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F E D E R A L R E S E R V E B A N K OF R I C H M O N D



NOVEMBER

1959

re Fatter In '58
“Personal income broke all records in 1958!”
. . . or “Income’s 1958 gain was less than it had
been since ’54.” Accentuate the positive—or the
negative—either statement is equally true of the
$356 billion personal income received by persons
living in these United States last year. The $2,057
per capita personal income was a record breaker,
too. On the other hand, its $14 increase over the
year before was the smallest of any of the eight­
een year-to-year increases which occurred in the
past twenty years.
CONSIDER THE CIRCUM STANCES
In the early
months of 1958, the shadows of recession still
hovered over the nation. Business activity moved
at a slow pace. Unemployment was a very real
problem in certain areas. Not until early summer
did it become generally evident that the downpull
of recession was giving way to the upward push
of recovery. In rising $8 ^2 billion in 1958, per­
sonal income showed remarkable resistance to
those strong deflationary pressures which more
logically might have been expected to whittle its
size. In only four states—Ohio, Michigan, Indi­
ana, and W est Virginia—did incomes drop below
their total in the previous year.
INCOM E BEH AVIO R IN THIS A REA
Persons liv­
ing in Virginia, North and South Carolina, Mary­
land, and the District of Columbia were among
those who shared in the nation’s rising income in
’58. And gains in total personal income stacked
up well with those in other states and in the
nation. North Carolina’s 6 % increase was equaled
or exceeded by only eight other states and, per­
centagewise, was three times that of the United
States as a whole. Gains in personal income of
Virginia, South Carolina, Maryland and District
of Columbia residents were roughly twice the 2%
increase registered by all of the United States.
In each of those areas, too, per capita income in
1958 topped that of the previous year and reached
never-before-attained levels. Average income per
person in 1958 climbed to $2,634 in the District
of Columbia; $2,221 in Maryland; $1,674 in V ir­
ginia; $1,384 in North Carolina; and $1,218 in
2




South Carolina. Average income of Maryland
and District of Columbia residents exceeded the
national average by 8 % and 28% respectively.
Only thirteen other states could point with pride
to per capita incomes larger than that for the
nation as a whole. Residents of other Fifth Dis­
trict states have yet to build their average incomes
to equal that for the United States; however, the
gap narrowed slightly in 1958 for Virginia and
the Carolinas as their per capita income increased
more than the nation’s.
Some West Virginians, however, had the mis­
fortune to feel their wallets grow thinner, as total
personal income for the state shrank $119 million
and income per person averaged $6 6 less than in
1957. While other Fifth District residents saw
their stacks of greenbacks grow, what was hap­
pening to their neighbors in W est Virginia?
A CLUE IN REACTION TO RECESSION Durable
goods industries fell chief victims of the lag in
business activity during the recession which cut
across portions of both 1957 and 1958. For in­
stance, consumers spent over $ 8 billion more in
1958 than in the year before. But for what types
of goods and services did their money go? More
went to pay the grocer, more was spent to buy
clothing. Less was allotted to the purchase of
automobiles, as consumers strongly resisted the
appeal of new cars—and even the temptation to
trade for a “newer used” model. Monthly rent,
utility bills, and the many other expenses of hous­
ing and household operation absorbed a larger
share of individuals’ budgets in 1958. Kitchen
and other household appliances were repaired,
given an extra polish—and made to last for a
while longer.
Declines in production of automobiles, non­
electrical machinery, and primary and fabricated
metals made up three-fourths of the drop in manu­
facturing last year. Understandably, the burden
of this concentrated decline in manufacturing fell
most heavily on the nation’s highly industrialized
regions—Great Lakes, New England, and the
Mideast.

