Full text of Economic Quarterly (Federal Reserve Bank of Richmond) : June 1969

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FEDERAL RESERVE BANK OF RICHMOND

MONTHLY
REVIEW

Long-Term Employment and
Recent Unemployment Trends
Farm Debt Continues To Rise
Federal G rants-In-Aid
The Fifth D istrict

Long-Term Employment
And Recent Unemployment Trends
In The United States
A s the nation's econom y has flourished over the

creased unemployment and that, in the current busi

past several years, total employm ent has grow n to

ness climate, much of the increase w ould concentrate

record levels and the unemployment rate has fallen

am ong the less-skilled, w ho also make up m ost of

to the lowest level since the K orean W a r.

the low er incom e groups in U . S. society.

But

In a

especially since 1965, gradually declining rates of

society increasingly preoccupied with the problem s

unemployment have been accompanied by an accelera

of low -incom e groups, the effects o f a deceleration

tion

in the econ om y’s grow th on unem ployment is ac

the

rate

inflation.

W ith

increasing

urgency, policym akers have turned their attention

cordingly a matter of m ajor concern.

to the inflation problem and have sought prescrip

T his article reviews briefly the differential unem

tions which w ould at once contain or dissipate in

ployment experience of various labor force groups,

flationary pressures while allowing the econom y to

classified by age and race as well as by occupation,

expand at a rate sufficiently rapid to create jobs

during the period 1961-68, the nation’s largest busi

for all new entrants into the labor force.

ness expansion.

It is, of

It also offers some com m ents on

course, widely understood that failure to achieve

the changing industrial com position o f employm ent

the latter half o f this objective w ould lead to in

in the U . S. econom y since 1929.

EMPLOYMENT DISTRIBUTION
Per Cent

Per C ent

State and Local Governm ent

Services

Federal Governm ent

Finance, Insurance
'a n d Real Estate

Total Trade

Construction

Mining

Source:

U. S.

Departm ent of Labor.

M anufacturing

In d u s tria l D is trib u tio n of E m p lo y m e n t, 1929-1968
Chart I shows the percentage distribution o f em
ployment by m ajor industry groups from 1929 to
1968. A s might be expected, the percentage o f all
em ployed persons engaged in agriculture has shown
a consistent decline, from approxim ately 2 5 % in
1929 to around 5 % in 1968. T he Depression years
provided the only exception to the decline. From
1929 to 1932, the percentage of the labor force em
ployed in agriculture showed a fairly steady increase
to a high of approxim ately 3 0 % in 1932. This
apparent large m ovem ent back to the farm could be
substantially overstated, how ever, since total em
ployment also fell from 1929 to 1932.
M anufacturing employm ent clearly exhibited an
upward trend from 1932 to its peak during the war
years of 1943 and 1944. Since the war, however,
manufacturing employm ent as a per cent of the total
has shown only a slight dow nw ard trend. Until
1932, Federal Governm ent employm ent stayed
around 1.5% of total employment, then m oved closer
to 2 % between 1932 and 1938. During W o rld W a r
II, the percentage em ployed by the Federal G overn
ment rose to almost 6 % . Since the K orean W a r.
however, it has remained between 3 .5 % and 3 .8 % .
In contrast to the Federal Governm ent figures,
the percentage o f total employm ent accounted for
by state and local governm ents has shown an im pres
sive expansionary trend in recent years.

T he per

centage em ployed in the service industries has shown
a similar expansion. These long-term trends clearly
illustrate that the U . S., once a prim arily agrarian
econom y, has for some years now shown indications
o f changing from a “ good s-p rod u cin g” to a “ serviceoriented” econom y.
A part from the obvious decline in agricultural
employment, and the sizable expansion in services
and state and local governm ent employment, the chart
shows a remarkable constancy in the percentages.
A ll the other categories, including Federal G overn
ment employment, have remained approxim ately the
same except during the years of depression and war.
Employment and Unemploym ent Defined
term “ unem ploym ent,”

The

as used in econom ic and

social analysis, is at best an imprecise concept and
the measurement of unem ployment raises num erous
questions, many of which are settled quite arbitrarily.
T he U . S. Department of L abor, which publishes
monthly data drawn from a sample survey of 50,000
households, recognizes for statistical purposes three
exact categories such that all persons may be classi
fied as “ em ployed,” “ unem ployed,” or “ not in the
labor force.”

