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FEDERAL RESERVE B A N K OF R IC H M O N D



MARCH

1960

Textile Research—"An Industry of Discovery"

A supposedly indestructible and unstainable
white suit was represented in a British motion pic­
ture a few years ago to be good and sufficient cause
for panic in every quarter of the textile and apparel
industries. W ith such garments available, all but
a few firms engaged in the manufacture of cloth
and clothing might conceivably find themselves
going out of business. One human trait in par­
ticular, however, makes this quite unlikely. Peo­
ple like variety. The men and women of the future
may value disposability more than durability—
much as do children of today. The time may come
when even men’s suits will be sold by vending
machines in handy packages of a dozen, perfectly
tailored in assorted styles and fabrics, neatly
pressed, graded for warmth or coolness, impervi­
ous to soup and gravy, and in spite of all this to
be worn a few times and thrown away.
The imagination always responds to the thought
of possessing the powyer to peek into the future
through the slowly unfolding curtain of time.
When imagination reacts upon an accumulation of
knowledge it generates the kind of ideas that are
the origins of progress. This reaction between
Digitized for2
FRASER


imagination and knowledge is taking place in
centers of textile research which on the map of
the United States form roughly a great arc swing­
ing from the northeast down through the eastern
and southern states into Texas. Located around
the center of this arc are the textile research facili­
ties of the Fifth District, a versatile combination
of experienced men and specialized equipment
ready to tackle any project related to the investi­
gation, processing or production of any fiber, fila­
ment or fabric.
"THE PRODUCT OF RESEARCH IS KNOWLEDGE"

Three main groups support the many phases of
textile research. The principal responsibility is
assumed by the textile producing companies them­
selves who are in many instances pursuing their
own individual projects for the development of
new products and processes as well as cooperating
to support study of the many broad problems with
which all producers are concerned. The colleges
and universities provide basic research facilities
and personnel, educate both administrative and
technical specialists for the textile industry, and

serve as the centers of cooperative effort sponsored
by textile firms. Government enters the picture
providing financial support for a wide range of
studies for the general benefit of the entire indus­
try. The United States Department of Agricul­
ture is actively assisting in projects to improve the
quality of cotton fiber through improvements in
production and processing and is cooperating in
the maintenance of facilities for the study of the
spinning, knitting and weaving processes. State
governments are making their contribution through
support of institutions of higher education where
research activities are concentrated.
A complete list of textile research facilities in
the Fifth District would include several private
research companies, an impressive number of
chemical and textile companies, as well as some
colleges and universities. This brief article, how­
ever, of necessity mentions only a few examples.
These provide a general picture of the organization
and accomplishments of the Fifth District’s textile
research centers.
In the nation’s capitol Harris Research Lab­
oratories has for fifteen years been conducting
projects in “basic research” (into the chemical
and physical properties of fibers) and “utilization
research” (for greater usefulness and attractive­
ness of fabrics) under the sponsorship of many
different clients. H arris’s contributions to cotton
range from studies related to the beauty, luster,
wash-and-wear characteristics and general appear­
ance of fabrics to water-repellent and mildew-re­
sistant finishes for Army use. The staff which
originally numbered twelve has grown to more
than sixty members and includes chemists, physi­
cists, biologists and textile technologists. This
organization has become the largest independent,
private textile research laboratory in the nation.
The textile research projects are carried out in a
modern building with about 22,000 square feet of
floor space equipped with chemistry and physics
laboratories, wind tunnel machinery for testing
the passage of heat and moisture through fabrics,
rooms which are dust-free and maintain constant,
predetermined conditions of temperature and mois­
ture, radioactive tracer equipment and other spe­
cialized analytical instruments.
"RESEARCH-A KEYSTONE OF PROGRESS"
One
hundred and ten miles southwest of Washington,



