Full text of Economic Review (Federal Reserve Bank of Atlanta) : November 1967, Volume 52, Number 11

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

IN THIS ISSUE:
• What’s Happening

MONTHLY
REVIEW

To Prices?
• Job Growth:
Population Centers
vs. Hinterland
• Southern Mortgage
Banking Matures
• District Business
Conditions

F E D E R A L



R E S E R V E

B A N K

O F

A T L A N T A

November 1967

W

h a t 's

H a p p e n i n g

Are prices going up?
If you are the average man-in-the-street con­
sumer, you might very well reply bitterly, “Of
course. They never come down, do they?”
On the other hand, if you are a dealer in
inedible fats and oils or a cotton textile mill
owner, you might say that you certainly hope so,
but that if they keep going down, you will be
bankrupt and won’t care.
Which is by way of illustrating, both that
prices tend to be a rather emotional topic of con­
versation and that you can nearly always find
somebody who is dissatisfied with their behavior,
either because they are going up or down or not
doing one or the other fast enough.
If you are selling something, whether it be a
commodity, a manufactured product, or a service,
you want its price to be high; if you are buying,
you want prices low. All of us are concerned with
the specific prices that immediately affect our
welfare as producers or consumers. We are also
concerned (or should be) with prices in general,
since inflation or deflation affects the value of
money and, therefore, our decisions to spend, to
save, and to invest.
If we want to measure the behavior of prices
“in general,” however, we immediately face a
problem. Literally, millions of prices are set
everyday in the United States. They may be es-

M o n t h ly R e v ie w , V o l. L I I , N o . 11. F ree su b sc rip tio n
a n d a d d itio n a l copies a v a ila b le u p o n request to the
R e se a r c h D e p a rtm e n t, F e d e ra l R e se rv e B a n k of
A tla n ta , A tla n ta , G e o rg ia 30303.
142




t o

P r i c e s ?

tablished impersonally in organized markets like
the Chicago Board of Trade or the New York
stock exchanges, stamped on paper tags by de­
partment store clerks, printed in manufacturers’
price lists, or quoted verbally by the comer
barber.
If all prices always rose or fell simultaneously
in the same proportion, there would be no prob­
lem of measurement. We could simply say that
prices went up (or down) by x percent this
month. But prices never behave this way. Some
go up, while others go down, or they rise or fall
at different rates. Nothing meaningful can be
said about millions of individual prices simulta­
neously, so we must find some way to lump them
together, with a single number as the result.
Changes in that number, then, will provide a
measure of how prices “in general” have changed.
The Bureau of Labor Statistics is the prin­
cipal compiler of price statistics in the United
States. It publishes numerous subsidiary indexes,
as well as two major ones—the Consumer Price
Index (CPI) and the Wholesale Price Index
(W P I). At first glance, this seems like a bewild­
ering array of figures that is rather disappoint­
ing after being promised “one number” whose
behavior would tell what is happening to prices.
But different people want to know different
things about prices and sets of prices. The tex­
tile industry is particularly interested in textile
prices, the steel industry in steel prices, and so
on. But for any particular combination of prices,
the Bureau of Labor Statistics computes a single
index number that represents the central ten­
dency of that particular universe.
MONTHLY REVIEW

Consumer Prices
The Consumer Price Index, according to the
Bureau, “is a statistical measure of changes in
prices of goods and services bought by urban
wage earners and clerical workers, including
families and single persons.” This statistical
measure is derived by comparing the total cost
of a fixed “market basket” once a month with
the total cost in some given base period. The base
period currently used is 1957-59. Thus, if the
CPI is 117.1 (as it was in September 1967), this
means that in that month it cost the average
urban wage earner and clerical worker family
$11.71 to buy the same bundle of goods and
services for which they paid $10 in 1957-59.
The items making up the “market basket” are
divided into five main groups: (1) food; (2)
housing; (3) apparel and upkeep; (4) transpor­
tation; and (5) health and recreation. Chart I il­
lustrates how the various groups have affected the
overall index (“all items,” the top line) at differ­
ent times. The almost steady rise in this index
during the period shown is nothing new. It has
been rising slowly since 1961, when the present
economic expansion began. However, its rate of
increase advanced in early 1965, again in early
Chart I
N e a rly all m ajor c o m p o n e n ts of the c o n s u m e r p rice in d e x
h a ve rise n ste a d ily s in c e 1965, w ith the m o st rap id in c re a s e s
in the ove rall in d e x (sh a d e d a re a s) r u n n in g c o n c u rre n tly w ith
fo od p rice a d v a n c e s.
Percent

1965

1966

1967

" S e a s o n a lly a d ju ste d b y B L S .
S o u rc e : U. S. D e p a rtm e n t of Lab or, B u r e a u of L a b o r S ta tistic s.

NOVEMBER 1967




1966, and, most recently, from June through
August.
The increase in early 1965 was primarily the
result of rising food prices, the other components
changing relatively little. In early 1966, all the
components rose and their combined effect pro­
duced the most rapid rise in the overall index
since 1957, an annual rate of 5.4 percent. In late
1966 and early 1967, food prices declined and
transportation prices at least hesitated, leading to
six months of very slow increases. Beginning in
June of this year, this restraint disappeared, and
the “all items” index climbed rapidly, at an
annual rate of 4.7 percent from June through
August. In September, food prices again dropped,
although not to June levels, and the rise of the
all items index moderated.
Wholesale Prices
The Wholesale Price Index is designed to meas­
ure price changes at a different level of produc­
tion, not, as with the CPI, at the moment goods
and services are bought by consumers, but rather
“in primary markets,” or at the level of “the first
significant commercial transaction.” The relevant
prices, in other words, are those at which prod­
ucts enter the market for the first time, as op­
posed to consumer prices, those at the other end
of the distribution process.
There are 15 major divisions of the WPI, but
13 of them are lumped together under the gen­
eral heading of “industrial commodities.” The
other two are “farm products” and “processed
foods and feeds.” These three series display
markedly different behavior, as shown in Chart
II. At the beginning of 1965, the overall index
(“all commodities,” the top line) hardly dif­
fered from its level in the base period. This had
been one of the outstanding characteristics of
the business expansion during its first four years.
Wholesale prices had remained almost constant,
on average, even though consumer prices were
slowly rising. But a combination of rising in­
dustrial, farm, and food and feed prices in 1965
and most of 1966 produced a fairly rapid increase
in the overall index.
The overwhelming importance of industrial
prices is apparent in the period of late 1966 and
early 1967 when, in spite of sharp drops in farm
products and food and feed prices, the overall
index declined less than one and one-half percent
and was still 5.1 percent above its January 1965
level. Perhaps the most alarming feature of Chart
II is the rise in industrial commodity prices from
August through October of this year. After virtual
143

Chart II
T h e ove ra ll w h o le s a le p rice in d e x s h o w s little flu c tu atio n b e­
c a u s e of the h e a v y w e ig h t of in d u stria l c o m m o d itie s. H o w ­
ever, s o m e v o la tility is e v id e n t in the p ric e s of farm p ro d u c ts
a n d p ro c e sse d fo o d s a n d feeds.
Percent

Sou rce: U. S. D e p a rtm e n t of Labor, B u re a u of L a b o r S ta tistic s.

stability for thirteen months and absolutely no
change for five, this crucial sector of the index
rose at an annual rate of 2.7 percent.
Since the behavior of the overall index is
so strongly influenced by industrial prices, it
is interesting to see which industrial groups have
teen most important. Chart III shows how four of
these industrial groups have behaved. Metals and
metal products and machinery and equipment
have contributed strongly to the 1965-67 rise,
both because they have been among the most
rapidly rising groups and because of their large
relative importance. Metals and metal products
Chart III

T he C o n s tru c tio n
The Consumer Price Index (CPI) attempts to measure
changes in prices of goods and services bought by
urban wage earners and clerical workers, including
families and single persons. It is derived by compar­
ing the total cost of a fixed “market basket” once
a month with the total cost in the base period, 195759. The key word is “same.” That is, the composi­
tion of the “market basket” is held constant, both as
to the items included and their quantity, so that the
change in total cost must be due to changes in prices.
Of course, if the market basket were held constant
too long, it would get out of touch with the actual
behavior patterns of the population, and the Bureau
would be trying to price things that nobody buys any
more, such as steel phonograph needles or player
pianos. To avoid this, the Bureau conducts a Con­
sumer Expenditure Survey periodically. The last one
in 1960-61 involved collecting complete records of in­
come and outlay of a selected sample of families for
a calendar year. As a result, the relative importance
of many of the items in the market basket were
changed, new ones added, and others dropped.
The current sample chosen to represent the market
basket includes 812 items. Not all of these are priced
every month everywhere in the country, as this would
be prohibitively expensive. A representative sample
is priced at a selected sample of retail outlets in a
selected sample of cities. The five largest urban areas
are priced every month, other large cities and a selec­
tion of smaller cities and towns once every three
months, staggered so that some are priced every
month. Food prices are collected monthly in every
urban area, however. In the Sixth District, prices
are collected in Atlanta, Nashville, Baton Rouge, Or­
lando; Florence, Alabama; and Vicksburg, Mississippi.
A separate CPI is published, quarterly, only for At­
lanta, however.
Separate indexes are computed and published for
each of the main subdivisions of the index and several
special groupings. The major subdivisions, with their
percentage weights, are:
M a jo r G r o u p s

T h e rela tive sta b ility of the in d u s tria l c o m m o d it ie s in d e x
c o n c e a ls a h ig h d egre e of d iv e rsity in its c o m p o n e n t parts.
Percent

P e rce n t of A ll Ite m s
D ecem ber 1963*

F oo d
H o u s in g
A p p a re l a n d u p k e e p
T ra n sp o rta tio n
H e a lth a n d recre a tio n
M e d ic a l ca re
P e rso n a l ca re
R e a d in g a n d recre a tio n
O th e r g o o d s a n d s e r v ic e s
♦Totals m ay not add to 100 because of rounding.