T he Bureau defines as employed persons all those
who, during a survey week, did any w ork at all as
paid employees in their ow n business, profession,
or farm, or w ho w orked 15 hours or m ore as unpaid
w orkers in an enterprise operated by a member of
the family.

A ll persons not w orking but w ho had

jobs or businesses from which they were tem porarily
absent because of

illness,

bad weather, vacation,

labor-management dispute, or personal reasons, are
also counted as em ployed whether or not they were
paid by their employers fo r the time off, and
whether or not they were seeking other jobs. M o re
over, each em ployed person is counted only once.
T hose w ho held m ore than one jo b are counted in
the jo b at which they w orked the greatest number
of hours during the survey week.
T he

“ unem ployed,”

according

the

B ureau’s

definitions, com prise all persons w ho did not w ork
during the survey week, w ho made specific efforts
to find a jo b within the past four weeks, and who
were available for w ork during the survey week
(excep t for tem porary illn ess). A lso included as
unem ployed are those w ho did not w ork at all, were
available for w ork, and (a ) were waiting to be
called back to a jo b from which they had been laid
off, or ( b ) were waiting to report to a new wage
or salary jo b within 30 days.
T h e civilian labor force is the sum of all civilians
classified as em ployed and unem ployed. Civilians
16 years of age or over w h o are neither em ployed
nor unem ployed are classified by the Bureau as “ not
in the labor force.” This group includes persons
engaged in housew ork in their own home, those in
school, those unable to w ork because o f long-term
physical or mental illness, retired persons, those
too old to w ork, and the voluntarily idle. In the
charts giving the unemployment rates, the figure
for each age, sex, or racial classification represents
the percentage of the total civilian labor force in that
class which is unemployed.
R e c e n t U n e m p lo y m e n t T re n d s

T h e u n e m p lo y

ment rate for all groups o f workers taken as a whole
from D ecem ber 1968 to February
at 3 .3 % .

1969 remained

F or the U . S. econom y, this unem ploy

ment rate was very low and represented a culmination
of a m ore or less steady decline from a rate o f 7 .1 %
in M ay 1961.

A t the end of 1968 approxim ately

2.6 million persons were unemployed, whereas 4.8
million were unem ployed in early 1961.
T hese totals include persons w ho are between
jobs, i.e., the so-called “ frictionally”

unemployed,

those tem porarily unem ployed for seasonal reasons,
those whose principal w ork skills have been rendered

obsolete by technological advances, as well as others
w ho, for whatever reasons, seek unsuccessfully to
market their labor services. It may also include
some w ho have concrete jo b offers but w h o elect to
probe the market fo r something better. In a rela
tively affluent society, marked by personal freedom
to m ove from one labor market to another, it is

w orkers such as clerical w orkers, farm workers,
white-collar workers, craftsmen and forem en, sales
workers, and even all white males over 20 had u n
employm ent rates o f less than 3 % as o f the fourth
quarter of 1968.

highly unlikely that, at any given time, the entire

categories. T hese classes are not necessarily m u
tually exclusive. T he charts illustrate quite clearly
that in the 1960’s at least, in periods o f generally

labor force will be em ployed.

Som e level o f un

employm ent is m ore or less “ norm al.”
Precisely
what fraction of the labor force this level may rep
resent is a question that has never been answered to
the com plete satisfaction of m ost economists or labor
market experts. Som e econom ists put the figure
as low as 2 % or 3 % ; others place it higher.
But whatever the fraction of the total labor force
that makes up this category and thereby represents,
as a practical matter, the lowest overall unem ploy

