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FEDERAL

RESERVE




BANK

OF

RICHMOND

OCTOBER

1959

Congress Looks
At Ceilings
Looking at ceilings this last summer was a
favorite work-tim e, if not pastime, of the recently
adjourned 86th Congress. No, not the ceilings in
the legislative halls, or corridors, or even indi­
vidual offices, but the self-imposed ceilings both on
our national debt and on how much interest the
T reasu ry can pay on longer-term securities it sells
in the m arket or on the savings bonds it sells to
individuals. W hat prompted this not upward nor
outward but inw ard gaze by Congress at the lim its
it w as im posing?
LOOK-SEE SPARKED BY PRESIDENT
E a r ly la s t
Jun e the President sent a message to Congress
asking it to lift its ceilings, if not its eyes, heaven­
w ard in order to “safeguard the public credit” and
permit “sound conduct of the Government’s fi­
nancial affairs.” In his message the President
said that he was asking the Secretary of the T reasu ry to transm it appropriate legislation to accom­
plish these resounding phrases—legislation pro­
viding principally for three things :
F i r s t — An increase in the regular public debt lim it
from $283 billion to $288 billion and in the tem ­
porary lim it from $288 billion to $295 billion.
S e c o n d — Removal of the 3.26% interest rate ceil­
ing on savings bonds.
T h i r d — Removal of the present 4^4% interest rate
ceiling on new issues of T reasury bonds.
E xplanation of the w h y of these proposals, along
w ith drafts of bills, was immediately furnished
Congress in more detail by T reasury Secretary
Anderson, who testified further on the proposals
at public hearings held by the House W ays and
M eans Committee on June 10. W h y were the
proposals deemed so v ital? The Secretary gave
Congress a number of reasons, review ing separate­
ly the debt lim its and interest rate ceilings.
DEBT CEILIN G
H istorically a fixed lim it on the
national debt came about rather casually. It dates
back to 1917 when the Congress passed the Second
L iberty Bond Act. P rior to the L iberty Bond
Acts in 1917 Congress usually passed a new law
each time the T reasu ry needed to borrow money
and by setting the terms (including am ounts) and
types of securities to be issued kept close control




over the amount and type of debt issued. To
sim plify matters, however, as w ell as in recogni­
tion that W orld W ar I would involve substantial
borrowing, Congress in the Second L iberty Bond
Act pulled together some of the unused borrowing
authorizations from previous acts and authorized
the T reasury to issue bonds “not exceeding in the
aggregate $7,538,945,460.” Increases in the au­
thorized debt made necessary by W orld W ar I, by
deficits during the depression years, by W orld
W ar II and subsequent events, including the
K orean W ar, were in turn made possible by Con­
gress sim ply am ending the Second L iberty Bond
Act each time new debt authority w as needed. An
amendment to that Act in 1941 lumped the author­
ization for bonds, notes, certificates, and bills into
one debt figure—a ceiling on the total outstanding
debt—and there has been no subsequent legal
change in the coverage of the ceiling although prior
to June the lim it was increased, in ten steps, from
$65 billion to $288 billion.
Over the years since Congress
shifted its focus on the public debt from the specific
securities to the m axim um amount outstanding
m any argum ents have been advanced for and
against a debt ceiling. Those favoring a ceiling
generally stress that it provides some check on
excessive spending, a check that is even more im­
portant in view of C ongress’s difficulties in con­
trolling expenditures under the present budget
and appropriation process. The principal arg u ­
ment advanced by those opposed to a debt ceiling
is that it m ay hamper the carryin g out of necessary
Government program s, such as national defense,
in the absence of an adequate tax program. As
PRO AND CO N

Since 1953 the national debt has been pressing closely against
the successive statutory l i m i t s e s t a b l i s h e d b y C o n g r e s s .