PER CAPITA PERSONAL INCOME
1954-1958
CH AIN REACTION Repercussions of the marked
contraction in durable goods manufacturing were,
however, felt far beyond the borders of the heavily
industrialized areas. As production was cut back,
demand for fuel and raw materials diminished.
W ith smaller quantities of fuel and materials mov­
ing into the nation’s factories, and fewer finished
products flowing into the nation’s markets, use of
transportation facilities naturally declined. In­
come from both mining and transportation dropped
in every region last year, and in the majority of
states—including Virginia, Maryland, and West
Virginia.
Since mining and transportation industry wages
and salaries make up a relatively small proportion
of the total in Maryland and Virginia, income
there was not too seriously affected. But as de­
mand for coal from West Virginia’s bituminous
mines plummeted, so did wages and salaries in
her second largest income-producing industry. In
1958, W est Virginians earning their living direct­
ly from mining employment received only threefourths as much income as they had in 1957. The
$113 million reduction in mining payrolls made up
over one-half of W est Virginia’s gross wage and
salary decline.
Income from manufacturing—West Virginia’s
largest source of wages and salaries—dropped
more sharply, percentagewise, than in any other
Fifth District area. Of the state’s many varied
manufacturing industries, only paper, printing and
publishing, and fabricated metals had larger pay­
rolls in 1958 than in the previous year. W ith less
freight to haul, railroad crews, too, were faced
with smaller incomes.
Effects of income losses from major industrial
sources penetrated into other areas of the state’s
economy as well. Less money to spend inevitably
meant that some merchandise gathered dust on
the shelf, and outlays for nonessential personal
services were trimmed. W ith demand depressed,
both trade and service enterprises contributed less
to wage and salary income than in the previous
year.
The impact of W est Virginians’ declining in­
comes was cushioned slightly by rising wages and
salaries in finance, insurance, and real estate; com­
munications and public utilities; Federal, state,
and local government.
A Q U ALIFICATIO N
To highlight income gains in
Virginia, North and South Carolina, Maryland,
and the District of Columbia is not to imply that
those areas passed wholly unscathed through the




1954

1955

1956

1957

D istrict incom es come p rim a rily fro m w a g e s and s a la r ie s —an d

■■■■■■
■■■■■

m a n u fa ctu re rs an d g o ve rn m e n ts a re the p rin c ip a l p a y m a s te rs .

period of business downturn. Wage and salary
income declines which did occur in some busi­
nesses and industries there were, however, more
than counterbalanced by income gains in others,
whereas—as has been seen—those income gains
which did occur in West Virginia were able to
offset partially but not to cancel the losses.

SOURCES OF PERSONAL INCOME
1958

%
1100

otS

4




r In coime

sa

OF SHOES, AND SHIPS, AND SEALING WAX. . .

or, more truly, of fabrics, wearing apparel, ciga­
rettes, end tables and beds, paper, shop tools— ad
in fin itu m . For manufacturing outpaces all other
businesses and industries as an income producer
in North and South Carolina, as in W est Virginia,
and is second only to government (Federal, state,
and local totaled) in Maryland and Virginia. Even
in the District of Columbia there is a bit of manu­
facturing—food processing, printing and publish­
ing are the most prominent.
Wage and salary income from manufacturing
fell last year in four of the five District areas
where total personal income rose, and served to
make their gains smaller than they might other­
wise have been.
Of the five areas where income rose last year,
Maryland is the site of greatest concentration of
“heavy” industry—the type which bore the brunt
of the recession. Maryland’s transportation equip­
ment, primary and fabricated metals, electrical and
nonelectrical machinery industries paid over onehalf of all manufacturing wages and salaries
earned in the state last year. Declines in their
payrolls accounted for nearly three-fourths of the
gross loss in wages and salaries paid by Maryland
manufacturers in 1958. Total wages and salaries
received from manufacturing employment dropped
approximately 4% —the third largest percentage
decline in the District.
So-called “soft goods”—or nondurables—are
more characteristic of Virginia, North and South
Carolina manufacturing, although products of
North Carolina’s furniture factories and of V ir­
ginia’s east coast shipyards are renowned.
It is necessary to look at few changes other than
those in textile manufacturers’ payrolls to under­
stand why South Carolina’s wages and salaries
from manufacturing declined last year and those
in North Carolina were held to a fractional gain.
In South Carolina, where well over one-half of
all wages and salaries paid by manufacturers origi­
nate in the textile industry, the $ 1 0 million de-

wtm

age and Sa ary ncome

60

iiEk'®
I

40

20

Proprietors Inca
Property I ncome
W. Va.