T he accom panying charts show unemployment
rates by selected age, sex, race, and occupational

rising unem ployment, the unem ployment rate for
nonwhites and for unskilled workers tended to m ove
up substantially faster than it did for other groups.
O n the other hand, in periods o f business expansion
the unem ployment rates fo r unskilled and nonwhite
persons fell considerably m ore than those for other
groups. T he unem ployment rate for nonwhite males
over 20 was 11.9% in 1961, but it dropped to 3 .5 %

ment rate, it is clear that the figure is not the same
fo r all groups within the labor force. F or example, in

by the end of 1968.

the fourth quarter o f 1968, when the unemployment
rate for the civilian labor force was 3 .3 % , the rate
for the “ all married m en” category was only 1.4% .

from 5 .3 % to 1 .6 % . Unem ploym ent am ong unskilled
nonfarm w orkers fell from 15.1% to 6 .1 % , while
for craftsmen and forem en it declined from 6 .7 %

O n the other hand, despite the low overall rate, the
rate am ong males in the 16-19 age group was 11.5% .

to 2 .2 % . T he unem ployment rate for white-collar
workers also dropped only slightly.

It is well known that the young change job s far m ore
unemployment is probably higher am ong the young

A s shown in the table o f selected unemployment
rates in 1969, the rate of unemployment fo r all civ i
lian w orkers rose in M arch to 3 .4 % from the 3 .3 %

than

level which had been maintained since year-end 1968.

often than married men, and consequently frictional
in

older

age

groups.

Other

categories

D uring the same period, the

unemployment rates for white males over 20 fell

This increase was mostly due to a rise in teen-age
unemployment.

A s is evident in the charts, h ow

ever, unem ployment rates fo r 16-19 year-olds have
SELECTED UNEMPLOYMENT RATES, 1969

a great deal of irregular variation.

(Season ally Adjusted)

Type of W orker

Jan .

In the case of

nonwhite females in that age group, as a matter of
Feb.

March

April

fact, the unemployment rate did not seem to have
a dow nw ard trend at all during the 1961-68 e x

A ll civilian w orkers
M arried men
Both sexes, 16 to 19 yea rs

3.3
1.4
11.7

3.4
1.4
12.7

3.5

W hite w orkers
M ales, 20 yea rs and over
Fem ales, 20 years and over
Both sexes, 16 to 19 years

3.0
1.7
3.3
10.1

2.9
1.7
3.3
10.1

3.1
1.8
3.1
11.4

3.1
1.8
3.3
11.3

N onwhite w orkers
M ales, 20 yea rs and over
Fem ales, 20 years and over
Both sexes, 16 to 19 y ears

6.0
3.8
5.0
22.9

5.7
3.2
5.3
22.0

6.0
3.2
6.0
21.6

6.9
3.7
7.2
23.6

pansion.
In A p ril 1969, the overall unem ploym ent rate rose
to 3 .5 % , with much o f the increase concentrated
am ong adult w om en and nonwhite workers.

T he

unem ployment rate fo r nonwhite w orkers rose to
6 .9 % from the 6 .0 % M arch figure.

Blue-collar un

employm ent increased to 4 .1 % from 3 .7 % and teen
age unemployment rose to 12.8% from 12 .7 % , but

Type of O ccupation

the white w orker unemployment rate held steady at

W hite-collar w orkers
C lerical w orkers

1.9
3.0
2.6

1.9
2.7
3.3

2.0
3.1
2.9

1.8
2.4
3.3

Blue-collar w orkers
Craftsm en and foremen
O p eratives
N onfarm laborers

3.8
2.1
4.2
6.6

3.6
2.1
4.2
5.5

3.7
2.2
3.9
7.0

4.1
2.2
4.6
6.8

selected age, race, and occupational group since 1961

Service w orkers

4.2

3.8

4.5

unemployment rate can be a matter o f considerable

Source:

U. S. Departm ent of la b o r.

' ...... A . .. /

3 .1 % .
These

trends

the

unem ployment

rates

illustrate w hy relatively small changes in the total
social moment.
W illiam E. Cullison

FARM

DEBT

FARM -M ORTGAGE DEBT HELD BY M A JO R LENDERS
FIFTH DISTRICT, JA N U A R Y 1, 1950-1968
$ Million

1,000

$ Million

□

Federal Land Banks

[~1
□
0
0

Farm ers Home Adm inistration
Life Insurance Com panies
All Operating Banks
Individuals and Others