FEDERAL DEBT
AND
STATUTORY DEBT LIMIT 1941-1959

evidence they cite experiences such as the cutbacks
in national security spending in 1957 to stay w ith­
in the debt lim it, as w ell as other “manipulative
practices,” including the 1953 sale to commercial
banks by the Commodity Credit Corporation of
certificates of interest, representing shares in a
pool of price support loans.

cash balance the T reasury m ay at times have to sell
new issues of securities in advance of the m aturing
of old securities. This could mean that for a short
time the T reasu ry’s total debt might exceed the
ceiling. For greater flexibility, therefore, the Sec­
retary called for an increase in the regular debt
limit. F in ally, the Secretary noted that the $3
billion debt leeway as a minimum would provide
some m argin in the event a national em ergency
occurred when Congress was not in session.
The need for an even higher tem porary debt
lim it was related more directly to the seasonal
pattern of budget receipts. Even w ith a balance
between expenditures and receipts for an entire
calendar year, expenditures exceed receipts by
substantial amounts in the last half of each year.
Paym ents by sm aller corporations, paym ent of the
greater portion of total liability by large corpora­
tions, and concentrations of individual declarations
and final paym ents result in relatively high tax
receipts in the first half of the calendar year and
low tax receipts in the second half. These fluctu­
ations, according to Secretary Anderson, might
mean that at interm ediate points the cum ulative
deficit might well exceed even the proposed per­
manent ceiling.

Secretary Anderson
led off his discussion of needed increases in the
debt lim its last June by noting his general approval
of some sort of restriction. “The existence of a
restrictive debt lim it plays an important part in
our struggle for fiscal soundness” because it
focuses attention on the part of the public, E xecu­
tive Department, and the Congress on the prob­
lems of sound Government finance. As his prede­
cessor, Secretary H um phrey, had put it, breaking
through the debt ceiling is like breaking through
a sound b a r rie r: “there is an explosion when you
go through it and there ought to be one.”
Three main reasons for an increase in the per­
manent debt lim it were advanced by Secretary
Anderson. F irst, the financing of budget deficits
engendered by the 1957-58 recession w as expected
to bring the public debt to approxim ately $285
billion on June 30, 1959—$2 billion over the regu­
lar debt ceiling existing at the time of the Secre­
ta ry ’s testimony. A second reason advanced was to
enable the T reasu ry to have enough leeway, in
terms of its cash balance, to be more flexible in its
borrowing operations. Strangely enough, the
T reasu ry has the same problem as many individu­
als or businesses in m aintaining a sufficient cash
balance for working purposes so as to avoid too
frequent borrowing, or at least to avoid borrowing
at inopportune times. To m aintain an adequate
THE SECRETARY'S REASON S

INTEREST CEILIN G ON SA V IN G S BONDS
In his
message to Congress the President said that im ­
proving the terms of savings bonds so as to make
them more attractive would “ . . . strengthen the
contribution of the program both to habits of thrift
throughout the Nation and to a better structure
of the public debt.” Secretary Anderson spelled
out these reasons in testifying before the House
W ays and M eans Committee.
The Secretary stressed the contribution to thrift

Because Treasury spending exceeds receipts by larg e amounts during h alf of the year, a higher debt limit is tem porarily necessary.

$ Bils.

B U D G E T R EC EIP T S—S E M IA N N U A L
FISCAL YEARS 1956-1960

50

40

30

20

10

0
 1956
p. Prelim inary


_________________________________________________
1957
)et Message.

1958

1959

1960

habits by purchases of E and H bonds on payroll
savings plans. Alm ost half of current sales are
accounted for by purchase on payroll savings plans
by some eight million Americans. “ M any of these
savings grow out of the payroll plan, savings
which would not take place in such volume if it
were not for the savings program .” The discipline
of paycheck deductions to buy savings bonds has
helped many sm all savers to save regularly. As
of last Jun e more than $42.5 billion of E and H
bonds were outstanding.
A s to the debt structure, the Secretary pointed
out that the savings bond program puts more of
the public debt in the hands of long-term investors
who hold on to their savings in this form. “Few
people realize that the average dollar invested in
these bonds stays w ith the T reasury approxim ately
seven years.” T his cuts down the T reasu ry’s need
to turn to short-term inflationary borrowing.
NEED FOR HIGHER RETURN
The need for in­
creasing the interest return to make savings bonds
more attractive was related to the fact that cash-ins
were outrunning sales in 1959 and by increasing
amounts. T his in turn reflected the worsening
competitive position of such bonds as an outlet for
savings. The rate of interest return on E and H
bonds had become much less favorable, in com­
parison with savings accounts as well as with other
types of securities—both Government and private.
To improve im m ediately the competitive posi­
tion of savings bonds interest-wise the T reasury
proposed a higher rate—at least l 2 °/c per annum
/
more— on new bonds if held to m aturity, and on
future earnings of outstanding bonds if held to
m aturity. The Secretary noted this would result
in equitable treatm ent of all bondholders; it would
leave present holders little incentive to cash bonds
and buy new ones—an operation costly to both
the investor and the T reasury.
INTEREST CEILIN G ON OTHER TREASURY BONDS

