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FEDERAL RESERVE BANK OF RICHMOND MONTHLY REVIEW S ources of Bank E xpansion in the Fifth D istrict: Internal and E xtern a l Growth L abor T u rn ov er: A n oth er V iew of The L abor M arket Rural H ousing in the Fifth D istrict SOURCES OF BANK EXPANSION IN THE FIFTH DISTRICT: INTERNAL AND EXTERNAL GROWTH A m on g those tasks charged to bank regulatory agencies is the responsibility for maintaining co m E ffe c t o f R e g u la tio n s on B an k E x p a n s io n D if ferences in state banking laws and regulations are a petition in the com m ercial banking industry. In their m ajor factor explaining differences in internal-ex efforts to achieve this objective, regulatory agencies ternal grow th patterns am ong Fifth District states. must keep abreast of those changes in bank structure Three District states permit branching statewide, one that affect bank perform ance. state permits de n ovo branching in a bank’s home A m on g the most closely watched factors influencing structure and per office form ance are the number of banks in a market, the degree of concentration of banking resources am ong merger, and one state prohibits branching entirely. M ultiple-bank holding companies exist in three D is the largest banks in a given geographical market, and trict states.1 the absolute size of individual banks in a market area. F or purposes o f studying the effects of bank territory and statewide branching through Bank regulations do not, of course, directly re strict deposit grow th in existing offices. T he market expansion, or bank deposit grow th, on these market environment, coupled with the success or failure of characteristics, it is useful to distinguish between in bank management teams to market their products ternal and external deposit growth of a banking o r ganization. U sing the three largest banks in each Fifth District state, this article attempts to estimate the portions o f deposit grow th attributable to internal and to external expansion, respectively, between effectively, is the prim ary determinant o f this kind of internal deposit grow th. State restrictions on de novo branching and on the form ation of de n ovo holding com pany subsidiaries, however, can pose serious obstacles to internal grow th through m oving into new markets 1961 and 1971. E xternal grow th refers to expansion by acquiring markets. H ence, while internal grow th is possible the resources of other banks through merger or co n solidation or, in the case o f a bank holding com pany, portunities open to bank management are greater in states where banking laws governing branching and by acquiring controlling holding com pany activity are m ore permissive. interest in an operating or expanding facilities in old in all states regardless of state regulations, the o p bank. Internal grow th, by contrast, is associated with State laws affecting branching and holding com the econom ic expansion of the geographical areas pany activity also determine the potential for e x served by the bank and with the bank’s attempts to increase its market share in areas that it already ternal grow th. Banks located in states with few limitations on branching often rely exclusively on serves. m ergers with other banks to achieve external growth. Internal expansion is achieved by one o f the follow ing m eth od s: ( 1 ) expansion of the resources o f existing offices, (2 ) establishment of new, or de novo, offices, or ( 3 ) in the case of a holding com pany, establishment of de novo bank subsidiaries. G row th through de novo banking or branching gen In states with restrictive branching regulations but relatively permissive holding com pany regulations, banking organizations may rely more heavily on the organizational structure o f a bank holding com pany to achieve desired grow th. Federal antitrust laws as well as Federal bank erally results from management’s decision to tap new regulations are also important in determining the geographical markets or to attract deposits by open path of expansion pursued by banking organizations. ing additional offices in areas that it presently serves. Federal bank regulatory agencies and the Justice Exam ples of this type of grow th are numerous. They Department are required by the Bank M erger A ct include the development o f suburban drive-in fa and the Bank H old in g Com pany A ct to examine cilities as well as the establishment o f new facilities (either banks or branches) in areas that have be com e econom ically prom ising. 2 1 For a complete discussion of Fifth District branching and holding company laws, see this Review, December 1970. A recent opinion released by the Attorney General of West Virginia states that bank holding companies are legal in the state. MONTHLY REVIEW, JUNE 1973 carefully the com petitive and public benefit aspects of m ergers and acquisitions of banking organiza tions. Especially in the case of large banking o r through internal expansion. T he degree o f this ef fect, of course, depends on several other factors as ganizations that occupy a distinctly dominant posi tion in their respective markets, strict enforcement in the state, the absolute size of the bank, the rela tive size o f the bank, size variation am ong the largest banks, and the number and size o f nonbank affiliates. of Federal banking and antitrust laws may pose serious barriers to external grow th. Because o f this, some large banks or banking organizations may well, such as the geographical dispersion of offices T he follow in g section explains one method of esti mating a bank’s internal grow th rate. Subsequent ju dge their external grow th potential to be limited and may, for that reason, concentrate on internal sections attempt to isolate the method of grow th means of grow th. That is, they may focus their ef forts on increasing the business o f existing offices largest banks in each Fifth D istrict state between or on establishing de novo branches or, in the case statistics that were these banks. of holding companies, on setting up de n ovo bank subsidiaries. (internal or external) that was used by the three 1961 and 1971 and som e of the statewide banking Estimation of affected Internal by and the decisions External of Deposit Effect of Expansion on Market Characteristics Growth Since state banking laws are perhaps the chief de terminants of the method of grow th pursued by bank clude the acquisition of deposits by m erger, co n ing organizations, it follow s that these laws also pany. have an im portant bearing on the degree of con cen tinguishable from tration of banking resources, the number of banks, implications for the internal expansion of the affected and the size of banks in banking markets. in stitu tion . F o r e x a m p le, if a ba n k a cq u ire d a n other bank in 1963, the deposits o f the acquired bank Internal grow th, o f course, does not reduce the number of banks or banking offices in a particular market. In deed, internal grow th through de n ovo branching into a new market increases the number o f com peting offices in that market. Similarly, de novo bank e x E x te rn a l g r o w th is d e fin e d a b o v e to in solidation, or purchase of a bank by a holding com W h ile such grow th may be conceptually dis internal grow th, it clearly has would be considered in the com putation o f external grow th in 1963. Thereafter, grow