Total

0
1950
Source:

1955
U. S. Departm ent of Agriculture.

Fifth District farm ers' total farm -m ortgage debt outstanding at the beginning of 1968 reached
an all-tim e Ja n u a ry 1 high of $1,301 .8 m illion, $111. 2 million or 9% above a y e a r earlier.
The increase continued the u pw ard trend w hich began shortly after W orld W ar II. Since
1950, the an n ual increase in farm -m ortgage debt outstanding has ranged from $19.5 million
to $122.8 million and has avera g e d $56.6 million per year.

FARM -M ORTGAGE DEBT: TOTAL AM OUNT O U TSTAN D IN G AND
PROPORTIONS HELD BY M A JO R LENDERS
FIFTH DISTRICT, JA N U A R Y 1, 1950-1968
Proportions Held by M ajor Lenders

Y e ar

Total
Farm -M ortgage
Debt

Individuals
and
O thers

All
O perating
Banks

Life
Insurance
Com panies

Farm ers
Home
Adm inistration

Federal
Land
Banks

$ Million

Per Cent

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959

283.3
319.6
354.7
394.3
428.0
468.9
507.3
526.8
557.8
596.4

40.8
43.0
46.0
47.0
46.5
45.8
44.3
43.2
42.0
40.9

29.2
27.5
25.0
24.3
24.0
23.6
24.2
23.1
22.0
22.2

7.8
8.3
8.8
8.8
9.7
11.2
12.0
12.8
13.5
13.2

6.6
6.8
6.7
7.0
6.9
6.4
5.8
5.9
6.4
7.0

15.6
14.4
13.5
12.9
12.9
13.0
13.7
15.0
16.1
16.7

1960
1961
1962
1963
1964
1965
1966
1967
1968

644.3
679.2
741.3
792.5
872.2
969.7
1,092.5
1,190.6
1,301.8

39.6
38.4
38.3
38.4
38.4
38.4
38.4
38.4
38.4

22.6
22.3
21.3
21.7
22.8
23.1
22.9
21.7
20.6

12.8
12.5
12.2
12.4
11.7
11.3
11.3
11.3
10.8

7.3
7.8
8.9
8.3
7.4
6.6
5.8
4.9
4.1

17.7
19.0
19.3
19.2
19.7
20.6
21.6
23.7
26.1

http://fraser.stlouisfed.org/
Source:
U. S. Departm ent
Federal Reserve Bank of St. Louis

of Agriculture.

INUES

RISE

NON-REAL-ESTATE FARM DEBT HELD BY M AJOR REPORTING LENDERS
FIFTH DISTRICT, JA N U A R Y 1, 1950-1968
$ Million

$ Million

6 qq

Q
□

Farm ers Home Adm inistration
Production Credit Associations

All Operating Banks

Total

0
1950

1955

Source:

U. S. Department of Agriculture.

Non-real-estate farm debt outstanding in the District on Ja n u a ry 1, 1968 totaled $530.2 m il
lion, a record Ja n u a ry 1 high and $51.1 million or 1 1 % above a y e ar earlier. The increase, as
in the case of farm -m ortgage debt, m arked a continuation of the uptrend which began fo llo w
ing W orld W ar II. Since 1950, the an n ua l increase in outstanding non-real-estate farm debt
has ranged from $5.0 million to $51.1 million, or an a v e ra g e of $23.3 million per ye a r.

