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IN THIS ISSUE: MONTHLY REVIEW •T he Unemployment-Inflation Trade-Off: What 1969 Forecasts Imply •Alabama’s Economy Grows, but Loses Speed •Board of Directors • District Dusiness Conditions FEDERAL RESERVE BANK OF ATLANTA FEBRUARY 1969 Monthly Review, Vol. LIV, No. 2. Free subscription and additional copies available upon request to the Research Department, Federal Reserve Bank of Atlanta, Atlanta, Georgia 30303. The Unemployment-lnflation Trade-Off: What 1969 Forecasts Imply Compared to 1968, most forecasters have pre dicted a slower economic expansion in 1969. A slower economic expansion is not always good news. But the recent opinion of most economists is that some deceleration in economic activity in 1969 is not only desirable, but is essential if current inflationary price rises are to be checked or reduced. The anticipated slowing of dollar gains and the effects on price advances and un employment vary considerably, however, accord ing to 11 major business forecasts analyzed by this Bank. The results and some implications of these forecasts are summarized in this article. A Slower Economic Expansion In December 1968, when this Bank solicited 1969 economic projections from various individuals or organizations that customarily make fore casts, there was wide agreement among the re spondents that the economy would slow down in 1969. There was less agreement on how much deceleration is expected. For example, the pro jections of Gross National Product (G N P) for the entire year ranged from a low of $903 billion to a high of $921 billion. The median forecast of GNP was $913 billion. If this projection is taken as “typical,” then GNP is expected to increase FEBRUARY 1969 around $52 billion in 1969, or about 6 percent over the $861-billion level reached in 1968. Although sizable, a $52-billion increase is con siderably smaller than the extraordinarily large $ 7 1-billion increase, or 9-percent gain, recorded in GNP during 1968. The slower economic expansion, according to the opinion of most forecasters, was expected to start in the final quarter of 1968 as the earlier increase in personal and business income taxes and some cutback in government expenditure pro grams began to restrain economic activity. As the preliminary figures on economic activity for the final months of 1968 began to come in, they revealed further rapid gains. GNP, measured in current prices, had increased at an annual rate of nearly $17 billion in the final quarter, only slightly less than the $18-billion rise the previous quarter. The rate of increase, measured in dollars of constant purchasing power, had declined from 5 to 3.8 percent. The unemployment level, low throughout 1968, was declining, and in December the jobless rate was down to 3.3 percent—the lowest in 15 years. Moreover, about half the fourth quarter increase in GNP was the result of higher prices, thus continuing the inflationary trend of previous quarters during the year. The range and quarterly patterns we received 19 Table I GNP, Inflation, and Unemployment (Based on Surveyed Forecasts) GNP ($ billions) N um ber of Forecasts Range of 1969 Forecasts 903-910 912-914 915-916 917-921 1969 Median Forecast 913 1968 Actual** 861 3 3 3 2 U nem ploym ent Rate Percent Inflation* 4.2-4.6 4.2-4.3 4.0-4.1 3.9-4.1 2.5-3.4 3.0-3.2 3.0-3.4 3.3-4.0 4.2 3.0 3.6 4.0 ‘ Percent increase in GNP deflator. **Preliminary. for 1969 GNP projections indicate that most fore casters were probably surprised by this further rapid strength in the economy in fourth quarter 1968. The $887.5-billion GNP figure attained in the final quarter even surpassed the lowest fore cast in our survey for first quarter 1969. And, it was close to the median GNP figure anticipated by the forecasters for first quarter 1969 before the fourth quarter 1968 results were in. The 1969 quarterly forecasts were mixed. Two of the predictions showed a more or less steady growth rate (in current dollars) of about 1.2 per cent per quarter for 1969. The results from two econometric forecasting models included in our survey reflected the general pattern of what once was regarded as the “standard forecast,” i.e., a slower rate of growth of about 2 percent in the first half of the year, followed by a rapid expan sion of about 4 percent during the second half. The remaining seven forecasts as a whole envi sioned a slightly higher growth rate in the second half as compared to the first six months. On the whole, the median forecast predicted an annual growth rate of about 2.4 percent in the first half and about 3.5 percent in the last half of the year. Despite the availability of additional and some what surprising information received after the orginal projections were made, the substance of the projections on an annual basis is not deTable II 1969 GNP Quarterly Forecasts (Billions of Dollars) 1 Quarter II Quarter III Quarter IV Quarter Low High Median 882.0 894.0 910.0 925.0 899.5 910.5 928.0 944.0 892.1 902.8 919.3 935.1 20 stroyed, and the implications for prices and unem ployment probably are not greatly altered. So far, the rapid gains in aggregate spending through the end of 1968 have continued to exert pressure on an already high employment-inflation prone economy. Fiscal restraint programs de signed to curb inflationary pressures had less than the desired effects. Consequently, the problem of continuing rapid gains in aggregate spending and too much inflation still remain largely un diminished in early 1969. Less Inflation and More Unemployment Corresponding to their projections of slower economic gains in 1969, most of the forecasters we surveyed also predicted less inflation than occurred in 1968. The median forecast of the rate of price advance was about 3.0 percent, as measured by the GNP implicit price deflator. Although a 3.0-percent inflation rate is historically high, it would represent a full percentage point re duction from 4.0 percent in 1968. Individual fore casts of overall price rises expected in 1969 ranged from a low of 2.5 percent to a repeat performance of last year’s 4.0 percent. Thus, despite some differences in the actual amount of price increases