2 2 .43
33.23
10.63
13.88
19.45
5.70
2.75
5.94
5.06

Three of these major groups—food, apparel and
upkeep, and transportation—show significant seasonal
movements and are regularly published on a seasonally
adjusted, as well as unadjusted, basis. The overall
(“all items”) index is not seasonally adjusted be­
cause seasonal fluctuations in the components offset
one another.

Source: U. S. Department of Labor, Bureau of Labor Statistics.

Digitized1for
4 4 FRASER


MONTHLY REVIEW

o f t h e P r ic e I n d e x e s
The Wholesale Price Index (WPI) is designed to
measure price changes in primary markets, or at the
level of the first significant commercial transaction.
Wholesale prices, in other words, are those at which
products enter the market for the first time. The
WPI is designed to cover “all commodities sold in
commercial transactions in primary markets of the
United States.” A sample of about 2,300 items has
been chosen to reflect price changes in this uni­
verse, constructed so as to represent all commodity
groupings, market participants, and geographical areas.
Most quotations are obtained by mail from reporting
firms, but some are the prices established on organized
exchanges, such as coffee, wheat, etc. The various
items are weighted by the net selling value of com­
modities produced, processed, or imported in the
U. S., according to the industrial censuses. These
weights were revised in January 1967, using data
from the 1963 Censuses of Manufacturers and Mineral
Industries, and the commodities were regrouped to
provide more meaningful aggregates.
There are 15 major groups in the WPI, listed
below, together with their relative importance:

C o m m o d ity G ro u p s
A ll

account for 12.8 percent of the net selling value
of all commodities, and machinery and equip­
ment for 12.1 percent. Chemicals and allied
products and textile products and apparel, on the
other hand, hardly changed. The textile group
index was less than one and one-half percent
higher in August than it had been in January
1962, and chemical prices were actually lower.
Thus, concealed beneath the relative stability
of the overall industrial index is considerable
diversity among its component groups. But with­
in any one group the diversity is frequently even
greater. Chart IV shows, for example, three of the
subgroups contained within the chemicals and
allied products group. The index for prepared
Chart IV
T h e ste e p fall in in e d ib le fa ts a n d o ils p rice s s in c e ea rly
19 6 5 c o n tra sts str o n g ly w ith the sta b le p ric e s of prepared
p a in ts a n d d r u g s a n d p h a rm a c e u tic a ls.
Percent

a1957-59= 100 I

I
120

R e la tive im p o rta n ce
(percent), 19 6 3 w e ig h ts
a s of D e c e m b e r 196 6

c o m m o d it ie s
F a rm p ro d u c ts
P ro c e ss e d fo o d s a n d fe e d s
In d u s t ria l c o m m o d itie s
T extile p ro d u c ts a n d a p p are l
H id e s, s k in s, leather, a n d related p ro d u c ts
F u e ls a n d related p ro d u c ts an d p ow er
C h e m ic a ls a n d a llie d p ro d u c ts
R u b b e r a n d ru b b e r p ro d u c ts
L u m b e r a n d w o od p ro d u c ts
Pulp, paper, a n d a llie d p ro d u c ts
M e ta ls a n d m etal p ro d u c ts
M a c h in e r y a n d e q u ip m e n t
F u rn itu re a n d h o u se h o ld d u r a b le s
N o n m e ta llic m in e ra l p ro d u c ts
T ra n sp o rta tio n e q u ip m e n t
M is c e lla n e o u s p ro d u c ts

1 00.000
10.637
16.533
7 2 .8 3 0
7 .149
1.264
7.130
6 .378
2 .339
2.418
4 .877
12.799
12.110
3.584
3.040
7.244
2 .498

Prepared
Paints„

110

s ; »( Drugs and
i Pharmaceuticals
100
i

100 —

90

90

Inedible
Fats and
Oils

80

1965

1966

80

1967

S o u rc e : U. S. D e p a rtm e n t of Labor, B u re a u of L a b o r S ta tistic s.

The relative importance of these groups has changed
considerably over the years. For instance, the 1909
weights, used in one of the earliest versions of the
index, were:
C o m m o d ity G ro u p
F a rm p ro d u c ts
Foods
A ll oth er

1 9 0 9 W e ig h ts (percent)
29.04
25.54
4 5.42

The index, when it was constructed with these
weights, was much more volatile than it is now, be­
cause it was more heavily influenced by farm products
and foods, whose prices are always much more subject
to change than are those of industrial commodities.

NOVEMBER
1967



paints is slowly rising, while drugs and phar­
maceuticals show no trend. Neither displays any
pronounced movement from month to month. But
the inedible fats and oils index shows tremendous
volatility, and the road has been almost entirely
downhill since early 1965, when the W PI actually
advanced. The same underlying crosscurrents are
visible in other groups, such as textiles (rising
prices for silk yams and falling prices for manmade fiber products) and metals and metal
products (iron and steel prices very slowly in­
creasing and nonferrous metals recently declin­
ing).
The diversity in price movements that we have
noted can be observed in almost any period. It is
145

an essential feature of our economic system that
prices should be flexible in relation to one an­
other, because they are guideposts to business­
men, encouraging production of those things
whose prices are rising, discouraging the produc­
tion of those whose prices are falling. Without
this flexibility of individual prices, resources
would be misdirected and our standard of living
would inevitably be lower. It is not at all desir­
able, however, that the price level should be
flexible. Inflation, among other things, diverts
businessmen from their proper preoccupation
with production and distribution to speculate on
the future course of prices. Deflation’s nastiest
by-product is unemployment, but it, too, pro­
duces business uncertainty and other unpleasant
effects. So, just as flexibility of individual prices
is necessary for our economy to work efficiently,
reasonable stability of the price level is necessary
for the same end.
Inflation?
By comparison with other countries, we have
never had what could be called a “runaway” in­
flation. The 2-percent average annual rise in
wholesale prices from 1965 to date, or the 2.8percent increase in consumer prices, is piddling
compared with the 73-percent inflation in the
cost of living in Uruguay in 1966 or the incredi­
ble 855-million percent rise of wholesale prices
in Germany in 1923. But this gives us no grounds
to be smug. A 2.8-percent average annual increase
every month can cut the purchasing power of
the consumer’s dollar by nearly 43 percent in
twenty years, or by 61 percent at the JuneAugust annual rate of 4.7 percent.
The worst feature of inflation is that it is self­
reinforcing. As prices in general rise, people ex­
pect them to continue upward and behave so as
to make that expectation come true. We must be

1 4 6FRASER
Digitized for


constantly on the alert to prevent any such in­
flationary spiral—or, for that matter, a defla­
tionary spiral either—from getting started. The
price of stability, to paraphrase a famous quota­
tion, is eternal vigilance.
Monetary policy—the power to change the
availability of bank reserves—and fiscal policy—
the power to change the tax receipts and expendi­
tures of the Federal Government—constitute our
principal defenses against inflation. Both work
ultimately on the level of total demand, moderat­
ing its rise when it increases faster than produc­
tive capacity, stimulating it when it rises too
slowly to employ all our productive resources.
So far in 1967, the private demand sector has
not been a heavy contributor to raising total de­
mand. Construction is only now achieving the
level it reached last year before the credit
squeeze; consumers have been saving larger-thanusual percentages of disposable income; businessfixed investment has marked time; and inventory
investment has fallen to very low levels. It is
perhaps significant that price increases were mod­
erate until after midyear. There are indications,
however, that many of these areas are likely to
show increasing strength over the next three
quarters. And defense spending, while not rising
so rapidly as it did in 1965-66, is still contribut­
ing to the expansion of total demand. Monetary
and fiscal authorities will need all their wisdom
and sophistication in the coming months to main­
tain a stable, growing economy without inflation.
Lawrence F. M ansfield

B a n k A n n o u n c e m e n ts
On October 1 the Darien Bank, Darien, Georgia, a non­
member bank, began to remit at par for checks drawn
on it when received from the Federal Reserve Bank.

MONTHLY REVIEW

J o b

G r o w t h :

P o p u l a t i o n

One of the more popular variants of “the rich
get richer and the poor get poorer” theme applies
to the relative growth rates of urban and rural
areas. The general belief is that large urban areas
boom at the expense of smaller areas which do
not receive their share of new jobs. For example,
at a recent meeting of an industrial group, one
speaker warned: “Industrial growth is going into
population centers, while in the hinterland the
growth is spotty.” The same theme has been
echoed many times, and ominous implications
are frequently drawn from this thesis because of
urban slums and congestion. But has the recent
behavior of employment displayed this urbanrural dichotomy in the Atlanta Federal Reserve
District?
For the purposes of this discussion, population
centers are defined as the Major Labor Market
Areas (MLMA’s) and the hinterland as the dif­
ference between the state total and the sum of
the MLMA’s for each state. Hinterland data are
somewhat rough because some MLMA’s include
counties in more than one state. Since these
counties are small, relative to the state totals, and
since nonfarm payroll statistics reflect place of
work rather than residence, the distortion in
hinterland data will be small.
The U. S. Department of Labor has defined 18
of the Standard Metropolitan Statistical Areas
(SMSA’s) in the Sixth District as major labor
markets. For the six states these population cen­
ters contain about half the Sixth District’s nonfarm jobs. In 1966 the percent of nonfarm jobs
in MLMA’s by state ranged from 13 in Missis­
sippi, which has one MLMA, to 58 in Tennessee
and Georgia, which have 4 and 5 MLMA’s, re­
spectively. The MLMA’s are listed in the table
and outlined on the map on page 149.
NOVEMBER
1967



C e n t e r s

v s .

