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MONTHLY REVIEW IN THIS ISSUE: • Incomes Policies: A Quick Critique • Measuring Monetary Policy • Banking Nntes • Index for the Year 1970 • District Business Conditions FED ERA L R ESER V E BAN K OF A T L A N T A DECEMBER 1970 In c o m e s P o lic ie s : A Q u ic k C r it iq u e A high and growing level of employment, low unemployment, a stable price level, a high rate of economic growth, and a reasonable balance of international payments are five economic ob jectives that have top priority in almost all countries. There are numerous economic policies or tools available to any government for use in achieving these goals. Indeed, they comprise a broad spectrum of policy measures, ranging from direct intervention in the economy to very broad and general measures that affect the econ omy in a primarily indirect manner. Some rela tively new measures that have recently received increasing attention in this country are the in comes policies. This article focuses on incomes policies. To provide background, however, it begins with a brief discussion of more conventional policies and notes some of their alleged deficiencies. These problems have led to development of M o n t h l y R e v i e w , V ol. L V , N o . 12. F re e su b scrip tio n an d a d d itio n a l c o p ies a v a ila b le u p o n req u est to th e R e se a rc h D e p a r tm e n t, F ed e r a l R e se rv e B a n k of A tla n ta , A tla n ta , G eorgia 30303. 174 incomes policies in some nations and, more re cently, to calls for such a policy in the United States. The article points out in general terms what actions might comprise an incomes policy and asks how well incomes policies have worked in actual experience, especially with regard to their generally accepted purposes. M o re C o n v e n t io n a l P o lic ie s On one end of the spectrum of economic policies are two general or aggregate tools—monetary and fiscal policies. Essentially, both monetary and fiscal policy actions indirectly affect the econ omy. They are designed to influence the eco nomic decisions of individuals, rather than ac tually dictate the decisions. These policies do not determine directly the incomes most of us earn or the prices we pay for our purchases. There are exceptions, of course. Certainly, the income of a person who entirely depends upon Social Security would vary directly with govern ment action. Nevertheless, these policies usually operate indirectly, rather than directly, on our economic decision-making. Monetary policy in the United States is deter mined and carried out by the Federal Reserve M O N T H L Y R E V IE W On one end of the spectrum of economic policies are two general or aggregate tools— m onetary and fiscal policies. System. By adjusting the supply of reserves available to banks, the Federal Reserve can af fect the supply of money and available credit in the economy. This, in turn, affects the price of credit, the investment decisions of investors, and the purchasing power of consumers. Thus, total spending in the economy can be spurred either to absorb unused capacity or can be restrained to relieve the pressure on an inflationary economy. Fiscal policy operates primarily through the budgetary activities of the Federal Government. By increasing or decreasing its own expenditures, the Government directly adds to or detracts from total spending. By lowering or raising taxes, the spending power of the private sector of the econ omy is increased or decreased. C a lls fo r C o n tr o ls Until recently, general monetary and fiscal poli cies have carried the burden of the fight against inflation in the United States. They have not been without opposition, however. Some critics contend that, because of the complex and indirect channels through which monetary policy operates, it is effective in cooling an overheated economy only after a long delay. Many observe that, for various reasons, monetary policy discriminates between various sectors of the economy. For ex ample, in a period of scarce credit, housing and state and local governments are usually placed under greater strain than are other sectors. Fiscal policy is assailed because of the time required to make policy adjustments. Even if changes in expenditures and taxation are effec tive policy instruments, they usually require Con gressional action, which is not always rapid and may be influenced by political considera tions. Worse still, many critics argue that even if restrictive monetary and fiscal policies were ef fective in curtailing excess demand, they would still not be sufficient to stop the spiral of price increases. Thus, we are told that the nation will end up with the worst of all possible worlds— inflation and high unemployment. The current pressures on prices, according to critics, come D ECEM BER 1970 from the cost or supply side of markets, and monetary and fiscal policies are not effective in fighting this “cost push” aspect of inflation. How can this be? There are several reasons why prices may not respond immediately to reduced demand. First, much of the economy is not characterized by numerous, highly competitive small firms, a necessary condition for what economists call “perfect competition.” Instead, the economy con tains many firms which may have considerable influence over the prices they charge. Once these firms have set a price, they are reluctant to reduce it. Cuts in production are preferred to price cuts when output cannot be sold at existing prices. Also, demand slowdowns are often accompanied by rising costs. Despite production cuts, some companies may be initially reluctant to lay off trained personnel for fear of losing them to other companies. As output falls, output per man-hour, or productivity, tends to fall. At the same time, workers attempt to catch up with past inflation by demanding wage increases. With productivity declining and wage rates rising, unit labor costs of output rise. Thus, even in the face of declining demand, there remain pressures to keep prices from falling. Eventually the decline in output and rising costs lead to layoffs. Unemployment rises. Unit labor costs begin to fall or rise more slowly. Productivity increases. Companies undertake other cost-cutting procedures. But with continued pressure on wages, the results of these efforts come slowly. Prices may continue to rise for a time. Also, unemployment may continue to rise until workers locate existing job vacancies or until growth in the economy is sufficient to provide new jobs for the unemployed. Critics of restrictive policies found support for their views in the economic development of the past six or nine months. For a painfully long time, prices seemed to have continued a relent less rise; unemployment has increased; and the economy has behaved sluggishly. Despite recent indications of better price performance, cries are still heard for different policies, either to ob tain or to speed the necessary economic adjust ments. But what other policies are available? Recall that monetary and fiscal policies lie at one end of the spectrum of economic policies. At the other end lie direct or compulsory con trols. These policies directly affect many of the economic decisions of individuals. In general, they are designed to fix specific prices, wages, 175 D espite recent indications of better price per formance, cries are heard for different policies, either to obtain or to speed necessary econom ic adjustm ents. profits, credit, or perhaps even types of produc tion, especially during periods of inflation. The individual businessman would be prohibited from charging more than a certain ceiling price for his product. The individual worker could not receive more than a ceiling wage for his labor services. The individual consumer also might be prohibited from purchasing an item for which he does not have sufficient rationing points. Clearly, such policies greatly interfere with freedom of choice. In addition, they substantial ly distort the workings of a free enterprise econ omy. Usually, these policies require a large bureaucracy merely to implement the controls. Because they are fixed, prices cannot perform their vital role as signals to producers and con sumers, and cannot direct productive resources into areas of greatest demand. Consequently, compulsory controls not only hinder individual freedom but also undermine efficient produc tion processes. As a substitute for well-conceived, responsible monetary and fiscal policies, direct controls are not particularly attractive. Even worse, historical experience has shown that they do not eliminate, but only temporarily suppress, the basic causes of inflation. For example, direct controls could not offset ill-conceived, irrespon sible monetary or fiscal policies. In c o m e s P o lic ie s The undesirability of compulsory controls has led most critics to seek milder measures. Most often, they have urged that wage-price guide lines be established for the United States econ omy. This measure has been sought as a supple ment to, not a replacement for, corrective mone tary and fiscal policies. Critics maintain that guidelines would assist the more general mea sures by shortening the time required for them to slow the rise in prices and thus prevent at least some of the rise in unemployment. Guide lines would assist in offsetting cost-push pres sures. Wage-price guidelines are one variation of an other type of economic policy, incomes policies. 