expected, the forecasters in gen eral see inflation as a continuing problem in 1969. Consumer prices were projected to advance about 2.7 percent this year, compared to a 4.2-percent rise in 1968, while wholesale prices were esti mated to rise 2.1 percent, following a 2.5-percent increase last year. The projections of our respondents seem to imply that they believed reducing or completely eliminating inflation could not be accomplished quickly, even if the rate of economic expansion were to slow down. Moreover, they seemed to believe that a necessary first step in reducing inflation in 1969 is to accept some increase in unemployment along with the projected slower pace of overall economic activity. Consequently, their median forecast of a smaller rise in prices this year was coupled with a typical projection of an increase in the unemployment rate to 4.2 per cent from the 3.6-percent rate of 1968. Some of the forecasters, however, expect the unemploy ment rate to stay below 4.0 percent, while others project a rise above the 4.2-percent typical esti mate. In most cases, those projecting an unem ployment rate on the low side predicted the largest dollar increases in GNP and rate of price advances; those predicting a higher unemploy ment rate expected smaller increases in GNP and prices. M O NTHLY R E V IE W The treatment by the forecasters of these trade off relationships between GNP, inflation, and unemployment reflect observable conflicts in trying to achieve, simultaneously, high employ ment, reasonably stable prices, and a sustainable rate of economic growth. While most everyone accepts these objectives as desirable goals of the domestic economy, it is also generally recognized that imbalances between these goals may appear frequently. When such conflicts arise, it may be possible to achieve a certain goal only at the ex pense of not fully achieving others, or of only partially accomplishing several of the objectives. The existence of an inflation-unemployment trade-off is widely acknowledged, and was im plicit in most of the forecasts reviewed. But there was lack of agreement among the forecasters on the amount of slowdown in business activity and increase in unemployment necessary to reduce the inflationary momentum. The 1969 Economic Report of the President and The Annual Report of the previous administration’s Council of Eco nomic Advisers acknowledged these conflicts in goals and labeled the reconciliation of prosperity at high employment with price stability the na tion’s most important unsolved problem of overall economic performance. The former Council of Economic Advisers, however, differed in their report from the forecasts we surveyed on the probable trade-off magnitudes. According to the Council, GNP should expand about $60 billion in 1969, more than the $52-billion median estimate our respondents reported. Of greater significance, it expects the unemployment rate can be main tained below 4 percent (in contrast to a rise to the 4.2-percent median forecast by our respondents), while the price advance is reduced to slightly more than 3 percent (about the same as the projections we received). Although these differences in views cannot be easily reconciled, it is useful to look at what has happened in some past years for an indication of the possible range of the inflation-unemployment trade-off in 1969. The regression lines in the chart represent an ap proximation of the average relationships between unemployment and overall price increases. The lines indicate that to move down the vertical scale toward more stable prices, some increase in un employment along the horizontal scale is sug gested. The trade-off pattern between prices and unem ployment has changed since 1950. The green line in the chart illustrates the pattern from 1961 to 1968, compared to the gray line for the entire pe riod 1950-68. The pattern since 1961 fits ex tremely well the actual results for each of the years. Since 1965, the unemployment rate has The rate of increase in prices has usually accelerated when unem ploym ent was at a very low level. The gray line represents an overall average approxim ation of this trade-off pattern over the entire period 1950-68. The scatter of dots show ing the inflation-unem ploym ent re lationships for individual years around this longer-run pattern indicates the lack of a precise statistical fit. On the other hand, the rates of advance in prices and m ovem ents in the unem ploym ent rate for each year between 1961-68 are represented rem arkably well by the overall pattern for this period— the green line. These relationships, are the im plicit basis for most forecasters suggesting that some increase in unem p loym ent m ust be accepted in order to reduce inflation in 1969. Percentage Change from Previous Year Im plicit G N P Price Deflator Past Trade-Offs Past relationships between the rate of unemploy ment and price changes undoubtedly influenced the forecasters in their contention that a low rate of unemployment is generally associated with the tendency for price advances to accelerate. The dots in the accompanying chart represent the plottings of the rate of inflation ( increase of GNP deflator) for each year from 1950-68 correspond ing to the unemployment rate for the same year. FEBRUARY 1969 Th e two lines estimated were: 1950-68: log y = 0.86311 - 0.84182 log X ; R2 = .18 1961-68: log y = 1.56660 - 1.90487 log x; R2 = .85 y = percent change in GNP price deflator previous years, x = unem ploym ent rate. from 21 been below 5 percent, and prices have risen over 2 percent per year, as illustrated by the dots rep resenting the years 1965-68. In the early 1960’s, when the unemployment rate was above 5 per cent, the annual rate of increase in the price level was held below 2 percent. Although the economic forecasters would surely point out that many other factors besides the level of unemployment may affect short-run in flationary tendencies, they generally concluded that some increase in unemployment is probably necessary to reduce the increases in the price level. If we accept this basic assumption and as sume the average pattern of 1961-68 will also hold in 1969, the degree of