H i n t e r l a n d

Demographic Factors and Total Employment
Population growth proceeded at a more rapid
rate in the MLMA’s (11 percent) than in the
less urbanized areas (10 percent) during the
1960-65 period. Moreover, the participation rate
(labor force divided by the population) was low
in the hinterland because farm families have more
children and a large percentage of the population
is made up of retirees. The migration from rural
to urban areas occurs primarily among young
adults, the most likely participants in the labor
force. Therefore, the 40-percent participation rate
of MLMA’s, compared with 35-percent for nonMLMA’s, comes as no surprise.
A faster population growth and higher partici­
pation rate enabled the MLMA’s to outdistance
the hinterland in growth of the work force be­
tween 1963 and 1966. With a larger supply of
new workers and the declining number of farm
jobs making only a slight impact, the population
centers registered a 13-percent advance in total
employment between 1963 and 1966, compared
with an 11-percent gain in the hinterland.
Despite a slower growth in total employment,
the areas outside population centers recorded a
dramatic reduction in the unemployment rate—
from 6.0 percent in 1963 to 3.7 percent in 1966.
For MLMA’s the change was from 5.1 percent to
3.3 percent. Although the rate remained lower
in the MLMA’s in 1966, the differential was re­
duced from 0.9 to 0.4 percentage points. Florida
was the only District state in which the unem­
ployment rate outside the MLMA’s was lower.
The high percentage of farm workers in the
work force in the hinterland explains much of
the difference in the rate. Farm employment has
large seasonal fluctuations and is experiencing a
147

secular decline in jobs. In 1966 the U. S. unem­
ployment rate for farm workers was nearly double
that for nonfarm workers. If the same unemploy­
ment rate for farm workers prevailed in the Dis­
trict as in the U.S., the jobless rate for nonfarm
workers in the non-MLMA’s would be 3.4 percent
—almost the same as for MLMA’s.
Although the population centers outpaced the
hinterland in terms of total job growth, the more
widely used statistics on nonfarm payroll employ­
ment give the nod to the less urbanized areas in
the growth race. What accounts for the difference
in the behavior of total and nonfarm employment
between the two types of areas? Although
MLMA’s had a faster growth in the work force
than other areas, the increase in the supply
of nonfarm workers was similar for both types
of areas because of the reduction in farm employ­
ment. During the 1963-66 period farm employ­
ment was reduced by 108,000, or 15 percent. All
of the lost agricultural jobs were outside
MLMA’s. Therefore, the subtraction of farm
workers from the total work force gives an equal
increase of about 12-percent in the nonfarm labor
for both types of areas.
Lower wages outside the major labor markets
explain part of the faster growth in the hinter­
land. Wages on which social security taxes were
paid during first quarter 1962 in the six states
averaged $1,041 in MLMA’s and $893 outside
MLMA’s. Since wages in both types of areas ad­
vanced 15 percent in the 1962-66 period, relative
wages have not changed. However, the dollar dif­
ferential has increased. Although some of the
differential in wages results from the higher av­
erage skill in the MLMA’s—indicated partly by
the higher levels of median education—area wage
studies have found a wage differential between
urban and rural areas for the same job. Wage
rates may affect some firms’ decision to choose
one location over another.
Smaller towns and rural areas of the region
could still be lagging if job growth in the nonMLMA’s were concentrated in the metropoli­
tan areas not classified as major labor markets.
Of the 31 SMSA’s—defined as cities with a popu­
lation of 50,000 or more inhabitants and the
counties which are economically and socially in­
tegrated with the central city—only 18 are
MLMA’s. In the 1960 Census each of the
MLMA’s had a population of 200,000 or more.
In the 1962-66 period employment covered by
social security for the non-SMSA’s grew faster
than for the SMSA’s, 26.2 and 24.7 percent, re­
spectively. Thus, the alternative definition of
Digitized148
for FRASER


“population centers” does not alter the results!.
With the supply of nonfarm workers similar in
and outside MLMA’s, the answer for the differing
behavior of job growth in the two types of areas
must be found in the demand for various kinds
of labor.
Labor Demand by Major Types of Activity
One reason for the faster nonfarm job growth out­
side the MLMA’s is that the types of economic
activity most important in the hinterland have
grown faster than average in the District states;.
During the 1963-66 period, the three sectors
which grew faster than total nonfarm employ­
ment were construction, manufacturing, and gov­
ernment. The less urbanized areas had a larger
percent of employment in each of these activities
than did the major labor market areas. The large
share of employment in fast growing sectors out­
side MLMA’s was reinforced by a more rapid in­
crease in these three sectors in the hinterland.
The faster growth in government jobs outside
MLMA’s can be explained partially by the loca­
tion of two state capitals and many military and
space facilities in areas outside large population
centers. Inasmuch as the fast growth in construc­
tion jobs outside MLMA’s is expanding the busi­
ness base, new jobs are being created.
Some Geographical Differences
For the six-state total, non-MLMA’s grew
faster than the MLMA’s, although in Georgia and
Louisiana the situation was reversed. In cases
where the other areas did not grow faster,
MLMA’s registered a rather vigorous growth
rate. In Georgia, Atlanta and Augusta nonfarm
jobs advanced 19 percent, and in Louisiana,
Baton Rouge jobs jumped 25 percent and New
Orleans employment 21 percent. Of the MLMA’s,
Mobile had the lowest growth rate because of a
reduction in government jobs, still in progress.
In 11 of the 18 cases, the MLMA had a slower
growth of nonfarm jobs than did the non-MLMA
in the state where it was located. In all six states
the “other” area grew faster than at least one of
the MLMA’s in that state.
While employment for the hinterland has been
concentrated in the District’s fast growing sectors
during the years of cyclical expansion, this may
not be the case from a longer-term secular point
of view. Jobs in cyclical industries like manufac­
turing and mining had below average growth rates
over the last 20 years. Goods producing indus­
tries have generally been subject to a faster rate
MONTHLY REVIEW

1963-66 Percent Change
in Nonfarm Employment

1966 Unemployment
Rate

H H Below Average

Below Average

[23 Average

Average
I

H I Above Average

Above Average

Area Employment Indicators

N o n fa rm

M a n u f a c t u r in g

Unem ­
p lo ym e n t
Rate, 19 6 6

14.4
10.3
2.3
18.4

18.2
8.2
13.3
22.4

4.2
4.1
4.4
4.2

18.7
12.5
15.0

20.9
15.5
23.9

2.6
2.2
3.5

16.1
22.2

21.9
20.3

2.4
2.4

16.1
18.4
19.7
18.8
12.2
8.6
14.6

17.6
20.9
19.5
7.7
20.2
8.3
17.2

3.4
2.8
3.2
3.5
2.9
3.5
3.7

1 9 6 3 -6 6 P e rce n t C h a n g e
Area

Alabama
1.
2.

B ir m in g h a m
M o b ile
O u tsid e M L M A ’s

Florida
3.
4.
5.

J a c k s o n v ille
M ia m i
Tam paSt. P e te rsb u rg
O u t s id e M L M A ’s

Georgia
6.
7.
8.
9.
10.

A tla n ta
A u g u s ta
C o lu m b u s
M acon
Savannah
O u tsid e M L M A ’s

NOVEMBER 1967




196 3 -6 6 P e rce n t C h a n g e
N o n fa rm

Area

Louisiana
11.
12.
13.

B a to n R o u g e
N ew O rle a n s
S h re v e p o rt
O u tsid e M L M A ’s

Mississippi
14.

Jackson
O u tsid e M L M A ’s

Tennessee
15.
16.
17.
18.

C h a tta n o o g a
K n o x v ille
M e m p h is
N a sh v ille
O u tsid e M L M A ’s

Six States
18 M L M A ’s
O u tsid e M L M A ’s

M a n u f a c t u r in g

Unem ­
p lo ym e n t
Rate, 196 6

17.9
25.4
20.5
10.5
15.8

14.5
8.2
21.9
31.6
8.6

4.3
3.7
3.3
3.2
5.3

17.0
13.5
17.7

23.6
19.5
24.0

4.2
3.2
4.3

18.6
21.9
13.8
13.5
20.8
20.9

23.5
25.4
12.5
15.8
23.2
28.0

3.2
2.9
2.7
2.9
2.4
4.3

17.0
15.8
18.1

19.8
16.1
22.7

3.5
3.3
3.7

149

of technological advance, which reduces labor
requirements per unit of output, than have the
service industries. Large cities, long characterized
as industrial centers, now have a larger percent
of employment in nonindustrial jobs than do the
smaller areas. However, an important part of ex­
pansion depends upon the growth of an area’s in­
dustries which serve national markets and create
a demand for jobs in the local service areas.
Therefore, developments in the manufacturing
sector, which primarily serves nonlocal markets,
need examination.
Growth in Manufacturing Employment
In manufacturing, the difference in the 1963-66
percentage growth rates in jobs between MLMA’s
and non-MLMA’s was greater than for any other
major division, with rates of 22.7 and 16.1 per­
cent, respectively. Manufacturing jobs in the
hinterland areas recorded their best gain in Ten­
nessee, with a 42-percent advance in durable
jobs in which furniture and fabricated metals
manufacturing led the way.
Durable goods jobs in the hinterland increased
more rapidly in each state than in the MLMA’s
of that state, even though the fastest growing
durable goods industries were concentrated in
population centers.
For the six states, the fastest growing durable
goods manufacturers were transportation equip­
ment, fabricated metals, and furniture. Transpor­
tation equipment jobs are substantially more im­
portant in the MLMA’s, fabricated metals are
somewhat more concentrated in MLMA’s, and
furniture manufacturing is more pronounced out­
side the major labor markets. The only durable
goods industry with a job growth rate substan­
tially below that of total manufacturing, lumber
and wood products, is concentrated outside
metropolitan areas. Furniture and fabricated
metal manufacturing jobs grew faster in the nonMLMA’s in every District state than in the pop­
ulation centers.
For nondurable goods manufacturing, the fast­
est growth in this region occurred in the apparel
industry, located primarily in small towns. In the
food, paper, and printing industries, where the
area growth was about average, the pace was
substantially faster outside the large urban areas.
In the chemical industry, on the other hand,
growth was higher in the MLMA’s. However, the
chemical industry does not employ a large num­

