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In i s is s u e : P e o p le A a n d D e c a d e P la c e s : o f S o u th e a ste rn H o w D o D is t r ic t S o u th e rn C h a n g e S ta te L o c a l T h e y B a n k in g D is t r ic t B u s in e s s a n d S ta ck U p ? N o te s C o n d it io n s E x p e n d it u r e s : People and Places: A Decade of Southern Change by William D. Toal In e v e ryd ay usage, the term “ e ffic ie n c y " im p lie s " g e t t in g the m o s t o u t o f w h a t y o u 'v e g o t . " M o r e su ccin tly, to the e c o n o m is t the term su g g e sts u sin g re sou rce s— land, labor, a n d c a p ita l— in su c h a m a n n e r as to m a x im iz e p o ssib le o u tp u t. U n fo rtu n a te ly , in the real w o r ld this g o a l is n o t a lw a y s attain ab le. N e verth ele ss, re sou rce s w ill r e sp o n d to e c o n o m ic c h a n g e ; a n et im p ro v e m e n t in resou rce e fficie n c y is m o st ofte n the result. T h e d e c a d e o f the Sixties p ro v id e s a case in p oint. T h e latest C e n s u s data reveal that c h a n g e s in the S o u th e a st's p o p u la tio n — o n e o f the r e g io n 's richest n atural re so u rc e s— w e re related, in n o sm all w ay, to e c o n o m ic forces. T h is article e x a m in e s the f o llo w in g q u e stio n s c o n c e r n in g the S o u th e a st's p o p u la tio n c h a n g e d u r in g the Sixties: 1. How did the Southeast's population change? 2. To what extent did economic conditions influence population change? 3. Did migration influence regional economic conditions and promote greater efficiency? 4. What can the decade of the Sixties tell us about future population changes and their effects? A n O v e r v ie w T h e 1970 C e n s u s o f P o p u la tio n fu rn ish e s the raw m ate rial fro m w h ic h this stu d y is draw n . In its series o f releases, da ta are a v a ila b le c o v e r in g the e c o n o m ic a n d d e m o g r a p h ic ch aracteristics o f the U n ite d States a n d its p o p u la tio n . T h e latest C e n s u s in d ic a te s that for the se c o n d d e c a d e in a row , the S o u th e a st's p o p u la tio n g ro w th (in p e rce n ta ge term s) o u tp a c e d the n a t io n 's.1 A s T a b le 1 ind icate s, h o w e v e r, p o p u la tio n g ro w th v arie d c o n s id e r a b ly a m o n g the S o u th e a ste rn states. O n ly F lorid a a n d G e o rg ia , the m o st p o p u lo u s o f the six states, w ere a b le to m a in ta in rates o f p o p u la tio n in cre a se a b o v e the n a tio n a l rate. In b o th the S o u th e a st a n d nation, h o w e v e r, p o p u la tio n g r o w th d e c lin e d from the rate ex p e rie n c e d d u r in g the Fifties. F lo rid a 's sh a rp re d u c tio n in its rate o f p o p u la tio n increase, fro m an e x c e e d in g ly h igh rate e x p e rie n c e d in the Fifties, la rge ly a c c o u n ts fo r the re d u c tio n in g ro w th fo r the re g io n as a w h o le . Monthly Review, Vol. LVI, No. 11. Free subscription and additional copies available upon request to the Research Department, Federal Reserve Bank of Atlanta, Atlanta, Georgia 30303. 1The Southeast, as defined here, includes those states entirely or partially within the Sixth Federal Reserve District—Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee. 198 M O N T H L Y R E V IE W TA BLE 1 SUMMARY STATISTICS Population Natural Increase Net Migration (% change) (% of population1) Alabama 1960-1970 1950-1960 1940-1950 Florida 1960-1970 1950-1960 1940-1950 Georgia 1960-1970 1950-1960 1940-1950 Louisiana 1960-1970 1950-1960 1940-1950 Mississippi 1960-1970 1950-1960 1940-1950 Tennessee 1960-1970 1950-1960 1940-1950 District States 1960-1970 1950-1960 1940-1950 United States 1960-1970 1950-1960 1940-1950 - 5.4 6.7 8.1 12.6 18.7 20.2 - 7.1 -1 2 .0 -1 2 .1 37.1 78.1 46.1 10.3 20.4 15.6 26.8 58.3 30.4 16.4 14.5 10.3 15.1 20.6 19.5 - 1.3 6.2 9.3 11.9 21.4 13.5 15.8 23.2 19.7 - 4.0 1.8 6.2 1.8 0.0 0.2 14.1 19.8 19.6 -1 2 .3 -1 9 .9 -1 9 .8 10.0 8.4 12.9 11.3 16.7 17.8 - 1.3 8.3 4.9 16.3 21.4 13.8 13.0 19.8 18.9 - 3.3 1.6 5.1 13.3 18.5 14.5 11.6 16.8 13.4 1.7 1.7 1.0 ’ Based on population as of beginning of each decade Source: U.S. Department of Commerce D e s p ite the o v e ra ll d e clin e , three o f the six So u th e a ste rn states a ctu a lly e x p e rie n c e d g a in s in their rate o f p o p u la tio n gro w th . M is s is s ip p i, in particular, e x p e rie n c e d a net p o p u la tio n ga in for the first tim e in the last three d e cade s. B e sid e s the d iffe re n c e s in p o p u la tio n gro w th a m o n g the states, there w e re v a ria tio n s within in d iv id u a l states. G e n e ra lly sp e a k in g , the m e tro p o lita n areas g re w at the e x p e n se o f the n o n m e tr o p o lita n areas, as T a b le 2 in d ic a te s.2 A ls o e x p e rie n c in g m o re rap id p o p u la tio n g ro w th w ere areas e n c o m p a s s in g o r b o rd e r in g m ilitary ba se s an d a e ro sp a c e facilities, and, to a lesser