th in the newly acquired office w ould be com puted as part o f the internal expansion of the successor institution. In pansion by a bank holding com pany increases the order to estimate the grow th of a banking institution number o f banking offices in a market, and, in ad that results strictly from internal expansion, an esti dition, increases the number o f banks in the market. mate o f the grow th E x tern a l g r o w th o f ban k h o ld in g co m p a n ie s through the acquisition o f operating banks does not determined. Several methods can be used to approxim ate the reduce the number of banks or o ffic e s ; however, the part o f internal expansion that results from concentration of resources am ong the market’ s largest acquisitions o f banks. In this article, it is assumed that offices of acquired banks g row at a rate equal to the average grow th rate of all banks in the state. T o justify this method, a sample of acquired banks was taken from each District state (ex cep t W est V irg in ia ) to determine whether the grow th of ac banking organizations is altered when these bank holding companies acquire additional banks in a par ticular market. T he result o f such acquisitions is, of course, that the number o f independently controlled banks is reduced. Likewise, external grow th by merger of existing banks in the same market results in the elimination o f one of the banks as an in dependent entity and thus has a direct effect on the concentration of banking resources. Because external grow th affects the concentration of acquired offices must be past quired banks differed significantly from the average grow th rate of all banks. In each state, the tests revealed no significant differences between the tw o rates. Expansion in Fifth District States T o ta l d e of banking resources, inform ation concerning the posits of com m ercial banks in the Fifth District in share of grow th accounted for by acquisitions of the creased by large banking organizations is often helpful in as N orth Carolina banks had the fastest grow th rate 138 percent between 1961 and 1971. sessing the present and future competitive impact of follow ed by V irginia, South Carolina, W est V irginia, acquisition and M aryland. by these organizations. If external T he com pounded annual rates of grow th has been a m ajor contributor to the total grow th varied from 10.1 percent in N orth Carolina grow th of the state’s largest organizations, the com to 8.3 percent in M aryland. petitive effect in local markets is likely to be greater District grew at a rate of 9.1 percent com pounded than the resulting effect where grow th has occurred annually. FEDERAL RESERVE BA N K OF R IC H M O N D T otal deposits in the 3 T he three-bank concentration ratio increased from T h e number o f Fifth District banking organiza tions declined from 921 to 664. A total o f 126 new banks were form ed while 301 banks were acquired 48 percent in 1961 to 50 percent in 1971. by m erger, absorption, or consolidation. deposits in 1971. T w o banks Each of the three banks had m ore than $1 billion in total suspended operations. South Carolina M aryland Between 1961 and 1971, total deposits in M aryland banks increased $3,261 million. F orty- one percent of the grow th was attributable to the internal and external grow th of deposits in the three largest banks. These banks also accounted for 14 of the 38 m ergers and acquisitions o f M aryland banks in the ten-year period. E xternal grow th through merger accounted for approxim ately 19 percent of the increased deposits of the three largest banks. A fter projecting deposits of the acquired banks, however, almost one-third o f the grow th resulted from acquisitions. O ne interesting aspect of the M aryland experience was that the fastest grow in g bank am ong the three largest relied very little on acquisitions to achieve its deposit grow th. O n the other hand, the bank with the smallest rate of deposit grow th acquired 45 percent of its new deposits by acquiring other banks. A fter p rojectin g the deposits of its acquired banks, e x ternal grow th accounted for 78.4 percent of this bank’s total deposit grow th between 1961 and 1971. T otal deposits in all comm ercial banks in South Carolina increased by 151 percent or 9.7 percent com pounded annually. T he three largest banks accounted for 46.5 percent of the total deposit grow th in the state. Between 1961 and 1971, the number o f banking organizations declined from 144 to 99. Som e 55 m ergers were consummated, 19 involving acquisitions by the three largest banks. E xternal grow th accounted fo r 18 percent o f the deposit grow th of the three largest banks prior to adjustm ent for grow th o f acquired banks and 34 percent after adjustment. A s in N orth Carolina, the bank with the highest deposit grow th rate relied more heavily on acquisitions than the other two banks, and the bank with the slowest rate of deposit g r o w th g r e w p rim a rily b y in tern al m ean s o f e x pa n sion . A p p r o x im a te ly 32 p e rce n t o f the g r o w th of the fa stest g r o w in g ban k resu lted d ir e c tly from bank mergers. A fter p rojectin g the deposits of the acquired banks, almost 60 percent o f the grow th could be attributed to acquisitions in the 1961 to 1971 period. O n the other hand, the bank with N orth Carolina and V irginia e x the slowest rate of grow th am ong the three largest perienced the fastest rates o f deposit grow th am ong Fifth District states, each with a grow th rate of ap acquired only three small banks over the ten-year proxim ately 10 percent com pounded annually. cent of its total deposit grow th prior to adjustm ent for grow th of the acquired banks, and 14 percent after adjustm ent for this grow th. N orth Carolina Total N orth Carolina deposits increased $5,638 million, while the number of banking organizations declined by 46 percent from 171 to 92. Between 1961 and 1971, 86 m ergers and acquisitions were consum mated, 32 by the three largest banks. These banks accounted for about 48 percent o f the total deposit grow th in the state. Internal expansion in the three largest banks ac counted for a larger share o f total expansion in N orth Carolina than in any other District state ( e x cept W est V irginia where grow th must be internal). O nly 16.7 percent o f the grow th in the three North Carolina banks was external. A fter projectin g de posits of acquired banks, 29.8 percent was external. Unlike the M aryland situation, the fastest grow in g period. These acquisitions accounted for only 6 per W e s t Virginia Since W e st V irginia does not per mit multiple branch offices and multiple-bank hold ing companies, deposit grow th must be achieved by attracting m ore deposits to existing offices. N ot surprisingly, the grow th rate o f the three largest banks in W e st V irgin ia was not as high as that achieved by the largest banks in other D istrict states. W est V irg in ia ’s rate of grow th of banking deposits did, how ever, exceed that of total Fifth District d e posits. T otal state deposits increased by $1,958 m il lion ; the three largest banks accounted for only 9.8 percent of the increase. T he num ber o f banking o r ganizations increased from 181 to 199, while the N orth Carolina bank relied heavily on acquisitions. number of organizations declined in other District O ver 50 percent of its