Digitized150
for FRASER


ber of people. For the paper and food industries,
the availability of the principal material inputs
makes the less populated areas attractive. The
small capital requirements and the availability
of many small towns with an adequate supply of
female labor draws apparel firms to these areas.
Thus, the more rapid growth in nondurable goods
jobs outside the MLMA’s is not unexpected.
Dispersion of Jobs
These employment developments reflect a gen­
eral dispersion of industry away from population
centers. A recent study by the U.S. Department
of Labor also indicates that job growth is pro­
ceeding at a faster pace in the fringe counties
of metropolitan areas than in the central counties.
This dispersion reflects improved transportation
and the move away from city congestion. In the
central cities, the cost of both land and labor is
considerably higher.
The concerted effort of many industrial de­
velopment commissions to bring new industry
into these less developed areas has also played
a role in the dispersion of industry. These agen­
cies make special studies of small areas to un­
cover potentialities and develop different train­
ing programs to improve the quality of the local
labor force. Many of the less developed counties
have taken advantage of special legislation, such
as industrial bonds and tax concessions, to at­
tract industries to their area. Such devices are
less frequently used by large cities.
While the data clearly indicate that the areas
outside metropolitan areas have grown faster in
terms of nonfarm and industrial jobs in recent
years, the aggregates cover up many of the dis­
parities among individual areas. The variability
of job growth is greater among hinterland coun­
ties than MLMA’s because non-urban counties
are more likely to depend upon a few industries
or firms. If the fortunes of a dominant firm lo­
cated in a less developed county falter, the local
economy can easily lag. For larger areas, the
number of different industries allows great op­
portunity for offsets. Yet the disparities in the
fortunes of less populated counties do not mean
the hinterland is losing out on the competition
for new jobs. Growth may be spotty, but both nonfarm and industrial jobs have increased at faster
rates in the hinterland in general than in the large
population centers in recent years.
R ichard Long

MONTHLY REVIEW

S o u t h e r n
G ro w th

M

a n d

o r t g a g e

B a n k i n g

M

a t u r e s

—

P a r t

II

S tru c tu ra l C h a n g e

In fulfilling the essential role of maintaining and
improving regional access to national capital
markets, southern mortgage bankers have be­
come larger, better capitalized, more experienced,
and more flexible. In the 1950’s, the industry’s
growth was explosive in terms of the number of
companies establishing themselves and rapidly
increasing their volume of specialized services.
In the 1960’s expansion has continued at a slower
pace, and the emphasis has shifted from quantita­
tive to qualitative growth.
Volume and Source of
Mortgage Funds Administered
Mortgage bankers are service organizations. Al­
though they devote much of their resources to
originating mortgages and providing other ser­

vices to their borrowing clients, they typically
emphasize continuing servicing of mortgages for
predominantly nonlocal investors as the measure
of their size and growth. According to Bank esti­
mates, at the end of 1966 about $11.4 billion of
mortgages on properties located in the South1 re­
quired such servicing, excluding that normally
performed by local institutions of their own per­
manent portfolios (Chart I). Of this total, an
estimated $9.1 billion, or 80 percent, was serviced
by specialized mortgage companies. Commercial
banks in the region, acting as mortgage bankers,
serviced an additional 6 percent, while nonregional life insurance companies accounted for
the remaining 14 percent directly or from offices
xT h e states of A la b a m a , F lo rid a , G e o rgia, L o u isia n a ,
M is s is s ip p i, a n d Tennessee.

S u r v e y T e c h n iq u e s a n d R e s u l t s
The analysis presented here was drawn primarily
from a universe survey of all known mortgage bank­
ing firms (174), active in mortgage servicing on
December 31, 1966. Most of the firms are members
of the Mortgage Bankers Association of America and
are headquartered in the six-state region of Alabama,
Florida, Georgia, Louisiana, Mississippi, and Ten­
nessee. Also included in the survey were known
firms that are not MBA members.
An auxiliary survey was made in Florida, where
the most changes in the number of firms have oc­
curred over the past seven years. It was initially
limited to determining whether firms advertising under
“Mortgages” or “Real Estate Lending” in classified
telephone directories were in fact mortgage banking
firms and whether they would participate in the survey.
Five responded to a follow-up inquiry with basic ser­
vicing data included in the total servicing volume of
the analysis.
A third supplementary survey was conducted, cover­
ing all known mortgage banking firms headquartered
outside the six states but which had branches, affiliates,
or other formal servicing arrangements for mortgages
on properties in the region. The basic survey was
also supplemented by personal visits, correspondence,
and telephone conversations with various mortgage
bankers.
The main survey was patterned after a similar, but
less extensive, survey made in the summer of 1960.
The earlier survey was the Bank’s first formal attempt

NOVEMBER 1967




to appraise the role of mortgage bankers in the
region’s capital inflows and in particular to quantify
their contributions to regional mortgage financing. The
current survey updates those data and in addition pro­
vides the basis for evaluation of structural changes
within the industry.
Survey response was excellent, considering the type
and quantity of detail requested:

Survey Section
Main survey
Florida supplement
Branch operations of
firms headquartered
outside region

Questionnaires
Responses
Number
Mailed Number Percent
174
106
61
185
5*
3
32

16**

50

^Of the 22 firms responding to the 185 initial in­
quiries, 5 subsequently returned abbreviated ques­
tionnaires covering volume of servicing totaling
$26.4 million, 5 returned questionnaires without
furnishing any data, and 12 did not return ques­
tionnaires.
*Two additional firms responded but could not
break out their servicing volume by state because
of computer programming problems.

151

Chart I
S o u th e rn m o rtg a g e b a n k e rs se rv ic e d o v e r tw o-third s of m ort­
g a g e s ow ne d by n o n -so u th e rn in v e s to rs on s o u th e rn p ro p er­
ties, a c c o r d in g to a s u rv e y m ad e on D e c e m b e r 31, 1966.
B ILLIO N S O F D O L L A R S
4
8

1

All Servicers
Reporting Mortgage
Bankers
Active Non reporting
Mortgage BankersEstimate
Branches of NonSouthern Mortgage
Bankers
Life Insurance
Companies SelfServicing

I

I

located in the region.
Specialized mortgage companies responding
to the survey and headquartered in the South
serviced $7.2 billion, or 63 percent of the total.
Active nonreporting mortagage companies ser­
viced an estimated $826 million. Fifteen of 31
mortgage companies headquartered outside the
region but who maintained branch offices within
the region serviced an estimated $1.1 billion.
The foregoing analysis makes it clear that a
particular region such as the South is not wholly
dependent upon its own mortgage companies for
importation of mortgage funds. It is equally clear,
however, that major dependence does have to
be placed upon them. Historically, locally-ori­
ented institutions have maintained such channels
over the longer run.
Less than 25 percent of the companies head­
quartered in the South serviced two-thirds of the
$7.2 billion total for the group, as can be seen
in Chart II. The ten largest companies, represent­
ing less than 10 percent of all the reporters, ser­
viced slightly more than 40 percent of the total
mortgage volume. Total 1966 servicing volume of
this group exceeded $200 million per firm, and
by June 30, 1967, two administered portfolios in
excess of $500 million each.
The prime role of the large mortgage banker
is emphasized in Table I. First, he must make
rapid adjustments to changing conditions in the
sources of funds. The largest mortgage companies
have one of the lowest proportions of servicing
for life insurance companies. Since the large firms
specialize heavily in mortgages with a national
secondary market, i.e., FHA and VA mortgages,
they had to find new sources of funds when life
152



insurance companies switched preferences to
other forms of investment. They found a sub­
stantially enlarged investment flow from mutual
savings banks. These banks, located mainly in
New York State and New England, had a high
preference for FHA-VA mortgages, but they also
preferred to acquire them “off the shelf.”
The mortgage banker must also be able to
make adjustments in his operating methods. The
larger mortgage firms were better equipped in
staff, capital, credit lines, and other factors to en­
large their risk-taking functions by originating
such mortgages for their own inventories. They
were also frequently in a position to “make a
market” for smaller companies by buying mort­
gages from them for later packaging and sale in
large lots to “off-the-shelf” buyers.
This combination of shifting sources of funds
and changing methods of operations brought
substantial benefits to the southern mortgage
borrower. Size, resources, experience, and flexi­
bility enabled the large mortgage banker to move
into developing pockets of relative shortage of
mortgage funds by either branching, appointment
of originating agents, or affiliation with existing
firms. As Table I shows, the largest southern
mortgage firms were considerably below average
in proportion of servicing for life insurance com­
panies and considerably above for mutual savings
banks. Because the latter are heavily concen­
trated in both New York State and New Eng­
land, these larger mortgage companies are also
well above average in servicing mortgages owned
by investors in both areas.
The role of the medium- and small-size mort­
gage banker is not to be overlooked in the chang­
ing credit needs and sources of funds. Many
Chart II
L a rg e m o rtg a g e b a n k in g firm s, s e r v ic in g ove r $ 1 0 0 m illio n in
m o rtga ge s, a c c o u n te d fo r a lm o s t tw o -th ird s of s e r v ic in g b y
firm s h e a d q u a rte re d in the S o u th on D e c e m b e r 31, 1966.
Servicing
Volume