NON-REAL-ESTATE FARM DEBT: TOTAL AM OUNT O U TSTAN D IN G AND
PROPORTIONS HELD BY M A JO R REPORTING LENDERS
FIFTH DISTRICT, JA N U A R Y 1, 1950-1968
Proportions Held by M ajor Reporting Lenders

Y e ar

Total
Non-Real-Estate
Farm Debt*

All
O perating
Banks*

Production
Credit
A ssociations

Farm ers
Home
Adm inistration

$ Million

Per Cent

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959

110.1
120.2
127.0
146.8
152.0
157.0
169.2
179.2
200.3
222.8

56.4
58.3
59.3
59.7
60.2
59.3
62.0
62.2
57.9
55.5

22.1
22.1
23.4
23.5
22.9
23.0
22.6
23.5
29.0
33.0

21.5
19.6
17.3
16.8
16.9
17.7
15.4
14.3
13.1
11.5

1960
1961
1962
1963
1964
1965
1966
1967
1968

253.7
266.9
292.9

54.1
53.3
52.0

35.3
36.2
37.1

387.4
428.9

51.4
51.8
49.9

38.7
39.2
40.6

530.2

47.4

43.8

■. : ■
' ■
"-

llll
359.5

http://fraser.stlouisfed.org/
eed by Comm odity
Federal Reserve
of St. Louisent of Agriculture.
Source:Bank
U. S.

Credit C orporation.

Mmmm.

HI*

FEDERAL GRANTS-IN-AID

In the present fiscal year the Federal Governm ent
is providin g nearly $21 billion in grants to state and
local governm ents, and it is expected that this figure
may reach the $25 billion mark in 1970. Grants-inaid are generally defined as the payment of Federal
funds to a low er-level governm ent fo r a specific
purpose, usually on a matching basis and in ac
cordance with prescribed standards or requirements.
T h e present Federal grant system, which has been

1960’s have been characterized by new program s to
finance health services and medical care to the poor,
to rebuild urban centers, to broaden educational
opportunities,

develop

econom ically

depressed

regions, and to com bat poverty generally.
Grants-in-aid are a product of our republican form
of governm ent with its tradition of decentralized
decision-m aking.

T h e Federal Governm ent, barred

expanding rapidly in the past few years, has a his
tory predating the Constitution. Grants developed

by Constitutional reservation from intervention in
certain state and local affairs, has used grants-in-aid
to accomplish its aims.
Fiscal realities have rein

as an im portant tool for carrying out the essential

forced the development of grant program s.

partnership of the state and national governm ents
in a federal system.
T hese grants coordinate the
public services of states and localities with Federal

nineteenth century the Federal Governm ent was land

financial support in program s of national concern.

present century the advent o f the incom e tax has

The

provided the Federal Governm ent with a supply of
financial resources far greater than those available

com position

Federal

grants

has

varied

through time as the areas o f concern to the nation
have changed.
History and Development T h e first F ed era l
grants to state and local governm ents were made in
1785. In that year Congress provided grants of
Federal land to support education in the N orthw est
T erritory. Land continued to be the prim ary form
o f Federal aid until 1837. In that year the Federal
G overnm ent realized a $28 million surplus which
was distributed am ong the states on the basis o f
Congressional representation.

N o restrictions were

placed on the use o f these funds.

T he first restric

In the

rich, and it used these resources to prom ote its aims
in education and econom ic development.
In the

to state
revenues
than are
used by

and local
are m ore
the sales
states and

governm ents. A lso incom e tax
responsive to econom ic grow th
and property taxes traditionally
localities. Thus, the “ reven u e/

responsibility gap,” or the discrepancy between the
revenue capabilities of a governm ental unit and its
program responsibilities, has been reinforced by the
incom e tax.
A im s and Criticisms

G ra n ts-in -a id are u sed to

achieve various objectives.
to

encourage or

M any grants are used

stimulate the development

tions on Federal aid came with the M orrill A ct of

specific activity, fo r example, public housing or high

1862, which provided support of higher education.

way construction.

These restrictions included a definition o f objectives,

tended to guarantee a minimum service level to all

state matching of funds, and reports on the use

states, as the agricultural extension program s do.

Other grant program s are in

Som e grants are designed to redistribute wealth

o f funds.
T he early years of this century saw grants e x
tended for agriculture, highways, and some social

geographically. F or exam ple m ost public assistance
program s give larger grants to states with low er

welfare program s.