176 During the 1960’s, incomes policies of various sorts were employed to help achieve the goals of stabilization policy in numerous countries. These policies vary from country to country in both objectives and methods, and there is no generally accepted definition of an incomes policy. In the spectrum of economic policies, they fall somewhere between the general or in direct monetary and fiscal policies and direct, compulsory controls. Incomes policies seldom involve actual direct controls but often restrain the more or less free reins allowed by general monetary and fiscal policies. Most incomes policies are designed to reconcile the economic goals of individuals (such as higher profits by managers and businessmen) with the economic goals of the nation as a whole (such as stable prices). Usually an incomes policy is primarily concerned with the advance of the general price and wage levels, rather than with wages and prices in particular industries. In some countries, the government not only defines acceptable limits for overall increases in wages, prices, and profits but also sets a more or less exact criterion for the distribution of in comes among the various categories of income recipients. For example, the government might decide that, in the aggregate, wage earners should receive 65 percent of the national income. One reason for the difficulty in defining an incomes policy is the different emphasis given to the various objectives of these measures in several nations. Rather than attem pt a general definition, let us look at three varieties of an in comes policy that have been used in the Netherlands, the Scandinavian nations, and the United States. This will highlight the variations in the approaches and also permit us to draw some conclusions about the effectiveness of these policies. Incomes Policy in the Netherlands Among the Western nations, the Netherlands has had one of the strongest incomes policies. The dependence of the nation’s economy on foreign trade has resulted in extraordinary cooperation between trade unions, business, and the govern ment. All have realized the importance of main taining the country’s international competitive position; all have been willing to accept an in comes policy. After World War II, the Netherlands faced the task of rebuilding its economy. To assist in ac M O N T H L Y R E V IE W complishing the reconstruction without sacrific ing its international competitive position, a strong incomes policy was adopted. Wage- and price-fixing machinery was established. Although controls were compulsory, they were greeted by an exceptional spirit of cooperation between all sectors of the economy. In 1945, the Labor Foun dation was established to formalize cooperation between labor and management. In the same year, an Extraordinary Decree on labor relations set up a Board of Mediators with the power to fix wages and determine rules governing wage changes. The Board was also given the power to administer penalties and sanctions. However, the Board was required to seek the advice of the Labor Foundation and, in practice, generally followed its recommendations. In 1950, another organization was established— the Social and Economic Council. The Council is comprised of equal representation from gov ernment, business, and labor. Whereas the Labor Foundation is concerned primarily with wage policy on the industry level, the Council focuses on broader, national objectives (including the distribution of income). A m o n g th e W e s te r n n a tio n s , th e N e th e r la n d s h a s h a d o n e o f th e s tr o n g e s t in c o m e s policies. Between 1945 and 1954, wages were controlled in the Netherlands. No increases were allowed without permission of the Board, and wage boosts were allowed only for cost-of-living increases. Some differences were allowed, however, where job skills differed, in order to induce workers to advance. Since economic recovery was underway, wages as a share of Gross National Product fell during this period. In 1954, the Council developed a new policy. Rather than merely maintaining the purchasing power of wage earners, real wages would be al lowed to increase. Wages as a share of GNP would remain constant. Overall wage increases were negotiated on this basis, largely through col lective bargaining. Wage differentials between jobs, however, were permitted to increase. A new government in 1959 instituted yet an other new policy. Emphasis was shifted from economy-wide wage adjustments to changes by particular industries. Wage increases in each in D ECEM BER 1970 dustry were tied to productivity advances in that industry, as estimated by the Board of Mediators. Industries with higher-than-average productivity advances had to pass on some of the advances in the form of both lower prices and higher wages. Falling prices in high productivity industries meant that wage increases could be granted in industries with slow productivity growth and reflected in higher prices without af fecting overall prices. The task proved too difficult for the Board of Mediators, and dissatisfaction with the estimates grew. Accurate estimates of productivity in creases by industry are difficult to estimate. Also, rapidly rising wages in other nations put pressure on the Board’s standards. Labor demand in the Netherlands was high and wages actually paid often exceeded approved levels. By 1963, the program had to be changed again. Responsibility for individual negotiations was shifted to the individual firms and unions. Settle ments were submitted for approval to the Labor Foundation, which in turn was influenced by the Economic and Social Council's assessment of the economic climate and acceptable wage increases. The Board of Mediators entered the process only if the Foundation disapproved specific settle ments, but the Board did retain formal powers to control wages. These new arrangements did not last; the same demand pressures developed again. In 1967, the entire system was dropped and free negotiations were permitted. The government, however, still retains the power to invalidate individual agree ments. But what about prices? Throughout the post war period, the government also had extensive legal control over prices. However, the threat of control was sufficient in itself, and actual pricing policies were based almost entirely on voluntary cooperation between the government and busi ness. Price policy was actually carried out by the Ministry of Economic Affairs. The Ministry received advance notice of price increases for all goods and services, along with the justification for these price hikes. If the Ministry did not ap prove, it usually requested that they be rescinded. If this failed, legal powers were available to force a rollback. Throughout the postwar period, price and wage policies were closely coordinated. For example, in 1951, prices were raised by 10 percent, but wages by only 5 percent, in order to restore ex177 tem al balance. A 5-percent wage increase in 1964 was passed on into a 5-percent price in crease. These close policy links provided the Netherlands’ government with considerable in fluence over wage and profit incomes and the uses to which income was put. Investment ex penditures were stimulated, while consumption was minimized. In summary, the Netherlands moved from a policy of virtually direct controls to progressively less restriction until 1969.1 There is reason to be lieve that the policy greatly aided the nation to achieve a stable reconstruction without seriously eroding its international competitive position. As the recovery proceeded, the vital cooperation be tween economic sectors began to diminish, and the government’s ability to rely on voluntary restraint dissipated. Free market forces finally dominated. Throughout the postw ar period , price and wage policies were closely coordinated in the N etherlands. The Scandinavian Experience Among the Scandinavian nations, Norway’s in comes policy most closely resembles that of the Netherlands. Both nations faced similar prob lems. Direct government regulation was relied on to speed postwar recovery without damaging the international competitive position. Price and profits controls were extensively utilized in Nor way, but since then have been progressively relaxed. Compulsory arbitration of labor disputes was employed until 1952. However, the various economic policies have not been so closely co ordinated as in the Netherlands. Wage negotia tions, conducted on a national level between un ion and management groups, usually set patterns for industry- and firm-level negotiations. The government does not enter directly into the 1Recently, this trend has been reversed. In 1969 and 1970, the Netherlands’ government used price controls with varying de grees of effectiveness. These have now been extended in the form of guidelines until March 1971. Also, the budget proposal for 1971 provides for a temporary wage freeze. 178 Am ong the Scandinavian nations, N orw ay’s incomes policy m ost closely resembles that of the Netherlands. . . . Sw eden presents a slightly different picture. negotiations but, rather, merely announces what it considers acceptable settlement limits. Through out most of the 1950’s, government influence was used sparingly. But in 1968, compulsory arbitration was reinstated to settle stalled negotiations. On the whole, government interven tion in the economy was not quite as detailed as in the Netherlands; however, it has remained somewhat stronger. Sweden presents a slightly different picture. The government’s policy maneuvers in that country have been intermittent. The manual labor force and the white collar labor force are organized into two separate unions, and conse quently, it has been more difficult for nationwide bargaining to achieve settlements consistent with national economic objectives. As in Norway, Sweden’s formal administrative framework is not as elaborate as in the Netherlands. Beginning in 1948, the Swedish Government urged unions and management to use a policy of wage restraint in order to achieve price stability. Dividend limitations and higher profits taxes were coupled with the request. The policy worked fairly well from 1949 to the Korean War boom, but in 1952, both wages and prices rose more than 29 percent, and the wage restraint policy was dropped by the government and by the unions. In 1953 and in 1954, the policy was reinsti tuted, but under the pressure of stronger demand again failed in 1955. Moderate national settle ments characterized the second half of the 1950’s. The reason was probably reduced demand for labor and goods, rather than union restraint. Prices remained reasonably stable. The 1960’s policy saw little change in Sweden. Central negotiations still set the national pattern for wage settlements. However, strong demand for labor and other factors resulted in local wage payments which have exceeded centrally negoti ated settlements. In the latter part of the decade, the government appointed an arbitration com mittee to aid in settling stalled central wage negotiations. In general, Sweden’s incomes policy has been much milder and more intermittent than those M O N T H L Y R E V IE W of the Netherlands and Norway. Legal fixing of prices, profits, or wages was not used. Price sta bility was sought by efforts to hold down wage in creases, but compulsory arbitration was not em ployed. However, this policy has probably been