N. C.

S. C.

Md.

Va.

D. C.

cline in textile mill employees’ earnings made up
nearly three-fourths of the gross decline in wages
and salaries paid by the state’s manufacturers in
1958.
In North Carolina, where textile manufacturing
is the source of just under one-half of manufac­
turers’ wage and salary payments, the drop in
earnings totaled nearly $20 million, 85% of the
gross decrease in manufacturing wages and
salaries paid in the state last year. That North
Carolinians wT able to increase their total earn­
ere
ings from manufacturing employment despite the
cutback in textile manufacturers’ payrolls was the
happy result of an accumulation of small gains
from the production of many diverse items, among
them tobacco and cigarettes, apparel, paper, chemi­
cals, and machinery.
Declines in earnings of fabric mill workers in
Virginia were likewise important income de­
pressants, and earnings in the state’s fastest grow­
ing industry—chemicals—showed an even larger
dollar loss. Third and fourth ranking incomeproducing industries—food canning and process­
ing and transportation equipment—paid more in
wages and salaries last year, however, and so
helped limit Virginia’s total income loss from man­
ufacturing to a fraction of 1 %.

OURCES OF WAGE AND SALARY INCOME
1958
Oth er

\Aanufac h
nrm<j

Services
ad £

Government

W. V a .

N. C.

S. C.

Md.

KEYS TO INCOME G AIN S
Although a tall, thin
man, Uncle Sam is the single fattest source of
wage and salary income for residents of tiny Dis­
trict of Columbia and of Virginia, and he carries
only slightly less weight, incomewise, in Mary­
land. North and South Carolinians, too, find
government employment a lucrative source of in­
come. But in W est Virginia, Federal govern­
ment employment yielded only slightly over Z c/o
of total wage and salary income last year. In
1958, wages and salaries paid to Federal civilian
and military personnel contributed $3,670 million
to the income of Fifth District residents—$141
million more than in 1957. Of that increase, $137
million went to areas where total income rose last
year, while W est Virginia’s portion of the gain
was only $4 million.
Handling the multiple affairs of states, cities,
and counties, too, is big business. Roads must
be built, schools operated, taxes collected—to men­
tion only a few of the many tasks that keep em­
ployees on the jump. Paying to have this mul­
tiplicity of duties attended to in the Fifth District
was more costly in 1958— some $172 million more
so. This rise brought incomes received last year
by residents of Virginia and W est Virginia, North
and South Carolina, Maryland, and the District



of Columbia from state and local governmental
sources to a total of $1,600 million.
In warehouses, over the counters of general
stores and supermarkets, specialty shops and de­
partment stores—in small towns, suburbs, and
cities—over 900,000 persons were occupied last
year distributing merchandise to residents of and
visitors to this five-state area.
Of the Fifth
District areas where total income rose last year,
only in the District of Columbia was trade’s con­
tribution to wage and salary income smaller than
in the previous year, and the dollar decline was
not sufficient—in the light of other income gains—
to depress the total appreciably.
Even as consumers must be provided with the
goods they seek, so also must they be furnished
with the services they demand. Last year, peo­
ple spent more for recreation, education, medical
care, personal business, and the many other items
characteristically termed “services.” Increased
outlays for these “health, welfare, and happiness”
items were reflected in rising wages and salaries
paid to those who were engaged in supplying them
—in the nation and in this area as well, except
in W est Virginia. Service industries contributed
over $1,770 million to Fifth District wage and
salary income last year. The entire increase over
the previous year—a little over $ 1 0 0 million—was
distributed among those areas where total per­
sonal income rose. In W est Virginia, income from
service enterprises was approximately $ 1 million
smaller than in 1957.
NOT TO BE M INIM IZED Smaller—but still vital
—contributions to incomes of Fifth District resi­
dents were made by rents, dividends and interest
(property income), and by net business earnings
of owners of unincorporated enterprises and of
self-employed persons—farmers, doctors, dentists,
and the like (proprietors’ income). “Other” labor
income (directors’ fees, for instance, or contribu­
tions under private pension, health and welfare
plans), together with transfer payments from both
private and public sources comprised a minor share
of the total.
Gains in income from each of these sources oc­
curred in Maryland, Virginia, North and South
Carolina, and in all except “other” labor income
in the District of Columbia. In West Virginia,
property income and transfer payments rose, but
proprietors’ and “other" labor income fell short
of the previous year’s.
5




