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I s i H i ; S i l l f i i l [ F e d e r a l R e s e r v e B a n k O f A t la n t a F e d e r a l R e s e r v e S t a t io n A t la n t a , G e o r g ia 3 0 3 0 3 ________________ A d d r e s s C o r r e c t io n R e q u e s t e d t , ' - w m m m m gi I "If BU LK RA TE U .S , P O S T A G E P A ID A tla n ta , Georgia P erm it N o . 292 T h e U. S. E c o n o m y in R e c o v e r y b y H a rry B ra n d t March or Ap ril 1975 marked the end of the longest and deepest recession since W o rld W ar II. Since then, industrial production has advanced steadily, so that about two-thirds of the drop during the 1973-75 recession has been made up (see Chart I). Nonfarm em ploym ent has increased by two and one half m illion persons since mid-1975, a restoration of the entire recession decline. The w orkw eek has lengthened, and the unem ploym ent rate declined from 8.9 percent in May 1975 to 7.5 percent in A pril 1976. By historical standards, however, unem ploym ent remains high. Before it began dropping, the unem ploym ent rate exceeded anything experienced in other post W o rld W ar II recessions. D uring the first full year of the current business recovery, it has dropped less sharply than during the comparable period follow ing the severe 1957-58 recession (see Chart II). In large part, this slower improvem ent can be attributed to smaller em ploym ent gains than in 1958-59. As the population increases and more people seek work, vast numbers of jobs must be generated before the unem ploym ent rate can show a large drop. Recent jobs gains, though sizable, have not been large enough to make a dramatic dent in joblessness. Interestingly, in the current business recovery, the em ploym ent of men has increased more slowly than the em ploym ent of women. Significant job gains took place in service-producing industries, where women dominate. Manufacturing jobs increased less; construction has shown almost no job gains. W h ile the em ploym ent picture is still not universally good, overall business activity has almost regained pre-recession levels. Helped by a swift first quarter 1976 rise, GNP (in real terms) all but recovered its prerecession peak (see Chart III). Monthly Review, Vol. LXI, No. 5. Free subscription and additional copies available upon request to the Research Department, Federal Reserve Bank of Atlanta, Atlanta, Georgia 30303. Material herein may be reprinted or abstracted provided this Review, the Bank, and the author are credited. Please provide this Bank's Research Department with a copy of any publication in which such material is reprinted. JU N E 1976, M O N T H L Y R E V IE W (II) (I) ECONOMIC INDICATORS MM JNEMPLOYMENT AND EMPLOYMENT Unemployment . Rate 125 Employment Men \ 75 76 ■ 0 5 10 Moatls Irem Rcccssim EM Nonfarm Employment > 75 76 0 5 10 Mutks Irem Secession EM Latest plotting: Top left, March; April for others Latest plotting: April Source: Source: Board of Governors, Federal Reserve Sys tem and Department of Labor Dept, of Labor (IV) (III) Latest plotting: Source: First quarter Dept, of Commerce The consumer has been a major force behind the current recovery (see Chart IV). Consumer expenditures on goods and services have climbed sharply; spending on residential construction has shown some recovery. Net exports provided considerable support to the U.S. economy until FE D ER A L R ESER V E BANK O F A TLAN TA Latest plotting: Source: First quarter Dept, of Commerce early 1976.1 Higher sales, in turn, brought a halt to ’ In early 1976 d eterioration in the U.S. trade balance— not an unusual occurrence in that stage of the business cycle— slowed the rise in econom ic activity. 71 (V ) (V I) SECTORS MODERATE RECOVERY %cat i>nil up First Year of Recovery '49 ’50 Latest plotting: Source: Top left, April; Top right, first quarter; bottom left, March; bot tom right, first quarter. Source: ’54 ’55 ’58 ’59 '60 ’61 '70 ’71 ’75 ’76 Dept, of Commerce Motor Vehicles Mfrs., Dept, of Commerce (VIII) (VII) INFLATION Change in Consumer Prices Prices First Year of Recovery IL 49 - '5 0 '54- 58 60 70 '75 '55 59 '61 71 76- WHOLESALE PRICES 'first 11 antfcs. ann ANN11, % Consumer Prices 15 1975 Latest plotting: Latest plotting: Source: Top right, April and March; bot tom left, March; bottom right, March Dept, of Labor massive reductions in inventories, follow ed by inventory accumulation. Various sectors show contrasting responses to recovery (see Chart V). Domestic auto sales in 72 Source: 1976 Top left, March and April; top right, fourth quarter; bottom left, Chem icals and Lumber, April, Machinery, February; bottom right: first quarter Dept, of Labor (Prices), Dept, of Commerce (Profits), and Board of Governors, Federal Reserve System (Utilization) March 1976 were their highest since mid-1973, except for a temporary bulge in the summer of 1974. This increase has been partly at the expense of imports. Intermediate- and full-size cars have JU N E 1976, M O N T H LY R EV IEW (IX ) (X ) PRIVATE NONFARM SECTOR Compensation 1 I 1 1, 1 1 1, 1 I 15 14 : 16 Productivity _■ ■ ■ I 1" '74 1 1 j ■ '75 '76 Unit Labor Cost _ i n n 14 Latest plotting: Source: 75 '76 First quarter Dept, of Labor been in particularly heavy demand recently; subcompact car sales have been slow. Single-family housing starts have recovered very w e ll; m u lti fam ily starts, almost not at all. Business fixed investment (capital spending) has remained fairly weak as manufacturers and public utilities spent cautiously. Some of the uptick comes from the Alaskan pipeline construction. State and local government spending, restrained by budgetary problems, has moved up rather moderately; Federal spending on goods and services has increased only slightly. So, even though the economy has performed w ell overall, the current recovery still can be characterized as moderate (see Chart VI). Real GNP increased more in the first year of recovery follow ing the deep recessions of the Forties and Fifties than it has during the 1975-76 recovery. This year's pace compares favorably, however, to the m ild recoveries of the Sixties and early Seventies. Costs and Prices M any observers believe that 1974's rapid inflation was an important factor in the past recession, as price