inflation for various unem ployment rates can be calculated. At the median estimate of a 4.2-percent unemployment rate pre dicted by the respondents, prices (G N P deflator) would rise about 2.6 percent in 1969 (according to our statistical relationship), or less than the me dian forecast (3.0 percent). On the other hand, if the former Council of Economic Advisers’ sug gestion of an unemployment rate below 4 percent (say 3.8 percent) is realized, then our statistical curve would yield an inflation rate of about 3.8 percent, or higher than the Council’s projection of slightly above 3 percent. Since all the dots for the years 1961-68 do not fall exactly on the regression line, such a me chanical application gives a misleading impres sion of exactitude. Although the line for 1961-68 shows the average relationships between the rate of unemployment and price changes, the actual rate of price change was greater or smaller than the change indicated by the line. Consequently, even the most mathematically minded forecaster would not expect 1969’s performance to follow precisely an estimate based on the average rela tionship. Moreover, the entire curve depicting the average relationship could shift again as it has in the past. The forecasts show, however, that a major short-run shift is not expected, and the rate of price increases is unlikely to be reduced a full percentage point below last year’s increase, with out an unemployment rate above 4 percent. None theless, the wide variations in the inflationunemployment trade-off in the past suggest that whether or not more stable prices can be achieved at low unemployment in 1969 is still an unresolved question. The unemployment rate itself, of course, is de termined by the demand for labor in relation to the active labor force. This demand is related to the strength of overall spending by businessmen, consumers, and government. Notable differences were reported by the forecasters in the expected 22 strengths and weaknesses in these major subcom ponents of total spending. Sm aller Consumer Gains Even though most of the respondents expected a smaller rise in consumer spending in 1969, there was a wide divergence in their individual projec tions. The most optimistic forecaster projected a gain of $38 billion in consumer spending over the 1968 level, while others envisioned a rise of only about $28 billion. The median forecast was for a gain of $34 billion during the year to a level of $566 billion for total personal consumption ex penditures. This represents about a 6-percent in crease from the previous year’s $534-billion level. The divergences in consumption projections stem largely from differences in the assumptions regarding the continuation of the surtax and in their assessment of the efficacy of the fiscal re straints put into effect last July. In general, those projecting the largest increases in consumer spending this year assumed either an elimination of the surtax or a reduction in the surtax rate after July. On the other hand, all of those ex pecting the smallest gains in consumer spending assumed the full retention of the 10-percent sur charge throughout the year. This latter group appeared also to expect some delayed effects of the earlier fiscal restraints. Most of the fore casters seemed to agree that the exceptionally rapid gains in consumer spending on durable goods last year—particularly on automobiles— will not be repeated in 1969. Other Major Sectors Projections for gross private domestic investment (capital investment, inventories, and residential construction) ranged narrowly from a low of $132 billion to a high of $140 billion for the entire year of 1969. The median forecast was $133 bil lion, a 4.6-percent rise over the preliminary 1968 level of $128 billion. A few respondents who made projections on business fixed investment gener ally confirmed the findings of the latest SECCommerce Department survey for the first six months of 1969 and the recent McGraw-Hill sur vey that showed businessmen’s plans to increase their plant and equipment expenditures by 6-8 percent in 1969. The forecasters in general expect a consider able deceleration in the rise in government ex penditures this year. The range of forecasts for government spending was $209 billion to $213.6 billion, with a median of $210 billion. The median represents approximately a $13-billion increase, M O NTHLY R E V IE W Table III Summary of 1969 Forecasts (Billions of Dollars Unless Otherwise Indicated) GNP Personal Consum ption Private Domestic Investm ent G overnm ent Expenditures Net Exports W holesale Prices* Consum er Prices* Industrial Production Index* U nem ploym ent Rate** Low High Median 903.0 560.6 129.0 209.0 2.0 109.9 124.5 166.0 4.0 920.5 572.2 135.1 213.6 6.1 112.0 126.1 168.6 4.6 912.5 566.3 133.4 210.0 3.7 111.0 125.4 167.1 4.2 ‘ Index, 1957-59 = 100. **Percent. or a 6.5-percent rise, over the previous year. This is a marked reduction in the rate of increase in government purchases of goods and services when the 1969 projection is compared to the rise of $19 billion, or 10-percent increase, in 1968. The forecasters in general expect an increase to $3.7 billion in the nation’s net exports this year from 1968’s $2.4 billion. To Sum Up Expectations about the performance of the na tion’s economy in 1969 vary considerably at this time. In a few instances, forecasters pointed to B ank the danger of an actual economic downturn, or recession; others emphasized fears of continuing rapid inflation. However, the consensus of those persons included in our survey points to a healthy economy in 1969; the expansion will continue but at a slower pace, prices will continue to rise but not as fast, and unemployment, though expected to rise, will remain low. Those persons who have the courage to engage in the difficult art of economic forecasting know all too well the imprecision of economic forecasts. They have learned from experience that economic relationships can be unstable, and they know that the human behavior behind the decisions establishing these relationships is not precisely predictable. That the economy could continue to expand so vigorously in late 1968, despite earlier