less effective. Substantial wage and price in creases have occurred, and during periods of strong demand the policy has been dropped. How ever, in the face of excess demand, a general price freeze is now being employed. The United States—Wage-Priee Guidelines The problems and the policy in the United States have been different. Postwar reconstruction was not necessary, and the balance of payments, al though a matter of concern, is less important to the total economy. There were, however, two other problems. The 1950’s were characterized by slow growth and persistently high unemploy ment, with the unemployment rate averaging a staggering 6.8 percent in 1958 and 6.7 percent in 1961. Prices during the period remained relatively stable, however. The task in the early 1960’s was to stimulate growth and employment without inducing infla tion. Expansionary fiscal and monetary policies were used to spur the growth. To accompany these policies, the 1962 Economic Report of the Presi dent announced a set of wage-price guideposts. The statement noted the inflationary bias built into the institutions of the economy, such as the ability of large corporations to offset unionnegotiated wage increases by raising prices. Many prices were not determined by competitive market forces, but were “administered.” A vigor ous application of wage-price guideposts might overcome this bias. The Report noted that the change in produc tivity is the basic guide as to whether or not an increase in wages or prices is inflationary. Money wages can increase at the same rate as the overall rate of increase in productivity in the economy without raising the labor cost per unit of output. Thus, the wage increases would not be inflationary. If the rate of productivity in a particular industry is greater (less) than the overall rate, and if its money wages increase The problems and the policy in the United States have been different. D ECEM BER 1 9 70 equaled the overall rate, the unit labor cost would fall (rise) in that industry. In this case its prices should be lowered (raised). There could be exceptions. For example, rapidly expanding industries might need to bid wages up in order to attract workers, while contracting industries would pay relatively less. This policy was entirely voluntary. Direct government control of prices and wages was never threatened. However, the persuasive power of the government can still be great. Unjustifiably large wage settlements and price increases were called to the public’s attention in order to mobilize public opinion. Shifts in government contracts, the possible freeing of government stockpiles, and the ever-present possibility of antitrust action were powerful incentives for business and labor to accept the guideposts. The policy worked reasonably well so long as there was unemployment and excess capacity. As demand increased, however, so did pressure on wages and prices. By 1966, transportation and automobile wage settlements, among others, ex ceeded the guideposts. In 1967, average hourly compensation in the private sector of the econ omy rose by 6 percent and consumer prices by about 3 percent. The guideposts began to crumble under the weight of excess demand. The 1967 and 1968 Economic Reports of the President recognized the collapse of the policy. Without the threat of compulsory controls, the guideposts could not be enforced. With the guideposts inef fective, the government fell back on conventional monetary and fiscal policies to combat the in flation which resulted from the overheated econ omy.2 S u c c e s s or F a ilu r e ? A review of the experience with incomes policies suggests that they have not been an unqualified success. Nevertheless, there have been instances when inflation probably would have been more severe if some form of incomes policy had not been in effect. These experiences suggest that 2Recently, the President established a National Committee on Productivity, with representatives from labor, business, the public, and the government. The Council of Economic Advisers now prepares reports that spotlight significant areas of inflation. Government purchases and regulations are under review for possible inflationary impact. It re mains to be seen whether or not these actions will reduce inflation. 179 A n essential requirement is that an incomes policy m ust be accompanied by appropriate monetary and fiscal policies. such a policy is more likely to succeed if certain conditions are present. An incomes policy seems more likely to hold down wage and prioe advances in an economy that is less than fully employed than in an economy in which there are few unused resources. Although there is an absence of general demand pressures in an underemployed economy, there may be cost-push pressures in some sectors. This type of policy could be useful in discouraging wage and price increases resulting from the con centration of economic power by either big labor or big business in certain industries. In this case, the incomes policy may hold down excessive ad ministered price and wage increases while mone tary and fiscal policies are adopted to help bring the economy to full employment. This seems to have been the case in the United States during the early 1960’s. On the other hand, experience suggests that if the economy were more than fully employed, an incomes policy would collapse. Such was the situation in Sweden in 1952 and 1955. In the United States, wage and price guidelines appar ently had some marginal success until 1965 when, with the economy almost fully employed, the policy became ineffective. Another essential requirement is that the policy must be accompanied by appropriate monetary and fiscal policies. It cannot be used as a substi tute for limiting excessive demand. This is espe cially true when the policy relies wholly on vol untary cooperation. If the government is stim ulating purchasing power through deficit finan cing during a period of full employment and the monetary authorities are adding to purchasing power by expanding the monetary base, no amount of exhortation would prevent business men and wage earners from giving in to the temp tation to seek higher prices and wages. An incomes policy would be more effective when there is a well-designed organizational framework of labor and business and when there is a strong consensus by these organizations in support of the policy. In the European countries where it was apparently effective during certain periods, there were strong labor and business 180 organizations. The Netherlands is an out standing example. Lacking such a well-designed and well-defined framework, the wage-price guidelines in the United States had to depend a great deal upon rallying the support of the American public on essentially moral grounds. For example, certain price increases in the early 1960’s were said to be unjustified or contrary to the public interest. The huge power and influence of the Presidency was brought to bear on those seeking to exceed the guidelines. As a practical matter, an incomes policy is more likely to be effective when productivity is increasing than when it is not. Condi tions of ris ing productivity make possible an increase in real wages over time without pinching the profits of businesses. Under these circumstances, the policy is more likely to receive support than when productivity, real wages, and profits are declining. W o u ld a n in c o m e s p o lic y be a p p ro p ria te a n d e ffe c tiv e in th e c u r r e n t A m e r ic a n eco n o m ic s e ttin g ? Moreover, it is more likely to succeed if it ap plies to all sectors of the economy. The applica tion of the policy to wages but not to prices would be ineffective. It must apply to both. For example, in the Netherlands, wage and price policies were closely coordinated. An incomes policy is more likely to be success ful when there is a strong threat of foreign com petition than when a greater part of the economy is insulated from economic developments in other countries. This was important to the suc cess of such a policy in the Netherlands. Foreign competition mobilized strong public support for it and provided an environment in which prices and wages were under external pressures not to increase too rapidly. On the other hand, if a country—at the same time it adopted an incomes policy—set up barriers to imports, the likelihood of success would be diminished. But it might also increase the need for an incomes policy. Another implication to be drawn, from expe rience is that success of this type of policy is closely tied to its timing. It might be appropriate at one time and not at another. For example, it could be worthless if applied before other restric M O N T H L Y R E V IE W tive measures begin to bite. If excessive demand pressures have been eliminated and price in creases are stemming mostly from cost-push pressures, the policy stands a better chance of success. A n In c o m e s P o lic y N o w ? Would an incomes policy be appropriate and ef fective in the current American economic set ting? It is contended by many persons that ex cess demand has now been largely eliminated in the American economy. The slowdown in the rate of economic growth, the large amount of un used capacity, and the higher unemployment rates are cited as evidence that total demand has been brought under control. At the same time, the continuing rise in prices in some sectors of the economy suggests to these persons that most cur rent increases in prices stem from cost-push fac tors. This seems, then, to be an appropriate time for applying some kind of an incomes policy. On the other hand, there are persons who cite the diminishing strength of inflationary forces as D ECEM BER 1970 evidence that, given time for the economy to ad just, monetary and fiscal policies will turn out effective. These persons argue that, even if the results are not completely satisfactory, one could not expect an incomes policy to do much better. In rebuttal, proponents of an incomes policy, however, argue that it would reduce the time re quired for monetary and fiscal policies to work, and, at the same time, hold down the rise in unemployment. Just as it is extremely difficult—if not impos sible—to determine how much influence incomes policies have had in the past, it is an open ques tion as to how effective au€h a policy would be under present conditions in the United States. In any case, too much should not be expected