■H Hi




MONTHLY REVIEW looks at . . .

An Area With Diversified Industrial Growth

PROBLEM The A sheville area in w estern
North C arolina is one of the great scenic
beauties of the nation.
It is beautiful
enough to attract eight m illion tourists a
ye a r, healthy enough clim atew ise to be rec­
ognized the nation over in this respect, and
it has enough "get-up-and-go" to do som e­
thing about its problem . For despite sp len­
did ad vantag es it does have a serious eco­
nomic problem of unem ploym ent stemming

from the seasonal nature of its tourist trade
and inadequate m anufacturing job oppor­
tunities. It has been one of 17 m ajor in ­
dustrial areas in the nation classified by
the Departm ent of Labor as centers of
"chronic labor surp lus." It has had at least
50% more unem ployment than the national
ave rag e in four of the past fiv e ye a rs.
There is no question that A sheville has a
mean economic problem to lick.

SliilPiS

SOLUTION Unlike n early all the other
areas of chronic labor surplus, the A sh e ­
ville area is succeeding in doing something
about its problems. Not only has it been
one of the few chronic labor surplus area s
able to increase its employm ent since 1950,
but it also has a num ber of new factories
under construction or read y for operation
which enhance considerably its long-run
prospects. Em ploym ent is at an all-tim e
high and in Septem ber the area w as moved
from the list of places w ith a substantial
labor surplus to a category indicating re la ­
tively moderate unem ploym ent. A most
significant feature of A sheville's recent in ­
dustrial growth is the d iversificatio n of its
m anufacturing plants. Note the d iversity:
food products, metal fa b rica tio n , glass con­
tainers, electronic devices, textiles, chem i­

cals (including rocket and m issile fuel), a p ­
p arel, blankets, paper, furniture and wood
products, shoes, m achine parts and tools,
carpet m aterials, silv e rw a re , parachutes,
and industrial rubber products.
Industrial d i v e r s i f i c a t i o n renders the
growth of an area much less vu ln e rab le to
economic change than that of an area
specializing in one or a fe w related indus­
tries. D iversification should also enable
A sheville to reduce its seasonal unem ploy­
ment and to m ake fu lle r and more pro fit­
ab le use of its economic resources, includ­
ing, of course, its labor force. The A she­
ville area is not "just g ro w in g "—it is g ro w ­
ing along lines that give promise of con­
tinued long-run growth and more stable
income. This is economic progress.