Ju st as in the case of the debt ceiling, the interest
ceiling on all new issues of T reasury bonds (other
than savings bonds) traces back to the transition
from the pre-W orld W ar I financing practices in
which the Secretary of the T reasury had little
discretion to the broadening of the T reasu ry’s au­
thority in the F irst and succeeding L iberty Bond
Acts. The F irst Liberty Bond Act in A pril, 1917,
set a 3^2% ceiling on new bonds, the Second Act
in September, 1917, increased this to 4°/c, and the
T hird and Fourth Acts (A p ril and Ju ly , 1918)
called for a
ceiling. T his latter ceiling has
held ever since on all new T reasury bond issues,
4



which includes all issues m aturing in more than
five years.
In discussing the 4 ^4% ceiling, Secretary
Anderson pointed out, “U ntil recently, the trend
of interest rates in the past 25 years has made
the 4 ^ -percent ceiling a somewhat academic
problem.” W h y ? Because it should be remem­
bered that interest after all is sim ply a price—a
price determined basically by the supply and de­
mand for credit. In the 1930’s the depressiondiminished demand for funds on the one hand,
and a sw elling supply of funds on the other hand,
resulting from a substantial inflow of gold into
this country, had depressed interest rates to un­
usually low levels. In the 1940’s to assist in the
financing of W orld W ar II the Federal Reserve
System supplied billions of dollars of funds to
meet essential demands and kept interest rates at
artificially low levels—well below the 4^4% ceil­
ing. Supplying these funds, however, resulted
in additions to the money supply far outrunning
the flow of goods and services, with a conse­
quent build-up of inflationary pressures—pressures
which erupted in the postwar period.
NO LON GER AN A CA D EM IC PROBLEM To try to
regain some measure of control over these infla­
tionary pressures, the Federal Reserve, beginning
in 1951, ceased supplying all the funds demanded
in expansionary periods, such as the present one.
As a result interest rates again have been more
responsive to free m arket forces of demand and
supply for credit, resum ing their more traditional
role in allocating resources. A s m arket forces have
been m arked recently by unusually strong demands
for credit by business, Government, and indi­
viduals, interest rates have risen sharply—cur­
rently to the highest level in m any years.
Thus the 4^4% ceiling is no longer an academic
problem for the T reasury. To compete for funds
in the m arket the T reasu ry must sell securities at
attractive rates, and in the present m arket this
means rates above 4 /4%. M arket conditions have
made the 4^4% ceiling a barrier to borrowing—
other than on short-term securities not subject to
the ceiling—and, according to the Secretary, a
“barrier to effective debt m anagem ent.” It is a
barrier to effective debt management since it forces
the T reasury to do all of its borrowing on short­
term securities where it is not subject to the rate
ceiling and can compete interest-wise. T his means
reliance on borrowing that must be renewed at
short intervals ; the T reasury must constantly take
its hat in hand and ask for funds. Even more im-

C O M P A R ISO N OF YIELDS O N M A RKETABLE TREA SURY SECURITIES
A N D INTEREST RATE C EILIN G , SEPTEMBER 1, 1959

Per
Cent

5 .0 0

4.7 5 -

4 .5 0

4.2 5

4 .0 0
Dots show yield on each issue of over one y e a r m aturity.