increases reduced purchasing power and then spending itself. Inflation prospects may, therefore, provide an important clue to future economic performance. FE D ER A L R ESER V E BANK O F ATLA N TA Latest plotting: Top left, first quarter; top right, January; bottom left, April; bottom right, February Source: National Conference Board, Dept, of Com merce, Standard and Poor’s, and Board of Governors, Federal Reserve System During the first year of a recovery, when there is substantial slack in the economy, inflation is usually not present to any extent. In this recovery, consumer prices rose much more than before (see Chart V II); still consumer price performance has improved remarkably from the double-digit rates of 1974 and the brief flare-up in the summer of 1975. Consumer prices rose only about 2 percent annually in February and March 1976 combined. Before spurting in A p ril, wholesale prices showed even more dramatic improvement, changing little from October 1975 to March 1976. Most of this improvem ent was the result of lower prices of food and fuel. Declines in food prices reflect last year's bumper harvests and, except for Russian grain purchases, low er U. S. agricultural exports. Gasoline prices dropped after the tariff on crude oil imports was eliminated. W hether these two trends w ill last indefinitely is w idely questioned. Increased demand and price hikes allowed under the new Energy Act have already pushed gasoline prices up in mid-April. If the Organization of Petroleum Exporting Countries raises its crude oil price, fuel prices may come under additional upward pressure. Meanwhile, the cost of wholesale beef has moved up, suggesting that retail meat prices may not fall further. To a large extent, however, food prices w ill depend on weather and w orld harvests. Inflation watchers have been further troubled by considerable increases in the price of consumer 73 (X II) (X I) La te st plotting: Top left, first quarter; top right, M arch; bottom left, Feb ru ary; bot tom right, first quarter Latest plotting: So u rce: Dept, of C om m erce, Board N ational C onference So urce: services (see Chart V III). (Medical, insurance, and transportation costs have continued to mount.) Prices of wholesale industrial commodities have also continued to rise. Strong demand could make it easy for businesses to pass these increases on to consumers. Since January 1975, wholesale prices of chemicals, lumber, and machinery have increased significantly. And most recently, higher prices on various steel and alum inum products have been announced. General prices could speed up if manufacturers continue pursuing an aggressive pric ing policy to cover increasing costs and to widen further their profit margins. The amount of slack still present in the economy is likely to temper price pressures in coming months. But sooner or later capacity may come under strain, intensifying cost pressures. In the m ajor materials industries, plant utilization has bounced back from 70 percent of capacity to slightly over 80 percent. A few nondurable industries like paper and textiles are already approaching capacity. M any others still have substantial idle capacity, and average manu facturing capacity utilization remains w ell below the preferred rate. Price prospects w ill also depend on labor costs (see Chart IX). A slowing in compensation increases has played an important role in holding down inflation. But wage demands may be more difficult to restrain in this year of heavy collective bargaining activity. 74 Left panel, first quarter; right panel, Ja n u a ry (ex. Italy, De cem ber) Dept, of Com m erce Productivity trends could prove to be as crucial as wages. In 1975, productivity in the private nonfarm economy w ent up; it rose 3 percent annually in the first quarter of 1976. As business recoveries mature, however, productivity gains typically slow, and labor costs increase. As long as inflation is kept in reasonable bounds and earnings keep rising, consumer spending is likely to provide a further push to the economy. Consumer confidence is up sharply, owing to more jobs, higher income, and less inflation (see Chart X). The financial values of consumers have been further improved by the sharp recovery in stock prices. Consumers have reduced their instalment debt relative to income, indicating that they can take on more debt. And consumer savings are high, judging from the way funds have poured into nonbank thrift institutions and commercial banks. The business sector typically takes its cue from the consumer. Therefore, as consumer sales kept rising, businessmen started to rebuild inventories (see Chart XI). The ratio of retail inventories to sales is now the lowest since early 1973, suggesting room for inventory potential. A capital spending revival is very likely, though its tim ing and vigor are still uncertain. The latest available McGraw-Hill survey shows businessmen planning to increase their plant and equipm ent (in real terms) only modestly this year. However, new JU N E 1976, M O N T H LY R EV IEW (X IV ) (X III) EDERAL RESERVE AND LIQUIDITY A ctnl M m y Sqpty f r H t k J L I E JK ’75-40 ’7 6 1 *. Feb. LMgcf t a 1.9 6.4 4 0 -’75 ta \1 10.3 40-76 6.5 14.3 March 6.1 1.3 10-76 u April 16.5 15.0 10-77 T ir f tM t a p s Ml M2 4)4% a 714% H v /,% 10J4% t> Vh% U 7% 10% Liquidity at Financial Institutions % Savings &Loan Assoc. 11 9 - Liquidity Ratio 7 J _ _ _ I_ _ _ I_ _ _ I__ I_ _ _ L '76 72 74 Latest plotting: Top left, March; top right, spring update; bottom left, fourth quar ter; bottom right, April Source: Board of Governors, Federal Reserve Sys tem, Dept, of Commerce, and Office of Management and Budget (Treas. Deficits) capital appropriations, which precede actual spend ing by several quarters, started up for manufacturers in the fourth quarter of 1975. And nondefense capital goods orders— another advance indicator of business fixed investment— rose in the first quarter. Increased profits and consumer sales are an incen tive for businessmen to expand capital outlays. Increased housing starts almost ensure further improvem ent in residential spending in coming months, w hile apartment building is still hampered by problems.