediate fi­
nancial capacity. The various program s described
in this article are based on the principle of maxim um
utilization of private initiative and private resources.
T heir growth to date suggests that the private sector,
with minim al cooperation from government, can make
a significant contribution to the solution of financing
problems in higher education.


j K

------------------------------------ W
Recent developments suggest new strength in Fifth
D istrict business as the current upswing moves firm ly
along in its fourth year. Seasonally adjusted bank
debits, following a M arch decline, rose 4% in A pril
to a new all-tim e high. R etail trade, disappointingly
sluggish in M arch and A pril, apparently took on new
life in M ay. Estim ates based on data for the first
three weeks of the month indicate an increase in de­
partm ent store sales about 5 % greater than the
normal seasonal gain, and trade reports suggest con­
tinued improvement over much of the D istrict. A pril
gains in nonfarm employment were slightly less than
seasonal, perhaps because the rise to normal seasonal
strength occurred earlier than usual this year. F ac­
tory man-hours also rose less than seasonally in A pril,
affected perhaps by local labor shortages.
B u ild in g s B u rgeo n Fifth D istrict contractors con­
tinue to work aw ay at a large and grow ing backlog
of business. B uilding perm its and contract aw ards
are still at high levels, v irtually assuring no slackening
of the pace in the months imm ediately ahead. S ea­
sonally adjusted building perm its rose 12% in A pril
and, in the first four months of the year, averaged
30% higher than for the same period last year. Con­
struction contract aw ards mounted rapidly in M arch
to a level that has been exceeded in only two prior
months. The increase raised the first quarter total
to a record level, one-third higher than in the same
months last year. Seasonally adjusted construction
employment rose in A pril but remained slightly below
the all-tim e high reached in February. As in the case
of some m anufacturing industries, reports suggest
that construction employment statistics m ay reflect
shortages of certain types of skilled labor.
C ig a re tte s B ounce B ack D istrict c ig a re tte pro­
duction, which declined one fifth in F ebruary follow­
ing the Surgeon G eneral’s report, made a partial re­
covery in M arch and returned to late 1963 levels in
A pril. Cigarette man-hours, which paralleled the
F eb ruary decline in output, resumed near-norm al
levels in M arch and A pril. Federal cigarette tax col­
lections, reflecting factory shipments, dropped 12%
in F ebruary to a level 20% lower than in F ebruary
1963. Collections then rose 11% in M arch and a
further 14% in A pril, roughly matching production

increases in those months. Following the recovery
that occurred in M arch and A pril, monthly collec­
tions were again at about the December 1963 level
but still 3% below A pril 1963.
F u rn itu re R o lls On T h e fu rn itu re in d u s tr y ’s
present rosy outlook contrasts sharply with the un­
certainties besetting the cigarette business. The
strength and endurance of furniture demand has been
a bright spot in District m anufacturing throughout
the current upswing. Each of the past two years
has been hailed in turn as a record year. D istrict
furniture output increased about 15% in 1962 and
an additional 10% in 1963. The evidence available
so far suggests that this y ear’s gain w ill be in the
neighborhood of 15%. Significant improvements in
productivity are indicated when the increase in pro­
duction is compared with the rise in man-hours.
W hereas output is now running about 40% above the
1961 level, man-hours are up only 28% . This y e a r’s
increase in output over last year appears to have been
achieved so far w ith only a 4% increase in man-hours.
T e x tile O utlook C lears C onditions in the te x tile
industry, which provides one in every three D istrict
factory jobs, show signs of settling down after an
unusual period featuring a variety of problems.
In M ay 1961, President K ennedy proposed a 7point program to deal with a complex cumulation of
textile problems. Since that time the textile in­
dustry, among others, has been accorded increased
depreciation allowances, an investment credit against
income taxes, and some relief from pressures of over­
seas competition. Also, new research has been
sponsored by the Department of A griculture to aid
cotton grow ers and users by reducing cotton produc­
tion costs. The most significant change, however,
was the reduction on A pril 11 of 6.5 cents a pound
in the effective price paid for cotton by domestic
textile mills. This was enough to offset most of the
competitive disadvantage to domestic m ills result­
ing from a price support program which pegged the
domestic price 8.5 cents above the world price.
The long-standing cost disadvantage associated
with two-price cotton, and uncertainty as to how long
it might last, contributed to substantial changes in the
industry. For one, synthetic fibers increasingly