M IL L IO N S O F D O L L A R S
100 0
2000
3000

No. Percent
Cos. of Total

33

4.5

24

11.0

$ 5 0 + to 100
Million

19

18.2

siO O +to 2 0 0
Million

14

26.1

Over $ 2 0 0
Million

10

40.2

MONTHLY REVIEW

Table I
Percent Distribution of Mortgage Servicing Portfolios
of Southern Mortgage Bankers at the End of 1966
100 Reporting Mortgage
Bankers, by Type of
Mortgage

Size of Firm in $ Millions Servicing
All
Firms

FHA Insured, 1-4 Family H ousing..................................... 49
FHA Insured, Multi-family H o u sin g...................................2
VA Guaranteed M ortgages.............................................. 25
Conventional, 1-4 Family H ousing..................................... 8
Conventional, Multi-family H ou sin g...................................5
Commercial, Other Than Multi-family H o u sin g.................... 10
Other
..................................................................... 1
96 Mortgage Bankers,
by Location of Investor,
Investors Headquartered
New York S t a t e ..........................................................37
New England ............................................................ 21
Sixth District S t a t e s .................................................... 16
All Other S t a t e s ..........................................................26
Outside the United Sta te s.............................................. *
99 Mortgage Bankers,
by Type of Investor
Life Insurance Companies.............................................. 46
Mutual Savings B a n k s ................................................. 30
Pension, Retirement, & Trust F u n d s ................................2
Savings and Loan Associations........................................ 4
FNMA
..................................................................... 11
Commercial B a n k s .......................................................3
Your Own In v e n to ry ....................................................3
All Others, Including Individuals..................................... 1

20 &

Over

100+ to

50+ to

200

200

100

20+ to
50

Under

53
3
27

49

45

43

52

*

2
20

16

2

5

27
9
3

6

10

23
9
4
16

40
25
15

20

40
16
15
29

35
16
17
32

24
33
15
28

42
34

47
30

41
31

2

2
2
10

6

15

12
8
10

28

10
22
40

1

2
10
2
3

4

1

1

3

5
3

2

1

1

11
1

6

63
15
4

4
13
5
4

5

14

1

49
18
5
5
16

2

*Less than 0.5 percent.

of these companies, located in smaller but grow­
ing southern communities, were long-time cor­
respondents for the major life insurance company
investors. As the trend from single-family to multi-unit residential building developed and as more
single-family housing was financed by conven­
tional mortgages, these firms evidently chose to
specialize more in these mortgage types. The
same holds true of mortgages on commercial
properties. The medium- and small-size com­
panies also appear to have been relatively more
active in developing alternative sources of funds
from within the six southern states and from “all
other states.”
The smallest mortgage companies were evi­
dently more successful than larger ones in a t­
tracting a relatively greater share of funds from
pension, retirement, and trust funds. They also
serviced a higher proportion of FNMA-owned
mortgages. The largest and the smallest com­
panies had the highest proportion of servicing for
savings and loan associations. The geographic
distribution pattern of servicing portfolios, Table
I, suggests that in the case of the smaller com­
panies a sizable volume of funds may have come
from within the region or from adjacent states.
NOVEMBER 1967



Savings and loan associations in the South have
recently increased their interest in FHA-VA
mortgage purchases, not only for diversification,
but also because these are viewed as nonrisk as­
sets for reserve purposes.
Medium- and small-size companies had higher
proportions of all three types of conventional
mortgage servicing than did the largest com­
panies. As previously noted, the tendency toward
specialization was more pronounced among this
size group than among the largest companies; in
some cases, individuals well versed in particular
types of mortgages, such as commercial, left their
employment to form their own specialized firms.
Growth of Southern Mortgage Banking Slows
One of the m^rks of a maturing industry is that
the rapid entry and fast growth phase gradually
gives way to concentration of the industry into
larger firms. Growth may continue, but it is
typically slower and capitalization requirements
tend to increase.
In spite of $9.1 billion mortgages being ser­
viced by southern mortgage bankers at the end of
1966, the rate of total growth has declined in the
153

1960’s. In the 1950’s, for example, total volume
climbed at a compound annual growth rate of 17
percent. Over the seven years, 1959 to the end of
1966, the compound growth rate amounted to
only 8 percent. An expected slowing of growth
was suggested by two factors noted in Part I:
first, a larger share of the South’s mortgage credit
requirements was being satisfield by its own local
and regional institutions; second, a sharp change
occurred in the investment preferences of life in­
surance companies away from mortgages.
The same pattern of slowing growth is present
when available data for 1949, 1959, and 1966
for 69 mortgage banking firms are analyzed. Over
the 1949-66 period the compound growth rate
of these firms was 13.1 percent. Between 1949
and 1959, it was 14.4 percent, but from 1959 to
1966 declined to 11.3 percent. Further examina­
tion of data for an additional 22 firms, not in
operation in 1949 but in business in 1959, re­
veals a compound growth rate between 1959
and 1966 of 13.7 percent, or 2.4 percent per year
higher than that of the older firms during the
same period.
In contrast to the 22 firms that began opera­
tions in the 1950’s, only nine respondents began
operations in 1960 or later. However, between
year-end 1959 and 1966, at least 51 companies
known to be in operation on December 31, 1959,
went out of business. Some merged with other
companies; several sold their servicing accounts
and concentrated on real estate, insurance, or
other types of related business; a few failed; and
others simply discontinued originating and/or
servicing mortgages. While these data are incom­
plete, they are indicative of a maturing industry.
Mortgage bankers were asked in the survey
to state the relative importance in their growth
of four specific factors and to list others of
importance but not covered in the four. Twentyseven indicated that purchase of servicing ac­
counts from others had played some part in their
growth. In two-thirds of the cases, however, it
amounted to 10 percent or less of their total
portfolio growth.
Purchase of entire mortgage companies or
merger with other companies was listed as a
factor in growth by only eight companies. In
three cases the contribution was 10 percent or
less, but in five it amounted to more than 30 per­
cent. Purchase of mortgage banking portions of
other companies (such as combination real
estate, insurance, and mortgage lending firms)
was listed by only six companies, five of which
indicated its importance as 10 percent or less,
and one between 20 and 30 percent.
5 4FRASER
Digitized 1for


Internal growth was given most frequently as
the most important type of growth of 90 firms.
Estimates of internal growth as a percentage of
respondents’ present servicing volume were:
Degree of Importance
100 percent
91 to 99 percent
81 to 90 percent
71 to 80 percent
61 to 70 percent
51 to 60 percent
41 to 50 percent
31 to 40 percent
21 to 30 percent
20 percent and under

Number of Firms
56
10
8
3
1
6
3
0
3
0

Five firms listed other factors:
1 Refinancing and purchases 40 to 50 percent
1 Increasing lending areas
40 to 50 percent
3 Investor transferred loans
30 to 40 percent
(1)
0 to 10 percent
(1)
(1) Assignment
from FNMA
0 to 10 percent
Growth of Assets, Capital and Net Worth,
Credit Lines, and Branch Operations
In the seven-year period between year-end 1959
and 1966, southern mortgage bankers expanded
their capital and net worth by 86 percent. Assets
grew only 72 percent. The latter is not so signifi­
cant, however, since mortgage inventories typi­
cally account for a large proportion of assets.
These in turn are offset almost entirely by ware­
house loans. Moreover, it is probable that the
cutoff date of December 31, 1966, unduly distorts
the asset data; the latter half of 1966 was an un­
settled period in which large sales from uncom­
mitted inventories were made to FNMA by many
mortgage bankers. For example, mortgage hold­
ings of FNMA on properties in the six states
increased by $155.2 m illion, accounting for
slightly more than 25 percent of the entire growth
in FNMA holdings during the seven-year period.
Growth of capital and net worth is what mat­
ters in mortgage banking. The degree of this
growth is significant not only to the individual
company and to the industry, but also to the
investors and the region the industry serves. Ade­
quate capital is a major determinant of most of
the other functions which risk-taking, flexibility,
maturity, and permanency require.
Throughout most of the 1950’s mortgage bank­
ers generally had been unable to add to their
capital at rates commensurate with their overall
MONTHLY REVIEW

growth. Most studies during this period empha­
sized their newness as financial institutions, their
tendency to operate as “correspondents” or “cap­
tive agencies” of investors, and their under-capi­
talization. Investors urged them to build capital
faster, and so did their legacy of vulnerability in
the longer past, their most recent experience in
the late 1950’s, and the changing market condi­
tions of the times. Shifting investment prefer­
ences of their major suppliers of funds and the
sharpened competition of local and regional in­
vestors under conditions of relatively easy avail­
ability of funds added to the pressures for taking
additional risks in originating and holding mort­
gages in inventory.
Southern mortgage bankers responded to this
challenge in differing degrees. On balance, the
growth rate of capital and net worth was posi­
tively correlated with size of firm, but there
were substantial exceptions (Table II). Of the
total of 77, 31 more than doubled their capi­
tal accounts. Only six firms showed a reduc­
tion, the largest of which was 35 percent. South­
ern mortgage bankers increased the amount of
mortgage servicing per dollar of capital from $90
in 1959 to $100 in 1966, according to Table III.
The smallest firms were the only ones that de­
creased their ratio. However, the largest firms
increased this ratio by a very small amount,
while the firms in the size range of $20+ to $50
million in servicing volume showed the largest
rate of increase. Some of the reasons the largest
firms require a higher ratio of capital to servic­
ing volume are that they typically operate more
branch offices, provide more services to builder
clients (such as construction lending, land de­
velopment, etc.), and are more heavily involved
in servicing single-family residential mortgages.
Mortgage bankers were asked to rank four
Table II
Growth of Capital and Net Worth
77 Mortgage Bankers
Year-end 1959-66
Rate of
Change
(Percent)