A R O M A T IC
. . . a n ew tobacco fo r this area

Aromatic tobacco—a flavorsome leaf with a pro­
nounced aroma—has long been a standard in­
gredient in the recipes of the popular blended
cigarettes so familiar to American smokers. Man­
ufacturers blend it with domestically grown fluecured, burley, and Maryland tobaccos to help pro­
vide that flavor and aroma so distinctive in an
American cigarette.
Through the years cigarette manufacturers have
had to import most of their supplies of aromatic
tobaccos from countries of the Mediterranean and
Black Sea areas. These tobaccos—-more com­
monly referred to as Turkish tobacco—have come
chiefly from Turkey and Greece. Last year the
nation’s cigarette makers bought about 105 million
pounds of this foreign-grown leaf.
United States production of aromatic tobacco is
still quite limited. Authorities estimate that it
averages about 1 million pounds annually. This
is a little less than 1% of the Turkish leaf im­
ported by the cigarette industry each year to blend
with other tobaccos.
Authorities of the U. S. Department of Agri­
culture believe that manufacturers have been using
more of this Turkish leaf in their cigarette recipes
in recent years. They estimate, for example, that
the average American-made cigarette now con­
tains about 1 0 ^4 % aromatic tobacco compared
with 8 ^ 2 % five years ago.
NEWCOMER TO FARM SCENE
Though tobacco
was given to the world by natives of the Americas,
Turkish leaf is a relative newcomer to this coun­
try’s agricultural scene. For several years now it
has been grown successfully by farmers in the
Piedmont and mountain counties of Virginia and
the Carolinas. W hat many growers began as an
experiment has developed into a profitable source
of supplemental farm income.
This little-leafed tobacco that’s so important in a
cigarette appears to be getting more and more of
a foothold in this section. Last year it was grown
in 56 counties in the Virginia-Carolinas area; ten
years earlier this so-called Turkish tobacco was
produced in only 13 counties. Some 560 farmers
tried their hands at growing the crop in 1958 and
produced a total of 264,000 pounds of leaf. The
tobacco sold for an average price of 86.4 cents per
8




pound and brought growers more than $228,000.
The price of the three top grades ranged from a
little better than $ 1.0 0 to $1.37^ per pound.
The average yield per acre is not available for
the three-state area. North Carolina’s harvested
yields per acre in 1958, however, averaged just
under 1,000 pounds. Some farmers are produc­
ing an average of 1,2 0 0 pounds to the acre through
mechanization and use of the most recent methods
of production, harvesting, and curing.
Production of aromatic tobacco requires a great
deal of hand labor—from 600 to 700 man-hours
per acre when recommended practices are followed
and even more when old methods are used. For
this reason, most farmers who grow this type of
tobacco can handle only a small acreage—one or
two acres, or less. Even so, production of Turkish
leaf has proved attractive to a number of farmers,
especially those having small farms with large
families which can provide the needed labor.
AN UNUSUAL TOBACCO There are important
differences between aromatic tobacco and the fa­
miliar flue-cured variety. Some of them, no
doubt, have put a number of farmers in the mood
to try their hands at growing the Turkish types.
There are no marketing quotas and acreage
allotments on the aromatic leaf. This has made it
attractive to many farmers who wanted an addi­
tional cash crop that would help replace some of
the income lost by their shrinking allotments on
other crops. Farmers are intrigued, too, by the
dollar-a-pound-and-better return paid for topquality leaf.
Typical Turkish leaves are quite small, measur­
ing only 5 to 6 inches long and from 2 to 3 inches
wide. To produce high-quality aromatic tobacco,
both rows and plants must be spaced close
together. This means that 60,000 to 70,000 plants
are required to set one acre, about ten times the
flue-cured average.
The aromatic producer doesn’t have to top or
sucker his tobacco. Nor does he have to sort it
into different grades after it is cured. He har­
vests his crop while the leaves are still green,
stringing them on wire rods as they are pulled
from the plants in the fields. And he must let
the tobacco wilt and yellow for about three days

U n u s u a lly sm all le a v e s —a b o u t 5 to 6 inches lo n g —and clo se­
ly sp aced p lan ts a re c h a ra c te ristic of aro m a tic tob acco .

Le ave s of a ro m a tic tob acco a re strung on w ire s an d hung on
ra ck s to p erm it the circu latio n of a ir a s they w ilt an d cure.