found their w ay into m arket sectors form erly domi­
nated by cotton. Intensified foreign and domestic
competition hastened the obsolescence of old and un­
economical facilities and became an important factor
in raisin g new capital outlays to record levels. W ith
large amounts of w orking capital tied up in cotton
inventories, which would decline in value as a result
of proposed revisions in the cotton program , m ills
strove for greater efficiency in production scheduling
and inventory control. L ast fall, the textile industry
granted 5% w age increases, sharing the benefits of
greater efficiency and the expected reduction in the
cost of cotton. V irtu ally all of these developments
had the effect of strengthening the industry for the
long run. Now that the adverse domestic effects of
the cotton export subsidy have been offset, many a
cloud which hampered the industry in the recent past
m ay turn out to have a silver lining.
Textile Prices Reflect Change T he tech n ical
and legislative developments of the past few years
have strongly influenced basic m arket conditions.
T his is perhaps best revealed in the statistics for the
cotton sector of this large and complex industry. The
data for this sector are more complete than for the
industry as a whole, and provide a basis for some
significant generalizations.
W holesale prices are a good index of the changing
balance between supply and demand. They reflect

the complex forces on both sides of the m arket. Four
relevant wholesale price series are presented in the
accom panying chart. The decline in basic cotton
textile prices during the 1960 recession is im m ediately
apparent. Cotton cloth prices fell sharply and did
not turn up again until Ju ly 1961. B y M arch 1962
about one third of the 1960 decline had been re­
covered, but the situation weakened and declines
resumed early in 1962. They continued until the
m iddle of 1963 when responses to the combination of
factors mentioned earlier began to produce a better
balance between supply and demand.
Y arn prices followed much the same pattern but
with a relatively shorter, more shallow' decline in
1960, a sharper recovery in 1961, and subsequently a
steeper decline. Cotton housefurnishings continued
their 1959 price rise wrell into 1960, then remained
stable during the rem ainder of the 1960-1961 reces­
sion. W hen business improved in 1961, home goods
prices sagged at first but paralleled cloth and yarn
prices from then on. D uring the whole period, ap­
parel prices (including other fibers as wrell as cotton)
moved slowly and irregu larly upward.
Cotton goods imports, in response to the high
prices prevailing at the start of the year, reached a
record level in 1960. In 1961, when falling prices
made U . S. m arkets less attractive to foreign sup­
pliers, imports dropped 25% . In the last quarter of
1961, the Geneva short-term import stabilization plan
went into effect and was followed a year later by the
long-term arrangem ent. Consequently, the recent
volume of imports reflects economic factors modified
by these arrangem ents. Although domestic prices
in 1962 stayed wrell below 1959-1960 levels, cotton
goods imports jumped 63% , prompted by firm er de­
mand here as well as lower costs overseas. Imports
m aintained about the same levels through 1963 and
have shown some tendency to rise so far in 1964.
Cotton goods prices again show signs of stabilizing,
having perhaps weathered the uncertainty generated
by discussion and ultim ate passage of the new law.
Domestic demand is strong but in good balance with
production. Productivity is risin g and textile m ills
plan record outlays this year for more cost-cutting
equipment. For the textile industry the immediate
future looks better now than it has for some time.

C over—N ational Cotton Council of A m erica; Coxe Studio,
G reen ville, S. C .; The Cham pion Paper and Fibre Com ­
p any of Am erica


Com pany

South C aro lin a State Ports Authority.

6. & 7.

The Cham pion Paper and Fibre