extent, areas b o rd e r in g c o lle g e s a n d u niversities. C o m p o n e n t s o f P o p u la tio n C h a n g e D iffe re n c e s in p o p u la tio n g ro w th a m o n g re g io n s o c c u r fo r tw o se parate re a son s: (1) natural increase (i.e., the d iffe re n c e b e tw e e n the n u m b e r o f birth s a n d the n u m b e r o f deaths) a n d (2) m ig ra tio n o f p e o p le in to a n d o u t o f a region. N a tu ra l increase, w h o s e b o u n d a r ie s— birth a n d d e a th — are q u ite d e fin ite can be e a sily m e a su re d ; m igra tio n , h o w e v e r, w h o s e b o u n d a r ie s d e p e n d u p o n the 2For a further look at population changes within states and their effects on housing demand, see Boyd F. King, "A Decade of Progress for Southeastern Housing,” this Review, September 1971. FED ER A L RESERVE B A N K O F A T LA N TA TA BLE 2 METROPOLITAN AND NONMETROPOLITAN POPULATION CHANGES 1960 to 1970 Population Natural Increase Net Migration (% of 1960 population) (% change) Metropolitan Areas Alabama 6.5 12.8 - 6.3 Florida 37.2 10.1 27.1 Georgia 25.7 16.9 8.8 Louisiana 14.0 15.6 - 1.6 15.4 Mississippi 18.3 - 2.9 Tennessee 13.0 12.6 0.5 District States 22.1 13.2 8.8 Nonmetropolitan Areas Alabama 4.2 Florida 37.0 Georgia 8.5 Louisiana 9.2 Mississippi - 0.8 Tennessee 7.2 District States 10.3 12.3 10.9 13.6 16.1 13.3 10.1 11.8 - 8.0 26.1 - 5.1 - 6.9 -1 4 .1 - 2.0 - 2.2 size o f the re g io n u n d e r c o n sid e ra tio n , b e c o m e s a m o re d iffic u lt p ro b le m to m easure. Likew ise, natural increase a n d m ig ra tio n are n o t n e ce ssarily in flu e n c e d b y sim ila r forces. A s expe cted , natural increase b o lste re d p o p u la tio n g ro w th d u r in g the Sixties. N e verth ele ss, the rate o f natural increase (i.e., the diffe re n c e in the n u m b e r o f births o v e r d e ath s d iv id e d b y the 1960 p o p u la tio n ) d e c lin e d in each o f the six Sou th e a ste rn states, ju st as it d id n atio n a lly, but re m a in e d slig h tly h ig h e r than the ove ra ll rate for the n ation. M o s t p ro b a b ly , risin g per c ap ita p e rso n a l in c o m e a n d "t h e p il l" a c c o u n te d fo r this slo w e r gro w th . A m o n g the S o u th e a ste rn states, c o n sid e r a b le d iffe re n c e s d id exist, w ith L o u isia n a 's rate o f natural increase the h igh e st a n d F lo rid a 's the low est. D iffe re n c e s in age structure a m o n g the states h elp e x p lain these variation s. For ex am ple, F lo rid a 's p e rce n ta ge o f the total p o p u la tio n in the 6 5 -a n d -o v e r a g e c atego ry, w h ic h w a s alre a d y h igh e r than fo r the rest o f the Sou th e a ste rn states, in crease d sh a rp ly w ith the in flo w o f retirees into the state (see T a b le 3). T h is n ot o n ly h e lp s to a c c o u n t fo r F lo rid a 's lo w rate o f natural increase bu t a lso h e lp s us to u n d e rsta n d the sh a rp d e c lin e in this rate. T o illustrate: Five c o u n tie s that are retiree h a ve n s a c tu a lly h ad an excess o f d e ath s o v e r births (i.e., a n e ga tiv e rate o f natural increase) in the Sixties. S in c e p e o p le in fa rm in g u su ally h a ve larger fam ilie s, it is w id e ly he ld that the d e gre e o f u rb a n iz a tio n has an in flu e n c e o n the rate o f natural increase. But d u r in g the Sixties, this d id n o t a p p e a r to h o ld true fo r the S ou th e a st. M e tr o p o lit a n areas a ctu a lly had a h ig h e r rate o f natural increase (13.2 percent) than n o n m e tr o p o lita n areas (11.8 percent). A s w e shall see, there w a s a great de al o f m igra tio n fro m n o n m e tr o p o lita n to m e tro p o lita n areas d u r in g the Sixties. T h is m e tro p o lita n in -m igra tio n , sin ce it is u su a lly c o m p o s e d o f y o u n g e r p e o p le 199 (w h o, in the past, h a ve been m o re m o b ile ), c o u ld p artia lly e x p lain w h y the rate o f natural increase w a s a c tu a lly h ig h e r in m e tro p o lita n areas. Even th o u g h re g io n a l v a ria tio n s in rates of natural incre a se h ave affe cted d iffe re n c e s in p o p u la tio n gro w th , m ig ra tio n has been, b y far, the stro n g e st in flu e n ce. In b o th m e tro p o lita n a n d n o n m e tr o p o lita n areas, p o p u la tio n g ro w th is m o re c lo se ly a sso c ia te d w ith net m ig ra tio n rates (i.e., g r o ss in -m ig r a tio n m in u s g r o ss o u t-m ig r a tio n d iv id e d b y 1960 p o p u la tio n ) than w ith rates o f natural increase. T h e Sixties m a rk e d the se c o n d c o n se c u tiv e d e c a d e that the S o u th e a st ex p e rie n c e d net in -m ig r a tio n ; in fact, the rate o f in flo w a ctu a lly increased. Bu t this m ig ra tio n w a s n o t e v e n ly d istrib u te d a m o n g the r e g io n 's states. Florida, rid in g the crest o f a large in flo w o f retirees, c o n tin u e d to d r a w in the greatest n u m b e r o f p e o p le . G e o r g ia s h o w e d a net in flo w o f p e o p le