a mile or two west of Charlottesville, Virginia, is
the Institute of Textile Technology. This organi­
zation is jointly owned and financed by a group of
mills having cotton spinning and weaving equip­
ment. It has been in operation for sixteen years,
but was established upon records, knowledge and
experience accumulated over a much longer time
by the sponsoring companies. Parallel programs,
highly integrated and inseparable in terms of sig­
nificance, are conducted at the Institute. In the
capacity of technical advisor and assistant to its
sponsors, the Institute may undertake any sort of
cotton research project. In its capacity as a center
for the training of technical experts in the field
of textiles, the Institute has the status of a gradu­
ate school of textile technology. It is chartered
by the Commonwealth of Virginia with the power
to grant both the Master of Science and the Doctor
of Philosophy degrees.
The Institute divides its research activities
roughly into two categories—relatively short-range
projects and relatively long-range projects. Items
in the former group arise as a result of requests
by mills for help on particular problems such as
studying and correcting causes of customer com­
plaints, training personnel, evaluating new prod­
ucts, and many others. It is estimated that be­
tween 200 and 250 such projects are completed by
the Institute staff each year.
Among the relatively long-range projects are
those which deal with problems related to raw ma­
terials, quality control, the design and testing of
new equipment, or any avenues of investigation
leading toward the potential improvement of tex­
tile products and processes. The work of the In­
stitute in recent years has resulted in important
long-range developments in such areas as new
chemical treatments for cotton fabrics, instruments
for measuring product characteristics and con­
trolling production operations, modifications of
existing equipment, quality control procedures and
the use of advanced mathematics with the aid of
electronic computers in seeking solutions to textile
research problems.
"RESEARCH IS AN ATTITUDE OF MIND" In North
Carolina, the cities of Raleigh, Durham and Chapel
Hill mark a three-sided area which is becoming
widely known as “The Research Triangle.” Here
the principal establishment devoted to the study
3




of textiles is the Textile Research Center of the
School of Textiles, North Carolina State College.
T.R.C. was founded in 1948 by the State of North
Carolina and the North Carolina Textile Founda­
tion, Inc., an organization of more than 450 mills,
fiber producers, enterprises related to the textile
field, and interested individuals. T.R.C.’s staff,
originally just two people, has grown to nearly one
hundred textile technologists, chemists, physicists,
technicians and other personnel. Its annual budget
is now close to $600,000.
The scientists at the North Carolina State Col­
lege Center are interested in all phases of industrial
textile research. Since the textile industry has
provided nearly all of the financial support behind
the Center, most of the projects have been rather
directly related to increasing the quality and im­
proving the efficiency of production of textile
products. The Center operates through twyo ma­
jor departments, a Processing Division and a
Chemical Division. The first plans and carries
out projects in all phases of the development and
processing of all major fibers to the gray cloth
stage. The second studies the chemical charac­
teristics of fibers, and of bleaches, dyes and finish­
ing processes for all kinds of fibers and fabrics.
T.R.C. has four other departm ents: a section
concerned with the development of textile ma­
chines and instruments, a library, a photography
division, and a testing and microscopy division.
The Textile Research Center places special
emphasis on the need for more basic research—
“pioneering textile research” is the way it is fre­
quently expressed there. A long step was taken
in this direction with the completion of a labora­
tory for the study of possible applications of
nuclear energy to textile materials and manufac­
turing. Another significant step was the installa­
tion of an IBM 610 computer for use in develop­
ing applications of computers to textile technology.
Starting July 1, 1959, the General Assembly of
North Carolina appropriated $80,000 a year to
support basic research in textiles. These funds
are being expended on advanced programs in tex­
tile and polymer chemistry and physics that will
in the future lead to the granting of doctoral de­
grees in these areas.
"RESEARCH EXPANDS EARNING POWER"
More
than 250 miles separate North Carolina’s “Re­