from an incomes policy, should one be put into effect. It would not be a panacea, and it would not work without sacrifice. At best, it would be marginally helpful and would not be harmful to other wellchosen policies. R obert H. F loyd 181 M e a s u r in g M o n e t a r y P o lic y T w o m e n t a l k in a T r e a s u r e r ’s o ffic e , d e e p in s id e t h e h e a d q u a r t e r s o f a n A m e r ic a n c o r p o r a tio n . T h e ir to p ic : “ H a s m o n e t a r y p o lic y b e c o m e le s s r e s t r ic ti v e s in c e l a s t m o n t h ? ” F i n a n c i a l s t a t i s t i c s lie s c a t t e r e d a r o u n d t h e ro o m . “L o o k w h a t's h a p p e n e d to t h e T r e a s u r y b ill r a te : I t ’s g o n e d o w n th r e e - e ig h ts o f a p o in t. T h e F e d ’s e a s in g u p .” “B u t t h e F e d e r a l fu n d s r a te ( a n d t h e y p a y a l o t o f a t t e n t i o n to t h a t b e c a u s e i t ’s w h a t b a n k s p a y to b o rro w m o n e y o v e r n ig h t) h a s n ’t b u d g e d . I d o n ’t s e e h o w y o u c a n s a y m o n e ta r y p o lic y h a s e a s e d a n y .” “O k a y , b u t t h e m o n e y s u p p l y g r e w a t a 5 - p e r c e n t r a te th is m o n t h , a n d t h a t ’s a c c o r d in g to t h e F e d ’s o w n p r e s s r e le a se . L a s t m o n t h , i t o n ly g r e w a t 4 p e r c e n t. P o lic y lo o k s e a s ie r t o m e .” “B u t fr e e r e s e r v e s fe ll. I t h o u g h t t h a t m e a n t c o n d itio n s w e r e t ig h t e r .” “S o d id I . B u t to ta l r e s e r v e s w e n t u p . T h a t d o e s n ’t lo o k l ik e t h e F e d is tig h te n in g a n y . H o w c a n c o n d itio n s b e tig h te r if th e b a n k s h a v e m o re re se rv e s? ” “I ’m c o n fu s e d .” 182 M O N T H L Y R E V IE W The conversation is hypothetical, of course. But the situation is not. A lot of people spend a lot of time trying to measure the posture of monetary policy. Often as not, they rely on published financial statistics: Treasury bill rates, Federal funds rates, money supply growth—all are socalled indicators of monetary policy. Often as not, each indicator gives a different answer. Often as not, the result is, “I’m confused.” To most economists, all this may look like nonsense. They know the economy is complicated and that a single “right” indicator of monetary policy may not exist. If there is one, it has not been discovered yet. If economic research ever discovers one, it may turn out to be something our two businessmen have never seen. “The best our businessmen can do,” most economists might say, “would be to consider as many relevant elements as they can when they analyze the economy. It is probably naive to expect a single indicator to summarize the in fluence of monetary policy on something as complicated as the American economy.” “All right,” says the businessman, “but what do I do in the meantime? I recognize that mone tary policy has a strong influence on economic behavior. I still want to measure what that in fluence is. Anyway, I hear all the time about experts making comments on the economy, and they cite indicators like the money supply or the Treasury bill rate. You can be patient and wait for the results of economic research. But I can’t. M y boss wants a sales forecast next week. “Even if it won’t do a perfect job, can’t I just pick one indicator or two and use them anyway? Won’t they measure monetary policy well enough for my purposes? What difference does it make which indicator I choose?” The answer, unfortunately, is that it makes a lot of difference. That we shall see in the next section. In the concluding section, we shall see why. D iffe re n t In d ic a t o r s G ive D iffe re n t A n s w e r s A list of all the variables people have used to measure monetary policy might be virtually end less. But only a small group of indicators are in widespread use, either because they have been suggested by the results of economic research or because they have been publicized in the financial press. Each of them has some appeal. We picked eight financial variables that have D ECEM BER 1 9 70 been widely cited as indicators of monetary policy. Two of them are interest rates: the Federal funds rate and the rate on three-month Treasury bills. A third, the level of free reserves, is denominated in dollars but is thought to be have like an interest rate. The other five indi cators we picked are so-called monetary aggre gates: the money supply excluding time de posits, the money supply including time deposits, the bank credit proxy, total reserves, and the monetary base.1 (Definitions and sources of these variables are in the Appendix.) There is no obvious way to characterize par ticular readings of these indicators absolutely, as either restrictive or stimulative. If we wish to use the Treasury bill rate as an indicator, for instance, then any characterization of a 5.25percent bill rate as “restrictive” or “stimulative” is arbitrary. What is clear, however, is that a 5.25-percent bill rate indicates less stimulation (or more restriction) than a 5.00-percent rate and more stimulation than a 5.50-percent rate. More stimulation might also be “indicated” by a decrease in the Federal funds rate, by an increase in free reserves, or by an increase in the growth rates for any of the five monetary aggregates we selected.2 Recognizing this, we calculated the number of months in which each pair of indicators gave signals in the same policy direction—toward more restriction or toward less restriction.3 The results, covering the 12 months of 1969 and the 60 months of 1965-69, are in Table I. From these results, it is easy to see why our two businessmen were confused. Different in dicators do give different signals. In 1969, the monetary base and total reserves came closest to giving the same signals; yet, even this pair agreed in only 9 out of 12 months. More typically, agreement on whether policy was more or less 10n e of the reasons for including both interest rates and monetary aggregates on our list of indicators is that these two types correspond to the “prices” and “quantities” on the supply-demand diagrams economists use in financial analysis. The economist’s choice of which interest rate, or which monetary aggregate, is determined by his definition of the market he wants to analyze. We were curious to see whether signals given by price-type (interest rates) indicators/quantity-type (monetary aggregate) indicators corre sponded more closely with signals given by other price-type/ quantity-type indicators. 2Our eight financial variables, in other words, are ordinal measures of monetary policy. 3Since we used eight indicators, each indicator can be com pared pairwise with seven others. There are 1 + 2 + 3 + 4 + 5 + 6 + 7 = 28 different comparisons to be made. 183 restrictive came in 6 to 8 of the 12 months in 1969, which implies that blind substitution of one indicator for another would have changed the answer almost half the time: In 4 to 6 months, the indicators gave opposite signals. Two indicators that would generally be expected to show close correspondence—the Federal funds rate and the Treasury bill rate—gave the same signals only 3 times out of 12.4 Nor was 1969 an unusual period. Calculations 4Here is a case where a pair of price-type indicators agree less well with each other than with some of the quantitytype indicators. In general, Table I shows no tendency for indicators to agree more with other indicators of the same (price or quantity) type. for the 60-month period from 1965-69 gave similar results. Most of the indicator pairs agreed in 35 to 45 of the 60 months or, again, only a little more than half the time. Moreover, separate calculations for each of the five years show that the degree of agreement for each pair of indi cators varies considerably from year to year.5 Table II repeats the analysis. The approach is slightly more sophisticated, but the results are much the same. To get each coefficient at the top of Table II, we took the 12 monthly readings in ■"'Annual data for 1965-68 are not shown but are available on request from the Research Department, Federal Reserve Bank of Atlanta. table i NUMBER OF MONTHS IN WHICH INDICATORS MOVED IN THE SAME POLICY DIRECTION 1965-1969* M, M o n e y Supply (Narrow) 60 M; M o n e y Supply (Broad) 45 60 BCP B a n k Credit Proxy 35 40 60 TR Total R e s e r v e s 34 39 51 60 M B Monetary 40 43 43 48 60 FR Free Reserves 33 32 31 31 29 60 FF Federal F u n d s Rate 33 34 32 45 35 40 60 BR Three-month T r e a s u r y Bill Rate 26 39 37 40 31 31 39 60 Mi M 2 BCP TR M B FR FF BR Base 1969** Mi M o n e y Supply (Narrow) 12 M; M o n e y Supply (Broad) 8 12 BCP B a n k Credit Proxy 6 6 TR Total R e s e r v e s 4 6 8 12 M B Monetary 7 7 7 9 12 Base 12 FR Free Reserves 8 6 8 8 5 12 FF Federal F u n d s Rate 7 7 7 7 6 7 BR Three-month T r e a s u r y Bill Rate 3 7 Mi mu 5 BCP 12 7 6 3 6 12 TR M B FR FF BR * 6 0 - m o n t h tot al * * 1 2 - m o n t h total 184 M O N T H L Y R E V IE W 1969 for each variable and ranked the months I, 2, . . . , 12, in order of increasing restrictiveness. (For instance, the month with the highest Trea sury bill rate was assigned a rank of 12; the month with the lowest rate was ranked as 1.) For the entire 1965-69 period, rankings ranged from one to 60. The ranked relationships for each pair of indicators are summarized by the Spearman rank correlation coefficients in Table II.6 Here, as in Table I, a higher number shows closer correspondence between two indicators: 1.000 would show perfect correspondence; .000 would show no correspondence. Table II reinforces the results of Table I: Different indicators do give different signals. In 1969, for instance, only seven pairs of indicators produced coefficients which can be considered significantly different from zero. (A zero coef- (1Spearman coefficients are discussed in most standard statis tical texts; see, for example, J. E. Freund, Modern Elemen tary Statistics (3d Ed., 1967), p. 364. If the monthly ranks assigned to each of a pair of indicators are identical (1-1, 2-2, etc.), their joint Spearman coefficient will be one. If the orderings are opposite (1-12, 2-11, etc., in the 12-month case), the Spearman coefficient will be minus one. The Spearman analysis has two advantages over the more naive procedure embodied in Table I: It weights large move ments in the indicators more heavily than small movements, and it also permits us to