3.75

J— i— i— i___ i___i___i___l___ i

i
10

C u rv e reflects g en e ra l re lation ship of these yie ld s an d y e a rs to m aturity

15
20
Y e a rs to M aturity

25

30

35

* A p p lies to Treasu ry bonds issued w ith a 5 y e a r or long er m aturity.

O n most Treasury securities the market has established yields above the 4’/4% rate the Treasury is allow ed to offer on longer issues.

portant, it can only ask for short-term funds and
this has serious inflationary implications. For
issuance of the T reasu ry’s short-term debt gen­
erally involves selling such securities to commer­
cial banks— except when nonbank demand is un­
usually strong—and this in turn means that bank
deposit money increases and m ay press on the
m arket for goods with possible inflationary price
rises as a result. In the President’s words, “The
piling up of an excessive amount of short-term
debt poses a serious threat that m ay generate
both the fear and the fact of future inflation at an
unforeseeable tim e.”
How did Congress
respond to the President’s appeals and the T reas­
u ry ’s proposals? Congress responded almost im­
m ediately to the debt ceiling proposal, took action
near the close of the session on the interest ceiling
on savings bonds, and made no change in the in­
terest ceiling on other T reasury securities.
D uring the latter part of June, Congress passed
a bill raisin g the permanent debt ceiling to $285
billion ($3 billion less than requested) and raising
the tem porary debt ceiling to the requested level of
$295 billion, at least for the 1960 fiscal year. The
unw illingness to raise the permanent debt ceiling
beyond $285 billion reflected the fact that the pub­
lic debt was not expected to exceed that amount
on Jun e 30, 1959, and that the outlook for fiscal
1960 was for a level of budget receipts sufficient
to cover budget expenditures.
Considerable Congressional debate arose this
C O N G R ESS LIFTS CEILINGS




summer over the interest rate ceiling proposals
and by late A ugust no action had been taken. On
A ugust 25 the President sent another special
message to Congress again urging removal of the
interest rate lim its both on savings bonds and
other new issues of T reasury bonds, resting much
of his case on the grounds that failure to remove
these lim its would necessitate excessive reliance
on short-term financing with grave consequences
to the purchasing power of the dollar. Following
the President’s plea, Congress voted to perm it the
T reasury, not unlim ited authority to increase the
interest on savings bonds, but immediate authority
to increase rates up to 4
so that the T reas­
u ry ’s proposals in this area could take effect.
Despite the P resident’s special plea, the Congress
rejected the request for the removal of the interest
rate ceiling on longer-term marketable bonds. It
did, however, pass a bill perm itting advance re­
funding of outstanding issues with the privilege to
the security owner of postponing the tax liability
or credit on the sw a p ; this does not solve the
T reasu ry’s problem in operating under the 4 Y ^ o
ceiling but would perm it debt lengthening more
readily if interest rates decline.
Congress, therefore, concluded its long 1959
session—long in part because of its long look at
ceilings— with higher ceilings on the national debt
and savings bond interest rates, but with the
T reasury still facing the critical problem of bor­
rowing some $85 billion over the next year—all
on a short-term basis unless interest rates decline.
5

On August 1 about 10% of the 3,40 0 m iles of interstate hig hw ays
proposed for the District had been completed and an additional
20% w a s under construction or aw aitin g bids.

The nation also

had 10% of the 41,000-m ile program completed and had 13%

REDRAWS
THE
MAP

under construction.

The District has spent or obligated $486

million in Federal and state funds for engineering, right-of-w ay,
and construction since the program started in 1956.
New con­
struction of the interstate system had been threatened recently
by inad eq uate funds.

Continuation of the program is assured,

how ever, by a one-cent increase on October 1 in the Federal
gasoline tax to be used for this purpose.

H A G ER STO W N

IBALTIMORE

A S H IN G T O N , D. C.