D uring the 1930’s Federal grants

per capita income, thus transferring revenue from

were greatly expanded to include new program s in

above-average incom e states to below -average in

welfare,

com e

housing, and

econom ic

security.

the

states.

few

grant-in-aid

program s

are

years immediately after W o r ld W a r II aid for health

undertaken prim arily to prom ote econom ic stability

and housing program s grew significantly, while aid
for highway construction was also expanded. The

and developm ent rather than to provide good s and

services, fo r example, grants to maintain em ploy

FEDERAL GRANTS TO STATE AND LOCAL
G O VERN M EN TS BY FUNCTION
$ Billions
16.0

14.0

1 2 .0 1-

i All Other
1 Education
I Health
! M iscellaneous Social W elfare
I H ighw ays
H Public Assistance

assistance to the aged and to families with dependent
children, and aid to the blind, increased only 2 6 8 %
and dropped from 5 5 % of all social welfare grants
to 4 2 % . D uring this same period grants to educa
tion increased 9 3 3 % , from about 9 % of all social
welfare grants to 2 4 % .

Grants for health and m is

cellaneous social welfare program s remained rela
tively stable over the period at around 5 % and 2 7 % ,
respectively, of total social welfare grants.
Grants for highways com pose the next largest
com ponent of Federal grants-in-aid.
increased

421%

during

the ten-year

These grants
period

and

varied in im portance from a low o f 2 4 % o f all grants
in 1957 to a high of 4 1 % in 1959 and then declined
to 2 7 %

by 1967.

rose 5 9 1 % .

T he “ all other grant” category

This category includes grants for urban

affairs, such as urban renewal and water and sewer
facilities, mass transportation, and urban planning
assistance; such agricultural and natural resources
grants as water shed protection, fish and wildlife
1958
Source:

1960

1962

U. S. Departm ent of
W elfare.

1964

1966

Health, Education, and

restoration, and management and basic scientific re
search in agriculture.

A ls o included are grants for

civil defense, libraries and com m unity services, law
enforcement

assistance,

and

the

Federal

airport

program .
ment security or for urban redevelopment.
O c
casionally grants are used to alleviate tem porary or

Increasing attention has been focused recently on
aid to metropolitan and urban areas. A pproxim ately

unusual difficulties in a particular state or locality.
Recently some experimental grants have been made
to demonstrate the feasibility of a particular ap
proach to a problem.
Federal grants-in-aid are often criticized for having
a tendency to induce states and localities to spend
funds to match Federal grants at the expense of
other needs not funded from grants-in-aid sources.
T he criticism has also been leveled that states lack
the necessary revenues because the Federal G overn
ment has preempted the m ost productive tax sources,

FEDERAL GRAN TS TO FIFTH DISTRICT
STATE AND LOCAL G O VERN M EN TS
$ M illions

W est V irginia
South C aro lin a
M aryland

B District of Colum bia
f§§ V irginia
CD North C aro lina

and the absence of a direct connection between the
taxing and spending authority leads to financial e x
travagance and irresponsibility. It is also argued
that the strings attached to grants-in-aid may lead
to Federal control of local activities.
F u n ctio n s

In the fiscal year 1967, Federal grants

to states and localities totaled $14.8 billion, up about
3 7 6 % from the $3.9 billion in 1957.

A b ou t tw o-

thirds of this total went to social welfare program s.
Social welfare grants increased 3 4 9 % over this tenyear period, but the com position of these grants was
altered somewhat during the decade.

Source:

U. S. Departm ent of H ealth,
W elfare.

Education, and

Public as

sistance, which includes old-age assistance, medical

6 0 % of the $21 billion of total Federal aid scheduled

and secondary education, are designed as aids to the

for

disadvantaged and hence tend to g o to states with

distribution in

1969 will g o

to urban areas.

This is an increase of about $8 billion or 2 0 5 %

low er per capita incomes.

since 1961 and a gain of $3 billion or 2 5 %

chart, this relationship is generally true in the Fifth

1967.

since

T he m ajor increase in Federal grants for

District.

A s shown in the second

South Carolina and W est V irgin ia have

urban areas has occurred in housing and com m unity

the lowest per capita incomes in the District, and at

development, education, and in program s to im prove

the same time the grants to these states measured

the plight of the poor.