total grow th was attributable states. to m ergers and subsequent grow th of the acquired banks. T he other tw o banks in the sample increased Virginia Because of its relatively restrictive their deposits prim arily through internal expansion. branching laws, V irg in ia ’s banking structure under A lm ost 90 percent o f their grow th was internal prior went considerable change between 1961 and 1971. to projection, and 80 percent was internal after p ro P rior to 1962, statewide branching was not permitted jecting deposits of acquired banks. either by merger or by the establishment of de novo 4 M ONTHLY REVIEW, JUNE 1973 DEPOSIT GROWTH OF THREE LARGEST BANKING ORGANIZATIONS IN FIFTH DISTRICT STATES, 1961-1971 Sources of Deposit G row th of 3 Largest Banks Total State Deposit Increase ($ Mil.) Deposit Growth of 3 Largest Banks ($ Mil.) Col. 2 Divided by Col. 1 (%) Internal ( % of total) External ( % of total) Internal* Projected ( % of total) External* Projected ( % of tota M a r y la n d 3260.7 1336.4 41.0 81.5 18.5 67.5 32.5 V irgin ia 5674.2 2426.9 42.8 64.3 35.7 33.7 66.3 North C aro lin a 5638.1 2675.4 47.5 83.3 16.7 70.2 29.8 South C aro lina 1679.9 780.6 46.5 81.6 18.4 65.9 34.1 W est V irg in ia 1958.1 192.0 9.8 100.0 0.0 * The deposits of acquired banks are projected from acquisition date to the end of 1971. offices. T he 1962 change in the branching law per mits statewide branching but only by merger. Conclusions T o ta l co m m e r cia l b an k d e p o sits in the Fifth District increased at a com pounded annual In their efforts to broaden their geographic markets, rate of 9.1 percent between 1961 and 1971 com pared several V irginia banks form ed multiple-bank hold to a rate o f 7.8 percent for total deposits in the United States. T otal deposits o f each o f the Fifth ing companies, through which they acquired other banks. This method of acquisition gave the holding com pany the added advantage o f branching locally District states grew at a faster rate than the grow th rate o f total U . S. deposits. Spread o f the In N orth Carolina, South Carolina, and V irginia, holding com pany movement, coupled with the m ore the fastest grow in g bank am ong the three largest in lenient m erger law passed in 1962, resulted in tre mendous external grow th o f V irgin ia’s banking o r acquiring deposits than the other tw o large banks. ganizations in the ten-year period ending in 1971. In M aryland, how ever, the fastest g row in g of the from its various bank subsidiaries. V irgin ia’ s total com m ercial bank deposits in creased $5,674 million or 10 percent com pounded an nually. T he three largest organizations accounted for approxim ately 43 percent o f the total deposit grow th. T he number of banking organizations de clined from 293 to 171. A total of 117 m ergers and acquisitions were consummated in the state, 52 by the three largest organizations. Each of V irgin ia’ s three largest banking groups each state relied m ore heavily on external methods o f three banks had the highest internal grow th rate. T he three banks in M aryland, N orth Carolina, and South Carolina achieved approxim ately tw o-thirds of their deposit grow th (including p rojection s) by internal means of expansion. W est V irgin ia ’s banks, because o f laws prohibiting branching and multiplebank holding companies, achieved all of their grow th internally. Changes in V irgin ia branching laws and grew at a much faster rate than total state deposits. increased activity o f bank holding companies resulted M ost o f their grow th was accounted fo r by m ergers or holding com pany acquisitions. A n expected c o n ginia’s large banks than am ong large banks in the sequence of this activity was an increase in the per other states. centage of total deposits held by the three largest external after organizations from 23 percent to 35 percent. offices. A lm ost 36 percent o f the deposit grow th of the three organizations was external. in a higher proportion o f external grow th am ong V ir T w o-thirds o f their total grow th was adjusting for grow th of acquired T he concentration o f deposits in the three largest A fter p rojection banks increased in N orth Carolina, South Carolina, of deposits of the acquired banks, tw o-thirds o f their and V irg in ia ; decreased in W est V irg in ia ; and re total deposit grow th was accounted for by mergers mained unchanged in M aryland. and acquisitions and subsequent grow th in the ac quired offices. T he external grow th of the fastest grow in g organization was slightly higher than the o f banking organizations in the five states declined 28 percent from 920 to 664. Clyde H . F arnsw orth, Jr. external grow th of the other two. T he total number FEDERAL RESERVE B A N K OF R IC H M O N D 5 LABOR TURNOVER? ANOTHER VIEW OF THE LABOR MARKET F or many years, the unemployment rate has served dustries. T otal accessions include new hires, rehires as an indicator of labor market conditions, an index o f previously laid off workers, and miscellaneous ac of general econom ic welfare, and a guide to econom ic policym aking. L ike most summary econom ic indi cessions. Total separations include voluntary quits, layoffs, and other separations. In addition to a g cators, the unem ployment rate is influenced by both gregate manufacturing series, data are available by state and by industry. L abor turnover series are e x supply and demand factors, whose separate influences may be mutually offsetting or reinforcing. A given rate of unemployment can therefore be consistent with m ore than one set o f labor market conditions, each of which could have different wage (and p rice) im p lica tion s. pressed as the number o f turnovers per 100 em ployees per month. A n accession rate of 2.1, for e x ample, is interpreted as 2.1 accessions per month for each 100 employees. U n d e r su ch circu m s ta n c e s, undu e emphasis on the unemployment rate as a policy guide Labor Demand and Labor Turnover without regard to underlying supply and demand labor turnover statistics as indicators o f labor market conditions could lead to unwarranted policy actions. E conom ic policies designed to reduce the unem ploy demand conditions rests upon a number of basic as sumptions.2 T he demand for labor is assumed to be directly related to the aggregate demand for good s ment rate by stimulating aggregate demand may in crease labor demand, place upward pressure on wages (and p rices), and yet have little impact on em ploym ent and the unemployment rate either be cause of offsetting supply shifts or labor market imperfections. T he purpose of this article is to focus attention on demand conditions in the labor market as re T h e use o f and services. Given the level of aggregate demand, the desired stock of w orkers is conceptually equal to the sum o f employm ent (filled jo b s ) and vacancies (unfilled jo b s ) . T he extent to which the desired labor force is achieved depends upon the efficiency of the labor market in matching the available w ork force to the available jobs. L abor turnover statistics flected in labor turnover and to exam ine recent un reflect the processes by which em ployers and em employm ent rate behavior in the context o f labor ployees adjust to demand conditions in the labor market conditions as indicated by labor turnover statistics. Particular emphasis is placed on a co m parison of labor turnover