A ro m a tic to b acco , u nlike other typ e s, is b aled b efo re it is
m ark e te d an d is sold u n d er co n tract ra th e r than at a u ctio n .




before putting it into the curing barn. After curing,
he must pack it in burlap-wrapped bales weighing
not more than 25 pounds each before it can be
marketed.
There’s no mystic sound of the auctioneer’s
chant on the aromatic market because the grower
sells his tobacco under contract rather than at
auction. Representatives of the contracting com­
pany weigh and grade each bale and purchase it
according to the grade-price basis set forth in their
contract with the farmers. Prices assured growers
under the contract range from 15 cents per pound
for low-quality leaf to $1.37*4 per pound for the
highest grade.
HOW IT ALL STARTED Aromatic tobacco was first
produced commercially in this country in 1948 in
a few Piedmont and mountain counties of V ir­
ginia and the Carolinas. This commercial under­
taking, however, was preceded by nine years of ex­
perimental work with the small-leafed tobacco.
Experimental plantings were first begun by
Duke University in 1939. Success of the early
tests and the difficulty of importing aromatic to­
bacco from abroad during World W ar II intensi­
fied interest in these experiments. And so spe­
cialists from the Agricultural Experiment Stations
and Extension Services of North and South Caro­
lina and Virginia joined Duke University’s re­
search staff in carrying out further experiments in
several areas. These tests, made under actual
farm conditions, further proved that quality aro­
matic tobaccos could be grown and cured success­
fully on many farms in the Southeast.
Organization of a marketing and processing
company with headquarters in Anderson, South
Carolina, was the next step. This was in 1948,
the year commercial production began. The com­
pany contracted with farmers to buy their tobacco
on a grade or quality basis, paying them a specific
price for each of seven designated grades. Pro­
duction of the new crop has since spread to other
areas, but the South Carolina firm continues to
buy all the Turkish leaf produced in the country.
A CROP IN DEMAND
American smokers are
puffing their way through a record-breaking 460
billion cigarettes this year, and authorities esti­
mate that the number smoked by 1975 may ap­
proximate the 700-billion mark. Unless smokers
change their tastes in cigarettes and cause manu­
facturers to reduce the amount of Turkish leaf in
their blend formulas, it appears that the demand
for aromatic tobacco will continue its upward
trend.
9

thefE D

U ild is t r ic f

During recent weeks the business situation in
the Fifth District has generally held firm against
the growing depressiveness of the steel strike, still
the single big factor. Diverse forces—reflecting
the basic character of the District's industrial pat­
tern—have held employment fairly steady in spite
of the strike. Leading District industries such as
textiles, chemicals, furniture, cigarettes, all con­
tinue to support a high level of business activity.
Employment generally exceeds 1958 levels and
has fallen only slightly below the peak 1959 levels
established prior to the strike.
The really noticeable effects of the strike are
still concentrated in certain areas of the District
but the impact is definitely spreading. The most
recent information from the states of the District
may be summarized as follows:
Maryland has about 22,000 idle steelworkers
(28,000 union members from closed plants less
about 6,000 standby maintenance wrorkers) and
about 9,300 out of work in related industries due
to the strike. The secondary unemployed are
mainly railroad and other transportation, metal
products fabricating and assembly, and construc­
W hen steel p ro du ctio n




resum es molten pig iron

w ill a g a in

fill

tion workers, although other manufactures and
wholesale and retail trade are also affected. All
of these inactive employees with the exception of
about 500 workers are in the Baltimore area. The
total number of workers idled by the strike is
about 2.6% of Maryland’s labor force.
W est Virginia has approximately 8,000 idle
steelworkers, more than 90% of whom are in the
six counties of the northern panhandle which are
outside of the District. In addition, over 5,000
workers in steel-related industries other than min­
ing are currently idle, of whom about 3,500 are
estimated to be in the District. Most of these are
in metals and metal products manufacturing, glass,
transportation, chemicals, and construction. The
impact of the strike has added a total of around
7,700 to W est Virginia’s ranks of unemployed
miners. Total strike-related unemployment in
West Virginia has, therefore, grown to about
12,700. Total nonfarm employment before the
strike numbered about 460,000.
Virginia has about 500 striking steelworkers,
all in the Roanoke area, and about 2,500 workers
secondarily idle, mostly in mining and railroads.
this 750-ton S p a rro w s Point open h e arth fu rn a c e , id le since Ju ly

15.