fo r the first tim e in the last three de ca d e s. T h e oth er fo u r re g io n a l states, h o w e v e r, all lo st p o p u la tio n th ro u g h m igra tio n . M u c h o f this lo ss ste m m e d fro m a c o n tin u a tio n o f the sh a rp o u t-m ig r a tio n o f b la c k s fro m the S ou th e a st, p artia lly b r o u g h t a b o u t by c o n tin u e d m e c h a n iz a tio n in the r e g io n 's farm sector. M o re o v e r , the rate at w h ic h b la c k s m o v e d o u t o f the S o u th e a st w a s a c tu a lly slig h tly h igh e r than d u r in g the Fifties. A ll six S o u th e a ste rn states ex p e rie n c e d net o u tflo w s o f n o n w h ite p o p u la tio n . TA BLE 3 CH ARACTERISTICS OF STATES Total Population 1960 1970 Alabama 3,266,740 3,444,165 M e t r o p o lit a n .............................................. Nonwhite .................................................. 65 and O v e r .............................................. Florida 4,951,560 6,789,443 M e t r o p o lit a n .............................................. Nonwhite .................................................. 65 and O v e r .............................................. Georgia 3,943,116 4,589,575 M e t r o p o lit a n .............................................. Nonwhite .................................................. 65 and O v e r .............................................. Louisiana 3,257,022 3,643,180 M e t r o p o lit a n .............................................. Nonwhite .................................................. 65 and O v e r .............................................. Mississippi 2,178,141 2,216,912 M e t r o p o lit a n .............................................. Nonwhite .................................................. 65 and O v e r .............................................. Tennessee 3,567,089 3,924,164 M e t r o p o lit a n .............................................. N o n w h it e .................................................... 65 and O v e r ................................................ District States 21,163,668 24,607,439 M e t r o p o lit a n .............................................. Nonwhite .................................................. 65 and O v e r .............................................. United States 179,323,175 203,184,772 Metropolitan .......................................... Nonwhite .................................................. 65 and o v e r .............................................. Com position (% of total) 1960 1970 -------51.8 52.3 30.1 26.6 8.0 9.5 -------68.6 68.6 17.9 15.9 11.2 14.5 -------46.0 49.7 28.6 26.2 7.4 8.0 -------53.7 54.8 32.1 30.2 7.4 8.4 -------15.6 17.7 42.3 37.2 8.7 10.0 -------47.6 48.9 16.5 16.3 8.7 9.8 -------50.5 53.0 26.2 23.4 8.7 10.6 -------64.6 69.0 11.4 12.6 9.2 9.9 C o n se q u e n tly , the n o n w h ite p ro p o r tio n o f the S o u th e a st's p o p u la tio n d e c lin e d d u r in g the last de ca d e , w h e re a s the p ro p o r tio n rose for the their m e tro p o lita n areas fro m o th e r parts o f the n ation as w e ll as fro m the entire n atio n (see T a b le 3). T h e c o n tin u e d m e c h a n iz a tio n o f the S o u th e a st's farm se cto r a lso set the pattern for m ig ra tio n S o u th e a st itself. O n the o th e r hand, o u t-m ig ra tio n from n o n m e tro p o lita n areas o f the Sou th east, in a net sense, to o k place. Except in Florida, the d iffe re n c e s b e tw e e n m e tro p o lita n a nd n o n m e tr o p o lita n areas. T h re e o f the six S o u th e a st ern states e x p e rie n c e d net in -m ig r a tio n into n o n m e tro p o lita n areas in each o f the r e g io n 's states lost p o p u la tio n as p e o p le m o v e d to oth er parts o f the c o u n try a n d to the m e tro p o lita n areas o f the Sou th east. M ig r a tio n — S .E . e x p e r ie n c e s n et in -m ig ra tio n , d e sp ite o u t-m ig r a tio n of b la c k s Net migration rate 1 9 6 0 -1 9 7 0 Its C a u s e s a n d Effects O v e r a n d a b o v e the bare statistics re fle ctin g the c h a n g in g p o p u la tio n lies a far m o re im p o rta n t c o n sid e ra tio n : W h a t cau se d these c h a n ge s, an d w h a t w ere the effects o f the gro w th a n d re d istrib u tion o f the p o p u la tio n w ith in the nation. In particular, the force s stim u la tin g p e o p le to m igrate from o n e re gio n to a n o th e r h ave be en the su bject o f m u c h research a m o n g e c o n o m ists, d e m o g ra p h e rs, a n d so c io lo g ists. E q u a lly im p o rta n t are the effects these p e o p le (as e c o n o m ic factors) have o n the re g io n s from w h ic h they m igra te and to w h ic h they m ove. Ala. Fla. Ga. 200 La. Miss. Tenn. Dist. states N u m e r o u s stu d ie s h ave p o in te d o u t that a siz a b le p o rtio n o f m igra tio n is related to e c o n o m ic influences. O n e sh o u ld n o t expect, h ow e v e r, all o f the factors in flu e n c in g a p e r s o n 's d e c isio n to m igrate