H U N TIN G TO N

CH ARLESTO N

RICH M O N D

N EW PORT NEWS
N ORFOLK
\

W IN STO N -SALEM

G R EEN SB O R O
DURHAM
RA LEIGH

A SH EVILLE

CH ARLO TTE

G R EEN V ILLE




INTERSTATE
COMPLETED
CO LU M B IA

INTERSTATE
UNDER
CONSTRUCTION
OR PARTIALLY
COMPLETED
CH ARLESTO N

PORTSMOUTH

BANKing on AUTO
a survey by the Ric
Electronic com puter—W achovia Bank and Trust Com pany

L ast year 12 billion checks. . . B y 1970, 22 bil­
lion. To handle this avalanche of paper, the
banking industry is banking on automation and
p articularly on a new revolutionary method of
check handling. Other businesses w ith a back­
breaking paperwork load are w atching closely the
development by the banking industry of M IC R —
M agnetic Ink Character Recognition. T his method
provides for reading of the original data by m a­
chines as well as by men, and thus has broad
significance for all record-keeping jobs. John and
Jan e Public also are becoming fam iliar with the
M IC R language—the strip of specially designed
A rabic num erals at the bottom of this page—as
more and more banks prepare for mechanization
by issuing checks with this type of numbers im ­
printed in magnetic ink.
The adoption by the American Bankers A sso­
ciation of this common language for checks and a
standard location for depositors’ account numbers
on checks is a m ajor break-through in bank opera­
tions. These decisions were not finalized until
December 1958 and represent several years of in­
tensive study and research. Equipment m anu­
facturers are producing m achinery that autom ati­
cally w ill read checks, sort them in any order, and
perform bookkeeping tasks. Equipment to meet
the needs of varied sizes of banks has been de­
signed—from the semiautomatic electronic book­
keeping machines to system s linked to a high -speed
electronic computer.
But bankers have not been sitting on their
hands w aiting for a common-language-machine




system for checks. Great strides have been made
in other procedures for speeding up the handling
of checking accounts as well as such areas of bank
operations as consumer loans, m ortgages, and trust
accounts. Banks have used punched card account­
ing methods for years and were among the first
industries to use computers.
Because of the rapid changes taking place in all
areas of bank mechanization, the Richmond Fed
canvassed the larger D istrict banks on their pres­
ent status and future plans for automation. Every
bank with deposits over $25 m illion was asked to
fill in a short questionnaire. The usual splendid
cooperation of D istrict banks resulted in a reply
from every one of the 70 banks surveyed. Here
are the results of the survey.
WHO'S AUTOM ATED E very shade of bank mech­
anization showed up in the survey—from the deep
hues of a computer now in use and having under
consideration the highest powered equipment for
reading m agnetic ink characters to the light shade
of the “w ait and see” approach to the problem.
The question then arises as to how to define an
automated bank. In sum m arizing the survey re­
sults, the word “autom ated” w ill be used to
describe a bank using semiautomatic bookkeeping
machines or the equipment usually pinpointed as
data processing—the conventional punched card
tabulating equipment or an electronic computer.
As expected, the larger the bank, the higher the
degree of automation. T w enty of the 25 banks
with deposits $100 million and over have some

Electronic posting m achines—Southern Bank & Trust Com pany

Punch

of this equipm ent: 3 use an electronic com puter;
18, punch card equipm ent; and 14, the sem iauto­
matic posting machines. Only 2 of the 20 confine
their automation to these latter machines. The
sm aller banks—-those with deposits ranging from
$25 to $100 million—were, of course, less auto­
mated, but their showing was nevertheless im­
pressive. Nineteen of these 45 banks have in­
stalled electronic posting machines, and 1 bank
uses punched card equipment.

duced several years ago. Around 85% of the 39
automated banks and around one-half of all the
reporting banks use this equipment for demand
deposit accounting, with regular checking accounts
having a slight edge over the special checks. Some
banks are using this equipment as a step toward
further automation of their checking accounts.
These machines can be linked to other automated
check-handling equipment or to a standard dataprocessing system. Also these machines require
numbering the depositors’ accounts—prerequisite
for the M IC R equipment.