behavior in the current business cycle with that of the representative postW o rld W a r II cycle. market. T urn over is thus assumed to respond sys tematically to the changing com position o f total labor Labor Turnover Data E a ch m on th the B ureau of L abor Statistics publishes data on the turnover o f payroll employm ent in the manufacturing sector. L abor turnover data measure the gross movement of w orkers into and out of manufacturing employment and are frequently cited as indicators of overall labor market conditions. T he data are estimated from a sample o f firms accounting for approxim ately 54.0 percent of total manufacturing employment and ap proxim ately 26.0 percent o f nonagricultural payroll em ploym ent.1 L abor turnover data consist o f m onthly time series on accessions and separations in manufacturing in 1 A technical discussion of the sample and the relationship of labor turnover data to other published series can be found in U. S. De partment of Labor, Bureau of Labor Statistics, Employment and Earnings, 19 (December 1972), pp. 118-29. demand between em ploym ent and jo b vacancies. U nder these assumptions, labor turnover statistics should generally reflect the degree to which total labor demand is translated into actual employm ent and, conversely, the extent to which total demand is unrealized because of inefficiencies in the labor market. Quits V oluntary quits are assumed to be p osi tively related to the availability of alternative jo b o p portunities. If aggregate demand grow th causes vacancies to rise relative to actual employm ent, quits can be expected to increase for tw o reasons. First, em ployers seeking needed w orkers may attempt to attract them from other firms. Such quits are at 2 The economic implications of labor turnover are examined in de tail by Charles C. Holt and Martin H. David, “ The Concept of Job Vacancies in a Dynamic Theory of the Labor Market,” in The Measurement and Interpretation of Job Vacancies (New York: Columbia University Press, 1966), pp. 78-110. More recently, an empirical examination of labor turnover data was conducted by Charles L. Schultze, “ Has the Phillips Curve Shifted? Some Addi tional Evidence,” Brookings Papers on Economic Activity (2 :1971), pp. 452-67. M ONTHLY REVIEW, JUNE 1973 tributable to a scarcity o f workers with desired skills. Second, w orkers are m ore likely to quit in order to search for better em ploym ent opportunities when job s are plentiful. A vailable evidence indicates that the latter quit com ponent has becom e increasingly im portant in recent years and reflects prim arily the behavior o f dissatisfied you ng workers, w ho are gen erally less educated w orkers with relatively little w ork experience seeking job s with better pay and vacancies that remain unfilled due to labor market inefficiencies. In such situations the accession rate by itself is an am biguous indicator of labor demand im proved advancement potential.3 In either case, the market and low accessions an inefficient market. O f course, as employm ent approaches the desired labor voluntary quit rate can be expected to rise in res ponse to increasing jo b availability. B y similar rea conditions. If, however, it is interpreted in light of labor demand conditions implied in quit and layoff behavior, the accession rate may provide inform ation on the efficiency o f labor markets. S o lon g as labor turnover suggests strong demand conditions, high accessions w ould indicate a relatively efficient labor soning, the quit rate should decline in response to the effect of moderating aggregate demand on the stock, vacancies will decline and the rate o f acces sion should fall. Such an interpretation will be use ful in discussing the behavior of accessions in the demand for labor. It will also decline as employm ent current econom ic recovery.4 begins to approach the total demand for labor and vacancies becom e scarce. Based on these assump tions, the quit rate can be interpreted as an indicator of employee response to changing employm ent o p portunities. L a yoffs Labor Turnover and the Business Cycle (1 ) the current cycle indicator quarter of One aspect of the em ployer response to changing labor requirements is assumed to be re The cyclical behavior of labor turnover is displayed in Charts 1-5. T w o series are plotted in each ch art: 1972; (2 ) from the fourth the corresponding repre sentative cycle indicator. T he value o f the repre sentative cycle indicator in each period is the g e o flected in the layoff rate. If vacancies rise relative to employment as econom ic activity quickens, layoffs should decline, particularly if firms find it increas metric mean o f the corresponding period values of ingly difficult to satisfy grow in g labor requirements. com puting averages o f ratios.) Eventually, as employm ent begins to approach the desired labor stock, and vacancies decline, em ployers representative cycle indicator is charted over a thirteen quarter period, from four quarters prior to the cyclical trough through eight quarters after the trough. may becom e less reluctant to lay off marginal w ork ers. W h en econom ic activity moderates, the desired the indicator from each of the fou r previous business cycles.5 (T h e geom etric mean is frequently used in T h e behavior o f the labor stock declines relative to employment, and lay The Quit R ate T he behavior o f the quit rate fo l low s a definite cyclical pattern, as illustrated in offs can again be expected to rise. A ccession s A ccessions, which represent mainly Chart 1. D uring past cycles, the quit rate has gen erally fallen during recession, risen during early re new hires and rehires of previously laid o ff workers for both permanent and tem porary positions, also reflect employer attempts to adjust to changing labor demand conditions. In general, total hires should covery, then turned back dow n after six quarters o f econom ic recovery. T his downturn probably rep tend to increase as jo b vacancies rise relative to em ployment and to fall as vacancies decline relative to ability in the later stages o f recovery as em ployers employment. T he magnitude of the accession rate, which reflects the speed o f employm ent response to changes in desired labor, also depends upon labor supply and the efficiency of the labor market in matching w orkers with jobs, however. U nder iden tical demand conditions, hires should proceed at a faster rate in an efficient labor market than in an inefficient market. Thus, a low accession rate might reflect an approxim ate equilibrium between desired labor and actual employment. But it w ould also be consistent with a relatively large number o f job 8 The impact of increasing labor force participation by young workers receives considerable attention in U. S. Congress, Joint Economic Committee, Reducing Unemployment to 2 Percent, Hear ings, 92nd Congress, 2nd Session, 1972. resents w orkers’ perceptions o f declining jo b avail complete their adjustm ent to changing econom ic c o n ditions. In contrast, the quit rate has risen c o n 4 The relationship between labor hoarding and labor turnover should perhaps be mentioned. Hoarding generally refers to employer at tempts to maintain or obtain an employment level in excess of the desired labor stock. The practice can be attributed to uncertainty regarding the timing and magnitude of economic fluctuations and the costs of labor turnover. Layoffs will tend to be delayed until the employer is convinced that an economic slowdown is in progress. Premature layoffs would increase a firm’s chances of losing trained workers to other firms and in turn having to incur the overhead expense of finding, hiring, and training replacements. Likewise, (re) hiring workers during economic recovery will generally pick up only after employers have become strongly convinced of a cyclical upturn. Hoarding might then occur if employers anticipated subse quent labor shortages and built up a temporary excess labor stock in order to avoid the higher costs of finding needed workers when labor became relatively scarce. In short, labor hoarding can be in terpreted as a rational employer response to cyclical economic fluctuation. Labor hoarding is generally consistent with assumed labor turnover behavior. 