to be e c o n o m ic in nature. For exam ple, M O N T H L Y R E V IE W its b e in g h ig h e r than an y o f the o th e r So u th e a ste rn M ig r a t io n is in flu e n c e d by in c o m e . . . Net migration rate 1960-1970 26.8 13 u y .. .................................... -1.3 -7.1 n i? .: Ala. and Fla. Ga. in c o m e La. Miss. is in flu e n c e d Tenn. Dist. states by m ig r a tio n Per capita income as % of U.S. ■ 1960 states. C le a rly , in the case o f Florida, the p sy c h ic in c o m e o r rew ard s o b ta in e d fro m the w a rm a nd su n n y c lim a te p lay a m a jo r role in the d e c isio n to m igrate. Im p e rfe c tio n s in the la b o r m a rke t a lso c o m p lic a te the d e c isio n to m igrate. S in c e resou rce prices, p artic u larly w ag e s, are n o t a lw a y s d e te rm in e d by free m arke t forces, m a n p o w e r m a y n o t be fu lly e m p lo y e d in o n e re g io n eve n th o u g h it is in another. If c h ro n ic la b o r su rp lu s c o n d itio n s exist in a regio n, this re g io n p ro b a b ly w o u ld n o t a p p e a l to the p o te n tial m igran t, re gard le ss o f h o w h igh p er c ap ita in c o m e is. T o c ap tu re the effects o f these im p e rfe c tio n s, d iffe re n c e s in rates o f u n e m p lo y m e n t a m o n g re g io n s are often in c lu d e d in m ig ra tio n studies. A C lo s e r L o o k Ala. Fla. Ga. La. Miss. Tenn. Dist. states the m o v e m e n t o f p e o p le , p artic u larly retirees, to areas o f w a rm te m p e ra tu re a n d su n sh in e can o n ly be c o n sid e r e d e c o n o m ic if these a m e n itie s are c a lc u la te d as a fo rm o f " p s y c h ic in c o m e ." N e t flo w s o f m ig ra tio n a m o n g the S o u th e a ste rn states p ro v id e a ro u g h e stim a te o f the in flu e n c e s exerted b y p e r c ap ita in c o m e a n d u n e m p lo y m e n t on m igra tio n . It is n ecessary, h ow eve r, to take a c lo se r lo o k at m ig ra tio n patterns b e lo w the state level if the p u sh a n d p u ll effects o f the e c o n o m ic facto rs m e n tio n e d a b o v e are to be su c c e ssfu lly q u a n tifie d . T h e m a p illustrates m ig ra tio n patterns in the S o u th e a st in m o re detail. It s h o w s fifty-seven areas— thirty m e tro p o lita n (Sta n d a rd M e tr o p o lit a n Statistical A re a s— S M S A 's ) an d tw e n ty -se v e n n o n m e tro p o lita n . T o explain the v aria tio n in P u sh a n d P u ll F orce s D iffe re n c e s in re g io n a l e c o n o m ic c o n d itio n s exert b o th a p u s h -o u t effect, c a u s in g p e o p le to leave re g io n s o f d e p re sse d e c o n o m ic activity, a n d a p u ll-in effect, a ttractin g p e o p le in to stro n g e c o n o m ic areas. M a n y m ig ra tio n stu d ie s have a p p ro x im a te d the p u sh a n d p u ll b y relatin g net m ig ra tio n to p er c ap ita p e rso n a l in c o m e (or w age ) levels a m o n g regio ns. T yp ica lly , o n e can expe ct that re g io n s w ith h igh p er c ap ita p e rso n a l in c o m e s w ill receive the b u lk o f the in -m ig ra tio n , w h ile re g io n s w ith lo w p er cap ita p e rso n a l in c o m e w ill b e c o m e net lo sers o f p o p u la tio n th ro u g h m igra tio n . A s the ch art indicates, the m ig ra tio n flo w s a m o n g the S o u th e a ste rn states in the Sixties c o n fo r m ro u g h ly to this re la tio n sh ip ; that is, th o se states w ith p er c ap ita p e rso n a l in c o m e levels nearest the n atio n a l a ve rag e h ad the largest m ig ra tio n in flo w s M IG R A T IO N (1960-1970) o r sm a lle r net o u tflo w s, w h e re a s the states w ith lo w e r p er c ap ita p e rso n a l in c o m e s su ffered the largest net o u t-m ig ra tio n . D e s p ite its in tu itive a p p e a l, this sim p le re la tio n sh ip c a n n o t be e x p e cte d to e x plain all o f the v a ria tio n in p o p u la tio n m o v e m e n ts a m o n g regions. For ex am p le, F lo rid a 's p er c ap ita p erson al in c o m e rem ain s b e lo w the n atio n a l average, d e sp ite FE D E R A L R ESERVE B A N K O F A T LA N T A PA TTERN S □ □ □ □ Note: Less 10% Less 10% than 10% in-migration or more in-m igration than 10% out-m igration or more out-migration Striped areas represent SM SA’s 201 m ig ra tio n p attern s a m o n g these areas, w e fo rm u la te d a m ig ra tio n m o d e l. In this m o d e l w e u se d d iffe re n c e s in p er c a p ita p e rso n a l in c o m e , d iffe re n c e s in u n e m p lo y m e n t rates, a n d a d u m m y v a ria b le to c ap tu re the "p s y c h ic r e w a r d s " o f m ig ra tio n to Florida. T h e m o re statistically o rie n te d reader can turn to the A p p e n d ix fo r a m o re th o r o u g h a n a ly sis of the m o d e l. In brief, d iffe re n c e s in p er c ap ita p e rso n a l in c o m e be tw e en an area a n d the n a tio n as a w h o le p lay a central role in d e te r m in in g the extent o f m ig ra tio n ; they e x p lain o v e r 10 p e rce n t o f the v aria tio n in net m ig ra tio n