WHAT'S USED FOR WHAT
Alm ost all of the rec­
ords required in performing the services by banks
for their customers have been tackled with
punched cards. For example, they are used to
keep track of loan repayments, trust accounts,
Christm as and vacation club accounts. T heir use
is also popular for internal bank operations— such
as in calculating the payroll, in analyzing the
bank’s securities portfolio, and in performing other
cost accounting duties. D istrict banks reported
payroll, consumer loans, and trust accounting as
the three most popular applications; club accounts
and m ortgage loans tied for fourth place.
Punched cards are even being used for check­
ing accounts—the No. 1 paperwork job of banks
and, currently, the least mechanized. Three Dis­
trict banks use regular punched card equipment
and two others an electronic computer for their
special checking accounts; and one bank has its
regular checking accounts on a computer.
Most banks, however, have left this area of
operations to electronic posting machines intro­

card

equipm ent—Union

Com pany

of

M aryland

WHAT'S ON THE DOCKET
Movement towards a
fully automated bank is evidenced by the number
of banks with equipment under active considera­
tion. Of the 19 banks with punched card equip­
ment, 9 are considering the installation of an
electronic computer and 12 an electronic check
sorter. Of the other 20 automated banks, 5 have
a check sorter and 1 a computer under consider­
ation. Over half of the nonautomated banks plan
use of electronic posting m achines; half of these
banks are in the deposit size class $25-$50 million.
Most D istrict bankers indicated a strong and
grow ing interest in bank mechanization. T heir
comments pointed out that today is a period in
the banking industry for exploring, exam ining,
evaluating, and planning for data-processing sys­
tems that w ill enable it to serve customers and a
grow ing economy still more rapidly and efficiently.

A d e t a i l e d st at ist ic al c o m p i l a t i o n o f r e p l i e s to t h e
Bank A u t o m a t i o n S u r v e y is av ai labl e o n r e q u e s t .

5E ; ID I
>




Trust

9

The Fifth District
Probably the most frequently repeated state­
ment on business conditions in the past three
months w a s : S o j a r , t h e e f f e c t s o f t h e s t e e l st ri ke
h a v e b e e n c o n f i n e d to a j e w i n d u s t r i e s a n d to a
r e l a t i v e l y fezv cities. T h e i m p a c t o n g e n e r a l e c o ­
n o m i c a c t i v i t y h a s b e e n f a i r l y light.
The applicability of this generalization to the
Fifth D istrict is indicated by the latest em ploy­
ment figures. The number of nonfarm workers
on payrolls, which does not include w orkers on
strike, eased downward .9% from the Ju ly total
when adjusted for seasonal tendencies. The de­
cline w as due entirely to the effects of the steel
strike on m anufacturing, mining, and transporta­
tion. Employment in other lines—construction,
service industries, government, and finance, in­
surance and real estate increased. The number
on the A ugust payrolls of stores and other trade
organizations remained unchanged.
Furtherm ore, the decline in total employment
in the D istrict centered in M aryland and W est
V irgin ia, the principal locations of the D istrict’s
steel plants and bituminous coal mines. There
were over 28,000 steelworkers in M aryland and
8,000 more in W est V irgin ia (m ostly in Fourth
D istrict counties) on strike at mid-September.
Over 4,000 more workers in other industries in
the former state and 10,000 in W est V irgin ia were
One of the serious effects of the prolonged

10




also unemployed at that time as a direct conse­
quence of the steel strike.
Slight gains in employment, on the other hand,
occurred in V irginia, N orth Carolina, and South
Carolina. In V irgin ia, for exam ple, only 500
steelworkers were out on strike, and gains
recorded by both m anufacturing and nonmanufac­
turing industries raised total nonfarm employment
to an all-tim e high. Unemployment, as a per
cent of the Old Dominion’s labor force, dropped
sharply to 3.6% in A ugust from 4.1% in the pre­
ceding month.
M AN U FACTU RIN G M AN-HOURS DOW N
The
m ark of the steel strike on economic activity in the
Fifth D istrict is more clearly discernible in the
record of hours worked in m anufacturing plants.
The total in A ugust, adjusted for seasonal in­
fluences, declined 1.5% below the preceding
month’s figure. The most severe losses, of course,
occurred in prim ary metals and fabricated metal
products. However, declines showed up also in
such other durable goods industries as furniture
and stone, clay, and glass. Despite favorable
order backlogs in the textile and apparel indus­
tries, tem porary operating adjustm ents resulted in
declines in man-hours worked in A ugust in certain
divisions of the industries. In all instances man-

steel strike has been the slump in carloadin gs of bituminous coal at

District mines.