predictions of a slowing down, therefore, did not come as a complete shock to the forecasting ex perts. It was an example of the instability of re lationships at work. Neither should it diminish our respect for those persons, the forecasters, who have the courage to make up their minds about the probable course of the nation’s econ omy. Their present uncertainties can be taken as a warning that to be successful, economic policies must be kept flexible. J o e W. M c L e a r y a n d C. S. P y u n A n n o u n c e m e n ts Two nonmember banks—Bank of Hurtsburo, Hurtsburo, Alabama, and Bank of Sevierville, Seviervilie, Tennes see—began to remit at par on January 6 for checks drawn on them when received from the Federal Re serve Bank. Sevier County Bank, Sevierville, Tennessee, a non member bank, began to remit at par on January 10. And on January 27, another nonmember bank, The Farmers Bank, Douglas, Georgia, also began to remit at par. FEBRUARY 1969 23 Alabama's Economy Grows, but Loses Speed Alabama enjoyed another year of economic growth in 1968. More of the state’s residents were working than in the year before, personal income rose to a record level, and spending also increased. Expanding loans and deposits indicate that the state’s bankers participated in the in creased level of business activity in 1968. Solid economic gains like these are not unusual for Alabama. Last year, however, the rates of gain in most sectors of the economy were below those of recent years. This slower growth was closely tied to some outside developments, as in the past Alabama’s economic fortunes have often been linked to the influence of special national and regional economic events. What Happened . . . Tracing Alabama’s economic trends last year sug gests a two-part performance. When the curtain opened at the beginning of the year for the first act, economic activity was expanding, but grad ually began to taper off in some sectors and to decline in others. The second act, portraying economic conditions during the final half of the year, saw a recovery in some of the hesitant sec tors and better gains overall. 24 Alabama’s employment trends in 1968 ex emplify this two-act economic performance. Total nonfarm employment trended downward through the first half of the year, and the unemployment rate advanced. In June, about 6,000 fewer workers were employed in nonfarm jobs across the state than at the beginning of the year, after account ing for the normal seasonal change. At the same time, the unemployment rate had edged up to 4.8 percent of the labor force from the 4.3-percent rate at the beginning of the year. After June, the nonfarm employment pattern was reversed and the unemployment rate began to drop. Employment declines during the first half of 1968 were shared by the manufacturing as well as the nonmanufacturing sectors, and manufac turing payrolls advanced only hesitantly. These trends reversed, for the most part, in the second half. The strong recovery in nonfarm employment beginning at mid-year was attributable almost entirely to a sharp rebound in manufacturing jobs. As a result, manufacturing payrolls also shot up rapidly before experiencing a setback in November and December. Nonmanufacturing em ployment, on the other hand, rose during the spring and summer, fell off in autumn, and headed up again in the final quarter. M O NTHLY R E V IE W Banking activity, as measured by bank loans and deposits at member banks of the Federal Re serve System, also followed the two-part perfor mance of the employment trends to some extent. These banking indicators moved erratically side ways during the first half of 1968 before taking off on a sharp upward surge in the second half. Bank debits fluctuated irregularly, but made significant gains for the entire year. On balance, the year as a whole was not as good as it might have been. Employment, pay rolls, and personal income all increased less than the year before. Bank debits (a measure of check book spending) moved irregularly, but a 12-per cent advance for the year as a whole surpassed the previous year’s rate of gain. The trend in bank debits varied considerably across the state, however, reflecting the uneven pace of general business conditions among local areas. Where It Happened . . . While nationwide economic developments almost always affect Alabama’s economy, in 1968 the state’s economic fortunes, as indicated by em ployment trends, were closely linked to two par ticular aspects of national business conditions. The national steel strike threat and the cutback in Federal Government spending on space pro grams adversely affected Alabama’s employment growth last year. These two outside influences had their biggest impact in the Birmingham and Huntsville areas. In Birmingham, manufacturing employment averaged below the 1967 level. Average monthly employment was down 1.4 percent compared to the previous year. Most of this drop resulted from a reduction in primary metals employment. In creases in the number of workers in the nonman ufacturing sector—notably construction, trade, transportation, communication, and utilities— more than offset the manufacturing jobs’ decline Thus, total nonfarm employment increased 0.6 percent. Employment declines in Huntsville during 1968 were more widespread. This area’s non manufacturing sector, which accounts for the bulk of jobs, experienced a drop in average monthly employment of nearly 3 percent during 1968, compared to 1967. Space-related service em ployment was the chief cause of this decline. Also influencing the slowdown in space activity was an over-the-year reduction in ordnance workers in the manufacturing sector. Because of the heavy dependence of Huntsville on space-related activi ties, most other employment sectors were affected FEBRUARY 1969 25 construction, and finance, insurance, and real es tate jobs aided the growth in the nonmanufactur ing sector. Most of the employment strength in Tuscaloosa came from the manufacturing sector. Mobile and Montgomery managed to make fractional gains in total employment between 1967 and 1968, but for different reasons. In Mo bile, declining nonmanufacturing employment, chiefly in government