make some inference about whether the relationships are statistically significant. TABLE II SPEARMAN COEFFICIENTS OF RANK CORRELATION 1965-1969 Mi M o n e y Supply (Narrow) 1.000** M M o n e y Supply (Broad) .669** '2 1.000** BCP B a n k Credit Proxy .332** .779** 1.000** TR Total R e s e r v e s .332** .523** .783** 1.000** M B Monetary .373** .386** .539** .753** 1.000** Base FR Free Reserves .289* .672** .659** .454** .269* 1.000** FF Federal F u n d s Rate .237* .611** .529** .278* .184 .850** 1.000** BR Three-month T r e a s u r y Bill Rate .209 .639** .509** .220* .138 .758** .929** Mi M 2 BCP TR M B FR FF 1.000** BR 1969 Mi M o n e y Supply (Narrow) 1.000** M = M o n e y Supply (Broad) .783** BCP B a n k Credit Proxy .025 TR Total R e s e r v e s M B Monetary Base 1.000* * .504 1.000** -.225 .210 .532* 1.000** .144 .330 .356 .571* 1.000** FR Free Reserves .387 .683* .252 .126 - .032 FF Federal F u n d s Rate .808** .648* .049 -.021 .144 .413 1.000** BR Three-month T r e a s u r y Bill Rate .436 .228 -.193 - .168 .147 .014 .657* Mi Ma M B FR BCP TR 1.000** FF 1.000** BR * D i f f e r e n c e f r o m z e r o s i g n i f i c a n t ( 9 5 % level) * * D i f f e r e n c e f r o m z e r o h i g h l y s i g n i f i c a n t ( 9 9 % level) D ECEM BER 1 9 70 185 ficient for a pair of indicators would say, in ef fect, that if we wanted to guess the rank of a month according to one of the indicators, we would probably come as close by guessing at random as we would come by using the ranking for the same month according to the other in dicator.) Most of the 1965-69 coefficients are significantly nonzero, but in almost every case they are low enough to reinforce our conclusion that different indicators give different answers about the posture of monetary policy.7 W hy? Different indicators do give different measure ments of monetary policy. That much is clear. Even in cases where we might expect a pair of indicators to move together very closely, they don’t. Why don’t they? For a couple of reasons: First, monetary policy actions take longer to influence some indicators than others. Second, each indicator is not in fluenced solely by monetary policy actions but by a great many other things. Indeed, when these considerations are recognized, it would be sur prising if any pair of indicators did give the same signals month after month. Let’s look at each of these reasons in a little more detail. Before doing that, however, we should ask what we mean when we talk about an indicator of monetary policy. Few of us are interested in Federal Reserve monetary policy actions8 for their own sake. W hat we are really interested in are the effects of those policy ac tions. People use indicators to describe, and to predict, the effects of monetary policy actions. Effects on what? Effects on a great many dif ferent markets. Most people, and certainly most economists, would answer, “effects on the econo my.” (More precisely, perhaps, “on total income and production in our economy.” ) But a build ing contractor might not agree; he might be more interested in knowing about effects on housing starts. A prospective borrower might say, in stead, “effects on interest rates.” Obviously, the list could get pretty long. Different people are interested in the effects on many different markets. Assume, however, that our basic concern is with monetary policy’s effects on the whole econ omy. For most of us, that would be true. Like the two businessmen whose dialogue began this arti cle, we might rely on financial statistics such as the Treasury bill rate or the money supply figures, hoping that what happens to these statis tics now will tell us what will happen to the economy later. Even so, there is no reason to expect the financial statistics to move in tandem. Policy actions now may affect the Treasury bill rate right away, for instance, but it may be two or three months before we can observe the effects of the same policy actions on the money supply. Nevertheless, policy actions probably do affect some indicators rather quickly: not only the Treasury bill rate but also the Federal funds rate and the level of free reserves. Why don’t the signals given by indicators like these correspond more closely? The answer lies in our second reason, which is probably more important: Each indicator re sponds to a great many things besides monetary policy actions. The Treasury bill rate responds to monetary policy actions, for instance, but it also responds to the amount of funds people want to invest. Then, too, the bill rate depends on the volume of bills the Treasury decides to sell. If the Treasury bill rate falls by a percentage point, there is no way we can tell how much of that drop resulted from last week’s (or last year’s) monetary policy actions and how much resulted from other happenings.1’ The same point could be made for all the indi cators we examined (and any other indicators, for that m atter). The various indicators “indi cate” a lot besides monetary policy. It is hardly surprising that they often give different signals. S t i ll C o n fu se d ? We started off with a pair of confused business men. They were confused because different indi cators were giving different signals about mone tary policy. If they read this article, would they still be confused? Perhaps. But in the process, they may have learned a few lessons that are not 7As before, there is no systematic tendency for price- or quantity-type indicators to correspond more closely with indicators of the same type. sExamples of such actions are purchases and sales of govern ment securities, changes in the discount rate, and in the reserve requirement percentages required of member banks. 186 !'Economists try to answer questions like these with so-called econometric models. The results are both complicated and uncertain. M O N T H L Y R E V IE W always understood: that the workings of the economy are complicated; that our knowledge of the linkages between monetary and financial measures is inexact; and that he who puts his APPENDIX: trust in (and his money on!) a single financial variable does so at his own risk. W illiam N. Cox, III DESCRIPTION AND SOURCES OF DATA D e s c rip tio n S o u rce M o n e y S u p p ly (N a r ro w ) S e a so n a lly a d ju ste d m o n th ly a verages of d a ily fig u res a t a ll co m m ercia l ban ks F e d e r a l R e se r v e B u lle tin M o n e y S u p p ly (B roa d ) S e a so n a lly a d ju ste d m o n th ly a v era g es of d a ily figu res. (T im e d e p o sits a t a ll co m m ercia l ban ks ad d ed to M i) F e d e r a l R e s e r v e B u lle tin B a n k C red it P r o x y S e a so n a lly a d ju ste d m o n th ly a verages of d a ily fig u r es M o n ey M a rk e t & R eserve R e la ti o n s h ip s , B o a rd o f T o ta l R e se rv e s S e a so n a lly a d ju ste d m o n th ly a verages of d a ily fig u res M o n ey M a rk et & R eserve R e la ti o n s h ip s , B oard o f I n d ic a to r B oard o f G overnors o f th e F ed er a l R e se rv e S y s te m B o a rd o f G overnors o f th e F ed er a l R e se rv e S y s te m G overnors G overnors M o n e ta ry B a se S e a so n a lly a d ju ste d m o n th ly a verages of d a ily fig u r es (a d ju ste d for reserve r eq u irem en t c h a n g e s a n d sh ifts in d e p o s its a m on g c la sse s o f b an ks) F ed era l R eserve B an k of S t . L o u is R e v i e w , A u g u st F re e R ese rv e s S e a so n a lly a d ju ste d m o n th ly a verages o f d a ily fig u r es F e d e r a l R e s e r v e B u lle tin F ed er a l F u n d s R a te M o n th ly avera g es o f d a ily fig u res F e d e ra l R e se r v e B u lle tin T h r e e -m o n th T r e a s u r y B ill R a te M o n th ly average o f e n d -o f-w ee k d isc o u n ts F e d e r a l R e s e r v e B u lle tin D ECEM B ER 1970 1968, V ol. 50, n u m b er 8, a n d U . S . F in a n c ia l D a t a , F ed er a l R e se rv e B a n k o f St. L ou is 187 BANKING STATISTICS Billion $ DEPOSITS — y — -2 3 .5 - 2 2 .5 Total Deposits* / — - 2 1 .5 _ - 13.5 — «ru ILoans (net)** / __ Investments** / - 12.5 «A. - 7.0 4.0 Savings* i i i I i i i i i i i 1 i i i i i i i i i i i- 6 .0 J D J 1969 J i i i i i i i i i i i Ii i i i i i i i i i i D J 1970 J D J 1969 J D 1970 LATEST MONTH PLOTTED: OCTOBER Note: All figures are seasonally adjusted and cover all Sixth District member banks. ♦Daily average figures. ** Figures are for the last Wednesday of each month. S IX T H D IS T R IC T B A N K I N G N O T E S BORROWINGS FROM FEDERAL RESERVE BANK OF ATLANTA Million $ - 100 -5 0 188 M O N T H L Y R E V IE W The significant decline in member bank borrow ings at the Federal Reserve Bank of Atlanta is further evidence that easier monetary conditions have prevailed during recent months. After averaging $50 million during the first seven months of this year (a decline from the level of nearly $90 million in the fourth quarter of 1969), the volume of borrowings eased to approximately $15 million in August, September, and October. In November, borrowings dropped to $4 million. Banks that are members of the Federal Reserve System are required to set aside a certain proportion of their deposits in the form of re serves. If a bank anticipates a reserve deficit dur ing a given reserve week, exclusive of any carry over or “as of” adjustments, then it can attempt to borrow or buy reserves to meet its reserve re quirements. Those banks with excess reserves may try to lend or sell reserves. Most commonly, banks adjust their reserve position through the Federal funds market. In the Sixth District, about 95 percent of the reserves that banks have borrowed during 1970 have come from this market. For the individual bank, an inflow of deposits or a shift from demand deposits to time deposits results in a net addition to reserves. Banks can also acquire reserves by selling loans or invest ments. Discounting with the Federal Reserve, although infrequently used by banks in meeting reserve deficiencies, is held in abeyance as an im portant alternative to the aforementioned meth ods. To illustrate: The number of banks making use of the discount privilege in a given week averaged less than ten in recent months, down from over twenty a week in the first seven months of the year. The drop in discounting during the last sev eral months reflects conditions that have been developing since spring. Total deposit inflows have been strong throughout most of the year, with nearly all gains coming from deposits that