rates a m o n g the areas o f the Sou th east. T he e x p la n a to ry p o w e r o f all three in flu e n c e s— per cap ita p e rso n a l in c o m e s, u n e m p lo y m e n t rates, an d the in flu e n c e o f F lorid a areas o n m ig r a tio n — explain 55 p e rce n t o f the total v aria tio n in net m ig ra tio n rates. C o n s id e r a b le d iffe re n c e s o ccu r, h o w e v e r, w h e n m e tro p o lita n a n d n o n m e tr o p o lita n areas are c o n sid e r e d separately. T h e three e x p la n a to ry facto rs ju st m e n tio n e d , p artic u larly p e r cap ita in c o m e , a c c o u n t fo r a h ig h e r p o rtio n o f n o n m e tr o p o lita n m ig ra tio n (76 percent) than they d o o f m e tro p o lita n m ig r a tio n (48 percent). O n ly w h e n m e tro p o lita n o u t-m ig r a tio n is ex a m in e d se p a rate ly d o u n e m p lo y m e n t rates have a sig n ific a n t effect. T h e h ig h e r the m e tro p o lita n are a's u n e m p lo y m e n t rate is relative to the U. S. u n e m p lo y m e n t rate, the greater the net o u t-m ig ra tio n . T h is facto r e x p la in s 53 p e rce n t o f the S o u th e a ste rn m e tro p o lita n are as' o u t-m ig ra tio n . R elative per c ap ita p e rso n a l in c o m e , h ow eve r, lo ses its e x p la n a to ry p o w e r in this case. (This statistical result is a c tu a lly q u ite re ason able . In m e tro p o lita n areas o f la b o r su rp lu s, p e o p le , in general, d o n o t su ffer from w h a t m ig h t be c alle d a " m o n e y illu s io n "; that is, even if per cap ita p e rso n a l in c o m e in a re gio n w e re relatively h igh, o u t-m ig r a tio n w o u ld still o c c u r if p e o p le w ere u n a b le to fin d jobs.) U n e m p lo y m e n t d iffe re n tia ls d id n o t a p p e a r to affect m ig ra tio n in n o n m e tr o p o lita n areas s ig n if icantly. T h is fin d in g is su rp risin g b e c a u se in crease d m e c h a n iz a tio n in the S o u th e a st's farm se cto r has, to a large extent, re p la ce d farm la b o r a n d c a u se d o u t-m ig r a tio n fro m these areas. But b e c a u se u n e m p lo y m e n t rates ofte n u n d e re stim a te agric u ltu ra l u n e m p lo y m e n t, ofte n c la ssify in g w o rk e rs as u n d e r e m p lo y e d rather than u n e m p lo y e d , the data u se d p ro b a b ly d id n ot su ffic ie n tly reflect the la b o r su rp lu s c o n d itio n s that a ctu a lly ex ist .* ::No attempt was made here to break the net migration total down into components. For an analysis of while and negro migration patterns in the Southeast, see Andrew Brimmer, "Regional Growth, Migration, and Economic Progress in the Black Community,” a convocation address presented at Bishop College, Dallas, Texas, September 15, 1971. 202 T h e C h ic k e n a n d E g g P r o b le m R e v isite d T o say that m ig r a tio n r e s p o n d s to re g io n a l d iffe re n c e s in e c o n o m ic activity is really o n ly part o f the picture. T h e m o v e m e n t o f p e o p le a m o n g re gio n s, h o w e v e r m o tiv a te d , w ill, in itself, in flu e n c e re g io n a l e c o n o m ic c o n d itio n s. T o the extent that su c h m ig ra tio n is trigg e re d b y e c o n o m ic c o n d itio n s, h o w e v e r, the net result is m o st ofte n an im p ro v e m e n t in the a llo c a tio n o f the p o p u la tio n (as an e c o n o m ic resou rce) a n d a c o n se q u e n t increase in e c o n o m ic e fficie ncy. H o w d o e s m ig ra tio n in flu e n c e e c o n o m ic c o n d itio n s ? Every re g io n o f the c o u n try is e n d o w e d w ith three b a sic re so u rc e s— land, labo r, a n d capital. In so fa r as in -m ig r a tio n incre a se s the a m o u n t o f la b o r u sed w ith a n y g iv e n a m o u n t o f la n d a n d capital, the return to la b o r (i.e., the w a g e ) w ill d e clin e . S im ilarly , to the extent that o u t-m ig r a tio n d e cre ase s the a m o u n t o f la b o r u se d w ith a n y giv e n a m o u n t o f la n d a n d cap ital, the return to la b o r w ill rise. T hus, o n e w o u ld e x p e ct re g io n s w ith relatively h igh p e r c a p ita in c o m e to ex p e rie n c e net in -m ig ra tio n . T h is in -m ig ra tio n , in turn, s h o u ld d e p re ss the return to la b o r and , c o n se q u e n tly , a lso d e p re ss per c a p ita in c o m e (or at least d a m p e n its rate o f g ro w th ) in the re g io n (o th e r th in g s re m a in in g u n c h a n g e d ); this s h o u ld then lessen the stim u lu s for future in -m ig ra tio n . T h u s, the p ro c e ss o f m ig ra tio n a n d re g io n a l e c o n o m ic g ro w th is a c o m p lic a t e d o n e w h e re the e c o n o m ic facto rs in flu e n c in g m ig ra tio n are th e m se lv e s a ffe cte d by this m igra tio n . T he p re c e d in g fr a m e w o r k w o u ld in d ic a te that the So u th e a st, a re g io n o f net in -m ig r a tio n in the Sixties, s h o u ld h a ve e x p e cte d its p er c ap ita p e rso n a l in c o m e to fall relative to the