Size of Servicing Portfolio,
December 31, 1966, $ Millions
All $20 and $20+ to $50+ to $100+ to Over
$200
$100
$200
$50
Firms Under

Over 200
100 to 199
50 to 99
25 to 49
Oto 24
- 1 to - 9
— 10 and Over

11
20
15
10
15
2
4
77

NOVEMBER 1967

4
0
5
4
7
0
1
21




1
4
5
3
7
1
1
22

2
6
2
2
0
0
1
13

2
4
2
1
1
1
1
12

2
6
1
0
0
0
0
9

Table III
Servicing Volume to Capital and Net Worth
1966 and 1959

1966 Portfolio
Size of Company
$20 Million and Under
$20+ to $50 Million
$50+ to $100 Million
$100+ to $200 Million
Over $200 Million
All Companies

Number of
Companies
1966
24
24
13
12
9
82

Dollar Amount of
Mortgages Serviced
Per Dollar Capital
and Net Worth

1959

1966

1959

19
22
12
12
9
74

72.5
81.3
102.9
152.8
90.0
100.1

88.1
55.2
88.2
137.1
88.2
90.3

policy factors as to relative importance in their
growth over the past five years. The most im­
portant of these, as indicated by response, was
“broadening to include more conventional loans,
such as commercial and industrial.” Of 68 listing
this as a factor, 40 indicated that it ranked first
in importance. Forty-five respondents listed “con­
centrating more heavily upon ‘mortgage banking’
(as opposed to other real estate services, insur­
ance, etc.).” Of these, 19 ranked it first in im­
portance.
Considerably fewer mortgage bankers empha­
sized “expansion of range and service functions
outside of the origination and servicing of mort­
gages.” Only 12 of the 36 rated it most important.
A somewhat larger number, 42, listed the factor
of “becoming more specialized in FHA-VA mort­
gages and penetrating this sector of the market
more deeply” as important. Most of those listing
it first in importance were large firms that served
extensive geographic areas and operated branches.
Operational Methods and Range of Services
As has been suggested, one of the reasons that
higher capitalization is desirable for mortgage
companies is that their function requires risktaking. Just as the investment banker must incur
costs and bear risks in discovering, originating,
underwriting, and distributing an issue of bonds,
so must the modern mortgage banker incur costs
and assume risks in originating and inventory­
ing mortgages. As he has matured and as market
conditions have changed, risk-bearing has become
an even more important measure of his effective­
ness. It is true, of course, that the mortgage
banker has a couple of risk-limiting factors going
for him that the investment banker does not.
First, he has the government-insured or guaran­
teed mortgage, which insurance or guaranty lim­
its default risk and converts an otherwise ineffici­
155

ent capital market instrument into one that has
broad acceptability. Second, at most times he
has a floor under prices of mortgages eligible for
purchase by FNMA, which places some limit
on inventory risk.
The FHA-VA mortgage, combined with the
system of advance commitment by permanent
investors, facilitated the rapid growth of mort­
gage companies in the 1950’s. This expansion,
in both numbers of companies and in volume of
mortgage servicing, was possible on a relatively
small capital base. Thus, it is not surprising that
during most of that decade substantially less
than half the southern mortgage companies orig­
inated mortgages without prior commitment. By
1959-60, the proportion was still only about 46
percent (Chart I I I ) . The median volume of mort­
gage originations without such prior commitment
by these companies was only 40 percent of their
total volume.
Changing market conditions and growth of
capital and net worth in the 1960’s made it both
necessary and possible for southern mortgage
bankers to assume more risk in the originating,
inventorying, and selling of mortgages. Substan­
tial growth in capital base was accompanied by
a sharp expansion in credit lines and for many
companies by greater flexibility in opening, clos­
ing, and maintaining branch operations. As a
result of these and other factors, the number of
companies assuming greater risks through in­
creasing their “own inventory” originations rose
steadily during the 1959-66 period. A similar,
though less pronounced, rise occurred in the pro­
portion of noncommitted originations by these
firms.
During the current year the median proportion
of noncommitted mortgages of those companies
making such originations rose to 53 percent. One
of the reasons is that FNMA has provided rela­
tively greater support volume-wise for the FHAVA market than in some prior years; and, of
course, mortgages are offered to FNMA “off the
shelf.” As one mortgage banker stated, “If you
want to stay in business, you have to accept the
risk of price changes by both the market and by
FNMA and originate without commitment.” A
number of mortgage bankers, with the long view
and adequate capitalization, have maintained
firm price floors in short-term future contracts
with builders and others, even under market
conditions of rising yields.
Southern mortgage bankers have also been
willing to assume risks in conventional mortgage
originations. Somewhat more than 25 percent of
1 5 6FRASER
Digitized for


Chart III
More mortgage bankers are originating more mortgages with­
out prior commitments than during the 1950’s.

0

20
I

Percent
40
I

60
I

80
I

1959-60
lyoi
iyo z.

m n ,

99

9 F rm s

1963
I5 7 U H

1LG' DA Rj
iy d o

15 3 0 /

those originating without commitments in 1967
were doing so in conventional mortgages.
Higher capitalization has permitted southern
mortgage bankers to expand other functions dur­
ing the 1960’s. For example, in 1959-60, only
56 percent of respondents provided construction
loans. By 1967 this proportion had risen to 71
percent. Over one-third of respondents indicated
they are now originating high-loan-to-value-ratio
conventional loans, involving private mortgage
insurance and junior liens. The majority utilize
the General Electric Credit Corporation plan.
A much smaller proportion of firms, about 8
percent, make loans on “second” or “vacation”
homes. Less than 5 percent make loans on mobile
homes.
Respondents were asked to list any new ser­
vices or development which their companies had
initiated or adopted over the last six years. Most
of them listed entry into land development and
making land development loans. One firm had
been active in joint ventures with builders in
land development. Refinement of cost account­
ing systems for better departmental and branch
office management and control was also listed
by several companies. Among other replies were
expansion of operating territory, heavier empha­
sis on commercial and industrial loans, pre­
closed construction-permanent loans, and devel­
opment of source of funds through public sale of
demand notes limited to 10 percent of outstand­
ing mortgages held by the issuer.
MONTHLY REVIEW

Present Competitive Position
In a free market competition is the spur that
produces progress. Southern mortgage banking
firms, the least government-regulated of any re­
gional financial institution, achieved the results
reviewed here in a highly competitive atmosphere.
On the side of registering the bids of their bor­
rowing clients in the market for funds, they en­
joyed a period of ready availability of such
funds for a relatively long period between 1961
and 1965. They were thus able to cope with the
problem of replacement of a substantial reduc­
tion in the rate of increase of mortgage funds
becoming available from one major investor by
finding other buyers of southern mortgages.
The same favorable climate for increasing the
flow of outside mortgage credit into the South
also stimulated more competitors to help provide
the channels. Mortgage bankers were asked to
evaluate the intensification since 1960 of this
competition from commercial banks, from mort­
gage companies headquartered elsewhere but op­
erating in their market area, and from other firms
such as real estate firms expanding into mortgage
banking. Of 94 firms responding, 89 percent in­
dicated some increase in competition from com­
mercial banks, while 40 percent had experienced
a substantial increase. The same proportion of
respondents reported greater competition from
mortgage companies headquartered elsewhere.
About 44 percent indicated that it was substantial.
On the other hand, reflecting higher capital
requirements, scarcity of specialized personnel,
and other factors, the proportion of respondents
experiencing more competition from other types
of firms was 39 percent. Only one percent re­
ported substantially greater competition from
this source, while 61 percent had no change or
reduced competition.
Almost half the respondents—46 percent—an­
ticipate that competition from commercial banks
will rise significantly within six months to a year.
Slightly more than one-third—37 percent-—look
for such competition from other mortgage com­
panies through branch or other operations. Less
than one-fifth, however, expect significant in­
creases in competition from other firms. The most
frequent response of the latter was that greater

competition was expected from direct lending of
savings and loan associations.
In spite of increased competition, severe re­
adjustments in the wake of unsettled capital
markets, and a sharp recession in housing, only
24 percent of the respondents at midyear 1967
felt that the mortgage banking industry in their
markets had been weakened and only 2 percent
that it had been weakened significantly. Although
46 percent replied that the industry’s ability to
continue as an important member of the South’s
family of financial institutions was about the
same as before 1966, 29 percent felt that it was
somewhat stronger. Only 1 percent felt that it
was substantially stronger.
What of the Future?
The South has made remarkable progress in
financing a growing share of its mortgage credit
needs from local and regional savings flows. Con­
sidering its deeply based growth trends in popu­
la tio n , in d u strializatio n , em ploym ent, and
incomes, however, the need for substantial aug­
mentation of its own savings capacity will most
likely continue for many years. As its economy
grows more like that of the nation, the need for
interregional capital flows may be somewhat re­
duced as its savings base expands. Given the
pattern of sharp differentials in growth rates in
urban areas within the region, however, and the
spread of industry to smaller centers, the need
for intraregional capital flows seems likely to
grow further. Moreover, investment diversifica­
tion requirements of most financial institutions
will probably increase.
Since it is unlikely that the basic deficiencies
of the individual mortgage as a capital market
instrument will soon be remedied, capital deficit
regions will continue to need specialists in orig­
inating, inventorying, packaging, selling, and
servicing such mortgages. The southern mort­
gage banker has demonstrated his tactical com­
petence by his flexibility in adjusting to sharp
changes in his environment. He has given reas­
surance of his longer-run viability by his success
in rapidly building his capital, for the most part
from internal sources. He has confirmed his ma­
turity by the volume and quality of his service to
his investors and to a fast growing region.
H

ir a m

J. H

onea

This is the second in a series of articles on the southern mortgage banker. Copies of this article and Part I,
which appeared in the October issue, are available upon request to the Research Department, Federal Reserve
Bank of Atlanta, Atlanta, Georgia 30303.
NOVEMBER 1967




157

S i x t h

D i s tr i c t S t a t i s t i c s
Seasonally Adjusted
(All data are indexes, 1957-59 = IOO, unless indicated otherwise.)
Latest Month
(1967)

One
Two
Month Months
Ago
Ago

One
Year
Ago

SIXTH DISTRICT

200

Unemployment Rate
(Percent of Work Force) . .
Avg. Weekly Hrs. in Mfg. (Hrs.)