carry low reserve requirements. Ever since Reg ulation Q was relaxed in June on large-denomina tion CD’s, banks have regained their ability to adjust their reserves by controlling the inflow of these deposits. Further easing occurred during late September, when reserve requirements on all time deposits in excess of $5 million at each bank were reduced from 6 percent to 5 percent. Other factors also help account for the reduced level of discount activity. Recently, the growth of bank credit in the Sixth District has been ex tremely moderate, with most of the gains centerD ECEM B ER 1 9 70 ALTERNATIVE BORROWING COSTS P ercent "\ - 9 \ Federal Funds Rate V*V N \ \ ” V - 6 Discount Rate | J I J 1 N 1970 LATEST PLOTTING: DECEMBER 1 ing around the acquisition of municipal obligations by banks outside the larger cities. Furthermore, the cost differences in borrowing from the dis count window and alternative sources have de clined sharply. The average cost of Federal funds declined from about 9 percent at the first of this year to 8 percent by early summer. However, for the last several months, Federal funds have traded below 6-^/2 percent. In June, many of the larger banks were offering to pay over 7-V2 per cent for 30-to 89-day CD’s, whereas these same banks currently are posting rates under 6 per cent. While rates on these alternative sources were falling, the discount rate remained stable at 6 percent until it was lowered one-quarter of one percent in early November. Then another cut took place on the first of December. The bulk of reduction in the aggregate volume of discounts has occurred at reserve city banks, which have accounted for about four-fifths of total member bank borrowing. Facing a weaker loan demand, particularly for business loans, and being able to attract short-term CD’s many of these banks have used this opportunity to re build liquidity and to reduce their overall indebt edness. Unless economic and credit conditions change dramatically, discounting should remain below the levels of late 1969 and early 1970. Banks usually dislike borrowing at the discount window if there are other means through which they can acquire reserves at comparable borrowing costs. As long as monetary conditions are mod erately easy, discounting will be less necessary as a means of meeting reserve requirements. J o h n M. G o d fr ey 189 R e p r in t s I n c o m e s P o lic ie s : A Q u ic k C r itiq u e R o b e r t H . F l o y d , D e c e m b e r 1970, p p . 174-181 M e a s u r in g M o n e t a r y P o lic y W illia m N . C o x , I I I , D e c e m b e r 1970, p p . 182-187 R e v ie w s o f S ix th D is tr ic t S ta te E c o n o m ie s Reprints of Monthly Review articles (Single copies only) A A A A A A R e v ie w R e v ie w R e v ie w R e v ie w R e v ie w R e v ie w of of of of of of A la b a m a ’s E c o n o m y , 1960-70, S e p te m b e r 1970, 35 p p . F lo r id a ’s E c o n o m y , 1959-70, J u l y 1970, 35 p p . G e o r g ia ’s E c o n o m y , 1960-70, A u g u s t 1970 , 35 p p . L o u is ia n a ’s E c o n o m y , 1959-70, A u g u s t 1970, 32 p p . M i s s is s ip p i’s E c o n o m y , 1960-69, F e b r u a r y 1970, 28 p p . T e n n e s s e e ’s E c o n o m y , 1960-69, F e b r u a r y 1970, 27 p p . S ta tis tic a l C o m p ila tio n s (Single copies only) S t a t i s t i c s o n t h e D e v e lo p in g S o u t h , 1970. S t a t i s t i c a l t i m e s e r ie s fo r t r a c in g lo n g - r u n e c o n o m ic c h a n g e s in t h e S o u t h e a s t a n d U n i te d S t a t e s . S t a t i s t i c s o n C o m m e r c ia l B a n k s , S i x t h D is tr ic t, 1940-69, s e le c te d d a te s . S t a t i s t i c a l ta b le s a n a ly z in g c h a n g e s in lo a n s , i n v e s tm e n ts , a n d d e p o s its o f c o m m e r c ia l b a n k s in t h e S ix th D i s tr ic t. These publications are now available upon request to the Research Department, Federal Reserve Bank of Atlanta, Atlanta, Georgia 30303. 190 M O N T H L Y R E V IE W B a n k A n n o u n c e m e n ts On November 1, Coalmont Savings Bank, Coalmont, Tennessee, a nonmember bank, agreed to remit at par for checks drawn on it when received from the Federal Reserve Bank. A newly organized nonmember bank, The Citizens & Merchants Bank, Bremen, Georgia, opened for business on November 16. Officers are H. M. Wood, president; W. Kenneth Jones, vice president; and Dennis Vanbrackle, cashier. Capital is $250,000; surplus and other capital funds, $250,000. On November 20, The Community Bank of Boca Raton, Boca Raton, Florida, opened for business as a D ECEM BER 1970 newly organized nonmember bank. Officers are Daniel S. Goodrum, president; Jerry Thomas, chairman of the Board; L. K. Orndorff, executive vice president and cashier; and Fred Bayless, assistant cashier. Capital is $700,000; surplus and other capital funds, $350,000. Coosa Valley Bank, Gadsden, Alabama, another new ly organized nonmember bank, opened for business and began to remit at par on November 21. Officers are Tom Dawson, chairman of the board; Max L. Smith, president; and Jerry T. Goss, vice president and cashier. Capital is $250,000; surplus and other capital funds, $250,000. 191 INDEX FOR THE YEAR 1 MONTH PAGES JANUARY 2-20 JULY 90-108 AUGUST 110-124 MARCH 38-48 SEPTEMBER 126-140 APRIL 50-60 OCTOBER 142-152 MAY 62-72 NOVEMBER 154-172 JUNE 74-88 DECEMBER 174-196 Loan Sales by G e n e D . S u l l i v a n , 12. J o h n M . G odfrey , 104. Profitability by J o h n M . G odfrey , 148. G e n e D . S u l l i v a n , 126. BANKING STRUCTURE M ilk Flows Where Population Goes by PAGES 22-36 Growing Corner of the Nation's Egg Basket by MONTH FEBRUARY AGRICULTURE Agriculture Shows M ixed Behavior by 9 7 0 Gen e D . S u l l i v a n , 62. A Decade of Holding Company Regulation in Florida BANK ANNOUNCEMENTS by C harles D . S a lley , 90. 11, 31, 45, 57, 66, 79, 103, 121, 131, 147, 166, 191. BOARD OF DIRECTORS BANK HOLDING COMPANIES A Decade of Holding Company Regulation in Florida by C harles D . S a lley , 90. BANKING Banking in a Developing Economy: American Patterns by J ohn E. L e im o n e , CHEMICAL INDUSTRY Chemicals Bring Changes to the Southeast Latin 154. Banking Responds to Monetary Restraint by J o h n M . G odfrey , 7. Term Lending: A Lagging Respondent to Monetary Restraint by J o h n M . G o d f r e y , 80. BANKING NOTES, Sixth District Bank Liquidity by J o h n M . G odfrey , 118. Business Loans by J o s e p h E . R o s s m a n , 168. Certificates of Deposit by J o h n M . G odfrey , 136. Deposit Inflows by J ohn by R o bert E. W il l a r d , 161. CONSTRUCTION Construction Continues Strong by B oyd F. K in g , 15. CREDIT FLOWS Impairment in Credit Flows: Fiction by Fact or W illia m N . C o x , II I , 22. DAIRY INDUSTRY M ilk Flows Where Population Goes by G e n e D . S u l l i v a n , 62. DEBITS TO DEMAND DEPOSIT ACCOUNTS 19, 35, 47, 59, 71, 87, 107, 123, 139, 151, 171, 195. M . G o d f r e y , 84. Reduced Discount Activity by Federal Reserve Bank of Atlanta and Branches, Effective January 1 , 1970, 32. J o h n M . G odfrey , 188. 192 DISTRICT BUSINESS CONDITIONS 20, 36, 48, 60, 72, 88, 108, 124, 140, 152, 172, 196. M O N T H L Y R E V IE W ECONOMIC CONDITIONS, INTERNATIONAL FINANCE G e n e ra l Banking in a Developing Economy: American Patterns Getting Inflation Under Control by C h arles T . T aylor , 142. The Southeast: by A t the Turn of the Decade H arry B r andt , 2. by J o h n E . L e im o n e , 154. International Lending Agencies: for Economic Development by Alabama's Economy Moves in Step with the Nation's LATIN AMERICA B oyd F . K in g , 100. Area Diversity in Louisiana’s Growth by by A r n o l d D i l l , 27. E m e r s o n A t k in s o n , 55. H a r r y B r a n d t , 2. FARM INCOME R obert E . W illard , 132. MONETARY POLICY Banking Responds to Monetary Restraint by J o h n M . G odfrey , 7. Impairment in Credit Flows: Fiction Agriculture Shows M ixed Behavior by J o h n E . L e im o n e , 154. Lumber on the Rebound by The Southeast: A t the Turn of the Decade by by G e n e D . S u l l i v a n , 12. by International Lending Agencies: for Economic Development J o h n E. L e im o n e , Instruments 38. by A Boost to the Southeastern Measuring Monetary Policy by W illia m N . C o x , II I , 182. Minutes 1962-65. Available for Reference, 31. PRODUCTION INDEX R obert H . F loyd , 110. Revenue Sharing: by What It Might Mean R obert H . F loyd , 50. A New Measure of Industrial Activity: Manufacturing Production Index by PUBLIC FINANCE Incomes Policies: A Quick Critique Revenue Sharing: R obert H. F loyd , 174. by INDUSTRIAL ACTIVITY A New Measure of Industrial Activity: Manufacturing Production Index by C. S. P y u n , 74. Industrial Pace Slows by R obert E . W illard , 4. W hat’s Happening in Textiles? by R o b e r t E . W illa r d , 67. W hat It Might Mean R obert H . F loyd , 50. SIXTH DISTRICT STATISTICS District 18, 34, 46, 58, 70, 86, 122, 138, 150, 170, 194. STABILIZATION POLICIES Incomes Policies: by A Quick Critique R obert H . F loyd , 174. Measuring Monetary Policy by W illia m N . C o x , II I, 182. INFLATION TEXTILE INDUSTRY Getting Inflation Under Control What’s Happening in Textiles? by C harles T . T aylor , 142. D ECEM B ER 1 9 70 District C. S. P y u n , 74. INCOMES POLICIES by A Quick Critique R obert H . F loy d , 174. OPEN MARKET OPERATIONS GRANTS-IN-AID Federal Aid: Economy Fact or W illia m N . C o x , II I , 22. Incomes Policies: FINANCIAL INSTITUTIONS by Latin LUMBER INDUSTRY Georgia’s Economy Jogs Along by Banking in a Developing Economy: American Patterns J o h n E . L e im o n e , 42. Florida’s Torrid Growth Cools a Bit by Instruments J o h n E . L e im o n e , 38. ECONOMIC CONDITIONS, Sixth District States by Latin by R obert E . W illard , 67. 