hours exceeded by moderate m argins year-earlier
figures. The over-all strength of the textile in­
dustry, however, was reflected in a rise in total
man-hours worked in North C arolina’s factories.
In this state, where textile m ills employ over 50%
of all m anufacturing workers, the significant eco­
nomic indicator, man-hours, rose slightly during
A ugust contrary to the declines in the other four
D istrict states. Contributing to the rise in North
Carolina were substantial gains in cigarette fac­
tories and in lumber and wood mills.
"CH RO N IC LABOR SURPLUS" AREAS
The De­
partm ent of Labor has classified 70 areas in the
nation as centers of “chronic labor surplus” be­
cause of their relatively large unemployment in
the past five years. The list included 17 m ajor
industrial centers, two of which—Charleston,
W . V a. and A sheville, N. C.—are in the Fifth
District. The report pointed out that coal mining,
textile, and auto industry towns bear the brunt of
chronic unemployment. To be listed, an area must
have had at least 50% more unemployment than
the national average during four of the past five
years. A ll the areas in the report released by Sec­
retary of Labor M itchell fared worse than the rest
of the nation during the 1957-58 recession and are
laggin g far behind in the climb up from the bottom
of that business setback. Thus, while the country
has recovered about 93% of the recession job
losses, the report states that the 17 chronic unem­
ployment areas have regained only 31% .
FURNITURELAND, U .S.A.
Furniture m aking has
been one of the m ajor pacesetters in the recovery
of the D istrict economy from the 1957-58 reces­
sion. From the low point of the recession until
A ugust 1959 total man-hours worked in all m anu­
facturing plants in the District increased almost
10%. In furniture factories the extent of the re­
covery, as measured by man-hours, was almost
double that— 19%. The latest reports indicate
that new orders received by District furniture
plants in A ugust declined from the record amount
booked in Ju ly but remained, nevertheless, at a
relatively high level. Since they outran shipments,
unfilled orders rose to what was probably an alltime high. O rders, production, and shipments
were all about one-third greater in the first eight
months of this year than they were in the same
period last year.
North C arolina and V irgin ia are the leading
producers of wood household furniture in the
nation, m aking almost 50% of all the dining room
and bedroom wooden furniture in the country.




District furniture operations have expanded faster since the
recession than have operations in all m anufacturing industries.

T his area is also important in the production of
upholstered furniture, North C arolina being the
second largest producer among all states, with
about one-tenth of total output.
Active interest of buyers at the October South­
ern Furniture and R ug M arket in the H igh Point
A rea would help to m aintain new orders at the
advanced levels attained through the first three
quarters. B uyers from all over the nation are in­
specting exhibits of the D istrict’s furniture m akers
this month at showings in such other centers of the
industry as D rexel, H ickory, Lenoir, Lexington,
Morganton, Thom asville, and W inston-Salem in
North C arolina and M artinsville in V irginia.
C O A L UPTURN ANTICIPATED
D aily production
of bituminous coal by District mines averaged
450,000 tons in the first nine weeks of the steel
strike. This was 20% , about 113,000 tons, below
the high point for the year reached in June. R e­
firing the furnaces in steel m ills following settle­
ment of the strike should give rise to an upsurge
in coal production. It was reported at m id-Sep­
tember that steel companies were placing some
orders for coal in anticipation of the inevitable
conclusion of the long drawn out labor-m anagement dispute. In any case there was an increase
in carloadings in the week ended September 19 to
a high for the period of the strike.