search Triangle” from South Carolina’s growing
counterpart at Clemson College. The Clemson School of Textiles has a staff of about 30.
A wide variety of projects sponsored by various
textile manufacturers are under study. The pur­
poses of these studies include the improvement of
fibers, yarns and fabrics, the betterment of quality
and efficiency in manufacturing processes, and the
development of better bleaching and finishing
agents. The United States Department of Agri­
culture’s marketing and research services maintain
on the Clemson campus three laboratories equipped
to conduct extensive experimental work on the
production, processing and manufacturing of cot­
ton. One of the projects in its current program,
designed to boost cotton’s versatility and useful­
ness still higher, deals with ways and means of
making elastic cotton yarn, and making its elastic­
ity as permanent as possible.
One of the initial facilities at the Ravenel Re­
search Center on the Clemson campus is a re­
search and development building of some 40,000
square feet built by a textile machinery firm. As
in the case of North Carolina’s Research Triangle,
Ravenel provides an ideal opportunity for aca­
demic personnel, private industry and government
to pool their talents and resources in what is truly
a vital common interest.
"RESEARCH IS WEALTH-PRODUCING" In spite of
all that is being done, serious doubts are being ex­
pressed concerning the adequacy of our textile re­
search effort. For example, it is contended that
more research may be necessary to enable the tex­
tile industry to meet foreign competition success­
fully. Governor Hodges of North Carolina has
predicted on the basis of his visit to Soviet textile
mills that present foreign competition is mild com­
pared to that which Russia is capable of offering.
The textile industry has spent less than 0.5%
(some estimates are as low as 0 . 1 % ) of the value
of sales for research in contrast to a figure of about
2 % as the average for other manufacturing indus­
tries. Present developments indicate that a new
era of more intensive research is beginning. More
and more companies are building or expanding re­
search facilities. One of these days it may be
possible to make that “indestructible suit”—if so,
it is likely to be the result of progress and ac­
complishment of Fifth District research centers.
5

Monthly Review looks a t .. .
THE EASTERN SHORE
Water-bound by the Chesapeake Bay on the west and
the Atlantic on the east, the Eastern Shore might be called
the Maritime Province of the Fifth District. Predominant­
ly rural, it is peopled by a hardy, independent, and
friendly folk who proudly treasure their centuries-old
traditions as well as the comforts of today.
Modern highways, Maryland's famed Chesapeake Bay
Bridge, and efficient ferries operating from the Norfolk
area to its southern tip facilitate travel to and from the
Shore. More importantly to its truck farmers, perhaps,
they put the area within overnight transportation dis­
tance of many of the large consumer markets of the East.
The proposed bridge-tunnel between the Shore and a
point near Norfolk will undoubtedly increase the Eastern
Shore's tourist and business traffic.
The economy of the Eastern Shore is centered primarily
around its agricultural, manufacturing, and commercial
fishing activities. Farming is the Shore's largest indus­
try. It provides the major source of income and is the
area's biggest employer, accounting for up to one-fourth
of all workers. Poultry and large-scale truck farming
are the main farm income producers. Broilers are big
business and have made the Shore one of the most in­
tensive poultry-producing regions in the United States.
Its truck crop industry is also one of the oldest and most
concentrated in the nation. Dairying, another large
segment of the area's agriculture, is important in the
northern counties.
Manufacturing, second to agriculture in economic im­
portance, provides employment for from about one-fifth
to one-fourth of all employed persons. The canning and
processing of farm products and the seafood catch is by
far the leading manufacturing activity. The fishing in­
dustry is another major source of income and employ­
ment, providing oysters, crabs, clams and a wide variety
of fish for millions of seafood fanciers.
Though the tradition-laden Eastern Shore retains much
of the charm of its historic past, it is participating in some
of the nation's most progressive scientific projects. The
space-age activities now being carried on by the National
Aeronautics and Space Administration's research station
on Wallops Island have focused international attention
on the Eastern Shore.







Housing Slows as Expansion Accelerates
Not since 1950 had bulldozer operators and
builders been as busy as they were in 1959—clear­
ing land and laying foundations for the seemingly
unending variety of dwellings which added up to
the impressive 1,342,900 new houses started last
year. This was a sizable increase over 1958 and
a near miss for an all-time high.
The more than $22 billion that private nonfarm
residential construction cost last year did not miss
a new record mark, however. The previous high
was 1955’s $18.7 billion. Both the value of con­
tracts awarded for one-family houses and apart­
ment buildings and the number of dwelling units
covered by those contracts were greater than
in the previous year. Furthermore, an estimate
of mortgage debt outstanding on one- to fourfamily homes at year-end indicates that an un­
precedented net increase occurred during 1959.
CONTRA-CYCLICAL BEHAVIOR N e v e rth e le ss,
residential construction’s tendency to run counter
to uptrends generally characteristic of over-all
quickening economic activity began to manifest it­
self some months before the year ended. This