jobs was more than offset by gains in manufacturing jobs, principally in shipbuilding and repair. In Montgomery, the chief impetus came from the trade sector. by the slowdown. Total nonfarm employment de clined more than 2 percent below the 1967 level. In contrast to the experience in Birmingham and Huntsville, the Gadsden and Tuscaloosa areas enjoyed substantial gains in nonfarm em ployment. The monthly employment level aver aged nearly 5 percent above that of 1967 in these areas. The increased number of workers in Gads den was almost equally divided between the man ufacturing and nonmanufacturing sectors. A sizable upturn in durable and nondurable goods pushed manufacturing jobs upward; government, S ta n d a rd M e tro p o lita n BIRMINGHAM S ta tis tic a l A re a s MOBILE GADSDEN Thousands Thousands Factory Employment — Thousands Factory — 13 —21 11 Ay Nonfactory Employment % ff J ** Nonfactory Employment ' “ ■V 4 * _ i / -174 ro V _ 17 16 V-A Millions Billions Bank Debits J / _ 18 i — 81 •V p ' \i V k n \ i i n \ f* \* IwI V '\ * 7 —79 Bank Debits* / \ ( - 22 - Nonfactory Employment 850 Billions Bank Debits* fi a 750 / I HUNTSVILLE TUSCALOOSA MONTGOMERY Thousands Thousands Factory Employment —10 4 I— V v / / — 25 — 23 V Billions — 1.4 Bank Debits* —1.2 1967 1968 —3 1967 1968 1967 1968 •Seasonally adjusted annual rate. 26 M O NTHLY R E V IE W Variations in employment trends in the dif ferent metropolitan areas reflect the strengths and weaknesses in their underlying and unique economic makeups. Gains or losses in employ ment, in turn, influence activity in the banking community. One indicator is the amount of checkbook spending. . . . and the Trend in Spending Checkbook spending (bank debits) reflects bank ing activity in general, including purely financial transactions locally and check clearings from out side an area, and may not exactly parallel employ ment trends. In Birmingham, where employment generally increased only moderately last year, checkbook spending rose 12 percent, the same as in Tuscaloosa where employment rose more rapidly. Bank debits rose less rapidly in the other major metropolitan areas. Huntsville and Gadsden recorded the smallest increases in bank debits, 7 percent each, but employment trends in these areas were quite different. In Mobile and Montgomery, bank debits rose 8 percent and 9 percent, respectively. Sustained Prosperity Although her economic gains were not as large last year as they have been in some recent years, Alabama has a lot to brag about. The long-trend economic expansion in the state continued, push ing incomes and spending to record levels. Few workers were without jobs, as the unemployment rate remained at a low level. Indeed, with the pool of available workers already low and with some adverse circumstances in the national economy affecting the state, the very fact that growth was maintained is credit to the ability of the state’s diversified economy to weather minor irregularities. By early 1969, these had been large ly overcome, and Alabamians looked forward to another year of prosperity. J o e W. M c L e a r y T h is is on e o f a se rie s o f a r tic le s in w h ic h e co n o m ic d e v e lo p m e n ts in e a ch o f th e S ix th d isc u ssed . REVISED PUBLICATION A Review of Louisiana’s Economy, 1959-68. Revised January 1969. Now available upon request to the Research Department, Federal Reserve Bank of At lanta, Atlanta, Georgia 30303. FEBRUARY 1969 D is tr ic t s ta te s a re The monthly release on Consumer Instal ment Credit now contains data on credit cards and check credit activity. If you are interested in receiving this release on a reg ular basis, please write: Research Depart ment, Federal Reserve Bank of Atlanta, At lanta, Georgia 30303. 27 Board of D irectors ATLANTA Class C1 F e d e ra l R eserve B ank of A tla n ta a n d B ra n c h e s E ffective J a n u a ry 1 , 1 9 6 9 John A. Hunter—1969 President, Louisiana State University Baton Rouge, La. John C. Wilson—1970 President, Horne-Wilson, Inc. Atlanta, Ga. *Edwin I. Hatch (Chairman)—1971 President, Georgia Power Company Atlanta, Ga. BIRMINGHAM BRANCH JACKSONVILLE BRANCH Appointed by Board of Governors Appointed by Board of Governors Mays E. Montgomery (Chairman)—1969 General Manager, Dixie Home Feeds Company Athens, Ala. Henry King Stanford (Chairman)—1969 President, University of Miami Coral Gables, Fla. C. Caldwell Marks—1970 Chairman, Owen-Richards Company, Inc. Birmingham, Ala. Henry Cragg—1970 Chairman, Minute Maid Company Orlando, Fla. + William C. Bauer—1971 President South Central Bell Telephone Company Birmingham, Ala. *Castle W. Jordan—1971 President, Associated Oil and Gas Company Coral Gables, Fla. Appointed by Federal Reserve Bank Appointed by Federal Reserve Bank Will T. Cothran—1969 President, Birmingham Trust National Bank Birmingham, Ala. L. V. Chappell—1969 President, First National Bank Clearwater, Fla. Arthur L. Johnson—1970 President, Camden National Bank Camden, Ala. Harry Hood Bassett—1970 Chairman, First National Bank Miami, Fla. George A. LeMaistre—1970 President, City National Bank Tuscaloosa, Ala. J. Y. Humphress—1970 Executive Vice President Capital City First National Bank Tallahassee, Fla. + K. M. Varner, Jr.—1971 President, The First National Bank Auburn, Ala. + Edward W. Lane, Jr.—1971 President, The Atlantic National Bank Jacksonville, Fla. NO TE: ’ Nonbankers appointed by Board of Governors, Federal Reserve System. Expiration dates of term s occur on December 31 of the year beside each name. 28 M O NTHLY R E V IE W C la s s B - C la s s A 3 Philip J. Lee—1969 Vice President, Tropicana Products, Inc. Tampa, Fla. William B. Mills—1969 President, Florida National Bank Jacksonville, Fla. Hoskins A. Shadow—1970 President, Tennessee Valley Nursery, Inc. Winchester, Tenn. A. L. Ellis—1970 Chairman, First National Bank Tarpon Springs, Fla. :Harry T. Vaughn—1971 President, United States Sugar Corporation Clewiston, Fla. *John W. Gay—1971 President, First National Bank Scottsboro, Ala. NASHVILLE BRANCH NEW ORLEANS BRANCH Appointed by Board of Governors Appointed by Board of Governors James E. Ward (Chairman)—1969 Chairman, Baird-Ward Printing Company, Inc. Nashville, Tenn. George Benjamin Blair—1969 General Manager American Rice Growers Cooperative Lake Charles, La. Robert M. Williams—1970 President, ARO, Inc. Tullahoma, Tenn. -j-Edward J. Boling—1971 Vice President, Development and Administration University of Tennessee Knoxville, Tenn. Robert H. Radcliff, Jr. (Chairman)—1970 President, Southern Industries Corporation Mobile, Ala. *Frank G. Smith, Jr.