U. S. average. H o w e v e r, ju st the opposite has o ccu rre d . T h e c o n v e r g e n c e that d id o c c u r in p er c ap ita in c o m e has at least tw o ex p lan atio n s. First o f all, w h ile p o p u la tio n w a s m ig r a tin g in to the S o u th e a st in the Sixties, cap ital flo w e d into the re g io n at an eve n gre ater rate. T h is in flo w o f cap ita l acted to p u sh u p the r e g io n 's p er c ap ita in c o m e . S e c o n d , in c o n trast to the total region, all areas within the S o u th e a st h a ve n o t h ad in flo w s o f m igra tio n . In p articu lar, the n o n m e tr o p o lita n areas in all states e x ce p t F lorid a have e x p e rie n c e d net o u t-m ig r a tio n . G e n e ra lly sp e a k in g, these have be en the areas o f the m o st rap id g a in s in p er c ap ita p e rso n a l in c o m e . M o re o v e r , the m ig r a tio n in to the S o u th e a st has be en d iffe re n t than the m ig r a tio n o u t o f the Sou th east. T h e o u t-m ig ra n ts, c o m p o s e d la rge ly o f n o n w h ite a g ric u ltu ra l w o rke rs, g e n e ra lly have n o t a c q u ire d either the e d u c a tio n a l levels o r p ro d u c tiv e k n o w - h o w o f the b e tte r-e d u c a te d in -m igra n ts. T hus, the c o m p o s it io n o f the net m ig ra tio n stream has b e e n su c h as to raise the S o u th e a st's sto c k o f " h u m a n c a p it a l" a n d to M O N T H L Y R E V IE W a c tu a lly raise p er c a p ita in c o m e levels. T h o u g h a c o m p le te a n a ly sis o f the effects of e ach o f these facto rs (i.e., m ig ra tio n , cap ital sto c k gro w th , a n d h u m a n cap ital) o n re g io n a l g ro w th is b e y o n d the sc o p e o f this article, it a p p e a rs that m ig ra tio n has acted to raise S o u th e a ste rn per c a p ita p e rso n a l in c o m e levels nearer to the n atio n a l a ve rage ; o u t-m ig r a tio n fro m the n o n m e tr o p o lita n areas o f the S o u th e a st has be en a p artic u larly str o n g in flu e n c e o n c o n v e r g e n c e o f this re g io n 's p er c a p ita p e rso n a l in c o m e w ith n a tio n a l p er cap ita p e rso n a l in c o m e . Future articles in this Review w ill take u p the p ro b le m o f re g io n a l gro w th in m o re detail. A L o o k in to the S e v e n tie s w ill c o n tin u e to re sp o n d to these d iffe re n c e s a n d w ill c o n tin u e to m igra te to the m o re p ro sp e r o u s re g io n s d u r in g the Seventies. T h e net flo w s that result s h o u ld im p ro v e the a llo c a tio n o f resou rces t h r o u g h o u t the n atio n a n d create greater o ve rall e c o n o m ic efficie ncy. T h e extent to w h ic h resou rces r e sp o n d to c o n d itio n s is, h o w e v e r, often less than o p tim a l a n d ofte n very s lo w in c o m in g . C o n se q u e n tly , p o p u la tio n m o v e m e n ts are n o t the so le a n sw e r to re d u c in g re g io n a l in e q u a litie s in e c o n o m ic activity. S tim u la tin g the g ro w th o f cap ital in re g io n s la g g in g b e h in d the p ace o f n a tio n a l e c o n o m ic activity is o n e p o ssib le m e a n s; in c re a sin g the sto c k o f h u m a n cap ita l b y im p r o v in g a nd e n la r g in g a r e g io n 's e d u c a tio n a l in stitu tio n s is another. ■ B e ca u se e c o n o m ic c o n d itio n s a m o n g the n a tio n 's r e g io n s still s h o w d istin c t varia tio n s, re so u rce s APPENDIX The migration model adapted to the present study is of the following standard form: M = a + bXi + cX2 + dD where M = the net migration rate from 1960 to 1970. (That is, net migration from1960 to 1970divided by the population in 1960.) Xi = the average of 1959 and 1969 per capita personal income in the region under consideration relative to the nation as a whole, standardized around zero. That is: 1 ( Y 59 + Y6q) , _ (Y59 + Y59)us 1 where Y is per capita personal income. X2 = the 1966 annual unemployment rate for the region under consideration relative to the 1966 annual U. S. unemployment rate standardized around zero. That is: Unemployment Rate R, 1966 Unemployment Rate U.S., 1966 X- = --------------------------------------- — 1 D = the "sun and fun" Florida variable. (In order to avoid bringing undue biases into the model, it was necessary to adjust all Florida regions because of the large inflows of retirees whose decision to migrate was not necessarily related to either Xi or Xj.) The year in which data for each variable was selected was, where at all possible, determined so that influences throughout the decade could be feit. Hence, a simple average of beginning and end of decade years data, or mid-decade year data were selected; however, data restrictions often made even these approximations impossible. The model presented here is "cross section" in nature; that is, the observations on net migration rates, per capita personal incomes, and unemployment rates cover different geographic areas over one time period rather than, as in "time series" models, covering