Interest Rate
Per Cent

4.00

3.50

generated a feeling of uncertainty about housing’s
economic strength as the decade of the sixties
made its entrance.
The number of new houses started reached a
five-year high in April (on a seasonally adjusted,
annual rate basis) but then declined gradually
through the summer and early fall. Funds going
into residential construction continued to increase
through early summer, but then decreased slightly
each month from June through November. The
value of contracts awarded for residential construc­
tion totaled approximately $650 million less in the
last half than in the first half of the year, and the
number of dwelling units for which contracts were
awarded was nearly 80,000 smaller. A moderate
slowdown in home mortgage lending was apparent
by late summer as those who sought to borrow in
order to buy or build encountered stiffening com­
petition for the available supply of loanable funds.
FLASHBACK—"HOUSING AIDS RECOVERY" “De­
mand for new houses strengthened just as the re­
cession reached bottom and provided a timely con­
tribution to the gathering forces of recovery” . . .

Starts
Thousands

Yields on alternative types of investments influence
availability of funds for residential mortgage loans.

-

1600

U. S. Long-term
Bond Y ield s

1400

-

1200

3.00

2.50

-

“

Private Housing
(Seas. Adj. Annual Rates)

2.00

"

1953




1954

1955

1956

1957

1958

1959

1000

The number of private m ulti-fam ily dw elling units put under construction w a s greater in 1959 than in any previous y ea r of record.

“Expenditures on home construction began to ex­
pand last summer and contributed to recovery
from the 1957-58 recession” . . . “Greater availa­
bility of mortgage credit proved vital in accelerat­
ing home-building activity in 1958, as it had in the
two earlier postwar recessions.” Thus wras the
prominent role housing played in providing a
much-needed boost to slow-paced business activity
in the 1957-58 recession highlighted in the M onth­
ly Review just one year ago.
A SEEMING PARADOX
The contrast between
those few words, “greater availability of mortgage
c r e d i t which characterized home financing in
early 1958 and those describing mortgage market
developments during 1959, “stiffening competition
for the available supply of loanable funds/’ helps

to explain w'hy “housing aids recovery” but re­
covery does not appear to aid housing.
During recession months when business activity
slowed, a large volume of loanable funds flowed
into the mortgage market, partly because of small­
er demand for capital from business and industry
and partly because mortgage loan yields stacked
up favorably with yields on other types of invest­
ments. W ith financing no problem, home con­
struction began to enter an uptrend just as the
1957-58 recession touched bottom.
A continued high volume of savings flowing
into investment institutions and mortgage loan
commitments made earlier in the year enabled
housing to maintain its momentum through late
1958 and into the early months of 1959. But as

As business and industry exp an ded, potential home m ortgage borrow ers met more competition from other borrow ers for loan ab le funds.




Federal Government debt financing increased and
as businesses rebuilt depleted inventories and
reconsidered expansion plans shelved during re­
cession, competition for borrowed funds quickened,
forcing interest rates up and making financing for
prospective home buyers and builders both more
costly and increasingly hard to come by.
CONVENTIONAL LOAN RATES REACT
By De­
cember of last year, the 5 3/2 % to 5^4% rates on
conventional mortgage loans (those neither in­
sured nor guaranteed by the United States Gov­
ernment) typical in the first quarter of 1959 had
given way to yields of 6 % and above.
Surveying the mortgage market at year-end, the
National Association of Real Estate Boards found
that the proportion of communities which reported
the supply of mortgage money for conventional
loans “ample” dropped sharply from March to
December, wT the percentage describing it as
hile
“moderate” more than doubled and that terming
the supply “tight” nearly quadrupled. Following
a complementary trend, the number of new non­
farm houses started with the aid of conventional
financing hit an all-time high of 92,849 in April,
then declined in each succeeding month to 62,432
in November. However, the proportion of hous­
ing starts financed with conventional loans rose
from 62% at the end of 1958 to 69% at the end
of 1959, evidencing the relatively greater drawing
power of conventional financing, with flexible in­
terest rates, relative to government-aided financ­
ing, with fixed interest rates, in a tight money
period.
FHA AND VA RATES MOVE UP
To help allevi­
ate the pressure on Government insured and guar­
anteed mortgages caused by rises in interest rates
on alternative types of investments, Congress
raised the maximum interest rate on VA home
mortgages from 4^4% to 5;4% in July 1959, and
in September the FH A authorized an increase in
the maximum interest rate on FHA-insured mort­
gages to 5^4% from the 5 34% then in effect.
Yields on many other types of investments con­
tinued to rise through year-end, however, and the
competitive position of FH A and VA mortgages
was not appreciably improved by these increases.
Following the July rate change, a slight—but
temporary— improvement occurred in the private
market for VA mortgages. The September in­
crease in the FH A rate did bring about a slight
reduction in secondary-market discounts. On Sep­
tember 1 the price averaged $95.80; on December
10