North Carolina and South Carolina, where steel
does not directly influence employment, are en­
joying the lowest rates of unemployment since
1955. Textile producers are continuing to oper­
ate under the assurance provided by substantial
backlogs of orders. In the case of some broadwoven fabrics deliveries are booked as far ahead
as the third quarter of 1960.
THE BALTIMORE STORY The Baltimore area, the
center of District steel output and most critically
affected by the strike, merits special attention. On
the basis of productive capacity, Baltimore steel
represents 6 % of the nation’s steel industry, 89%
of District steel. During recent periods of normal
operation Baltimore steel has accounted for 12%
of all manufacturing employment in Maryland.
LOST WAGES, LOST BUYING POWER
Recent
estimates of weekly lost wages caused by the
strike in the vicinity of Baltimore amount to
$2,850,000 for striking steelworkers and $750,000
due to other job losses caused by the strike. This
is a total weekly wage loss approximating
$3,600,000. Even this amount, which is a bit con­
servative as compared to some published figures,
represents over 5% of average weekly personal
income for Anne Arundel County, Baltimore City
and Baltimore County combined.
STEEL SUSTAINS PORT TONNAGE
The impor­
tance of steel in Baltimore is evident in the record
of port activities. Total waterborne tonnage for
the port of Baltimore in 1958 is estimated at
33,000,000 tons, of which foreign trade accounted
for 22,400,000. Total imports amounted to
16,700,000 tons, 11,820,000 of which consisted of
iron, manganese and chrome ores. The port is,
therefore, currently dependent upon steel for 71%
of its import, 53% of all foreign, and 36% of the
annual total of waterborne tonnage of all types.
Because of the long-term contracts under which
the ore ships operate, there has been no percepti­
ble drop in ore imports. Nevertheless the accumu­
lation of stock-piled ore will eventually have to be
taken into account.
MIXED TRENDS Other indicators of Baltimore
business trends present a mixed picture. Bank
clearings, output of electricity, and value of build­
ing permits are for the first nine months of this
year 9%-, 9% and 11%, respectively, above 1958
levels. As elsewhere, automobile sales are making
a strong start approaching the records set at the
beginning of the peak 1955 model year. Yet Balti­
more department store sales, after taking normal



seasonal changes into account, have moved down­
ward 7% from July to August and 13% between
August and September. Department store sales,
after equalling or slightly exceeding 1958 during
the pre-strike months, dropped 7% below 1958 in
August and September.
DISTRICT MAN-HOURS DOWN
P ro b a b ly the
most tangible evidence of the widening effects of
the steel strike is the continuing decline in manhours worked in District manufacturing industries.
September figures, allowing for normal seasonal
changes, show a decline of 1.5% from the August
level which was in turn lower than July by the
same percentage. The over-all downward trend
is indicative of decreased production and lower
total wage payments. Primary metals and furni­
ture showed slight gains from the curtailed August
levels while machinery continued to advance.
TEXTILES TONE UP BUSINESS OUTLOOK Textile
markets are continuing their upward trend. Pro­
ducers report substantial order backlogs with pro­
duction of print cloths 90% sold for the 1960 first
quarter and 60% to 70% sold for the second quar­
M an -h ou rs w o rk e d in te x tile m ills, cu rre n tly su pp orted by u n ­
u su al streng th in the m a rk e ts , a re w e ll ab o ve 1958 le ve ls.