—1971 Vice President Mississippi Power and Light Company Jackson, Miss. Appointed by Federal Reserve Bank Appointed by Federal Reserve Bank Andrew Benedict—1969 President, First American National Bank Nashville, Tenn. A. L. Gottsche—1969 President, First National Bank Biloxi, Miss. H. A. Crouch, Jr.—1970 President, First National Bank Tullahoma, Tenn. Lucien J. Hebert, Jr.—1970 Executive Vice President Lafourche National Bank Thibodaux, La. W. H. Swain—1970 President, First National Bank Oneida, Tenn. Morgan Whitney—1970 Sr. Vice President, Whitney National Bank New Orleans, La. -fHugh M. Willson—1971 President, Citizens National Bank Athens, Tenn. + E. W. Haining—1971 President, The First National Bank Vicksburg, Miss. -Nonbankers elected by m em ber banks. *Reappointed for three-year term. 'Member bank representatives elected by m em ber banks. + New member. FEBRUARY 1969 29 Sixth District Statistics Seasonally Adjusted (All data are indexes, 1957-59 = IOO, unless indicated otherwise.) Latest Month (1968) One Two Month Months Ago Ago One Year Ago SIX T H D IST R IC T IN C O M E A N D S P E N D IN G Personal Incom e (Mil. $, Annual Rate) . Nov. 66,227 66,061r 66,023r 60,141 237 M anufacturing P a y r o lls ..................... Dec. 236 233 214 Farm Cash R e c e i p t s ........................ Dec. 139 133 134 145 104 131 C r o p s ..........................................Dec. 126 134 L iv e s t o c k ...................................... Dec. 171 161 145 164 Instalm ent Credit at B an k s* (Mil. $) 291 r 339r 281 r New L o a n s ................................... Dec. 316r 256r 270r 293r Repaym ents ............................... Dec. 273r P R O D U C T IO N A N D E M P L O Y M E N T Nonfarm E m p l o y m e n t ..................... Dec. M anufacturing ............................ Dec. Apparel ...................................... Dec. C h e m i c a l s ...................................Dec. Fabricated M e t a l s ........................ Dec. F o o d ............................................. Dec. Lbr., Wood Prod., Furn. & Fix. . . . Dec. P a p e r ..........................................Dec. Prim ary M e t a l s ............................Dec. Textiles ...................................... Dec. Transportation Equipment . . . . Dec. N o n m a n u fa c tu rin g ............................ Dec. C o n s t r u c t i o n ............................... Dec. Farm E m p lo y m e n t ............................ Dec. Unem ploym ent Rate (Percent of Work F o r c e ) .............. Dec. Insured Unem ploym ent (Percent of Cov. E m p . ) ................. Nov. Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Dec. Construction C o n t r a c t s * ................. Dec. R e s id e n t ia l...................................Dec. All O t h e r ...................................... Dec. Electric Power Production** . . . . Oct. Cotton C o n s u m p t io n * * ..................... Dec. Petrol. Prod, in Coastal La. and M iss.**Dec. 143 143 174 138 162 116 107 124 132 110 193 143 133 62 142 141 174 137 162 113 106 124 129 142 141 173 137 160 114 106 124 127 189 143 130 60 190 142 130 55 3.5 3.9 2.8 41.5 209 270 157 150 100 241 110 2.6 41.1 226 233 220 149 107 215 110 2.7 41.0 228 271 191 146 101 220 139 140 171 133 152 115 106 120 136 108 182 139 127 1.8 41.4 187r 230r 151 146 120 243 Latest Month (1968) One Two Month Months Ago Ago One Year Ago Dec. Dec. Dec. Dec. 162 159 115 95 160 159 113 94 161 158 112 81 162 151 99 104 . Dec. . Dec. 2.7 42.3 2.8 41.9 2.9 41.6 3.0 42.2 Member Bank L o a n s ...................................... . Dec. Member Bank D e p o sits.................................. Dec. Dec. Bank D e b its * * .................................................. 325 257 247 326 246 248 320 243 242 276 214 207 Manufacturing ....................................... N o nm anufacturing................................. C o n s t r u c t io n ....................................... Farm E m p lo ym en t....................................... Unemployment Rate (Percent of Work Force) . . . . Avg. Weekly Hrs. in Mfg. (Hrs.) . . . . . . FINANCE AND BANKING GEO RG IA INCOME Personal Income (Mil. $, Annual Rate) . Nov. 12,872 Manufacturing P a y r o lls ............................ . Dec. 241 147 Farm Cash R e c e ip t s ................................. . Dec. 13,022r 12,850r 11,564 237 213 244 132 152 123 PRODUCTION AND EMPLOYMENT Dec. Dec. Dec. Dec. Dec. 144 139 147 146 59 144 137 147 143 48 143 137 146 145 54 139 133 142 142 59 Dec. Dec. 2.8 41.3 3.4 40.9 3.2 40.9 3.1 41.2 Member Bank L o a n s ................................. . Dec. Member Bank D e p o sits ................................ . Dec. Bank D e b its * * ...................................................... . Dec. 321 248 268 309 241 269 305 242 264 273 217 252 Nonfarm E m p lo y m e n t................................ . Manufacturing ....................................... . N o nm anufacturing................................. . C o n s t r u c t io n ....................................... . Farm E m p lo ym e n t....................................... . Unemployment Rate (Percent of Work Force) . . . . . Avg. Weekly Hrs. in Mfg. (Hrs.) . . ,. FINANCE AND BANKING LO U ISIA N A INCOME F IN A N C E A N D B A N K IN G Loans* 299 263 296 259 294 258 262 236 227 193 243 222 190 242 220 190 235 200 180 218 8,378r 205 125 8,379r 207 105 9,933 211 156 10,078r 10,014r 207 203 170 150 9,273 194 150 PRODUCTION AND EMPLOYMENT Deposits* Bank Debits*/* A LABA M A INCOME Personal Income (Mil. $, Annual Rate) . Nov. Manufacturing P a y ro lls .................................Dec. Farm Cash R e c e ip t s ...................................... Dec. 8,593 204 123 7,923 189 113 PRODUCTION AND EMPLOYMENT Dec. Dec. Dec. Dec. Dec. 128 129 127 115 67 127 128 127 115 64 127 128 127 118 55 127 127 126 118 70 Dec. Dec. 4.1 41.9 4.5 41.3 4.6 41.3 4.3 41.3 Dec Dec. ................................................. Dec. 270 213 227 267 211 219 270 207 214 244 191 204 Unemployment Rate (Percent of Work Force) . . Avg. Weekly Hrs. in Mfg. (Hrs.) FLO RIDA INCOME Personal Income (Mil. $, Annual Rate) . Nov. 19,557 Manufacturing P a y ro lls ................................. Dec. 299 Farm Cash R e c e ip t s ...................................... Dec. 151 19,631r 19,708r 17,278 293 292 271 188 162 160 PRODUCTION AND EMPLOYMENT Nonfarm E m p lo y m e n t .................................Dec. 30 Dec. Dec. Dec. Dec. Dec. 131 122 134 143 51 132 123 134 140 58 132 123 134 140 58 130 119 132 145 56 Dec. Dec. 5.2 41.0 5.2 40.5 5.1 41.5 4.7 42.2 Member Bank L o a n s * .................................. Dec. Member Bank D e p o s it s * ........................... . Dec Bank D e b its * / * * ................................................. . Dec. 249 181 189 242 179 196 244 177 192 235 168 175 4,955r 271 126 4,948r 270 121 Nonfarm E m p lo y m e n t............................-. Manufacturing ....................................... . N onm anufacturing................................. . C o n s t r u c t io n .......................................-. Farm E m p lo ym e n t........................................... . Unemployment Rate (Percent of Work F o r c e ) ....................... Avg. Weekly Hrs. in Mfg. (Hrs.) . . ., FINANCE AND BANKING M IS S IS S IP P I INCOME Personal Income (Mil. $, Annual Rate) . Nov. Manufacturing P a y ro lls .................................. Dec. Farm Cash R e c e ip t s ...................................... Dec. 4,816 270 133 4,501 239 113 PRODUCTION AND EMPLOYMENT FINANCE AND BANKING Bank Debits** Personal Income (Mil. $, Annual Rate) . Nov. Manufacturing P a y ro lls .................................. Dec. Farm Cash R e c e ip t s ...................................... . Dec. 159 159 159 153 Dec. Dec. Dec. Dec. Dec. 145 156 140 147 51 144 154 140 144 52 144 154 139 141 45 141 150 138 148 56 Dec. Dec. 3.7 41.9 4.8 41.5 4.6 41.2 4.5 41.6 Member Bank L o a n s * .................................. Dec. Member Bank D e p o s it s * ........................... . Dec. Bank D e b its * / * * ................................................. . Dec. 359 256 231 353 253 251 349 247 237 324 237 243 Nonfarm E m p lo y m e n t .................................. Manufacturing ........................................... . N o nm anufacturing...................................... . C o n s t r u c t io n ............................................. Farm E m p lo ym e n t............................................, Unemployment Rate (Percent of Work F o r c e ) ...................... Avg. Weekly Hrs. in Mfg. (Hrs.) . . . FINANCE AND BANKING M ONTHLY R E V IE W Latest Month (1968) One Month Ago Two Months Ago One Year Ago TEN N ESSEE IN C O M E Nov. 10,456 Personal Income (Mil. $, Ann. Rate) 226 M anufacturing P a y r o lls ................. . Dec. Ill Farm Cash R e c e i p t s ..................... . Dec. 9,997r 10,124 223 222 137 120 9,602 205 104 Latest Month (1968) N o n m a n u fa c tu r in g ................. C o n s t r u c t i o n ..................... Farm E m p lo y m e n t..................... Unemployment Rate (Percent of Work Force) . . . . . Dec. Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Dec. One Month Ago Two M onths Ago One Year Ago 136 177 64 136 165 61 135 161 52 133 166 71 3.7 40.8 4.1 40.9 3.8 40.4 4.1 40.7 281 199 274 288 194 253 284 195 255 249 185 240 FIN A N C E A N D B A N K IN G PR O D U C T IO N A N D EM P LO Y M EN T Nonfarm E m p l o y m e n t ................. M anufacturing ........................ . Dec. Dec. 141 151 139 149 140 149 138 148 Member Bank L o a n s * .............. M ember B ank Deposits* . . . . Bank D e b i t s * / * * ..................... ♦Daily average •For Sixth District area only. Other totals basis. for entire six r-Revised. states. Sources: Personal income estimated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. payrolls and hours, and unemp., U.S. Dept, of Labor and cooperating state agencies; cotton consumption, U.S. Bureau of Census; construction contracts, F. W. Dodge Corp.; petrol, prod., U.S. Bureau of Mines; industrial use of elec. power, Fed. Power Comm.; farm cash receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes calculated by this Bank. Debits to Demand Deposit Accounts Insured Commercial Banks in the Sixth District (In Thousands of Dollars) Dec. 1968 Nov. 1968 Dec. 1967 Percent Change Percent Change Year-to-Date 12 mos. Dec. '68 from 1968 Nov. Dec. from 1968 1967 1967 Year-to-Date 12 mos. Dec. ’68 from 1968 ST A N D A R D M ET ROPOLITA N ST A T IST IC A L A R E A S t Birm ingham . . . . Gadsden . . . . Huntsville . . . . .............. M obile Montgom ery . . . Tuscaloosa . . . 1,955,487 72,504 211,284 563,284 349,973 119,250 1,719,574 65,972 195,323 512,565 333,887 111,946 l,566,528r + 14 61,510 + 10 185,576 + 8 500,314 + 10 331,960 + 5 101,444 + 7 +25 + 18 + 14 + 13 + 5 + 18 + + + + + + 814,672 1,692,722 2,897,751 608,862 203,692 162,890r 719,097 1,507,087 2,607,778 647,180 196,717 142,096 +21 + 13 + 19 + 22 + 16 - 3 +37 +27 + 32 + 15 + 20 + 11 +25 + 13 +25 + 18 + 11 + 11 1,621,435 482,089 1,508,433 469,213 + 16 +22 +25 + 25 + 19 +21 117,398 6,302,666 323,733 280,097 301,638 355,879 97,042 5,838,595 278,644 229,663 271,867 298,594 100,457 5,794,148 288,182 231,651 254,772 282,658 +21 + 8 + 16 +22 + 11 + 19 + 17 + 9 + 12 +21 + 18 +26 + + + + + + 13 15 7 12 11 15 . . 638,022 . . 155,548 . . 174,208 . . . 2,686,381 594,488 144,754 162,584 2,467,946 556,372 122,917 156,614 2,448,913 + + + + + 15 +27 + 11 + 10 + + + + 13 14 10 8 776,593 758,162 820,089 + 2 - 5 + 11 Chattanooga . . . 712,181 Knoxville . . . . 584,927 N ashville . . . . . 2,359,683 625,584 510,883 1,900,789 642,076 498,786 1,811,560 + 14 + 14 + 24 + 11 + 17 +30 + 10 + 13 + 16 + 8 + 5 + 6 + 17 +22 + 1 + 15 + 14 + 3 + + + + 15 19 17 14 + 5 + 21 + 0 +21 + + + + + 14 + 8 + 30 +20 +29 + 18 Ft. L auderdaleHollywood . . . 984,890 Jacksonville . . . . 1,906,911 Miam i .............. . 