5 The cycle periods are based on cyclical trough dates established by the National Bureau of Economic Research: 1949-IV; 1954-III; 1958-11; 1961-1; 1970-IV. FEDERAL RESERVE BA N K OF RIC H M O N D 7 tinually through the current cycle. M oreover, except for the fourth quarter of 1971, the current cycle rate has consistently exceeded the representative cycle rate. T he sustained rise and overall higher value of the current cycle quit rate suggest that total labor demand has consisted o f a relatively high proportion of unfilled jobs during the current business cycle, particularly in the recovery. Apparently, w orkers to lay off few er w orkers as one means of maintaining their needed labor force. the continuing increase in the quit rate during the current cycle. T he Q u it-L a yoff Ratio quit-layoff ratio. jobs, and employers have been able to attract needed w orkers away from other firms. to rise as jo b Chart 2 indicates that repre T he separate reactions of w orkers and em ployers can be summarized in the have not been reluctant to quit and search for better The L a y off R ate T he persistence of the d e cline in current cycle layoffs is thus consistent with T his ratio, which can be expected vacancies increase and to fall as vacancies decline, provides a com prehensive indicator of labor demand conditions. A s shown in Chart 3, sentative cycle layoffs began to decline tw o quarters prior to the cyclical trough, then turned back up after the ratio has generally declined in recession and risen in recovery. Reflecting the behavior o f its the third quarter o f econom ic recovery. auto strike and an anticipated 1971 steel strike are com ponents, the current cycle ratio generally exceeds the representative cycle ratio, indicating that rela presumed to account for the sharp rise in current tively high jo b vacancies have prevailed throughout cycle layoffs during the fourth quarter o f 1970 and the third quarter of 1971. E xcept for these strike effects, the layoff rate declined continuously through the current recovery. T he ratio has likewise co n tinued to rise throughout the current cycle, although it turned down in m id-recovery in the representative eight quarters of econom ic recovery, com pared with the m id-recovery turnaround observed for the rep cycle. resentative cycle. T he 1970 In addition, the current cycle lay off rate is generally low er than the representative cycle rate. Relatively low layoff rates also indicate the pos sibility of unsatisfied labor demand indicated by quit rate behavior. Faced with a large number o f un filled jobs and rising quits, employers can be expected The A ccession R ate Chart 4 indicates that over the representative cycle, accessions have fallen during recessions, risen during recovery, and then fallen again. Representative late recovery behavior o f quits and layoffs would seem to indicate that the decline in accessions was attributable to a decline in the availability of job s as actual employm ent approached the desired stock of workers and vacancies declined. LABOR TURNOV Chart 1 QUIT RATE Quarters from Trough Chart 2 LAYOFF RATE Quarters from Trough Note: Turnover rates are expressed as the number of turnovers per 100 employees per month. Cha QUIT-LAYC Quarters fr sistent with the quit and layoff evidence of a per sistently large stock of unfilled jobs. O n the other hand, current cycle accessions have been on the whole low er in recovery than have representative cycle a c and yet are appealing. Both situations would signal the failure of the labor market to provide labor market participants, em ployees and em ployers, with adequate inform ation for arriving at mutually agree able conditions for employm ent. Such im perfections have the effect o f retarding the adjustm ent o f actual employm ent to desired la b o r ; they, consequently, cessions, even though generally higher quits and low er layoffs indicate a relative abundance o f jobs. dampen the response o f the unemployment rate to econom ic recovery. Persistently low accessions and Current cycle accessions did not display the m id-re covery downturn observed in the representative cycle, and this sustained rise in accessions is co n It is evidently not a scarcity o f jobs that is responsi high vacancies might indicate a need fo r employers ble for the low accession rate so much as a scarcity of w orkers to fill available job s a n d /o r a reluctance to tailor production requirements to available labor. of w orkers to accept them. Firms have apparently attempted to compensate for slow hires by signi ficantly reducing layoffs, as indicated in Chart 5, aspirations which illustrates the cyclical behavior o f the accession layoff ratio. T he ratio is somewhat greater for the current cycle recovery than for the representative A t the same time, if high quits reflect unrealistic jo b of inexperienced workers, the labor market should som ehow encourage w orkers to revise their aspirations or im prove their employability. T o summarize, labor turnover during the current business cycle does not indicate unusually sluggish labor demand. Relatively high quit rates sustained cycle, even though current cycle accessions are rela throughout tively low , and the ratio has risen continuously w orkers perceive favorable alternative employm ent throughout the current recovery. opportunities. It is thus possible the recovery indicate that em ployed A t the same time, relatively low and that the relatively slow accession response to rela persistently declining layoff rates indicate that em tively high jo b availability reflects labor market im ployers are unable to find and keep needed workers perfections affecting the speed of adjustm ent o f em and, as a result, have reduced layoffs as one means ployment to the desired labor stock. o f maintaining their desired labor stock. O ne im pedi ment to adjustm ent w ould be a scarcity of skilled workers. A nother might be the tendency for young A lthough accessions have risen over the current recovery, the increases have been mild in com parison to their labor force participants to search longer because of representative cycle behavior. the relative scarcity of job s that require few skills labor demand to be translated into actual em ploy- T he failure o f rising :R INDICATORS Chart 4 Chart 5 FF RATIO ACCESSION RATE ACCESSION-LAYOFF RATIO m Trough Quarters from Trough Quarters from Trough Digitized Source: forU.FRASER S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings: Bulletin 1312-8 and various monthly issues. Chart 6 MANUFACTURING PAYROLL EMPLOYMENT Percent 1.10 “ 1.08 - shifts may either offset or reinforce demand factors, the unemployment rate alone can be an am biguous indicator of jo b availability. If a g row in g demand for labor is accom panied by an increasing number of labor force participants, due to rising population, larger participation rates, or both, the unemployment rate might remain unchanged or even rise. T he un employment rate w ould thus fail to signal the under lying im provem ent in jo b opportunities. 