159
149
108
88

157
150
108
77

157
150
110
83

154
143
110
78

. Sept.
. Sept.

2.9
42.1

3.0
42.4

3.1
42.3

2.6
42.7

. Oct.
. Oct.

270
205
222

271
200
223r

270
201
197

246
180
174

FINA NC E AND BA N KIN G

PRODUCTION AND EM PLOYM ENT
Nonfarm E m p lo y m e n t .................... Sept.
Manufacturing
.......................... Sept.
Apparel
.................................... Sept.
C h e m i c a l s ................................. Sept.
Fabricated M e t a l s ....................... Sept.
F o o d ........................................... Sept.
Lbr., Wood Prod., Furn. & Fix. . . . Sept.
P a p e r ........................................Sept.
Primary M e t a l s .......................... Sept.
Textiles
.................................... Sept.
Transportation Equipment . . . . Sept.
N o n m an utacturing.......................... Sept.
C o n s t r u c t i o n ..............................Sept.
Farm E m p lo y m e n t.......................... Sept.
Unemployment Rate
(Percent of Work F o r c e ) ............. Sept.
Insured Unemployment
(Percent of Cov. E m p . ) .................Sept.
Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Sept.
Construction C o n t r a c t s * ................ Sept.
R e s id e n t ia l................................. Sept.
All O t h e r .................................... Sept.
Electric Power Production**
. . . . Aug.
Cotton C o n s u m p t io n * * ....................Sept.
Petrol. Prod, in Coastal La. and M iss.**Sept.

136
135
166
130
152
114
103
118
126
104
185
137

133
135
167
131
150

136
135
166
132
152
112
103
118
126
105
178
137
124
54

136
135
163
131
152
114
103
118
126
106
181
137
62

121
68

107
114
131
106
175
133
127
57

4.1

4.1

4.1

3.6

2.5r
40.9
188
179
195
148
107
270

2.5
40.7
159
177
144
145

1.8

2.4
41.3
151
160
144
146
108
274

122

110

250

112

41.8
165
124
199
141
116

211

Personal Income (Mil. $, Annual Rate) Aug. 11,305 ll,2 05 r ll,1 78 r 10,332
194
203
Manufacturing P a y r o lls .................... Sept.
141
183
Farm Cash R e c e i p t s ....................... Sept.
158
141

Loans*
. Oct.
Oct.

258
230

257
229

256
226

241
224

. Oct.
. Oct.
. Sept.

196
176
210

193
172
210r

194
174
208

178
163
183

Deposits*

202

135
130
137
128
50

135
130
138
125
62

135
131
137
124
63

131
130
132

3.7
41.4

3.8
40.7

3.5
40.4

3.7
42.0

265
215
217

268
213
225

265
212
223

252
195
198

8,613r
179
236

8,574r
182
159

PRODUCTION AND EM PLOYM EN T
Nonfarm E m p lo y m e n t .................... Sept.
Manufacturing
...........................Sept.
N o n m a n u fa ctu rin g....................... Sept.
C o n s t r u c t io n ...........................Sept.
Farm E m p lo y m e n t...........................Sept.
Unemployment Rate
(Percent of Work F o r c e ) ............. Sept.
Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Sept.

120
51

FINA NC E AND BA N KIN G
Member Bank L o a n s .............
Member Bank Deposits . . . .
Bank D e b it s * * .......................

. , Oct.
Oct.

LO U ISIANA

Personal Income (Mil. $, Annual Rate) Aug. 8,706
182
Manufacturing Payrolls . . . .
. . . Sept.
143
Farm Cash R e c e i p t s .............

7,951
171
130

PRODUCTION A N D E M PLO YM EN T

ALABAMA
INCO M E
Personal Income (Mil. $, Annual Rate) Aug.
Manufacturing P a y r o lls ....................Sept.
Farm Cash R e c e ip t s ....................... Sept.

7,682
175
125

7,572r
177

7,567
177

7,214
174
126

PRODUCTION A N D EM PLO YM EN T
Nonfarm E m p lo y m e n t ....................Sept.
Manufacturing
...........................Sept.
Nor m an u fac tu rin g....................... Sept.
C o n s t r u c t io n ...........................Sept.
Farm E m p lo y m e n t.......................... Sept.
Unemployment Rate
(Percent of Work F o r c e ) ............. Sept.
Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Sept.

124
121
126
121
55

125

4.8
40.9

4.6
40.5

122
126
120
66

126
119
82

124
123
124
131
47

4.3
40.7 r

4.3
41.3

241
175

223
275
172

125

121

FINANCE AND BA N KIN G
Member Bank L o a n s ....................... Oct.
Member Bank D e p o s i t s .................Oct.
Bank Debits**
..............................Sept.

, . , Sept.

128
121
129
132
55

127
119
128
127
62

126
119
127
121
64

124
116
126
141
62

. . Sept.
. . . Sept.

5.0
42.5

5.1
41.8

5.5
42.6

4.3
42.7

Member Bank Loans* . . . .
. . . Oct.
Member Bank Deposits* . . . . . . Oct.
Bank D e b it s * / * * .................... , . . Sept.

231
164
172

231
163
171

233
163
184

223
152
165

4,396r

4,491 r

Nonfarm Employment . . . .
Manufacturing
.................
N o n m a n u fa ctu rin g.............
C o n s t r u c t io n .................
Farm E m p lo y m e n t.................
Unemployment Rate
(Percent of Work Force) . .
Avg. Weekly Hrs. in Mfg. (Hrs.)

M IS S IS S IP P I
IN CO M E
Personal Income (Mil. $, Annual Rate) Aug. 4,429
216
Manufacturing P a y r o lls .................... Sept.
85
Farm Cash R e c e i p t s ....................... Sept.

212

211

4,094
206

P RODUCTION AND E M PLO YM EN T
240
190
193

240
190
199r

200

INCO M E
Personal Income (Mil. $, Annual Rate) Aug. 17,248
Manufacturing P a y r o lls .................... Sept.
249
Farm Cash R e c e i p t s ....................... Sept.
164

17,025r 16,854r 15,590
246
243
237
160
140
149

PRODUCTION AND EM PLOYM EN T
Nonfarm E m p lo y m e n t .................... Sept.

. . . Sept.
. . . Sept.
. . . Sept.

FINA NC E AND BA N KIN G

FLORIDA

1 5FRASER
8
Digitized for


201

IN CO M E

FINANCE AND BAN KING

Bank D e b its * / * * ....................

One
Year
Ago

Sept.
Sept.
Sept.
Sept.

.
.
.
.

IN CO M E A N D SP EN D IN G
Personal Income (Mil. $, Annual Rate) Aug. 58,600 57,978r 57,795r 53,840
Manufacturing P a y r o lls ....................Sept.
201
194
198
134
Farm Cash R e c e ip t s ....................... Sept.
146
129
161
118
147
C r o p s ........................................Sept.
99
174
L iv e sto c k .................................... Sept.
161
156
144
152
Instalment Credit at Banks* (Mil. $)
264
322
302r
298
New L o a n s ................................. Sept.
265
Repayments
..............................Sept.
268
270
256

One
Two
Month Months
Ago
Ago

Latest Month
(1967)

151

151

151

145

Unemployment Rate
(Percent of Work Force) . .
Avg. Weekly Hrs. in Mfg. (Hrs.)

Sept.
Sept.
Sept.
Sept.
Sept.

138
144
135
132
38

137
143
135
131
49

137
143
135
128
58

137
147
132
145
47

Sept.
Sept.

5.3
40.8

5.0
40.1

5.3
39.9

5.0
41.2

Oct.
Oct.
Sept.

314
232
215

306
231
220

310
231
202

291
216
198

FINA NC E AND BA N KIN G

MONTHLY REVIEW

Latest Month
(1967)

One
Month
Ago

Two
Months
Ago

One
Year
Ago

T E N N E S SE E
INCO M E
Personal Income (Mil. $, Annual Rate) Aug. 9,230
Manufacturing Payrolls . . . .
. . . Sept.
197
107
Farm Cash R e c e ip t s .............

9,167
197
139

9,131r
191
126

8,659
191
107

One
Latest Month
(1967)
N on m an u factu rin g.................
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.) . . . Sept.

Two
Month
Ago

One
Months
Ago

Year
Ago

133
157
58

133
157
67

133
153
69

131
158
66

4.2
40.6

4.3
40.2

4.5
39.7

3.2
41.3

254
186
232

245
182
207

239
181
231

237
171
209

FINANCE AND BA N KING
PRODUCTION AND EM PLOYM ENT
Nonfarm Employment . . . .
Manufacturing
................

. . . Sept.

136
142

136
143

136
142

136
145

Member Bank L o a n s * .............
Member Bank Deposits* . . . .
Bank D e b i t s * / * * ....................

. . Oct.
. . Oct.

*For Sixth District area only. Other totals for entire six states.
**Daily average basis.
r-Revised.
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.