: : r.m&l

Savings and Loan Associations put a record $12 billion into
m ortgage loans for home purchase and construction last y ea r.

1, $96.40. On February 1, 1960, the secondarymarket price of FHA-insured mortgages bearing
5^4% interest averaged $96.30.
Although requests received by the Veterans
Administration to appraise proposed new homes
ran well ahead of the previous year during the
first six months of 1959, the drop-off which began
in July continued through December to reduce the
year’s total slightly below that for 1958. A down­
trend in applications for FH A loans also started
in mid-summer and extended through November.
Hopes for a reversal of this trend which were
raised by a surprising jump in applications during
December were short-lived, as January 1960 ap­
plications showed a greater than seasonal drop
from the month before.

theU

U

Eldistrict

I960 had an auspicious beginning with employ­
ment and production expanding through January
and undoubtedly giving income of Fifth District
residents another upward push. Significantly, the
expansion of business activity has been on a broad
front. Plus signs have been shown by most of the
District’s principal industries, including textiles,
cigarettes, furniture, food, primary metals, lumber,
and transportation equipment. One of the few
downturns reported was in construction contract
awards, although the sharp decline here may have
been a reaction in part to the equally strong rise in
the preceding month.
Although available February reports disclosed
no significant signs of current weakness in the Dis­
trict economy and business confidence remained
high, there was a tendency of businessmen to mod­
erate earlier estimates of the strength and length of
the business upsurge. W hether the change in busi­
ness sentiment stemmed from the influence of the
customary seasonal slowrdowns of February or
whether it had other origins may possibly be dis­
closed this month. In any case, developments this
month will be examined unusually carefully as
possible harbingers of the 1960 economic story.
MAN-HOURS GAIN
Man-hours in Fifth District
manufacturing industries in January posted a
1.8% increase over December after adjustment for
seasonal factors. The gains were widespread, in­
cluding all District states and all industry groups
except electrical machinery and printing and pub­
lishing. An especially strong increase was re­
corded by the transportation equipment industries
as automobile assembly plants in Norfolk and Bal­
timore stepped up production. Sizable gains were
also made in fabricated metal products and tobacco
manufactures.
Nonfarm employment after seasonal correction
rose from December to January in all Fifth Dis­
trict states. The increase for the District as a
whole was 0.5%, with W est Virginia making the
largest gain. West Virginia’s January employ­
ment total, however, remained below the year-ago
level. The industry groups which chalked up
gains were manufacturing, both durable and non­



durable, contract construction, trade, government,
and transportation, communication, and public
utilities. Declines occurred in mining, service in­
dustries, and finance, insurance, and real estate.
THE TOBACCO STORY
Cigarette production in
both the U. S. and the Fifth District reached rec­
ord levels in 1959. This signaled an excellent year
for District tobacco factories, which account for
80% of U. S. cigarette output. Production of
cigarettes in the District in 1959 registered the
fifth consecutive yearly increase with a 7% gain
over the 1958 level. In addition to cigarettes the
Fifth District is also a center for manufactured to­
bacco (plug, twist, fine-cut chewing, scrap chew­
ing, smoking, and snuff). Only 6 % of the fac­
tories in this group are in District states, but they
account for about half of U. S. production.
In addition to record output, the cigarette indusM achines that produce more than 1200 cigarettes every min­
ute enable supply to keep pace w ith the grow ing dem and.