one geographic area over a number of sequential time periods. Because of the somewhat low (squared) FE D E R A L R ESERVE B A N K O F A T LA N T A correlation coefficients (R2 's), the model should not be used for forecasting purposes; the model is developed strictly to examine the effects of certain economic factors on net migration rates and is, in no way, to be taken as a complete explanation of net migration flows. The migration equation was statistically fitted on three basic sets of data. First, it was tested on the total 57observations; that is, all 27 nonmetropolitan areas and 30 SMSA's. Next, the data were divided into metropolitan and nonmetropolitan areas and the model was tested separately on each set of data. (Tests were also run on net in-migration and net out-migration separately for both metropolitan and nonmetropolitan areas. Because of the small number of observations in these cases, the results will not be given below. The results have been alluded to, however, in the body of the article.) The statistical results obtained are given in the box on page 204. The total migration equation explains approximately 55 percent of the variation in net migration rates among Southeastern areas. This is in line with results obtained by other studies using a similar type of migration model. Per capita personal income differentials and the Florida "fun and sun" variable are the only two statistically significant variables. Both of these variables have the correct sign; the unemployment rate differential also has the correct sign, however, its coefficient is not statistically significant. As noted in the body of this article, per capita personal income differentials explain 11 percent of the variation in net migration rates. The coefficient for per capita personal income differentials indicates that if the differential rose by one percentage point (say from3 percent above the U. S. average to 4 percent), the net in-migration rate would increase by 0.36 percentage points. Because the push and pull effects of economic factors on migration may differ considerably between metropolitan and nonmetropolitan areas, it was felt that separate estimates of the model on both metropolitan and nonmetropolitan data were necessary. The metropolitan area model estimates do differ somewhat from the estimates of the total migration model. The (squared) coefficient of correlation (R-) is slightly less for SMSA migration than for the total migration equation. The effect of all the economic variables (including the Florida dummy variable) explains only 48 percent of the variation in net migration rates in metropolitan areas, as opposed to nearly 55 percent for total net migration rates for both metropolitan and nonmetropolitan areas. Again, both per capita personal income differentials and the Florida dummy variable are statistically significant and have the correct signs. The coefficient value of the relative per capita personal in come variable increases for the SMSA model alone. Thus, per capita income differentials appear to have a slightly stronger effect on migration in metropolitan areas than they do when all areas of 203 b • Total T Value Partial Correlation Coefficient 5.3758 (1.343) .3575** (2.666) (.33) Metropolitan T Value Partial Correlation Coefficient 4.670 (.848) .572* (1.917) (.33) Nonmetropolitan T Value Partial Correlation Coefficient 34.975** (3.925) 1.072** (4.764) (.68) c -.0156 (-.2166) (-.03) d R* Obser vations 24.0039** (5.422) (.58) .55** 57 -.165 (-1.222) (-.22) 20.390** (2.822) (.459) .48** 30 .054 (.820) (.16) 12.950** (2.393) (.42) .76** 27 *Statistically significant at 90 percent confidence level. ‘ •Statistically significant at 95 percent confidence level. the Southeast are considered. (When only net out-migration from metropolitan areas is considered, the unemployment rate becomes statistically significant and its coefficient is negative in sign, indicating that net migration away from metropolitan areas is stimulated by conditions of labor surplus. This result, however, is not given here.) When only nonmetropolitan areas are considered, the multiple correlation coefficient is much higher than for either metropolitan areas or all Southeastern areas. Again, both per capita income differentials and the Florida dummy variable have the correct sign and are statistically significant. The explanatory power of per capita income, as noted by its (squared) partial correlation coefficient, Bank Announcements appears to be particularly enhanced when only nonmetropolitan areas are considered. Moreover, the intensity of the response to per capita income differentials (as noted by the Xi coefficient) is much greater in this case than when either total migration or metropolitan migration is considered. As noted in the body of this article, the influence of unemployment rate differentials on migration does not appear significant because unemployment rates underestimate the extent of labor surplus in agricultural areas. Hence, per capita income differentials