1
1

Overseas shipments of coal through D istrict
ports for the first eight months of this year were
one-third less than last year. This is a m ajor
cause of the coal industry’s difficulties, since e x ­
ports accounted for one-fourth of the coal mined
in the D istrict in 1958. The over-supply of coal
in Europe continues, and 12-15 mines in the Ruhr
V alley w ill close voluntarily over a tw o-year
period in an effort to solve the problem of surplus
production. T his would close down from 6 to
10 million tons of the R u h r’s annual capacity of
130 million tons.
TEXTILES The most common trade report on the
textile m arkets since early Ju ly has been, “B uying
continued slow with only limited sales.” About
the middle of September reports began to change
to read, “A pickup in the pace of trading is evident
in the textile m arkets.” This increased buying
took place especially in print cloths but combed
goods and some synthetics also sold well. These
sales were for delivery in the first quarter of 1960
and brought m ills into a fairly good sold-ahead
position on print cloths for that period. Even
before this, however, backlogs of unfilled orders
had continued through the summer at relatively
high levels in most D istrict mills.
The September pickup in m ill sales also in­
cluded synthetic fabrics. Rayon, acetate, and
nylon goods sold in moderate quantities for first
quarter delivery before the flurry subsided toward
the end of September. This m arket had been very
slow and some secondhand goods had sold at
prices below m ill levels. These m ills generally
have good backlogs of orders for the rest of this
year.
Backlogs of orders at yarn m ills are at very
high levels. M ills are almost solidly booked for
fourth quarter, and carded yarns are in especially
tight supply. Prices of carded yarns are, of
course, firm as spinning mills find it increasingly
difficult to fill orders for early delivery. The
Carded Y arn Association in Charlotte reports that
on September 5 its members had backlogs of
orders equal to 10.61 times stocks on hand. This
compares wT backlogs that were 5.72 times stocks
ith
on hand at the same time last year. Inventories
at spinning m ills were at low levels—equal to only
1.11 w eeks’ production on September 5 compared
with 2.22 w eeks’ production last year.
Back-to-school demand for children’s clothing
and seasonal demand for women’s and men’s w ear
have kept knitting m ills busy. Backlogs of orders

12




at most m ills are quite large, and some trouble
meeting deliveries has been reported. Most mills
knitting seamless hosiery are booked for the rest
of the year. Seasonal conditions have brought
about an improved demand for full-fashioned
hosiery.
CON SUM ER SPEN DIN G STRON G
Seasonally ad­
justed sales by D istrict departm ent stores in Ju ly
and A ugust added up to near-record volumes,
topped, in fact, only by the total of the peak month
of A ugust, 1958. Incomplete w eekly figures in­
dicate that sales in September m ay have fallen off.
It is likely, however, that the total for the month
was above the year-ago figure. The September
decline appeared to be centered in the Baltim ore
area and undoubtedly w as a consequence of the
thinning pocketbooks of the 28,000 steelworkers
on strike from Bethlehem ’s giant Sparrow s Point
mill.
F urniture store sales also displayed consider­
able strength in A ugust by holding close to the
record-high volume of the preceding month. A d­
justed for seasonal variations, the A ugust index
of District furniture store sales w as at the second
highest point in 1959. The total for the first
seven months of the year was more than onefourth greater than last year.
BAN KIN G The big news in D istrict banking is
the continued boom in bank loan demand. Loans
of 20 of the D istrict’s largest banks climbed an
impressive 1.4% the first four weeks of Septem­
ber—the fastest September rise in m any a day.
The m id-Septem ber loan-deposit ratio— quite a
good indicator of loan demand— reached an aver­
age of 48% at all District member banks after a
3 percentage point jum p in one short year.
H eavy loan pressures have also led the banks
to tap the Federal R eserve’s discount window
relatively frequently and to liquidate substantial
amounts of investments. B y mid-Septem ber, Dis­
trict member banks had cut their Government
holdings enough to reduce Government securitydeposit ratios to only 29°/o of deposits. A year
before the ratio w as over 32% .

PH O TO

CREDITS

Cover—Architect of the C ap itol
and Trust C om p any
pany

-

Union

Trust

8. W achovia Bank

9. Southern Bank & Trust Com ­
Com pany

of

M aryland

C h esap eake and Ohio R a ilw a y Com pany
Furniture C om p any.

10.

11. Drexel