TEXTILE M A N U FA C TU R IN G

11

ter. Converters are showing some desire to place
orders for third quarter delivery. However, rising
cloth prices and lower cotton prices have strength­
ened the position of manufacturers. The expecta­
tion of further changes is apparently causing some
reluctance on their part to accept any substantial
volume of orders so far ahead.
Gray goods woven from man-made fibers are
showing a rising demand. Yarn mills are operat­
ing with substantial order backlogs and early
October inventories were reported equal to less
than one week’s production in contrast to inven­
tories equal to two weeks’ production at the same
time last year. Demand is currently strong for
women’s seamless hosiery and for spring lines of
socks and anklets. Sales of full-fashioned hosiery
and leotards are reported to be slow. A few scat­
tered indications of the effects of the steel strike
on the retail demand for knit goods are appearing,
but no evidence of this is yet apparent at the mills.
FURNITURE SETS FAST PACE
Operations at Dis­
trict furniture factories continued high in Septem­
ber. Production and shipments each rose for the
third consecutive month to what is probably an
all-time high for the industry. New orders in
October rose slightly from an already relatively
high rate and backlogs of unfilled orders, although
down slightly from the record August figure, still
added to an impressive total. The fall showings
of the southern furniture market wound up at the
end of October with reports of record-breaking
attendance and buying activity.
NONRESIDENTIAL C O N S T R U C T I O N

STRONG

Contract awards in the District fell sharply in
August from June-Julv levels. In September,
however, awards rose to the second highest level
for that month, exceeded only by September 1958.
A drop in residential construction was more than
offset by a 69% rise in nonresidential building
compared with last year. Total contracts awarded
for the first nine months of the year were up 5%
over 1958— with nonresidential showing the larg­
est gains.
BITUMINOUS CO AL Daily output of coal at Dis­
trict mines in September and the first half of Octo­
ber continued to run almost one-fifth below the
high level for this year achieved in June. The
458,000 tons averaged for this period compares
with 445,000 tons mined the first four weeks of
the steel shutdown which began July 15. Dis­
trict production for the year to date is still slightly
ahead of a year ago.
12




AGRICULTURAL SITUATIO N
Good midsummer
growing conditions helped many crops overcome
the effects of the June drought, but yields are still
generally lower than those of last year’s excellent
harvest. However, farmers planted substantially
larger acreages of all major Fifth District crops
except peanuts and hay. As a result, the U. S.
Department of Agriculture estimates that the to­
bacco, corn, and soybean crops will be slightly
larger than last year, and that the cotton crop, on
56% greater acreage, will be up by 38%.
On a less rosy note, heavy rains during the
harvest period reduced the quality and yield of
tobacco and cotton in many areas. In addition,
not all regions are sharing in the increased pro­
duction. In the Eastern North Carolina Belt, for
example, flue-cured tobacco production is down
about 8%> as compared with last year.
Cash receipts of Fifth District farmers in the
first eight months of 1959 were 4% below those
received in the same period of 1958. A drop of
7% in livestock receipts more than offset a slight
increase in sales of crops. Income from the fall
crop harvest, however, is yet to be reported.
BA N KIN G The effects of the steel strike have
now clearly spread to District member banks.
Gross loans were still rising pretty rapidly the
first three weeks of October, giving a superficial
appearance of strong loan demand. On closer
examination, however, it’s apparent that much of
the increase resulted from substantial lending of
short-term funds to banks outside the District.
Such loans—or Federal funds sales as they are
called—are made only when banks have excess
funds not needed for other purposes.
The banks’ investment and borrowing activi­
ties provide further evidence of lessened pressures.
Even with loans increasing rapidly, 20 of the Dis­
trict’s largest banks were able to expand invest­
ments by .8% between September 30 and Octo­
ber 21—a noticeable reversal of the steady liqui­
dation earlier during the year. Daily average bor­
rowings of member banks at the discount window
these same wT slid to a five-year seasonal low
eeks
of just $15 million.

P H O TO C R ED IT S
C o ve r—The

A m e ric a n

Tob acco

v ille C h a m b e r o f Co m m erce
C o m m erce - A g ric u ltu re

Com pany

6 . A sh e ­

9 . V irg in ia C h a m b e r of

In fo rm a tio n

S e rv ice , Clem -

son C o lleg e - A g ric u ltu ra l E xte n sio n

S e rvice o f the

V irg in ia Po lyte ch n ic
Com pany.

In stitu te

10. Beth leh em

Steel


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102