193 S ix t h D is t r ic t S t a t is t ic s S e a so n ally A djusted (All d a ta are indexes, 1957-59 = IOO, u n less in d icated otherw ise.) L a te s t M onth 1970 One Month Ago Two M onths Ago One Ye ar Ago Tw o M onths Ago One Y e ar Ago 348 198 362 154 361 326 196 181 173 182 130 93 181 173 182 129r 89 179 175 180 130 93 177 178 176 137 3 .9 40.7 3.7 4 0 .8r 3.5 40.5 2.7 41.2 402 286 401 288 398 276 373 260 293 252 172 255r 136 267 207 269 156 FLO R ID A S IX T H D IS T R IC T IN C O M E IN CO M E AND SP E N D IN G Oct. Sep t. Sept. Sep t. 261 142 102 179 262 167 149 169 262 210 228 197 257 143 99 186 In stalm e n t C red it at B a n k s* (M il. $) Oct. Oct. 338 311 341 304 348 307 330 298 Oct. Oct. Oct. Oct. Oct. Oct. Oct. Oct. Oct. Oct. Oct. Oct. Oct. Oct. 152 145 174 142 174 118 106 123 131 112 179 154 130 53 152 145 174 141r 175r 118 106 124r 127r 113r 192 154 128 55 151 145 174 141 173 118 106 125 126 112 195 153 130 55 152 150 176 144 181 115 111 130 137 117 210 152 141 56 Oct. 4.7 4.6 4.5 3.6 Oct. Oct. Oct. Oct. Oct. Sep t. Sep t. ‘ Oct. Sep t. Sep t. Sep t. Sep t. Sep t. Sept. Sept. Sept. Sept. Sept. Sept. Sept. Sept. Sept. Sept. Sept. Sept. 3.1 40.1 201 233 174 168 102 311 244 208 167 235 261 195 165 268 288 168 184 171 202 241 370 593 378 3.3 4 0 .Or 246 216 271 165 96r 310 244 207 166 236 262 194 165r 262r 288 168r 182r 167r 199 238 361r 605 382r 3.0 40 .4 220 263 183 168 108 294 245 208 166 236 261 193 167 261 291 168 182 166 198 239 379 616 382 1.9 40 .9 211 249 179 161 103 269 239 203 159 231 254 200 169 261 283 168 194 168 194 240 384 589 353 . Oct. . Oct. 360 300 358 302 356 298 334 281 . Oct. . Oct. . Oct. 247 203 287 249 206 282r 242 200 287 227 189 275 E M P LO Y M E N T AND PR O D U C TIO N M anu factu ring F o o d ............................................................. Lb r., Wood Prod ., F u rn . & F ix . P ap er ....................................................... P rim a ry M e t a l s ............................... T e x tile s ................................................. Tra n sp o rta tio n Equ ip m ent N o n m a n u f a c t u r in g f ......................... C o n s t r u c t i o n ..................................... Farm E m p lo y m e n t ............................... U nem p loym en t Rate (P e rce n t of W ork F o rce Jt • • Insured U nem p loym en t (P e rce n t of Cov. E m p .) . . . Avg. W eekly H rs. in Mfg. (H rs.) C o nstru ctio n C o n tra cts* . . . E le c tric Pow er P ro d u ctio n* Cotton C o n su m p tio n ** . . P ap er .......................................... P rin tin g and P u b lish in g N o n e le ctrica l M achine ry E le c tric a l M a ch in e ry . . . Tra n sp o rta tio n E qu ip m ent F IN A N C E AND B A N KIN G Lo ans* A ll M em ber B a n k s ........................ Larg e B a n k s ..................................... D eposits* One M onth Ago La te s t Month 1970 A LABA M A M a n u fa ctu rin g P a y ro lls ...............................Oct. Farm C ash R e c e i p t s ...........................................Sep t. 220 E M P LO Y M E N T ...............................Oct. N onfarm E m p lo y m e n tt M anu factu ring .................................................Oct. N o n m a n u fa c tu rin g ...........................................Oct. C o n s t r u c t i o n .................................................Oct. Farm E m p lo y m e n t ................................................. Oct. U ne m p loym ent R ate (P e rce n t of Work F o r c e J t .........................Oct. Avg. W eekly H rs. in Mfg. (H rs.) . . . Oct. 88 F IN A N C E AND B A N KIN G M em ber B an k L o a n s ...........................................Oct. M em ber B an k D e p o s it s .....................................Oct. B an k D e b it s * * .............................................................Oct. G EO RG IA IN CO M E M anu factu ring P a y ro lls ...............................Oct. Farm C ash R e c e i p t s ...........................................Sept. E M P LO Y M EN T N onfarm E m p lo y m e n tt ...............................Oct. M anu factu ring .................................................Oct. N o n m a n u fa c tu rin g ...........................................Oct. C o n s t r u c t i o n .................................................Oct. Farm E m p lo y m e n t .................................................Oct. U ne m p loym ent Rate (P e rce n t of W ork F o r c e J t .........................Oct. Avg. W e ekly H rs. in Mfg. (H rs.) . . . Oct. 152 136 159 140 48 151 138 158 129r 49 151 139 157 127 47 153 146 157 152 52 4.1 39.0 4 .0 3 9 .Or 3.7 40.1 3.1 40.7 FIN A N C E AND B A N KIN G M em ber B a n k L o a n s ...........................................Oct. M ember B an k D e p o s it s .....................................Oct. Ban k D e b it s * * .............................................................Oct. 358 246 331 355 247 326r 355 240 333 343 236 327 225 116 230r 269 227 234 116 131 119 134 116 43 131 120 134 119 43 131 120 134 117 44 133 6.5 42.0 6.6 4 1 .8r 6.4 42.5 5 .0 41 .8 295 195 213 296 198 209 295 194 222 274 178 204 291 78 287r 173 280 239 101 152 159 149 160 43 152 159 148 163 46 151 158 148 162 46 151 161 146 168 42 5.1 40.1 5.0 4 0 .4r 5.2 40.1 4.3 40.5 449 298 297 436 295 290 433 300 294 403 268 283 L O U IS IA N A IN C O M F. M a n u f a c t u r in g P a y r o lls .................................. O c t. F a r m C a s h R e c e i p t s .........................................S e p t. EM PLO YM EN T N o n fa rm E m p l o y m e n t t .........................................O ct. M a n u f a c t u r in g ...................................................... O ct. N o n m a n u fa c t u r in g .........................................O c t. C o n s t r u c t i o n ...................................................... O c t. F a r m E m p l o y m e n t ...................................................... O c t. U n e m p lo y m e n t R a t e (P e r c e n t o f W o rk F o r c e J t ........................... O c t. A vg . W e e k ly H r s . in M fg . ( H r s .) . . . O c t. F IN A N C E A N D 212 122 135 129 51 B A N K IN G M e m b e r B a n k L o a n s * .........................................O c t. M e m b e r B a n k D e p o s i t s * ..................................O c t. B a n k D e b i t s * / * * .............................................................O ct. M IS S IS S IP P I INCO M E M a n u fa ctu rin g P a y ro lls .............................. Oct. Farm C ash R e c e i p t s ...........................................Sept. IN C O M E 224 133 231 153 225 194 225 131 Oct. Oct. Oct. Oct. Oct. 132 133 131 101 49 131 133 131r 103r 52 133 133 132 121 57 134 137 132 124 60 Oct. Oct. 5.1 40.3 5.1 4 0 .l r 5.0 40.4 3.8 41.4 M em ber B a n k L o a n s ...........................................Oct, . Oct. M em ber B an k D e p o s i t s ............................... Oct Oct. . Oct. B a n k D e b i t s * * .............................. 327 230 246 323 231 240r 326 230 249 299 209 227 E M P LO Y M E N T N onfarm Em p lo y m en tt . . . . M an u fa ctu rin g .............................. N on m a n ufa ctu rin g . . . . C o n s t r u c t i o n .............................. F arm E m p lo y m e n t ............................... U nem p loym en t R ate (P e rce n t of W ork F o rc e Jt . . Avg. W eekly H rs. in Mfg. (H rs.) FIN A N C E AND BA N KIN G 194 M a n u f a c t u r in g P a y r o lls ..................................O ct. F a rm C a s h R e c e i p t s ................................................S e p t. EM PLO YM EN T N o n fa rm E m p l o y m e n t t .........................................O ct. M a n u f a c t u r in g ...................................................... O ct. N o n m a n u f a c t u r i n g ............................................... O c t. C o n s t r u c t i o n ...................................................... O c t. F a rm E m p l o y m e n t ......................................................O c t. U n e m p lo y m e n t R a te ( P e r c e n t of W o rk F o r c e J t ........................... O c t. A vg . W e e k ly H r s . in M fg . ( H r s .) . . . O c t. F IN A N C E AND 277 B A N K IN G M e m b e r B a n k L o a n s * .........................................O c t. M e m b e r B a n k D e p o s i t s * ..................................O ct. B a n k D e b i t s * / * * .............................................................O ct. M O N TH LY R E V IE W L a te st M o n th 1970 O ne M on th Ago Tw o M o n th s Ago O ne Year Ago N o n m a n u f a c t u r i n g ........................... O ct. C o n s t r u c t i o n ............................... O ct. F a r m E m p l o y m e n t ............................... O ct. U n e m p l o y m e n t R a te ( P e r c e n t o f W o r k F o r c e J t ................O ct. A v g . W e e k ly H o u r s in M fg . (H rs.) . . O ct. TEN N ESSEE IN C O M E 258 116 M a n u fa c tu rin g P a y ro lls ................................O c t . F a r m C a s h R e c e i p t s .............................................S e p t . 247 159 247 126 245 164 F IN A N C E A N D EM PLO Y M EN T 148 156 N o n fa rm E m p l o y m e n t t ...................................... O c t . M a n u fa c tu rin g ...................................................O c t . 148 153 * D a ily a v e ra g e * F o r S ix th D is tr ic t a r e a o n ly ; o t h e r t o t a l s f o r e n t i r e s ix s t a t e s Tw o M on th s Ago O ne Year Ago 144 154 57 145 149 60 144 143 58 144 159 58 5.0 3 9 .8 4 .8 3 9 .4 r 4 .8 3 9 .8 3.7 4 0 .2 355 226 284 354r 230 285 343 223 280 319 206 273 B A N K IN G M e m b e r B a n k L o a n s * ....................... O ct. M e m b e r B a n k D e p o s i t s * ................... O ct. B a n k D e b i t s * / * * ...................................O ct. 149 157 146 151 O ne M onth Ago L a te st M o n th 1970 b a s is t P r e li m i n a r y d a t a r -R e v is e d N .A . N o t a v a il a b l e S o u r c e s : M a n u f a c t u r i n g p r o d u c t io n e s t im a t e d b y t h i s B a n k ; n o n fa r m , m fg . a n d n o n m f g . em p ., m fg . p a y r o l ls a n d h o u r s , a n d u n e m p ., U .S . D e p t, o f L a b o r a n d c o o p e r a t in g s t a t e a g e n c i e s ; c o t t o n c o n s u m p t i o n , U . S . B u r e a u o f C e n s u s ; c o n s t r u c t io n c o n t r a c t s , F. W . D o d g e D iv., M c G r a w - H ill In f o r m a t io n S y s t e m s C o.; p etrol, prod ., U .S . B u r e a u of M i n e s ; i n d u s t r i a l u s e o f e l e c . p o w e r , F e d . P o w e r C o m m . ; fa r m c a s h r e c e ip t s a n d f a r m e m p ., U .S .D .A . O t h e r i n d e x e s b a s e d o n d a t a c o lle c t e d b y t h i s B a n k . A ll i n d e x e s c a lc u la te d by th is B an k . D e b it s t o D e m a n d D e p o s it A c c o u n t s Insured C om m ercial B anks in th e Sixth D istrict (In T h o u sa n d s of Dollars) Perc e n t C h a n g e P e rc e n t C h a n g e Year to d ate 1 0 m o s. Oct. 1970 F ro m 1970 Oct. Se p t. O ct. Se p t. O ct. fro m 1970 1970 1969 1970 1969 1969 O c t. 1970 S T A N D A R D M E T R O P O L IT A N S T A T IS T IC A L A R E A S t B irm in g h a m G ad sd en . . . . .......................... H u n ts v ille . . . . M o b ile .......................... M o n tg o m e ry . T u s c a lo o s a . . . . . . 