1.06 - 1.04 - In addition, enhanced jo b opportunities may not be translated into increased employm ent if available w orkers d o not possess skills needed for the job s generated. E m ployment might also fail to respond to demand if the 1.02 1.00 •98 available job s did not satisfy the w orkers’ desire for - appealing job s with advancement potential. Of course, given sufficient skills, these w orkers could probably find desirable jobs, so this case is not co m - ___ |___ |____|___ |___ I___ |___ |___ 1___ 1___ |----- 1-----1----- L . - 4 - 2 0 2 4 6 8 pletely different from the problem of scarce skills. In either case, favorable em ploym ent opportunities might have little impact on em ploym ent and the un Quarters from Trough Note: Representative cycle employment during each period is an arithmetic mean of corresponding period em ployment in the four* previous cycles. Current and representative cycle data are charted as a per centage of their respective trough values. Source: U. S. Department o f Labor, Bureau of Labor S ta tistics, Employment and Earnings: Bulletin 1312-8 and various monthly issues. employment rate, even in the absence o f labor supply changes. It is also possible that favorable jo b avail- Chart 7 JOB V A C A N C IE S IN M A N U F A C T U R IN G Num ber of ment contributed to the restrained response of the unemployment rate to econom ic recovery. C onse 1.4 200 ment has accelerated in the latter stages o f the cu r rent recovery. T he lack of jo b vacancy data prior to 1969 makes \ - \ . I ' \ current cycle, as the previous discussion has sug \ \ \ factors operating in the labor market. demand O f course the essentially supply determined. Digitized10 for FRASER “ •8 / \\ V .6 V— .4 1 IV 50 1 1 1969 !— Note: unemployment rate also reflects these factors, but it also responds to changes in the labor force that are / \ / \ ■ L abor turnover represents movement into and out response to / 100 during the current recovery. in 1.0 \ \ as a proportion of total labor demand, has also risen of em ploym ent prim arily - \ \ \ vacancies, however, have in fact risen during the Rate ✓ \ \\ 150 gested. M oreover, the ratio of vacancies to vacancies 1.2 \ \ \ Chart 7 indicates that jo b - \ \ it impossible to exam ine directly the assumed rela tionship between vacancies and labor turnover during Labor Turnover and the Unemployment 1.6 1 Vacancies cycle grow th, as shown in Chart 6, although em ploy plus employment, which reflects unsatisfied demand Rate - quently, actual current cycle employment grow th in manufacturing has not kept pace with representative previous business cycles. Vacancy Vacancies (1,000's) 250 1 II 1 1 III IV 1970— J 1 1 1 1 II III 1 IV •---- 1971 — J 1 1 1 II 1 1 III IV L _ 1972 _ 1 The vacancy rate is equal to 100 times the ratio of vacancies to the sum of employment plus vacancies. Source: Since these supply MONTHLY REVIEW, JUNE 1973 U. S. Department of Labor, Bureau of Labor S ta tistics, Employment and Earnings, M arch 1973. ability would induce workers to quit voluntarily and endure short spells of joblessness while searching for better jobs, placing upward pressure on the un employm ent rate. It is thus evident that the unem ploym ent rate can react in various ways to changes in labor market demand. T he response o f em ploy ment to labor demand will depend upon labor market efficiency. Chart 8 UNEMPLOYMENT RATE OF CIVILIAN LABOR FORCE Percent T he unemployment rate in turn is de termined by employm ent and the response o f labor supply to aggregate demand changes. B y providing inform ation on the first of these tw o responses, labor turnover data can shed some light on the moderate unem ployment rate response to econom ic recovery during the current business cycle. T h e cyclical behavior o f the unemployment rate is shown in Chart 8, which indicates that the repre sentative cycle rate exceeded the current cycle rate in recession and that the current cycle peak was almost 1 percentage point less than that o f the rep resentative cycle. T he cause of recent concern has been the failure of the rate of unemployment to re spond as it has in the past to general econom ic re covery. Exam ination of labor turnover during the 3.5 ----- 1— -4 •----- 1----- 1------1----- 1------1------1— _ l ____ i -2 current recovery reveals a labor market characterized by relatively high unrealized demand. Thus, the u n employm ent problem represents in part a failure of demand to translate into actual employm ent because of skill discrepancies between jobs and workers, exacerbated perhaps by offsetting increases in the labor supply. Conclusion The o p e n in g pa ra gra p h s of 0 2 4 i 6 i ■ 8 Quarters from Trough Note: Source: The representative cycle unemployment rate is a geometric mean of corresponding period unem ployment rates in the four previous cycles. U. S. Department of Commerce, Business Condi tions Digest, various issues. this between price stability and the rate of unemployment may exist with regard to the extent to which tra ditional aggregate demand policies can achieve sub in the form ulation of econom ic policy. stantially low er unemployment rates consistent with article pointed out the significance of the relationship O n the basis of labor turnover in the manufacturing sector, it ap reasonable price stability. pears that labor demand has displayed a tendency to for policies designed to im prove the coordination o f T he situation instead calls translate into relatively m ore jo b vacancies than em labor force skill characteristics with the econ om y’s ployment, reflected in higher quits and few er acces skill requirements. sions. counseling facilities, particularly for you ng people A s a result, the unemployment rate has been somewhat less responsive to aggregate policies than in previous business cycles. demand A n im T he importance o f im proved jo b about to enter the labor market for the first time, has been pointed out. T he you ng w ho make up the portant cause appears to be the rising proportion o f bulk o f new labor force entrants should be rea you ng and inexperienced workers in the labor force listically inform ed o f their jo b opportunities in light and a relative decline in the availability of skilled o f their limited skills and experience. workers for available jo b openings. training should be available for those desiring to ac Vocational M uch is still unknown about the interrelationships quire non-academ ic skills comm ensurate with satis between the unemployment rate, jo b vacancies, labor fying job s offering opportunities for advancement. turnover, and wage determination. But if labor A lthough the costs o f these and other labor market market im perfections can drive a wedge between im provem ents may be great, they might in the long labor demand and employment, while allowing de run be less than the social and econom ic costs of mand pressures to affect wage pressures, the im plica unfilled job s and unem ployed workers. tions are clear. Potentially significant constraints FEDERAL RESERVE BA N K OF R IC H M O N D Glenn P icon 11 RURAL HOUSING IN THE FIFTH DISTRICT T he National H ousing A ct of 1949 called fo r “ the Relative to Federal housing program s, “ rural” is de realization as soon as feasible o f the goal of a decent fined as open-country areas and places outside of hom e and a suitable living environment for every urbanized areas with less than 10,000 people. A m erican fam ily.” cently, numerous proposals have been made to au Thus, for 23 years n ow the R e U nited States has had a national housing policy di thorize the extension o f Federal rural housing p ro rected tow ard providing adequate housing for all grams to towns and cities with populations of up to Am ericans. 