- There has also been localized overbuilding of office space, shopping centers, and other commercial construction. Troublesome as this oversupply is now, it offers hope that a boom-bust construction cycle can be avoided. Should these lagging construction sectors pick up when other segments in the economy start to rise, the business recovery w ill be prolonged. U. S. merchandise trade, however, has worsened (see Chart XII). U ntil late 1975, U. S. exports had far exceeded imports for some time. Then the U. S. developed a trade deficit in first quarter 1976. Imports increased as the U. S. economy recovered, while exports were held down partly by weak economic activity in many countries abroad. Re covery among U. S. trading partners (that has, for -See "A p artm en t Building in the Recovery," this Review. FEDERAL RESERVE BANK OF ATLANTA Latest plotting: Source: Bottom left, right, February February; bottom Board of Governors, Federal Reserve Sys tem the most part, lagged ours), foreign demands for our farm products, and American crude oil needs are most likely to influence the U. S. trade position later in the year. M oney and Credit Recognizing that private borrowers need more credit in a recovering economy, what has happened to credit demands and interest rates? Short-term private credit demands, especially for commercial bank loans, have been slight (see Chart XIII). Bank lending has been weak so far for a variety of reasons that include lender caution. A growing internal corporate cash flow has kept down credit require ments and has improved badly depleted liquidity positions that have also been bolstered by heavy funding of short-term debt. The U. S. Treasury has borrowed heavily to finance large budget deficits. Its needs w ill decline, however, if the deficit becomes smaller as tax col lections rise w ith expanded business activity. Private short-term credit demands, on the other hand, are w idely expected to increase w ith the resumption of inventory accumulation and the need for working capital to support expanded sales. Despite the rebound in economic activity and heavy Treasury borrowing, interest rates during the current recovery have not risen to any significant degree. In fact, long-term interest rates in recent 75 months have hovered around the lowest levels since early 1974. Short-term rates have moved up only slightly from their 1976 lows. Reduced interest rates and comfortable financial market conditions reflect in part monetary policy measures aimed at encouraging continued eco nomic recovery w hile resisting inflation. M oney and time deposits have increased moderately8 (see Chart XIV). The annual growth rate of M i (private demand deposits and currency in circulation) was only 1.9 in fourth quarter 1975 and moved up to 4.6 percent in the first quarter of 1976. The broader aggregate, M l>, which includes savings and time deposits other than large CD's at commercial banks, increased by 6 percent (annual rate) in the fourth quarter of 1975 before accelerating to an 11-percent rate in the first quarter this year. These moderate rates of change in ■‘H ow ever, grow th in the m onetary aggregates in April was rapid. 76 the money supply are w ithin or close to the longrun target ranges that the Federal Reserve has specified to Congress. This projected monetary growth should prove adequate to support a solid expansion in economic activity and avoid inflation ary aggravation. Moreover, liq uid ity at financial institutions has improved so that they can readily supply funds to satisfy a significant expansion in credit needs. Liquidity at member banks, measured by their hold ings of U. S. Governm ent securities as a percent of deposits, is the highest since 1972. Nonbank thrift institutions, including savings and loan associations, have likewise raised their liquidity ratios to high levels, as have pension funds at life insurance companies. So, a financial base to support the current economic expansion has been laid. There is also growing evidence that the economic recovery is developing well, increasing the lik e li hood of a prolonged expansion. II JU N E 1976, M O N T H L Y R E V IE W A p a r t m e n t B u ild in g in t h e R e c o v e ry b y B . F r a n k K in g Starts of rental and condom inium dwellings in m ultiun it structures dropped from almost 45 percent of all U. S. private housing starts in the late 1960's and early 1970's to less than 25 percent last year. Less than a quarter of the housing recovery that began in early 1975 has come from m ultiun it building, and this sector has lagged even further in recent months.1 W hat has brought m ultiunit starts so low? How long w ill the slump continue? Even a brief analysis must consider four factors: underlying demographic forces in housing demand; cyclical demand factors; m ultiun it housing inventory; and the returns to owners of m ultiun it housing. In analyzing housing demand, two sets of forces can be usefully distinguished. Secular developments include demographic and real income trends as w ell as long-term movements in relative prices— particularly land prices. Cyclical forces include income, price, and interest rate movements. Demographic shifts have become particularly important. The rapid fall in m ultiun it starts after 1972 is consistent w ith basic demographic changes that began in the early 1970's.2 Households (including single persons) typically occupy m ultiun it housing early and late in life; most households in the 30-64 age group occupy single-unit housing. During the 1960's, the building of m ultiun it housing was spurred by increases in the proportion in the younger and older age groups as w ell as by sharp increases in single-person households in those groups. In contrast, the proportion of population from 30 to 64 years old fell. A ll three of these demographic factors tended to raise demand for m ultiun it housing relative to single units. ’ Data on m u ltiu n it starts include structures w ith tw o or m ore units. These encompass most con dom in ium units as w ell as rental apartments. 