2 ,0 8 7 ,0 5 2 2 ,0 0 0 ,9 9 0 1 ,9 1 9 ,1 6 6 7 4 ,2 0 7 7 5 ,1 7 3 7 2 ,5 0 5 2 2 6 ,0 1 2 2 0 4 ,8 1 9 2 2 4 ,8 9 6 + - 4 + 9 + 1 + 2 + 6 + 0 + 8 - 4 6 4 0 ,6 1 9 6 3 8 ,5 7 0 - + 15 4 4 0 ,1 2 5 3 8 3 ,6 5 9 3 9 5 ,0 6 6 +15 + 11 + 7 1 2 2 ,3 5 5 1 3 7 ,6 8 1 1 3 4 ,7 6 9 -1 1 - + 3 9 . . 1 ,1 4 9 ,3 2 4 1 ,0 2 8 ,6 4 9 1 ,1 2 0 ,0 0 2 + 12 + 3 + 9 J a c k s o n v ille . . 1 ,9 5 2 ,5 1 3 2 ,0 5 1 ,4 5 5 2 ,0 2 1 ,6 5 9 - - 3 + 5 M i a m i ................................ 3 ,7 1 5 ,6 0 5 3 ,5 5 6 ,0 1 2 3 ,7 0 7 ,0 1 9 + 4 + 0 + O r l a n d o .......................... 7 9 6 ,2 3 4 7 9 1 ,3 5 0 7 7 7 ,7 3 9 + 1 + 2 + 14 . 5 1 1 7 ,8 1 9 1 1 5 ,4 2 5 + 6 + 1 5 1 ,7 5 4 1 7 8 ,1 2 2 + 5 -1 1 + 8 + 8 O 4 2 ,6 8 5 4 0 ,4 3 6 3 9 ,5 5 0 + 6 + c a l a ................................ 9 9 ,2 1 9 8 7 ,3 6 5 + 2 +15 +19 S t. A u g u s tin e 9 5 9 ,2 9 6 5 4 ,3 4 3 5 4 ,1 3 1 + 9 +10 +10 1 2 4 ,3 0 7 1 2 5 ,5 1 6 1 2 9 ,7 6 7 - 1 - 4 - E l b e r t o n .......................... 1 8 ,0 7 5 2 0 ,8 8 5 1 6 ,9 5 4 + 7 +10 G a in e s v ille . . . . 4 + 13 + 10 + 10 1 3 2 ,6 1 1 1 3 3 ,6 6 8 1 1 8 ,0 6 5 - 1 + 12 + 15 ......................... 8 ,0 4 3 ,2 6 3 7 ,6 8 5 ,6 7 9 7 ,6 2 3 ,7 4 2 + 5 + 6 + 14 A u g u s t a .......................... 3 1 9 ,0 9 4 3 1 0 ,6 4 8 3 3 5 ,9 5 3 + 3 - 5 + 4 C o lu m b u s . . . . 3 0 4 ,5 1 5 3 0 4 ,4 2 2 3 0 1 ,1 1 7 + 0 + 1 + 3 .......................... 3 4 9 ,2 0 4 3 4 4 ,9 7 6 3 2 9 ,1 3 0 + 1 + 6 + 4 3 4 3 ,0 8 0 3 2 3 ,9 0 3 3 5 7 ,8 0 8 + 6 - 4 - 0 7 5 4 ,2 5 0 7 8 4 ,3 8 0 7 2 0 ,7 7 9 - 4 + 5 +21 P la q u e m in e G riffin .......................... L aG ran g e . . . . N ew nan .......................... -1 3 4 9 7 ,8 7 4 9 1 ,7 9 1 9 1 ,8 4 5 + 7 + 7 +16 4 7 ,3 7 8 4 6 ,3 7 4 4 2 ,3 4 4 + 2 + 12 +15 - 7 7 2 5 ,1 8 1 2 2 ,9 3 1 2 3 ,6 2 9 +10 + 3 3 ,9 0 5 3 1 ,6 6 2 2 5 ,0 3 9 + 7 +35 +23 e ................................ 9 6 ,4 8 8 9 3 ,8 3 4 9 8 ,7 7 9 + 3 - 2 + V a l d o s t a .......................... 7 1 ,6 3 0 7 1 ,0 1 4 6 4 ,2 4 7 + 1 +11 + 8 A b b e v ille . . . . 1 3 ,3 8 5 1 4 ,2 6 9 1 4 ,0 9 2 - 6 - 5 - 0 . . . . 1 7 3 ,4 1 9 1 5 6 ,6 4 0 1 7 3 ,1 4 9 +11 + 0 - 6 8 ,0 3 0 7 ,4 9 3 9 ,7 4 9 + -1 8 - 5 1 ,5 7 6 4 4 ,2 1 4 4 6 ,0 3 0 R o m . . . +15 +20 . . . . . + . + 3 D a l t o n ................................ + 13 L a fa y e tte 9 + +12 + 11 . - +12 1 8 5 ,2 1 4 5 6 1 6 ,7 8 8 . 6 1 ,1 9 2 ,4 1 0 +28 2 ,1 9 9 ,8 1 1 . 1 5 9 ,0 1 7 l,0 9 8 ,5 9 8 r + 6 0 0 ,6 5 1 R ouge + 1 6 8 ,9 8 7 1 ,2 2 9 ,2 0 3 8 9 2 ,0 5 2 ,4 5 1 B a to n +13 + 6 7 9 ,6 6 3 . . . 8 +11 2 ,2 7 9 ,0 5 8 . - + 7 7 ,2 9 3 + 14 Savannah -1 1 8 1 0 3 ,6 2 0 + 12 M acon 6 + 7 3 ,1 3 1 7 A tla n ta - 4 8 0 ,6 3 0 1 2 1 ,9 1 3 + A l b a n y ................................ 2 4 ,0 4 5 4 7 9 ,0 3 4 8 1 ,4 8 7 + 15 . 2 2 ,7 4 3 5 1 8 ,9 4 7 1 3 2 ,7 0 9 1 . 2 1 ,3 6 6 . . 7 P e te . . .......................... H aven A th e n s 8 . .......................... + B each . S a r a s o t a .......................... T am pa - W. P a l m . P e te rs b u rg 1 8 7 ,4 9 7 T a m p a —S t. 8 1 0 0 ,8 7 5 2 6 1 ,7 9 7 . . . 2 8 4 ,0 5 0 . . C o u n ty 2 0 1 ,7 7 6 . +10 1 2 4 ,4 0 5 2 8 0 ,8 4 1 . . . . 10 m o s. 1970 fro m 1969 1 5 8 ,8 3 1 2 1 6 ,0 4 7 P e n s a c o la T a lla h a s s e e S e p t. O c t. 1970 1969 . . B ru n s w ic k 9 O c t. 1969 . . . . W in te r F t. L a u d e r d a le — H o lly w o o d . S e p t. 1970 L a k e la n d S t. 6 1 1 ,1 7 7 to d a te G a in e s v ille M o n ro e 6 +10 5 Y ear O c t. 1970 F ro m A le x a n d r ia B u n k ie .......................... H am m ond N ew . . . . Ib e ria 1 7 4 ,9 8 6 1 6 9 ,6 2 4 1 7 2 ,2 5 0 + 3 + 2 + 5 T h ib o d a u x . . . . . . . 6 + 17 + 12 + 7 2 + 4 4 4 4 ,5 7 8 + 3 - 1 3 ,7 8 4 1 2 ,9 4 1 1 4 ,8 7 8 + 7 - 7 - 2 4 ,6 4 4 2 4 ,1 6 0 2 4 ,9 9 6 + 2 - 1 + 0 + 4 - 8 - 1 4 3 ,7 3 7 . . . . 7 6 4 2 ,2 8 5 L ak e C h a rle s . . . 1 7 5 ,0 3 4 1 6 6 ,1 5 1 1 7 8 ,3 0 2 + 5 - 2 - 2 H a ttie s b u rg . 8 6 ,2 0 4 7 7 ,1 0 7 8 2 ,8 2 8 +12 N ew . . . 2 ,8 1 2 ,7 4 5 2 ,7 0 7 ,7 8 2 2 ,8 7 2 ,7 9 5 + 4 - 2 + 4 L a u r e l ................................ 5 5 ,7 4 4 5 5 ,4 5 0 5 6 ,2 6 8 + + 9 8 1 ,1 2 6 7 2 ,7 2 6 9 5 ,4 9 8 + 12 -1 5 - 8 . 2 5 1 ,8 2 5 1 7 8 ,1 5 6 1 7 9 ,8 7 6 +41 +40 +27 M e r i d i a n .......................... . - 8 -1 2 - 5 8 3 8 ,7 6 5 8 4 4 ,0 6 4 9 3 4 ,4 9 2 - + N a t c h e z .......................... 4 5 ,0 8 5 4 6 ,9 9 7 -1 0 4 1 ,5 8 7 9 0 0 ,5 0 6 8 7 4 ,3 6 0 8 3 6 ,0 9 6 + 3 + 8 + 11 P a s c a g o u la — M o ss P o in t 9 1 ,1 9 4 - + 6 6 5 7 ,8 4 0 5 8 0 ,6 6 5 6 2 1 ,0 9 6 + 13 + 6 + O rle a n s B ilo x i—G u lf p o r t Jack so n .......................... C h a tta n o o g a K n o x v ille N a s h v ille OTHER . . . . . . . 1 ,9 0 7 ,2 8 1 . . . . 1 ,8 6 6 ,3 3 5 2 ,0 1 9 ,1 1 7 + 1 2 - 6 + 8 3 6 V ic k s b u rg Y azoo C ity B ris to l CENTERS Jo hnson 8 2 ,3 1 6 7 9 ,0 9 7 8 4 ,6 0 6 + 4 - 3 + .......................... 1 0 0 ,7 3 3 1 0 3 ,1 4 5 9 3 ,2 2 6 - 2 + 8 + 13 S e l m a ................................ 5 6 ,6 0 9 5 1 ,7 7 6 5 7 ,4 8 5 + 9 - 2 + A n n i s t o n ......................... D o th a n B a rto w .......................... B ra d e n to n . . . . + 5 5 5 ,0 0 7 5 1 ,4 4 6 + 7 + 15 + 14 . . . . 3 6 ,4 4 8 2 8 ,7 2 3 -1 1 + 13 + 4 9 9 ,0 4 9 9 6 ,3 7 2 9 8 ,7 7 3 + 3 + 0 + 5 1 0 1 ,9 3 9 1 0 1 ,0 9 1 1 0 8 ,6 2 5 + 1 - 6 + 8 1 7 9 ,5 1 4 1 7 7 ,4 7 6 1 8 8 ,9 4 9 + 1 - 5 - 2 . . C ity . . . . . . . D IS T R IC T , T o ta l 4 1 ,7 1 1 ,4 0 9 r 4 3 ,5 0 8 ,1 5 2 + 4 - 0 + 8 5 ,2 5 4 ,9 8 1 5 ,0 6 4 ,4 1 7 r 5 ,0 5 5 ,9 5 2 + 4 + 4 + 7 + 3 5 ,5 5 9 + 1 - 1 - 4 9 5 ,3 2 3 9 8 ,2 8 0 + 5 + 2 + 4 F l o r i d a ^ .......................... 1 3 ,9 1 9 ,5 9 6 1 3 ,3 6 0 ,4 1 4 1 3 ,8 1 0 ,9 7 8 + 4 + 2 2 2 3 ,5 9 9 - 0 - 7 - 3 G e o r g i a ! .......................... 1 1 ,8 8 9 ,7 4 3 ll,4 5 4 ,3 4 4 r 2 0 8 ,8 4 6 2 0 8 ,5 1 5 D a y to n a B each . . 1 0 4 ,7 3 6 1 3 7 ,5 9 5 9 6 ,6 3 9 1 3 1 ,5 4 4 1 1 0 ,8 7 8 1 2 8 ,1 3 2 Includes only banks in the Sixth District portion of the state 1 9 70 + + 8 5 + 6 7 + + 3 4 tPartially estimated . . . . 4 3 ,4 1 9 ,0 1 8 3 4 ,6 7 2 . D ECEM BER 8 4 ,9 7 5 5 8 ,9 7 5 3 2 ,4 8 8 . 3 5 ,0 3 4 . . S IX T H 3 8 8 ,8 5 6 . . . . ......................... K in g s p o r t 1 1 0 0 ,0 3 3 C o u n ty . 1 . A la b a m a ! B re v ard F t. M y e rs — N . F t. M y e rs 4 . 9 1 2 ,2 5 7 ,3 4 4 + 4 - 3 + 11 4 ,7 9 9 ,4 4 9 4 ,9 6 8 ,3 6 0 + 3 - 0 + 6 L o u is ia n a !* . - . 4 ,9 5 5 ,1 8 7 M is s is s ip p i* • • • 2 ,0 4 5 ,2 9 8 1 ,8 9 1 ,1 7 2 2 ,0 3 4 ,5 4 2 + 8 + 1 + 7 T e n n e s s e e t* . . • 5 ,3 5 4 ,2 1 3 5 ,1 4 1 ,6 1 3 5 ,3 8 0 ,9 7 6 + 4 - 0 + 6 t Estimated 195 D is t r ic t B u s in e s s C o n d it io n s E c o n o m ic a c t iv it y r e m a in s la c k lu s te r in th e S o u th e a s t , a c c o r d in g to la te s t a v a ila b le d a ta . A lt h o u g h n o n fa rm e m p lo y m e n t ro se a g a in in O c to b e r, the rise w a s o n ly slig h t. C o n s t r u c t io n c o n tr a c t a w a r d s d ro p p e d s u b s t a n t ia lly . C o n s u m e r s r e m a in e d r e lu c ta n t p u r c h a s e r s a n d re s p o n s e to b o u n t ifu l p ro d u c tio n , b u t e x c e ssiv e bo rro w e rs. A g r ic u lt u r a l p r ic e s s a g g e d in r a in fa ll h a s d im m e d p r o s p e c t s fo r a b u m p e r so y b e a n crop. L o a n d e m a n d c o n tin u e d w e a k, a n d the p rim e le n d in g rate w a s m a r k e d d o w n tw ic e in N o v e m b e r. O v e rall, n o n fa r m e m p lo y m e n t e d g e d u p w a rd for Preliminary esti mates indicate, however, that October’s unemploy ment rate edged up to 4.7 percent. Strike ac tivity was primarily responsible for employment changes. Settlement of the construction strike in Atlanta boosted nonmanufacturing employment, but transportation e q u ip m e n t e m p lo y m e n t dropped sharply because of the GM strike. Sec ondary layoffs from the GM strike appear minimal in the District. Primary metals, in par ticular have fared better than nationally, with employment actually showing gains in October. th e s e c o n d c o n s e c u tiv e m o n th . T o ta l c o n s tr u c t io n c o n tr a c t a w a r d s fe ll to the The decline was centered in the nonresidential sector. A re surgence of multi-family residential awards in Florida helped to boost total residential volume so that September’s decline was reversed. Sav ings flows to District savings and loan associa tions continued strong in October, and mortgage credit was more readily available in a growing number of markets. Hence, total consumer credit outstanding in creased only moderately. The continued sluggish ness in auto sales and retail trade contributed to reduce expansion in new loan volume. In O c to b e r, a g r ic u lt u r a l p r ic e s d e c lin e d to the The weakness was shared by both the crop and livestock sectors. The pro spective bountiful citrus crop was the main price depressor among crops, and heavy pork supplies were responsible for triggering price declines for all livestock items except milk. Excessive rain fall damaged unharvested crops throughout the District and has dimmed the prospects for the once excellent soybean crop. low p o in t o f the year. lo w e st le vel for a n y m o n th in 1 9 7 0 . T h e v o lu m e o f n ew c o n s u m e r in s ta lm e n t lo a n s m a d e by c o m m e r c ia l b a n k s in O c to b e r d e c r e a s e d s o m e w h a t b u t r e m a in e d h ig h e r th a n r e p a y m e n ts. NOTE: The p rim e rate w as cut tw ic e in N o v e m b e r, u n d e r s c o r in g s l a c k lo a n d e m a n d a n d a r a p id d e The number of banks borrowing at the discount window de clined because bank reserve positions were under less pressure. The discount rate of this Bank was lowered from 6 percent to 5% percent, effective November 11, and from 5% percent to 5V2 per cent, effective December 1. According to pre» liminary data, demand deposit inflows were strong in November, but interest-bearing deposits declined modestly. c lin e in sh o rt-te rm in te re st rate s. D a t a o n w h i c h s t a t e m e n t s are b a s e d h a v e b e e n a d j u s t e d w h e n e v e r possible to e l i m i n a t e s e a s o n a l influences. 196 M ON TH LY REVIEW D E C E M B E R 1970
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