11

try in 1959 saw the introduction of a host of new
brands, bringing the total number of sizes, shapes,
and trade names to an estimated 117. From this
wide range of choices the 58 million smokers in
the country could choose regular or king size, fil­
tered or nonfiltered, mentholated or nonmentholated, and even such items as tobaccoless ciga­
rettes. At the end of the year filtered cigarettes
appeared to have secured about 50% of the mar­
ket. Menthols made big gains during the year,
and with many new brands introduced, captured
about 10 % of total sales.
TEXTILE WAGES BOOSTED
In confirmation of
widespread rumors that had been circulating in the
textile industry, many of the District’s mills have
announced wage increases for their employees.
These wage hikes, which became effective Febru­
ary 29, were expected to average 5% although the
exact amount of the increase was not made known.
There was considerable speculation as to wheth­
er the wage increase would be followed by a rise
in the prices of industrial fabrics. This conjecture
was based in large part on the fact that these prices
have not risen as much as have prices of other
cotton fabrics in the past year. Another, and pos­
sibly more important, factor was that orders for
auto fabrics were reported to be fairly slow. In
general, it was not expected that the wage increase
would lead to the widespread price increase that
followed the wage boost a year ago.
Sales of cotton gray goods by District mills have
been very slow so far this year. Orders for cer­
tain kinds of cloth have been satisfactory, but there
has been no tendency on the part of buyers in gen­
eral to add to the orders they have already placed
with mills. Most mills still have large backlogs
of orders, however, and are maintaining operations
at a high level. Mills weaving synthetic fabrics
have booked orders for delivery as far in advance
as the third quarter. This has built up their back­
log of orders to its highest level since the Korean
W ar. Cotton yarn mills also have large backlogs
of orders as they have sold practically all their
production through June.
Man-hours, seasonally adjusted, in District tex­
tile mills in January showed a good increase over
December. All three categories, broadwoven fabric
mills, yarn and thread mills, and knitting mills,
bettered their December performance during Janu­
ary. In February mill operations in some scat­
tered areas were affected by outbreaks of flu, which
kept employees home and forced rearrangement
of production schedules.
12




COAL TRENDS UPWARD
In line with forecasts,
bituminous coal production through January and
early February ran ahead of year-ago levels. Dis­
trict coal output for the first five weeks of 1960
averaged 4% higher than the same period in 1959
but 11% under 1957.
After being hard hit by the 116-day steel strike
last year, it is estimated that the rebound in bitu­
minous coal demand in the nation may raise out­
put to 430-460 million tons this year. Production
in 1959, as in recession-bound 1958, amounted to
410 million tons. The expected increase for 1960
is based on expected record consumption by steel
mills and electric utilities. Declines are expected
in demand from other industrial customers and
from retail and export markets. The prospects for
improvement in overseas demand remain bleak.
European markets for District coal are marked by
heavy inventories and by increasing competition
from oil and gas. Pithead stocks of coal in the
European Coal and Steel Community countries at
the last reported date (September 1959) totaled
32.6 million tons, up severely from 22.5 million
tons at the same date a year earlier. Current re­
ports indicate, however, some decline in coal in­
ventories in recent months. District coal exports
have shown a somewhat improved trend since De­
cember 1959 but are still substantially below yearago levels.
BANKING District banking activity in recent
weeks has reflected quite well the recent strength
of the District economy. At weekly reporting
banks, loans climbed some .7% during February—
a much better than seasonal performance. Busi­
ness borrowing was particularly heavy.
Other indications of continued pressure on bank­
ing resources during February included sharp in­
creases in loan-deposit ratios, sizable sales of
Government securities, fairly heavy borrowing at
the discount window, and net purchases of Fed­
eral funds by larger District banks active in the
Federal funds market.

PH O TO CREDITS
C o ver—Deering Milliken Research C orp.
of Textile Technology

2 Institute

4 United States Dept of A g ­

riculture - North C aro lin a State College - Clemson
College

9 Corning

C aro lin a

Dept. Conservation

and

Moore
and

Architects - North
Developm ent

First Federal Savings and Loan Association
Am erican Tobacco Co.

10

11 The