2For a m ore extensive analysis of dem ographic trends and housing dem and, see Thomas C. M arcin, The Effects of Declining Population Growth on the Demand for Housing, U. S. D epartm en t of A griculture, Forest Service, G eneral Technical Report NC-11, 1974. FE D ER A L R ESER V E BANK O F ATLA N TA 77 CHART I M ultiunit starts declined sharply and recovered sluggishly. Mil. Starts - - 1.6 (Seas. Adj., Ann. Rt.) - 1.2 - .8 - i -72 '74 .4 i- O 76 In the early 1970's, growth in the proportion of younger and older groups slowed, but the proportion from 30 to 64 years old rose. These trends tended to lower relative demand for m ultiun it housing. The housing stock contained some 22- to 23-million m ultifam ily units at the time, compared w ith the addition of about a m illion new units in the peak year of 1972. Thus, small reductions in demand for all m ultiun it housing had a large impact on the need for additional units. Builders and developers reacted to these popula tion changes by combining attractive features of both homeownership and apartment living in m ultiun it structures w ith condom inium ownership. Such combinations were largely aimed at younger and older buyers. Needless to say, condominiums were not so attractive to buyers as they were to develop ers. Overenthusiastic building has left a large inven tory of condominiums competing against the output of potential housing developers. Cyclical demand factors— changes in real income, credit costs, and occupancy costs— worked against all new types of housing from late 1973 through 1975. Steeply falling real incomes and steeply rising interest rates discouraged builders and persons seeking better quarters. These cyclical conditions hit both main types of housing construction, but their effect on apartment building was exacerbated by long-run demographic factors and developers' slow reaction to them. Insensitivity to impending demographic changes was probably one factor that kept m ultiun it building levels too high too long. Vacancy rates on rental housing began drifting up in early 1972. Soon after, the number of apartments rented w ithin three months of com pletion— apart 78 ment absorption— declined. Apartm ent absorption in the third quarter of 1975 was more than 50 percent below its annual 1973 level and w ell below any third-quarter figure since the series began in 1969. (The absorption rate also declined after 1973, but by less than the num ber of apartments absorbed since the number completed also declined.) The extent of the oversupply of m u ltiu n it housing is suggested by cost trends of homeownership and rent. Rental and homeownership costs include three items: construction, interest, and maintenance. Rental costs also include owners' profits. Construc tion costs of m u ltiu n it and single-unit housing have risen at about the same rate since 1971; interest costs for each have moved in parallel fashion. On the other hand, rentals, the price owners of m u lti unit housing can get for their wares, have risen much less than either homeownership costs for single-unit housing or overall prices. From 1972 through 1975, rents rose an average 4.8 percent per year; homeownership costs were up 9.1 percent; and all consumer prices, 9.0 percent. These price changes do much to explain the common com plaint of potential builders and lenders that the numbers on m ultiun it housing "d o not make sense these days." W here does this leave the recovery in m u ltiu n it housing? Demographic trends unfavorable to CH ART II Demographic forces favor single unit housing. % of Population ’6 0 ’7 0 ’8 0 '9 0 2000 Note: Projections from U. S. Bureau of Census, Series II, (moderate growth). JU N E 1976, M O N T H LY R EV IEW aam CHART III Rent has not kept up with home ownership costs or prices in general. 180 140 100 I ’70 '72 I ’74 m ultiun it housing are likely to continue for some time. The proportion of population in the age group favoring single-unit housing is projected by the FE D ER A L R ES E R V E BANK O F ATLA N TA U. S. Census Bureau to rise; that favoring m ultiunit housing is projected to fall, at least through 2000. The effects of these demographic trends could be mitigated by higher relative purchase and occupancy costs of single-unit housing or by changes in tastes. Although there seems to be some movement toward simpler homes, radical changes in tastes are not evident so far, and patently higher costs for single unit housing have not stopped a steep decline in the proportion of m ultiun it to total starts. The latest available data on rental vacancies and apartment absorption give hope for modest, delayed recovery in the short run. The fourth-quarter 1975 drop in rental vacancies was sharper than is usual in the fourth quarter, and this rate is only slightly above its cyclical 1969-70 lows. However, apartment absorptions in third quarter 1975 were at a record low; a slight rebound in the absorption rate came entirely from fewer completions in apartment units. Since absorption and vacancy statistics cover only rental property, they do not indicate the inventory of unoccupied condominiums in m ultiun it struc tures. There are little hard data on this, but news papers and trade publications indicate that the condom inium inventory is still large, that much of it is inappropriate, and that sales are still slow. About the most optimistic statement one can make is that delayed recovery in m ultiun it starts may help sustain the present business recovery by taking up slack as other sectors of the economy slow. ■ 79 BANKING STATISTICS BIL. - 4 0 - 42 - 3 6 - 3 8 A/ - 28 - 24 /v - 14 -1 0 /V - A/ - 9 18 - 1 4 /V -6 -8 - 1974 LATEST M O N T H PLOTTED: APRIL, EXCEPT TO TAL DEPOSITS, M AR CH N ote: Seas. adj. figures covering District m em ber banks. S I X T H D I S T R I C T B A N K I N G 1975 4 1976 ‘ Fig ures are for the last W ednesday of each month tDaily average fig ures N O T E S C h a n g e s in T im e D e p o s its TIME AND SAVINGS DEPOSITS SIXTH DISTRICT MEMBER BANKS January1 October 1974 1976 ($ Millions) ($ Millions) DISTRICT: Savings . . T im e IPC less than $100,000 . . . . Tim e IPC over $100,000 . . . . Total ............................. 6,302 7,847 + 24.5 6,015 6,958 + 15.7 5,248 21,819 4,276 23,457 - 18.5 + 7.5 + 16.7 ALABAMA: Savings Tim e IPC le ss than $100,000 . . . . T im e IPC over $100,000 . . . . T o t a l .................................. FLORIDA: Savin gs . . Tim e IPC less than $100,000 . . . . Tim e IPC over $100,000 . . . . Total .................................. GEORGIA: Savin gs . . Tim e IPC less than $100,000 . . . . Tim e IP C over $100,000 . . . . Total ................................. 