T he fiscal 1970 budget calls

relative to

population,

personal

incom e,

state

for an increase of $2.8 billion or 2 0 % in grants to

and local revenues are am ong the highest in the D is

urban areas.

trict.

Fifth District Grants

W h ile total Federal grants-

in-aid to all states and localities grew 3 7 6 % in the
period

1957-67, total grants to the Fifth District

grew slightly m ore rapidly— by about 3 9 2 % .

Total

Federal grants to the Fifth District increased slightly
from around 8 %
about 9 %

o f all Federal grants in 1957 to

1967.

W ith in

the

District,

North

Carolina and V irgin ia have generally received the
larger shares of total g ra n ts; each state’s share has
generally ranged between 2 0 % and 3 0 % o f grants
to

the

District.

M aryland,

South

Carolina,

and

W est V irginia have each typically received about
15% of the grants to the District, while the District
of C olum bia’s share has increased slightly from less
than 4 %

in 1957 to almost 8 %

in 1967.

Generally, per capita aid is larger in states with
smaller per capita income.

This is due in part to

some grant program s, such as grants for hospital
construction, requiring low er matching by the rela
tively poorer states.

In addition, certain program s,

N orth

Carolina,

V irginia,

and

particularly

M aryland all have larger per capita personal in
com es than the other states, while they receive rela
tively smaller grants-in-aid.
rule is the District o f

T he exception to this

Columbia, which

has the

highest per capita incom e in the District and at the
same time receives relatively larger grants-in-aid.
T he states in the District tend to take advantage
of different types o f Federal aid.

In 1967 M aryland

received the largest portion of her Federal grants
for public assistance ( 2 7 % ) and education ( 2 6 % ) .
V irginia received over 4 0 % o f her grants for high
ways, with only 10% fo r public assistance.

W est

V irginia also took the largest portion of her grants
for highways ( 3 7 % ) .

N orth and South Carolina

placed great emphasis on education, receiving, re
spectively, 2 5 % and 2 9 % o f their aid fo r that p u r
pose.
33% ,

W ashington, D . C. took its largest share,
for

particularly

miscellaneous

social

com m unity

action,

welfare
food

program s,

stamp,

and

N eighborhood Y outh Corps program s.
W yn n elle W ilson

such as those for public assistance and elementary

FEDERAL GRANTS TO STATE AND LOCAL G O V ERN M EN TS—FISCAL

1967

G ra n ts a s %
of State & Local
G e n e ral Revenues*

G rants
per
C ap ita
(dollars)

United States

74.8

Fifth District

70.1

North C aro lin a

65.6

V irginia

65.9

M aryland
W est V irgin ia
South C aro lin a
District of Colum bia
* From ow n sources.
Source:

U. S. Departm ents of Comm erce and Health, Education, and W elfare.

Digitized for10
FRASER

53.5
107.9

66.6
124.8

The Fifth District
EARNINGS A N D EXPENSES OF MEMBER BANKS
Current operating revenues o f the 378 member
banks in the Fifth Federal Reserve District reached
an all-time high of $1,055 million in 1968.

A s indi

largest share— $247 million- -went to N orth Carolina’s 26 member banks.
Earnings B y Source

L o a n s p ro v id e d $716 m il

cated in the current issue o f Operating R atios, a

lion of incom e for District member banks last year.

publication of this Bank, net income after taxes

Loans com prised 52 .1 % of total assets and provided
6 5 .9 % o f total earnings, dow n from 6 6 .8 % in 1967.

jum ped from 8 .5 % of total capital accounts in 1967
to

9 .3 %

last year.

( Operating

Ratios

presents

arithmetic averages of individual bank ratios e x
pressed as percentages.