D e b its to D e m a n d D e p o s it A c c o u n ts
Insured Commercial Banks in the Sixth District
(In T h o u s a n d s o f D o lla r s )

Sept.
1967

Aug.
1967

Percent Change

Percent Change

Year-to-date
9 mos.
Sept. 1967 from 1967
Sept.
Aug. Sept. from
1966
1967 1966 1966

Year-to-date
9 mos.
Sept. 1967 from 1967
Sept.
from
Sept.
Aug.
1967 1966 1966
1966

STANDARD METROPOLITAN
STATISTICAL A REA Sf
Birmingham
. . .
Gadsden .............
Huntsville . . . .
Mobile
.............
Montgomery
. . .
Tuscaloosa . . . .

1,446,944
60,365
170,808
455,965
320,040
93,215

l,534,472r
64,612
193,104
522,778
333,933
102,120

l,384,857r - 6
64,171r - 7
180,010r - 1 2
416,606r -1 3
289,195r - 4
83,410
-9

+4
-6
-5
+9
+ 11
+ 12

+8
-5
+0
+7
+3
+9

576,551
1,427,445
2,200,773
470,560
187,237
135,612

587,408
l,526,081r
2,275,208r
538,311
199,575
151,291

528,878r - 2
l,361,298r - 6
l,868,937r - 3
460,591r - 1 3
184,075r - 6
121,481 - 1 0

+9
+5
+18
+2
+2
+ 12

+8
+5
+ 10
+7
+9
+14

1,292,692
370,718

l,325,198r
384,389

l,117,997r
339,668r

-2
-4

+ 16
+9

+10
+3

Albany
.............
Atlanta
.............
A u g u s t a .............
Columbus
. . . .
Macon
.............
Savannah
. . . .

89,881
4,599,060
275,339
221,362
252,432
250,426

87,505
4,784,437
310,507
236,462
261,107
276,884

97,885
+3
4,174,710r - 4
272,848r -1 1
209,736r - 6
224,27 lr
-3
238,470r - 1 0

-8
+ 10
+1
+6
+ 13
+5

-4
+8
+ 10
+ 10
+ 11
+9

Baton Rouge
Lafayette
.
Lake Charles
New Orleans

509,271
116,335
143,051
2,187,869

516,149
126,289
147,557
2,369,108

483,266r
115,352
138,931
2,218,506r

-1
-8
-3
-8

+5
+1
+3
-1

+ 10
+4
+ 12
+2

611,512

652,518

591,272r

-6

+3

+9

574,023
451,055
1,619,786

590,569
469,205
1,541,642

553,253r
433,336r
l,485,290r

-3
-4
+5

+4
+4
+9

+6
+6
+ 18

Anniston
. . . .
Dothan
.............
S e l m a .................

62,916
64,830
47,614

67,027
60,471
57,820

-6
+7
-1 8

-3
+5
+ 11

+1
+ 10
+ 14

Bartow
.............
Bradenton . . . .
Brevard County . .
Daytona Beach . .
Ft. Myers—
N. Ft. Myers . .
Gainesville . . . .

31,687
62,059
195,169
81,870

31,536
62,249
220,536
86,964

39,012
+0
59,225
-0
199,292r -1 2
77,279
-6

-1 9
+5
-2
+6

-7
+21
+5
+7

-4
+7

+ 12
+1

+9
+7

Ft. LauderdaleHollywood . . .
Jacksonville
. . .
M i a m i ................
O r l a n d o .............
Pensacola
. . . .
Tallahassee
. . .
Tam paSt. Petersburg
W. Palm Beach . .

Jackson

. . .
. . .
. . .
. . .

.............

Chattanooga
. . .
Knoxville
. . . .
Nashville
. . . .
OTHER C E N T ERS

71,442
84,336

74,177
78,854r

64,676
61,655
42,822

63,856
83,411

‘ Includes only banks in the Sixth District portion of the state.

NOVEMBER 1967



fPartially estimated.

Sept.
1967

Aug.
1967

-3
107,190
29,403r + 4
51,897
-5
19,298 -1 1
-6
254,078
90,144r - 4
-0
610,697
+8
52,507

+3
+ 16
+2
-8
+14
+3
+16
+1

+4
+5
+4
+1
+11
+1
+8
+1

80,661
38,791
81,550
15,838
68,543
31,674
24,028
22,118
72,076
50,254

-1
+0
-1
-1 2
-1 1
+7
+8
+2
—6
-9

-1 2
+6
-2
+2
-2
+ 14
-6
+13
-4
+28

+4
+5
-4
+11
+5
+6
-5
+1
+0
+17

11,965
134,368
6,793
36,425
39,846
11,430
21,799

13,216
116,582
6,169
36,258
34,986
10,832
21,106

+4
-7
-1 2
+ 18
-1 5
-1 0
-5

-6
+7
-3
+ 19
-3
-5
-2

+2
+13
+19
+ 17
-0
+11
+2

98,216
51,994
31,523
61,553
34,868

104,495
56,872
32,779
66,751
38,873

92,963
55,950
34,516
62,141
33,451

-6
-9
-4
-8
-1 0

+6
-7
-9
-1
+4

+9
+1
-5
+2
+6

53,668
39,543
25,402

55,321
42,427
51,164

51,506
40,545
25,739

-3
-7
-5 0

+4
-2
-1

+8
+3
+4

75,336
72,112
141,548

78,775
73,733
157,095

71,419
66,247
142,606

-4
-2
-1 0

+5
+9
-1

+4
+8
+5

30,982,312r 27,125,481r

-7

+6

+7

3,631,057r
7,699,520
6,946,930r
3,792,474r
1,293,351r
3,762,149r

-9
-9
-8
-6
-9
-3

+7
+11
+4
-1
+3
+6

+7
+8
+7
+3
+8
+11

109,980
33,988
52,887
17,777
290,655
93,204
705,834
53,029

113,723
32,829
55,960
19,934
307,166r
96,923
706,984
49,058

Athens
.............
Brunswick . . . .
Dalton
.............
E lb e r t o n .............
Gainesville . . . .
G r i f f i n ................
LaGrange
. . . .
Newnan .............
R o m e ................
V a l d o s t a .............

70,680
41,278
80,068
16,166
67,507
35,993
22,543
24,919
69,414
64,099

71,676
41,241
81,216
18,342
75,468
33,574
20,877
24,318
73,514
70,506

Abbeville
. . . .
Alexandria . . . .
Bunkie
.............
Hammond . . . .
New Iberia . . . .
Plaquemine
. . .
Thibodaux . . . .

12,412
124,755
5,960
42,983
33,899
10,287
20,680

Biloxi-Gulfport
. .
Hattiesburg
. . .
Laurel
.............
Meridian
. . . .
N a t c h e z .............
Pascagoula—
M oss Point . . .
Vicksburg
. . . .
Yazoo City . . . .
B r i s t o l ................
Johnson City . . .
Kingsport
. . . .

Lakeland
. . . .
Monroe County . .
O c a l a ................
St. Augustine
. .
St. Petersburg . .
S a r a s o t a .............
Tampa
.............
Winter Haven
. .

SIXTH DISTRICT, Total

28,712,696

Alabam a!
. . . .
F l o r i d a ! .............
Georgia!
. . . .
Louisiana!*
. . .
M ississippi!* • ■ •
Tennessee!*
. . .

3,869,491
8,519,704
7,251,038
3,756,983
1,336,346
3,979,134

{Estimated.

4,246,282r
9,339,478r
7,853,322
3,989,398
1,469,852
4,083,980

r-Revised.

159

D is tric t B u s in e s s C o n d it io n s

Expansion in most sectors exemplifies the District’s economy. Retail spending continued to advance
slowly, despite the sharp increase in consumer incomes. Manufacturing employment rose again, in the
face of adverse developments. Bank credit expanded at a lively pace in October, but the construction
sector showed somewhat less vigorous signs of recovery. Both cash receipts and net farm incomes may
fall below those of last year.
July and August retail sales in the District were
level to slightly declining, reflecting in part de­
pressed automobile sales prior to the new model
year announcements. In September, new car
sales, up only slightly, were probably held back
by the auto strike. Outstanding consumer credit
at banks rose only fractionally in September,
compared with a steady advance in personal in­
come through the first eight months of the year.
Little change occurred in the size of the Dis­
trict states’ work force and unemployment rate.
A small gain in manufacturing employment and
a longer workweek boosted payrolls, in spite of
an auto strike and layoffs. Jobs in apparel and
chemical industries increased more than other
manufacturing industries. Louisiana led other
District states in both manufacturing and non­
manufacturing gains.
Large commercial banks were busy suppliers
of credit in October, with much of the activity
being influenced by recent Treasury borrowings.
Loans to securities dealers sparked a moderately
strong gain in total loans while holdings of
short-term U.S. Governments in banks’ own port­
Digitized for
1 6 0FRASER


folios rose sharply. Deposit expansion at both
Reserve city and country banks resulted from
gains in demand deposits and passbook savings,
extending an emerging trend.
After achieving record dollar volume in August,
construction contracts retreated sharply in Sep­
tember. Following four straight months of ex­
panded volume, residential contracts declined.
An even sharper decrease occurred in other types
of construction. The exceptionally vigorous non­
residential contracting last autumn and the
erratic nature of its volume make current inter­
pretation difficult, but it appears that overall
recovery in construction is continuing.
Lower yields are expected in some District
crops. The projected output for oranges and
grapefruits in Florida is well below last year’s.
Cotton yields will drop for the second consecu­
tive year, but corn and soybeans production will
exceed 1966 levels. Total farm cash receipts will
probably be lower than those received last year.
N O T E : Data on w h ic h sta t e m e n ts are b a se d h a ve been a d ju ste d
w h e n e v e r p o s s ib le to e lim in a te s e a s o n a l in flu e n c e s.

MONTHLY REVIEW