80 January1 October 1974 1976 ($ Millions) ($ Millions) Percent Change 1,035 1,208 1,095 1,341 + 22.5 662 3,179 721 3,728 + 8.9 + 17.3 2,843 3,759 + 32.2 1,936 2,207 + 14.0 1,668 8,032 1,216 8,576 - 27.1 + 6.8 602 758 + 25.9 1,089 1,247 + 14.5 1,096 3,470 714 3,449 - 34.8 0.6 LOUISIANA*: Savings T im e IPC less than $100,000 . . . . Tim e IPC over $100,000 . . . . T o t a l .................................. M ISSISSIPPI*: Savin gs Tim e IPC less than $100,000 . . . . Tim e IPC over $100,000 . . . . Total ............................. TEN N ES S EE*: Savin gs Tim e IPC less than $100,000 . . . . T im e IPC over $100,000 . . . . Total ............................. Percent Change + 18.7 802 952 465 626 + 34.6 733 2,694 620 2,991 - 15.4 + 11.0 187 194 + 3.7 423 459 + 8. 5 272 1,133 289 1,308 + 6. 2 + 15.4 832 992 + 19.2 1,008 1,062 + 5.4 817 3,311 757 3,485 + 7.3 5.3 'D ata are partly estim ated. Th e to tals also in clud e de posits of other than in d ivid u als, p artnership s, and corporations. ‘ D istrict portion only. JU N E 1976, M O N T H L Y R EV IEW District member banks have taken m ajor steps to ward rebuilding their tightly stretched liquidity. That has involved acquiring large amounts of rela tively short-maturity U. S. Governm ent securities to improve the asset side of the balance sheet and restructuring deposits to improve the liab ility side. A previous analysis has examined banks' Treasury securities holdings; this note looks at recent changes in time and savings deposits. Based upon a broad survey of District member banks, total time and savings deposits advanced $1.6 billion, or 7 1/2 percent, between October 1974 and January 1976. This relatively small total gain masks significant changes in various interest-bearing deposits. For example, households added a con siderable volum e of funds to their passbook savings accounts and longer-maturity time deposits; at the same time, large-denomination time deposits of business firms declined. These changes significantly improved banks' deposit structure. District banks have been able to replace interest-sensitive and sometimes volatile money market time deposits w ith more stable consumer and small business deposits, confirming the improvem ent in bank liquidity. C o n su m e r and business passbook savings accounts showed the largest gain of all interestbearing deposits. That clearly reflects the tendency of households to remain liquid at the expense of earning a higher rate of return on longer-maturity bank time deposits. Savings accounts advanced $1.5 billion, up 25 percent. W h ile households accounted for most of the increase, businesses also con tributed, following recent regulatory changes that authorized banks to open savings accounts for profit-making businesses. By the end of January, business firms are estimated to have deposited about $150 m illion into these accounts. Among District states, Florida had the largest dollar ad vance in total savings accounts, up $916 m illion, or nearly one-third. Georgia, Tennessee, and Louisiana also recorded sizable gains. Nearly all of Georgia's growth came in the three months ended in January 1976, after some of the larger banks began to pay the maximum .allowable rate (5 percent) on pass book savings. O ther types of consumer time deposits, up a total of $943 m illion, or 16 percent, varied widely. Time deposits maturing w ithin one year rose $129 m illion. (Deposits maturing in 30 to 89 days pay 5 percent; those maturing in 90 days to 1 year may pay 5V 2 percent.) Changes at Georgia banks hide some of the underlying strength in these deposits. W h ile many Georgia banks were paying less than Regula tion Q ceiling rates on passbook savings, they were paying 5 V 2 percent on 90-day time deposits. As a result, these deposits rose 13 percent in the year ended October 1975. However, when more banks in the state began to pay 5 percent on pass book savings, time deposits maturing w ithin one FE D ER A L R ESER V E BAN K O F A TLAN TA year dropped 26 percent in three months. In con trast, these time deposits advanced nearly 40 per cent in Alabama and Louisiana between October 1974 and January 1976. For the District as a whole, consumers w ithdrew funds from time deposits maturing in one to two and one-half years, accounts that pay 6 percent. Again, Georgia was the exception with a 26-percent gain. Evidently the return relative to m aturity made these accounts unattractive in other District states. Time deposits maturing from two and one-half years up to four years rose $124 m illion, a 15-percent in crease. Banks could pay up to 6V 2 percent on those deposits. The major gain in time deposits came in the fouryear-and-over maturities, which rose $818 m illion, or 59 percent. Accounts maturing from four to six years may return 71/4 percent and now total $2.08 billion. Those accounts maturing in six years and over (offered for the first time in November 1974) and yielding 7V 2 percent total $260 m illion. Con sumers have obviously chosen to funnel deposits into either the im m ediately available passbook sav ings accounts or the higher-yielding, four-year-andover m aturity time deposits. Some of the latter gains may well represent the establishment of personal retirement accounts. W h ile the consumer was flooding banks with deposits, those businesses and households with larger deposits (over $100,000) reduced their ac counts by $971 m illion, down 19 percent. Nearly all of the decline was in the interest-sensitive money market negotiable CD's, which fell 27 percent. Most of the runoff, concentrated at the larger banks, was in Georgia, down $402 m illio n; in Tennessee, down $140 m illion; and in Florida, down $130 m illion. W ith loan demand weak and households providing more stable and generally less expensive deposits, most of the largest banks have been quite w illing to reduce their dependence upon these types of funds. Time deposits from other than households and businesses (mainly state and local governments and domestic and foreign banks) advanced slightly. Florida banks experienced a substantial decline, w hile Mississippi banks had a large increase. W h ile the data suggests there were only modest changes in total time and savings deposits at Dis trict banks between late 1974 and early 1976, a closer analysis brings out significant changes. Households poured a large volum e of funds into savings accounts and long-maturity time deposits. At the same time, banks let their large-denomination time deposits decline. Overall, these changes helped improve banks' deposit structure and have greatly improved their liq uid ity by allowing them to build a more stable deposit base. John M. Godfrey 81 S ix t h D is t r ic t S t a t is t ic s S e a s o n a lly A d ju s t e d (A ll d a ta a r e in d e x e s , u n le s s in d ic a t e d o t h e r w is e .) Latest Month 1976 One Two Month Months Ago Ago One Year Ago SIXTH DISTRICT INCOME AND SPENDING Manufacturing Income Livestock ........................ Instalment Credit at Banks*/' . Feb. . Feb. Feb. 139.7 213.8 275.4 197.3 . Feb. , Feb. 814 713 EMPLOYMENT AND PRODUCTION Nonfarm Em ployment................ . Manufacturing ............................ . Nondurable G oods.................... . Food........................................ . Textiles ................................ . Apparel ................................ . P a p e r .................................... . Printing and Publishing . . . C h e m ic a ls............................ . Durable G o o d s ........................ . Lbr., Woods Prods., Furn. & Fix. Stone, Clay, and Glass . . . . Primary M e ta ls .................... . Fabricated M etals................ . M a chinery............................ . . Transportation Equipment Nonmanufacturing........................ . C onstru ction ........................ . Transportation .................... . T r a d e .................................... . Fin., ins., and real est. . . . S e r v ic e s ................................ . Federal Government . . . . . State and Local Government . Farm Employment............................ Unemployment Rate (Percent of Work Force) . . . . Insured Unemployment (Percent of Cov. Em p.)................ . Average Weekly Hours in Mfg. (Hrs.) . Construction C ontracts*................ . Residential.................................... . All O ther........................................ . Cotton Consumption**.................... . Petroleum Production */** . . . . . Manufacturing Production . . . . . Nondurable G oods........................ . Food .................................... . Textiles ................................ . Apparel ................................ . Paper .................................... . Printing and Publishing . . . Chemicals ............................ . Durable G o o d s ............................ . Lumber and W ood................ . Furniture and Fixtures . . . . Stone, Clay, and Glass . . . Primary M e ta ls .................... . Fabricated M etals................ . Nonelectrical Machinery . . . Electrical Machinery . . . . . Transportation Equipment 139.9 219.5 288.4 189.5 678r 699r 633 733 131.9 113.7 113.9 103.7 107.0 116.3 110.2 125.7 108.9 113.4 101.5 116.5 103.1 122.2 152.5 105.7 138.3 119.3 122.7 136.0 149.5 157.1 106.5 146.7 96.3 132.4 113.9 114.1 105.4 107.3 116.2 109.8 124.8 109.4 113.7 102.5 116.3 103.3 122.3 151.1 108.1 138.9 122.6 123.6 136.7 150.3 157.1 107.2 146.3 95.9 132.3 113.4 113.9 106.7 106.3 116.8 109.9 125.1 109.2 112.7 101.8 116.8 102.2 121.2 149.1 107.9 139.0 125.5 123.5 136.1 150.5 157.5 108.1 146.7 95.1 130.2 107.6 106.0 103.7 95.3 102.6 105.6 124.5 106.1 109.6 94.4 116.1 103.7 121.1 150.9 99.4 138.2 135.1 123.7 135.4 150.5 154.7 104.9 142.6 94.1 Mar. 8.9 8.9 9.1 9.8 Mar. Mar. Mar. Mar. Mar. Feb. Mar. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. 3.9 40.8 229 156 302 76.4 88.0 149.6 151.5 135.0 152.6 135.5 143.6 133.2 163.5 146.3 159.4 136.1 135.3 101.9 112.0 159.0 235.4 143.7 3.9 41.2 181 166 196 79.1 87.3 147.4 150.3 134.8 150.7 135.2 141.9 132.3 161.0 142.8 147.8 136.2 134.1 101.6 112.8 152.8 224.3 142.5 4.2 41.1 163 137 189 75.6 87.4 147.4 149.9 134.0 146.8 134.4 144.6 132.1 160.6 143.4 145.7 138.8 141.3 102.9 113.4 150.5 227.3 139.8 6.7 38.5 178 127 227 54.4 91.8 141.4 144.6 135.6 136.9 120.9 133.7 127.3 159.7 136.6 126.2 117.1 142.3 102.7 112.6 153.8 227.8 121.8 271 267 223 268 224 276 234 234 228 192 335 225 191 315 219 193 303 222 200 347 ALABAMA INCOME Manufacturing Incom e........................Mar. Farm Cash R eceip ts............................Feb. 142.2 239.5 141.4 269.2 EMPLOYMENT Nonfarm Employment........................Mar. Manufacturing ................................Mar. Nonmanufacturing ........................Mar. Construction ................................Mar. Farm Employment................................Mar. 124.0 112.3 129.3 136.6 125.7 124.9 113.7 130.0 137.1 125.7 82 726r 748 115.8 214.3 308.1 187.7 Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. FINANCE AND BANKING Loans* All Member B a n k s ........................Mar. Large B a n k s ....................................Mar. Deposits* All Member B a n k s ........................Mar. Large B a n k s ....................................Mar. Bank Debits*/** ................................Mar. 137.3 195.4 212.3 223.1 Latest Month 1976 One Two Month Months Ago Ago One Year Ago Unemployment Rate (Percent of Work Force)*** . . . . Mar. Average Weekly Hours in Mfg. (Hrs.) . Mar. 6.8 6.8 40.9 8.2 41.0 40.4 FINANCE AND BANKING Member Bank Loans............................ Mar. Member Bank D eposits........................ Mar. Bank D e b its * * .................................... Mar. 278 241 340 277 235 321 278 231 302 267 214 294 135.9 218.7 138.7 219.5 131.2 195.2 122.3 249.1 147.4 120.0 152.6 120.6 74.4 148.1 120.5 153.4 124.9 69.9 148.3 119.8 153.8 128.8 72.1 150.1 117.4 156.4 163.4 80.8 11.0 40.5 11.0 41.2 11.0 39.9 10.2 39.7 285 255 354 286 251 349r 285 247 321 301 240 3C9 FLORIDA INCOME Manufacturing In c o m e........................ Mar. Farm Cash R eceip ts............................ Feb. EMPLOYMENT Nonfarm E m ploym ent........................ Mar. Manufacturing ................................ Mar. Nonmanufacturing............................ Mar. C onstru ction ................................ Mar. Farm Employment................................ Mar. Unemployment Rate (Percent of Work Force)*** . . . . Mar. Average Weekly Hours in Mfg. (Hrs.) . Mar. FINANCE AND BANKING Member Bank L oans............................ Mar. Member Bank D e p o s it s .................... Mar. Bank D e b its* * .................................... Mar. GEORGIA INCOME Manufacturing In c o m e ........................ Mar. Farm Cash R eceipts............................ Feb. EMPLOYMENT Nonfarm Em ploym ent........................ Mar. Manufacturing ................................ Mar. Nonmanufacturing........................... Mar. C onstruction................................ Mar. Farm Employment ............................ Mar. Unemployment Rate (Percent of Work F o r c e )................ Mar. Average Weekly Hours in Mfg. (Hrs.) . Mar. FINANCE AND BANKING Member Bank L oans............................ Mar. Member Bank D e p o s it s .................... Mar. Bank D e b its * * .................................... Mar. 133.7 210.4 132.2 214.4 130.9 207.6 104.8 218.4 127.1 106.5 136.6 114.1 106.9 127.6 106.6 137.3 118.6 107.7 127.6 106.6 137.3 119.0 104.4 124.5 97.7 136.8 127.2 104.0 8.1 40.7 8.7 41.2 8.9 41.2 10.3 37.7 256 199 418 243 193 390 248 189 377 250 195 350 151.3 171.1 155.8 191.3 153.8 162.8 131.3 181.3 121.3 106.6 124.4 106.6 92.2 121.8 108.1 124.7 107.2 93.0 121.5 107.0 124.5 110.0 88.9 120.6 107.2 123.3 105.8 102.5 6.8 41.0 6.8 41.6 7.6 42.0 7.9 41.1 252 220 285 243 215 283 244 214 263 261 207 259 145.1 275.7 145.8 293.2 143.4 233.8 117.7 214.8 130.4 128.6 131.2 125.6 93.8 130.1 127.9 131.2 128.2 92.9 131.4 128.1 132.8 127.5 93.0 127.3 119.0 131.0 128.5 86.2 LOUISIANA INCOME Manufacturing In c o m e........................ Mar. Farm Cash R eceip ts............................ Feb. EMPLOYMENT Nonfarm Em ploym ent........................ Mar. Manufacturing ................................ Mar. Nonmanufacturing........................... Mar. C onstru ction ................................ Mar. Farm Employment ............................ Mar. Unemployment Rate (Percent of Work Force)*** . . . . Mar. Average Weekly Hours in Mfg. (Hrs.) . Mar. FINANCE AND BANKING Member Bank L o a n s * ........................ Mar. Member Bank D ep o sits* .................... Mar. Bank Debits*/** ................................ Mar. MISSISSIPPI 142.2 238.8 117.3 233.1 124.2 118.4 105.8 124.1 129.8 113.6 112.8 129.3 137.3 128.5 INCOME Manufacturing In c o m e ........................ Mar. Farm Cash R eceip ts............................ Feb. EMPLOYMENT Nonfarm Em ploym ent........................ Mar. Manufacturing ................................ Mar. Nonmanufacturing........................... Mar. C onstruction................................ Mar. Farm Employment ............................ Mar. JU N E 1976, M O N T H LY R E V IE W One Two Month Months Ago Ago Latest Month Unemployment Rate (Percent of Work Force)*** . . . . Mar, Average Weekly Hours in Mfg. (Hrs.) . Mar. FINANCE AND BANKING Member Bank L o a n s* ........................Mar. Member Bank D ep osits*....................Mar. Bank Debits*/** ................................Mar. Manufacturing In c o m e........................Mar. Farm Cash R eceipts............................Feb. One Year Ago 5.7 40.4 5.6 41.0 5.7 40.7 7.9 38.2 270 240 303 267 234 316 264 229 296 266 217 255 135.0 191.7 112.4 244.4 139.5 231.5 137.7 198.6 *For Sixth District area only; other totals for entire six states ***Seasonaliy adjusted data supplied by state agencies. Latest Month One Two Month Months Ago Ago One Year Ago EMPLOYMENT Nonfarm Employment........................Mar. Manufacturing ................................Mar. Nonmanufacturing...........................Mar. C onstruction................................Mar. Farm Employment ............................Mar. Unemployment Rate (Percent of Work F o r c e )................Mar. Average Weekly Hours in Mfg. (Hrs.) . Mar. 129.6 114.8 137.9 123.9 97.0 130.0 114.1 138.8 130.6 129.7 113.1 138.9 137.6 125.5 107.8 135.3 135.0 89.8 7.7 7.4 41.2 7.3 8.9 38.4 280 236 299 280 229 289 279 228 274 291 220 276 FINANCE AND BANKING Member Bank L o a n s* ........................Mar. Member Bank D ep osits*....................Mar. Bank Debits*/** ................................Mar. **Daily average basis tPreliminary data r-Revised 100.2 100.2 N.A. Not available All indexes: 1967=100, except mfg. income, 1972=100. Sources: Manufacturing production estimated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. income 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 Div., McGraw-Hill Information Systems Co.; pet. prod., U.S. Bureau of Mines; 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. ‘Data have been bench marked and new trading day factors and seasonal factors computed using December 31, 1974 and June 30, 1975 Report of Condition data as bases. D e b it s to D e m a n d D e p o s it A c c o u n t s In s u re d C o m m e r c i a l B a n k s in t h e S i x t h D is t r ic t (In T h o u s a n d s o f D o lla rs ) Mar. 1976 Feb. 1976 Mar. 1975 Percent Change Year to Mar. date 1976 3 mos. from 1976 Feb. Mar. from 1976 1975 1975 Mar. 1976 Feb. 1976 . . . . . . 255,985 99,836 209,256 92,931 + 20 +65 +20 +19 +10 +17 + 13 + 5 +49 +12 Bradenton . . Monroe County O c a la ................ St. Augustine St. Petersburg Tampa . . . . 240,834 103,371 241,041 44,838 . 1,121,867 . 2,572,988 208,415 95,445 224,521 38,986 1,028,951 2,391,114 201,863 142,448 225,667 49,474 962,494 2,197,768 Athens . . . . Brunswick . . Dalton . . . . Elberton . . . Gainesville . . Griffin . . . . LaGrange . . . Newnan . . . . R om e................ Valdosta . . . 197,826 140,125 226,084 36,317 204,156 83,135 44,446 59,158 326,635 132,220 175,977 123,562 175,022 29,193 175,526 73,802 56,572 47,442 262,394 112,122 Abbeville . . Bunkie . . . . Hammond . . New Iberia . Plaquemine . Thibodaux . . 