50,000. T he prim ary emphasis o f this report is on com paring housing in rural areas, as defined by the In 1968 Congress, considering addi tional housing legislation, noted that this goal of the 1949 A ct “ has not been fully realized fo r many of Census Bureau, with housing in all other areas. the nation’s low er incom e families.” A ccordin gly, it view of the recent emphasis on expanding the areas passed the H ou sin g and U rban Developm ent A ct of 1968 reaffirm ing the national housing goal. Each served by Federal housing program s, however, hous year since passage of this A ct the President has 2,500 and 50,000 are also presented. issued a report on the nation’ s housing goals with In ing statistics for places with populations between T here were approxim ately 5.6 million occupied housing units in the Fifth D istrict in 1970, com pared recom m endations on how to achieve them. Despite this long-standing Federal concern with to 4.3 million in 1960. In 1970, 40 percent o f D is the nation’s housing, census data suggest that reali trict occupied housing units were in rural areas, and zation of this national goal remains a distant pros 60 percent were in non-rural areas. pect. W h ile national attention tends to focus on the housing problem s o f urban areas, the data indicate 25 percent of all occupied units were located in rural that deficiencies may be greater in rural areas. This densely populated state, had the smallest proportion article explores some features of the rural housing located in rural areas, and W est V irginia had the situation in the U nited States, with special emphasis largest proportion in rural areas. Comparable figures on the Fifth Federal R eserve District. In any rural-urban analysis the question o f defini for the District states and for the nation are shown in Table I. tion naturally arises. “ rural” Nationally, only areas. W ithin the Fifth District, M aryland, the most T he Census Bureau defines as those places located outside of urbanized areas1 that have a population of less than 2,500. Incomplete Plumbing m only used indicators O n e o f the m o st c o m of housing quality is the presence or absence o f plum bing facilities. 1 An urbanized area consists of a central city with 50,000 or more inhabitants and smaller adjacent cities and surrounding closely settled territory. For a detailed definition, see page X II, 1970 Census of Population, P C (1 )-A 1 . H ousing units having hot and cold piped water inside the structure as well as a flush toilet and a bathtub or shower for exclusive use of the occupants are defined in the Census of H ou sin g as having com plete plum b Table I ing. are defined as lacking com plete plumbing. LOCATION OF OCCUPIED HOUSING UNITS In 1970, 653,823 Fifth District occupied housing UNITED STATES A N D FIFTH DISTRICT STATES, 1970 Rural Non-rural Units lacking one or m ore o f these facilities units, or 11.6 percent o f all occupied units, lacked com plete plumbing. Total T h e com parable fraction fo r the nation as a whole was only 5.9 percent. A m on g Fifth Num ber % Num ber % Num ber 255,245 22 919,828 78 1,175,073 100 262,538 100 portion o f occupied units lacking com plete plum bing Va. 491,106 35 899,530 65 1,390,636 100 facilities, 17.3 percen t; and W ashington, D . C. had W. Va. 317,633 229,581 42 547,214 100 N. C. 815,320 373,684 58 54 46 1,509,564 100 51 694,244 360,689 49 734,373 100 Lack of com plete plum bing is a m ore com m on 2,252,988 40 3,366,410 60 5,619,398 100 characteristic o f rural housing than of non-rural 15,887,066 25 47,562,681 75 63,449,747 100 Md. D. C. S. C. 5th Dist. U. S. 262,538 100 % D istrict states, South Carolina had the highest p ro the lowest proportion, 2.1 percent. housing. Nationally, nearly tw o-thirds o f the o c cupied units lacking complete plum bing were in rural Source: 12 1970 Census of Housing. areas, although rural areas contained only one-fourth M ON THLY REVIEW, JUNE 1973 Chart 1 SELECTED CHARACTERISTICS OF RURAL HOUSING UNITED STATES A N D FIFTH DISTRICT STATES, 1970 Percent 100 Occupied H ousing— Rural fTTTTn as a percentage of total Housing Lacking Complete Plum bing— Rural as a percentage of total 80 - 60 40 Virginia M a rylan d Source: North C arolina West Virginia South Carolina 1970 Census of Housing In the sidering units that house m ore than one person per District 80 percent of the occupied units lacking com room as crow ded, there were 514,583 crow ded units of the occupied housing units (T a b le I I ) . plete plumbing were in rural areas, whereas only 40 in the District in 1970. percent of all occupied units were located in rural 9.1 percent o f the occupied units; whereas for the areas. nation as a whole, only 8 percent of the occupied Comparable data for each District state are units were crow ded. presented in Chart 1. Crowding T his figure amounted to A lthough crow ding is com monly considered to be an urban rather than a rural A co m m o n m easu re o f the a d eq u a cy problem , such is not the case in the Fifth District. of space in a housing unit is persons per room . C on- In all District states except M aryland, crow ded units Table ii Table III LOCATION OF OCCUPIED HOUSING UNITS LACKING COMPLETE PLUMBING LOCATION OF CROWDED UNITS UNITED STATES A N D FIFTH DISTRICT STATES, 1970 U NITED STATES A N D FIFTH DISTRICT STATES, 1970 Md. Non-rural Num ber Num ber % Num ber % 32,747 69 14,643 31 47,390 5,601 100 83 28,811 100 17 5,601 139,501 168,312 100 D. C. % 100 Md. Non-rural Total Num ber % Num ber 20,870 27 56,514 73 77,384 100 32,160 100 32,160 100 D. C. % Num ber % Va. 56,515 51 54,353 49 110,869 100 75 12,341 25 49,829 100 91 8,271 9 88,906 100 37,488 N. C. 175,695 81 40,276 19 215,971 100 N. C. 95,051 62 58,667 38 153,718 100 S. C. 93,710 73 33,933 27 127,643 100 S. C. 54,969 61 35,654 39 90,623 100 522,288 80 131,535 20 653,823 100 5th Dist. 264,894 52 249,689 48 514,583 100 2,301,464 61 1,471,354 39 3,772,818 100 U. S. 1,610,851 31 3,600,023 69 5,210,874 100 W. Va. 5th Dist. U. S. Source: 1970 Census of Housing. Q 80,635 < Va. Rural Total 3 Rural Source: 1970 Census of Housing FEDERAL RESERVE BA N K OF R IC H M O N D 13 Table IV units lacking complete plumbing, and South Carolina PROPORTION OF RURAL OCCUPIED UNITS THAT LACK COMPLETE PLUMBING AND ARE CROWDED had the highest proportion of units that were crow ded. M aryland had the lowest proportion both for units lacking com plete plum bing and crow ded units. Data for each D istrict state are presented in Table I