These averages will be the

basis of the ratios used throughout this article.)
Cash dividends declared rose to 3 .4 % of total capital
after remaining practically unchanged at 3 .1 % from
1962 through 1967. Net incom e rose from 0 .7 5 %
o f total assets in 1967 to 0 .7 9 % in 1968. A s usual,
the banks with deposits o f over $100 million received
the m ajor portion of total operating revenues. A l
though only 26 out of the 378 member banks in the
D istrict are in that class, their earnings amounted
to $715 million or 6 7 .8 % of the District total.
M em ber banks in V irginia, which total 152 and out
number those of other District states by a wide
margin, accounted for $346 million or almost onethird of the total revenues in the District. T he next

T he average rate of return on loans soared upward,
however, m oving from 7 .1 2 % in 1967 to 7 .4 0 % in
1968.
Incom e on loans was relatively m ore im
portant for large banks. Banks with deposits over
$100 million earned over six times as much on loans
as they received from the next largest source, interest
on Governm ent securities. Banks in the smallest
classification earned less than fou r times as much
on loans as on their next largest source.
District member banks earned $126 million

interest on U . S. Governm ent securities in 1968,
or 17.8% o f total earnings. H oldings of U . S.
Governm ent securities represented 19.8% o f total
assets, the same as the 1967 level.
P ortfolios o f
other securities, chiefly municipals, com prised 13.1%
of total assets.
Interest and dividends from this
source— $91 million— rose from 7 .9 % to 8 .7 % o f
current earnings. Trust department earnings were
concentrated heavily in the larger banks. T he 290
member banks with deposits under $25 million earned
less than $1 million of the $33 million total.
Expenses

C u rren t

e x p en ses

F ifth

D istrict

member banks also reached a record high in 1968,
totaling $787 million. Bank expenses amounted to
7 4 .9 %

of current

earnings.

F or

the

third

co n

secutive year interest on time and savings deposits
was the largest single item o f expense. Interest paid
totaled $306 million com pared with $261
in 1967.

million

T he increase was due to vigorous com

petition for deposits, rising interest rates, and in
creased participation in the m oney market through
the issuance of certificates of deposit.
Interest on time and savings accounts averaged
3 9 % of current operating expenses at District m em
ber banks, but the proportion varied substantially
from state to state.

T he percentage was highest at

V irginia banks, with 4 5 % ; follow ed by W est V ir
ginia with 4 3 % ; District o f Columbia, 4 0 % ; N orth

Carolina, 3 8 % ; M aryland, 3 3 % ; and South C aro
lina with only 2 0 % .

The average rate o f interest

V irginia
(3 .9 1 % )

( 4 .3 3 % ) , and the lowest in
and W est V irginia ( 3 .7 9 % ).

M aryland

paid on time and savings deposits at District banks
rose from 3 .9 2% in 1967 to 4 .1 0 % last year. H ere

The second largest item of expense for District
member banks was salaries and wages fo r employees.

again variations for the individual states were
noticeable.
T he highest average interest rates on

Such expenses totaled $148 million in 1968. Salaries
for officers reached a new high of $85 million. The

deposits were paid in N orth Carolina (4 .4 2 % ) and

sum of wages, salaries, and benefits for both officers
and employees climbed to $265 million.
P ro fits

FIFTH DISTRICT MEMBER BANKS
INCOM E AND EXPENSES

L a st y ea r F ifth D istr ic t m e m b e r ban k s

earned a total of $157 million after taxes.

The

D istrict’s 26 largest banks accounted fo r $109 m il
lion.

M em ber banks declared cash dividends o f $68

million.

Profits as a percentage o f current operating

incom e rose only slightly to 14.0% from the 13.8%
of 1967.

T he smallest banks converted the highest

proportion of incom e into net profits.

F or banks

with deposits of under $2 million, after-tax net in
com e was 19.1% of current operating income.

The

next largest proportion, 1 7.2% , was for banks with
deposits of $100 million or over.

Banks in the

$50-100 million class had the low est percentage of
profits, only
E m p lo y m e n t

13.1% .
L a st y ea r D is tr ic t m e m b e r banks

had a total o f 41,513 employees, 7,138 of which
were bank officers.

T he average pay o f officers

ranged from a low of $7,200 at the smallest banks
to $11,700 at banks in the $25-100 million class.
Other em ployees’ pay averaged from $3,600 at banks
in the under $5 million deposit class to $4,400 at
the largest banks.
Carla R. G regory