20,785 19,385 98,215 104,981 32,266 69,903 . + 22 + 19 + 9 +17 +28 +17 6,099,628 127,743 468,076 1,513,797 1,214,424 306,565 4,980,847 107,018 430,342 1,421,639 1,012,636 256,037 5,213,832 99,576 398,694 1,396,602 738,199 257,096 1,058,055 505,736 908,361 437,293 860,623 483,914 +16 +16 +23 + 5 +12 +5 2,736,685 486,271 282,619 6,800,651 2,419,579 415,594 249,400 5,501,811 1,878,105 445,890 286,469 4,921,194 +13 +17 +13 +24 + 46 + 9 +38 +3 510,453 8,875,815 2,223,095 710,936 620,795 937,293 4,893,984 1,442,180 440,963 7,409,153 1,867,682 616,639 561,790 1,176,918 4,469,008 1,190,915 456,796 7,302,095 1,564,279 516,670 545,104 1,170,233 4,245,402 1,298,338 + 16 +12 218,962 25,248,198 697,834 514,430 894,109 1,406,976 183,115 21,083,459 521,860 460,502 747,381 1,198,441 Alexandria Baton Rouge Lafayette . . Lake Charles New Orleans 373,860 2,104,604 474,171 344,660 6,546,771 295,612 1,956,761 397,073 291,539 5,635,268 Bilox-Gulfport . . . Jack son .................... 385,128 2,066,896 Chattanooga . . . . K n o x v ille................ N a s h v ille ................ 1,438,322 1,867,967 5,053,779 OTHER CENTERS Anniston ................ 141,897 Birmingham Gadsden Huntsville . Mobile . . Montgomery Tuscaloosa Bartow-LakelandWinter Haven Daytona Beach Ft. LauderdaleHollywood Ft. Myers . . . Gainesville . . Jacksonville . . MelbourneTitusville-Cocoa Miami . . Orlando . Pensacola . Sarasota Tallahassee Tampa-St. Pete W. Palm Beach Albany Atlanta Augusta Columbus Macon Savannah +32 +31 +24 +31 + 16 + 8 + 7 + 15 + 9 + 8 + 19 -2 7 + 7 - 9 + 17 + 17 + 7 —25 + 9 + 2 + 14r + 17 165,782 116,003 157,850 25,982 163,605 69,260 39,876 43,477 157,446 109,106 + 12 + 13 +29 +24 + 16 + 13 -21 +25 + 24 + 18 + 19 +21 +43 +40 +25 +20 + 11 +36 + 107 +21 + 19 + 9 +26 +33 + 18 +12 +25 + 12 +98 + 13 15,907 15,338 96,234 90,115 26,765 57,787 18,915 17,401 111,708 88,379 32,115 68,809 + 31 + 10 +26 + 11 + 2 -1 2 + 16 + 19 +21 + 0 + 21 + 2 + 5 + 7 -11 + 11 -1 0 + 2 181,192 94,312 149,733 69,522 161,256 87,920 137,125 62,980 151,160 77,280 120,054 54,233 + 12 +20 + 7 +22 + 9 +25 + 10 +28 + 19 + 15 + 13 + 17 . . 193,820 101,141 56,792 210,139 87,777 44,257 181,599 75,768 52,429 - 8 + 15 +28 + 7 + 8 +33 +26 + 8 + 9 Bristol . . . Johnson City Kingsport . . . 217,809 201,276 478,529 184,557 168,362 355,446 149,755 173,483 356,381 + 18 +20 +35 +45 + 16 +34 +45 + 11 +27 DISTRICT TOTAL . . 111,092,385 95,047,580 90,734,571r + 17 +22 + 14 11,496,687 30,124,754 28,452,707 10,243,837 4,051,314 10,678,281 11,194,767 28,360,143 26,563,363r 10,058,772 3,430,534 11,126,992 Dothan Selma STANDARD METROPOLITAN STATISTICAL AREAS' + 6+ 8 +20 +22 +12 +42 +28 + 38 +36 +11 + 14 - 5 + 19 + 15 -20 -20 + 6 +10 + 15 +12 + 21 + 11 + 1 185,396 +20 +18 + 4 19,494,214 +20 +30 +19 630,502 +34 +11 - 3 455,134 +12 +13 +11 789,115r +20 +12 +10 969,055 +17 +45 +39 +13 +11 +26 +27 +20 +10 + 3 +16 +12 +13 303,360 2,035,372 284,203 +27 +36 1,656,263 + 2 +25 +19 +17 1,149,005 1,551,321 4,433,854 1,300,110 +25 +11 1,669,234+20 +12 4,638,890 +14 + 9 - 2 + 1 +7 127,304 ’Conforms to SMSA definitions as of December 31, ^District portion only. FE D ER A L R ESER V E BANK O F A TLAN TA 331,531 1,903,051 376,154 271,125 5,476,521 121,614 +26 + 8 +19 +18 +16 +11 +17 +11 Mar. 1975 Percent Change Year to Mar. date 1976 3 mos. from 1976 Feb. Mar. from 1976 1975 1975 Hattiesburg . Laurel . . . . Meridian . . Natchez . . . . PascagoulaMoss Point Vicksburg . . Yazoo City . . . . . . . Alabama . . . . . Florida . . . . . Georgia . . . . . Louisiana- . . . . Mississippi . . Tennessee- . . . . 13,637,131 34,828,200 33,935,332 11,711,122 4,317,423 12,663,177 194,364 +22 76,143r + 7 + 19 +22 + 13 + 16 +23 +15 + 19 +28 +18 + 14 + 16 + 10 + 7 +26 +20 + 19 + 14 + 7 1972. 83 D is t r ic t B u s in e s s C o n d i t io n s 1967=100 — Seas. Adj — Seas. Adj. Mfg. Income /v 1967=100 Farm Cash Receipts a ___ Seas. Adj. 228 Unemployment Rate" 1111111111 r 1976 ' M1 1 1 1 M i n 1974 1 1 1 M1 1 1 1 1 1 1975 *S e a s. adj. figure; not an index Late st plotting: M arch, except mfg. production and farm cash receipts, February. Economic recovery continues, although some sectors have paused to consolidate earlier gains. Labor market growth was interrupted, and consumer indicators continued th eir erratic m o nthly behavior. A few large contracts in the nonresidential sector boosted construction. Reduced crop marketings depressed farm income, but planting progressed ahead of schedule. Bank deposit gains w ere strong. The unem ploym ent rate remained unchanged in March, although nonfarm em ploym ent declined for the first tim e in five months. Moderate decreases in manufacturing jobs were shared by the durable and nondurable sectors, w ith only machinery, printing and publishing, paper, and apparel showing strength. Nonmanufacturing jobs, except services and government, dropped. Construction jobs were particularly weak, w ith all states reporting losses. The average factory w orkw eek declined follow ing 12 months of growth, but average earnings remained unchanged. Manufacturing income declined slightly in March for the first decrease in the past six months. De partment store sales in February regained some of the ground lost in the previous month's sharp decline. Registrations of new automobiles dropped. However, these erratic month-to-month movements occurred around an upward trend in retail sales. Two large nonresidential contracts pushed the value of construction contracts in March to its highest level in 15 months. High nonresidential 84 activity overcame a small decline in the value of residential contracts. Interest rates on permanent residential mortgages inched down further, as strong deposit inflows at th rift institutions con tinued. Prices received by farmers in March held near the level of the previous tw o months. A large de cline in rice prices was offset by a sharp rise in orange prices. Estimated farm cash receipts for the first quarter dropped from the year-ago level because of reduced crop income. Recent returns to egg and pork producers have been squeezed by rising feed costs and declines in product prices. Cattle prices rose sharply in A p ril when the volum e marketed shrank. Crop plantings advanced ahead of schedule during April's favorable weather. M em ber banks experienced strong demand de posit gains during early A p ril. Bank lending ad vanced at the m edium and small banks during March. Lending at all banks rose during the first half of April. Recent bank purchases of U. S. Governm ent securities continued large. JU N E 1976, M O N T H LY R EV IEW
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