3,446,050 Orlando .............. 744,943 Pensacola . . . . 235,872 Tallahassee . . . 158,022 Tam paSt. Petersburg . 1,882,774 W. Palm Beach . . 586,477 Albany .............. Atlanta .............. . A u g u s t a .............. Colum bu s . . . . Macon .............. Savannah . . . . Baton Rouge Lafayette . Lake Charles New Orleans Jackson . . . . .............. 7 7 7 9 12 7 7 8 9 12 )THER C E N T E R S Anniston . . . . Dothan .............. S e l m a ................. 79,883 75,327 53,573 74,015 71,491 50,494 68,480 61,816 53,066 Bartow .............. Bradenton . . . . Brevard County . . Daytona Beach . . Ft. M yers— N. Ft. Myers . . Gainesville . . . 40,322 89,318 253,377 99,377 35,117 74,982 216,266 87,345 38,583 73,903 253,088 82,009 127,326 110,727 111,480 102,863 98,282 92,331 Dec. 1968 •Includes only banks in the Sixth District portion of the state. FEBRUARY 1969 tPartially estimated. Dec. 1967 Nov. Dec. from 1968 1967 1967 Lakeland Monroe County Ocala . . . . St. Augustine St. Petersburg Sarasota . . Tampa . . . Winter Haven . . . . . . . . . . . . . . 155,848 . 42,910 . 81,864 . 32,338 . 408,245 . 154,678 . 1,004,221 . 71,432 122,939 38,438 64,642 21,726 356,065 128,381 866,020 64,205 126,446 33,717 59,251 20,097 317,397r 121,572 782,124r 61,580 +27 + 12 +27 + 49 +15 +20 +16 +11 +23 +27 + 38 +61 + 29 +27 + 28 +16 +11 + 13 + 14 + 20 +12 +27 + 22 +15 Athens . Brunswick Dalton . Elberton Gainesville Griffin . LaGrange Newnan . Rome . . Valdosta . . . . ■ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,526 57,408 119,075 16,231 80,294 42,176 24,162 28,389 93,907 61,669 86,116 45,771 110,484 14,089 67,803 36,376 20,486 23,216 87,160 54,814 76,290 47,673 95,468 15,476 68,102 37,378 23,078 23,487 78,245 60,411 + 14 +25 + 8 +15 +18 + 16 + 18 +22 + 8 + 13 +29 +20 +25 + 5 + 18 + 13 + 5 +21 + 20 + 2 + 20 +13 +29 - 2 + 2 + 9 + 4 + 4 + 14 + 3 Abbeville Alexandria Bunkie . Ham m ond New Iberia Plaquemine Thibodaux . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,135 178,973 9,537 39,973 42,011 14,219 33,333 12,779 162,208 9,673 38,134 38,673 14,723 25,403 11,247 132,540 7,176 27,840 38,264 11,437 27,757 + 26 + 10 - 1 + 5 + 9 - 3 +31 +43 +35 +33 +44 + 10 +24 + 20 +13 + 13 + 5 + 5 + 6 +21 + 9 . . . . . . . . . . . . . . . . . . 129,088 63,153 45,602 81,487 45,840 118,757 62,380 39,240 67,400 40,742 105,037 55,861 33,552r 69,321 40,535 + 9 + 1 + 16 +21 + 13 +23 +13 + 36 + 18 + 13 + 16 + 13 +23 + 8 +11 . . . . . . . . . . . . 74,345 43,925 27,690 70,861 46,223 29,879 56,162 41,382 27,481 + 5 - 5 - 7 + 32 + 6 + 1 + 26 + 3 + 5 Bristol . . . . . . Johnson City . . . . Kingsport . . . . . 84,499 95,351 179,495 78,239 79,300 167,027 80,152 78,413 160,006 + 8 +20 + 7 + 5 +22 +12 + 16 +11 + 10 D ISTRICT, Total 38,885,259 34,606,477 33,202,613r +12 +17 + 14 4,346,036 10,836,357 8,896,641 4,271,162 1,615,220 4,641,061 4,092,348 10,061,834 8,888,347 4,087,018 1,610,339 4,462,727 +17 +25 + 12 +13 - 0 + 20 + 12 + 19 + 14 + 9 +12 + 13 Biloxi-Gulfport Hattiesburg Laurel . . Meridian . Natchez . . P ascagoula— M oss Point Vicksburg . Yazoo City . SIX T H 0 17 6 8 Nov. 1968 . . . . . Alabam a* . . . . . Florida* . . . . . . Georgia* . . . . . . . . Louisiana** . . . M ississip p i** . . . Tennessee** ^Estimated. 4,785,806 12,603,248 9,922,169 4,631,219 1,603,853 5,338,964 +10 +16 + 12 + 8 - 1 + 15 r Revised. 31 District Business Conditions The District economy has entered the ninth consecutive year of prosperity with continuing vigor. In the final month of 1968, employment advanced briskly and the unemployment rate dropped sharply. Sup ported by rising employment and income, the consumer sector remained strong, although the pace of consumer borrowings slackened somewhat. Bank lending continued to expand more than seasonally. Moderate gains were posted in both construction employment and new contract awards. With the exception of Florida citrus and winter truck crop areas, farm activity was in a seasonal lull. In December, nonfarm employment advanced briskly with strong gains in both manufacturing and nonmanufacturing jobs. The primary metals industry scored the largest gains in the manufac turing sector; while other industries scored mod erate gains. Reflecting the strong labor demand, the unemployment rate dropped sharply to a recent new low, and manufacturing workers put in a longer average workweek. Activities in Dis trict ports were disrupted by labor-management disputes. Consumer borrowing from banks remained strong in December, although less expansive than during other recent months. Personal loans and loans for nonautomobile consumer goods, in cluding credit card and check-credit plans, posted the largest gains; automobile loans increased less rapidly than the previous month, reflecting slower sales. Loans and investments climbed rapidly at member banks in December. And, in January, loans at larger banks continued to advance at a rapid pace. Losses of large denomination negoti able CD’s, though sizable, were less severe than nationally. 32 A very strong December in residential con tracting offset some weakening in other types of construction. Record yields for FHA-VA mort gages in late December were followed by a raising of the contract rate ceilings to 7*4 percent. Con tinued availability of mortgage financing, particu larly from “conventional” sources, has been crucial to maintaining the exceptional expansion in residential construction. Mortgage interest rates have continued to rise as competitive market yields have been under upward pressure. In general, 1968 prices for livestock and live stock products were above the year-ago level, while crop prices were lower. Prices for citrus prod ucts have moderated since the December 16-17 freeze. Revised estimates of Florida’s orange pro duction indicate that the freeze damage will keep output below December estimates. The juice con tent of oranges has been below that of recent years; consequently, gains in total production of frozen concentrate are less than expected earlier. N O TE: Data on w hich statem ents are based have been ad justed w henever possible to elim inate seasonal influences. M O NTHLY R E V IE W
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