V . UNITED STATES A N D FIFTH DISTRICT STATES, 1970 Percent Lacking Complete Plumbing Num ber of Occupied Units M a rylan d 255,245 13 Virginia 491,106 317,633 28 W est Virginia North Carolina South Carolina Fifth District United States Percent Crow ded 8 12 Rural Housing Programs V a r io u s F e d era l and state program s exist to help im prove the quality of housing in the United States. T he m ajor responsi bility for administering Federal housing program s 25 22 12 815,320 373,684 25 15 rural areas lies with the Farm ers H om e A dm inistra 2,252,988 23 12 tion 10 Founded to bridge the housing credit gap in rural 15,887,066 12 14 directed towards im proving housing conditions in in the U. S. Department of A griculture. areas, the prim ary purpose o f the Farm ers H om e Source: A dm inistration is to lend to low and moderate in com e people w ho cannot obtain credit from other 1970 Census of Housing. as a proportion of all occupied units were higher in sources. T his agency is restricted by law to lend ing in rural places with a population o f 10,000 or rural areas than in non-rural areas (T a b le I I I ) . This less. A ccordin gly, its activities extend to some areas condition is in sharp contrast to the situation for not included in the census definition of rural. the entire United States where only 31 percent of the crow ded units were in rural areas. T h e housing program of the Farm ers H om e A d W est V ir ministration is prim arily a hom eownership program , ginia had the largest ratio o f total number of crow ded although the agency also makes loans for rental hous units to total number o f occupied units in rural areas, ing and cooperatively-ow ned multi-family units as well as for farm labor housing. In recent years, the and M aryland had the smallest. Frequency of Housing Deficiencies In rural areas of the District in 1970, 23 percent of the o c cupied units lacked complete plumbing, and 12 per cent were crow ded. F o r the United States com parable statistics were 14 percent and 10 percent, respectively. V irgin ia had the highest percentage of NUMBER AND AMOUNT OF FARMERS HOME ADMINISTRATION RURAL HOUSING LOANS STATES in Fifth District states. President’s F ourth In fact, according to the A nnual R ep ort on National H ou sin g Goals, such loans accounted for a p p rox i mately 15 percent o f total Federal credit assistance for housing in 1971. Increases in the number and the amount of loans in District states have exceeded the national increases. Table V U NITED number and amount o f Farmers H om e A dm inistra tion loans for rural housing, shown in Table V , have demonstrated a dramatic increase both nationally and T he Farm Credit A ct of 1971 authorized the Farm Credit System to make non-farm rural housing loans. Farm Credit System loans are made through the A N D FIFTH DISTRICT STATES Federal Land Banks and may be made to residents FISCAL Y E A R S 1969 A N D 1971 1969 Num ber in open country and in places with a population of 1971 Am ount in Millions 2,500 or less. Am ount in Millions Num ber T hrou gh September 30, 1972, the Farm Credit System had extended 206 loans for a total amount o f approxim ately $4 million. T he F ed 15.1 eral Land Bank of Columbia, South Carolina, which 3,634 44.8 2,066 24.2 serves the states of Florida, Georgia, N orth Carolina, 7.3 1,014 1,287 12.8 987 8.8 North Carolina 3,225 31.6 7,313 92.7 South Carolina 1,573 14.5 7,212 97.5 System non-farm rural housing loan made in the 7,614 75.0 21,239 274.3 United States and accounts for approxim ately tw o- 53,818 480.6 113,464 1,367.8 thirds of the number and amount o f outstanding 542 M aryland Virginia West Virginia Fifth District United States $ $ and South Carolina, extended the first Farm Credit loans. Source: Data provided by Farmers Home Administration. 14 M ONTHLY REVIEW, JUNE 1973 Thom as E . Snider A P P E N D IX SELECTED CHARACTERISTICS OF FIFTH DISTRICT HOUSING, 1970 Occupied Units Rural Areas 255,245 M a ry la n d 2,500 to 10,000 48,072 10,000 to 50,000 77,338 W ashin gton, D. C. Urbanized Areas Total 794,418 1,175,073 262,538 262,538 V irgin ia 491,106 79,822 86,093 733,615 1,390,636 W est V irgin ia 317,633 46,054 68,218 115,309 547,214 North C arolina 815,320 129,777 197,174 367,293 1,509,564 South Carolina 373,684 92,820 84,154 183,715 734,373 2,252,988 396,545 512,977 2,456,888 5,619,398 15,887,066 4,527,259 5,221,333 37,814,089 63,449,747 Fifth District United States Occupied Units Lacking Complete Plumbing M a ry la n d 32,747 1,842 2,484 W ashin gto n, D. C. 10,317 5,601 47,390 5,601 139,501 7,304 4,389 17,118 168,312 80,635 2,463 2,386 3,422 88,906 North C aro lina 175,695 15,259 14,680 10,337 215,971 South Carolina 93,710 13,964 9,882 10,087 127,643 522,288 40,832 33,821 56,882 653,823 2,301,464 274,550 249,622 947,181 3,772,818 V irgin ia W est V irgin ia Fifth District United States Occupied Units That Were Crowded M a ry la n d W ashin gto n, D. 20,870 2,706 4,352 49,456 77,384 32,160 32,160 5,143 34,870 1 10,869 c. V irgin ia 56,516 14,340 W est V irgin ia 37,488 2,609 3,435 6,297 49,829 North C aro lina 95,051 12,098 17,686 28,883 153,718 South C arolina 54,969 10,753 9,034 15,867 90,623 264,894 42,506 39,650 167,533 514,583 1,610,851 349,176 384,132 2,866,715 5,210,874 Fifth District United States Source: 1970 Census of Housing. FEDERAL RESERVE BA N K OF RIC H M O N D 15 RECENT PUBLICATIONS 1972 A N N U A L R E P O R T T he Annual R ep o rt features an article entitled "T h e Check Payments System and the Fifth District Regional Clearing Plan.” T he article reviews the historical developm ent of the payments mechanism and describes the proposed Fifth District regional clearing system. T he R ep o rt also includes highlights o f the Bank’s operations during 1972, comparative financial statements, and current lists o f officers and directors of our Richm ond, Baltimore, and Charlotte offices. B A N K I N G IN T H E C O N S U M E R P R O T E C T I O N A G E T his 24-page reprint, which first appeared as a series of M on th ly Reviezv articles, reviews the develop ment of consumer protection legislation in the United States, with particular em phasis on the Truth in Lending A ct and the Fair Credit R eporting A ct. In addi tion. important legislation involving bank credit cards is examined, and the w ork of the National Commission on Consumer Finance is discussed. L IN E A R P R O G R A M M IN G : A N E W A P P R O A C H T O B A N K P O R T F O L IO M ANAGEM ENT This reprint of a M on th ly R ev iew article describes the linear program m ing model in a nonmathematical manner and explains how it can be used in the bank portfolio management process. Copies of these publications are available upon request from the Bank and Public R e lations Department, Federal R eserve Bank o f Richm ond, P. O . B o x 27622, Richm ond, V irginia 23261. The M o n t h l y R e v i e w is produced by the Research Department o f the Federal Reserve Bank of Richmond. Subscriptions are available to the public without charge. Address inquiries to Bank and Public Relations, Federal Reserve Bank of Richmond, P. O. Box 27622, Richmond, Virginia 23261. Articles may be reproduced if source is given. Please provide the Bank’s Research Department with a copy of any publication in which an article is used. Digitized for 16 FRASER MONTHLY REVIEW, JUNE 1973
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