are, in a sense, reflecting both the impact on migration flows of relatively low incomes and labor surplus conditions. Thus, the high partial correlation coefficient of this variable is not at all surprising. Jr., president; Raymond P. Chatfield, cashier; and William E. Burgett, assistant cashier. Capital, $500,000; surplus and other capital funds, $240,000. OCTOBER 12,1971 M A R IN E N A T I O N A L B A N K O F S T . P E T E R S B U R G St. P etersb u rg , Florida OCTOBER 1, 1971 A M E R IC A N B A N K IN G C O M P A N Y M o u ltr ie , G eo rg ia Opened for business as a nonmember. OCTOBER 1,1971 Opened for business. Officers: Ernest J. Winstead, president; Ralph H. Ammons, executive vice presi dent; F. K. Barzler, vice president and cashier; and R. W. Eades and Fred Tona, assistant vice presi dents. Capital, $400,000; surplus and other capital funds, $600,000. BAN K O F N EW RO A D S N e w R o a d s, L o uisiana OCTOBER 12,1971 Began to remit at par as a nonmember. N o r th P ort C h a r lo tte , Florida OCTOBER 1, 1971 B A R N E T T M A L L B A N K , N A T IO N A L A S S O C IA T IO N W in te r P ark, Florida Opened for business. Officers: G. J. Loudermilk, 204 N O RTH PO R T BANK Opened for business as a nonmember. Officers: William L. Hart, president; William Harvey Kyle, chairman of the board; and William R. Earnshaw, vice president, cashier, and secretary. Capital, $300,000; surplus and other capital funds, $300,000. M O N T H L Y R E V IE W Southeastern State and Local Expenditures: How Do they Stack Up? by Robert H. Floyd E x p e n d itu re s o f state a n d lo cal g o v e r n m e n ts rose d ra m a tic a lly d u r in g the 1960's. Be tw e e n 1960 a n d 1969, total direct ge n e ral e x p e n d itu re s o f state a n d lo cal g o v e r n m e n ts in cre a se d fro m $52 b illio n to a lm o s t $117 b illio n .1 State a n d lo ca l p u rc h a se s o f g o o d s a n d se rvices n o w exce ed th o se o f the Federal G o v e rn m e n t. H o w e v e r, s o m e o f this increase resulted fro m inflation. State a n d lo ca l g o v e r n m e n ts h a ve h a d to p a y h ig h e r p rice s a n d w a g e s fo r g o o d s a n d services. If the effects o f in fla tio n w e re e lim in a te d , a n d state a n d lo ca l g o v e r n m e n t e x p e n d itu re s w e re stated in 1960 prices, they still w o u ld have risen to a b o u t $76 b illio n . T h is still represents a real increase o f $24 b illio n , o r m o re than 45 p e rce n t o v e r the de ca d e . In the states that lie w h o lly o r p artly w ith in the Sixth Federal R ese rve D istrict, the pattern has a p p a re n tly b e e n m u c h the sam e. In 1960, the direct ge n e ral e x p e n d itu re s o f state a n d lo cal g o v e r n m e n ts in the Sixth D istric t states a m o u n t e d to $5.3 b illio n . By 1969, they h a d risen to $11.5 b illio n . A fte r e lim in a tin g the effects o f in flatio n , 1969 e x p e n d itu re s w o u ld h a ve b e e n a b o u t $7.5 b illio n — a real increase o f m o re than 40 p e rce n t d u r in g the d e c a d e .2 C le a rly , Sixth D istric t state a n d lo cal g o v e r n m e n ts h a ve gre atly in cre a se d the ir e x p e n d itu re s, a lth o u g h n o t q u ite as ra p id ly as state a n d lo ca l g o v e rn m e n ts in the n a tio n as a w h o le . O f cou rse, there m a y be v a lid re a so n s fo r this slo w e r increase. For ex am p le , the n e e d s o f D istric t g o v e r n m e n ts m a y n o t ha ve be en as great. O r their re sou rce s m a y n o t h a ve be en su ffic ie n t to ke e p pace. T h e p u r p o s e o f this article is to e x a m in e state a n d lo ca l g o v e r n m e n t e x p e n d itu re s in the Sixth Federal R ese rve District. In particular, it c o n ce n tra te s o n the e x p e n d itu re patterns o f these g o v e r n m e n ts d u r in g the 1 9 6 0 's— a d e c a d e o f e c o n o m ic g ro w th in the S o u th a n d in the D istric t as w ell. T h e article review s so m e re la tio n sh ip s b e tw e e n e c o n o m ic g ro w th a n d d e m o g r a p h ic c h a n g e a n d the p ro v isio n o f p u b lic ‘General expenditures of state or local governments include all expenditures except utility, liquor store, and insurance trust expenditures. When state and local government expenditures are combined, intergovernmental transfers are eliminated and these expenditures are referred to as direct general expenditures. Thus, direct general expenditures include only payments to employees, suppliers, contractors, beneficiaries, and other final recipients of government payments. Purchases of goods and services differ from other expenditures primarily in that they do not include transfer payments, such as welfare payments. Expenditures have been deflated by the GNP deflator for state and local expenditures. FED ER A L RESERVE B A N K O F A T LA N TA 205 g o o d s a n d se rvice s b y state a n d lo ca l g o v e rn m e n ts. m ig h t raise the u n it c o st o f p r o v id in g the sa m e It asks h o w the g o v e r n m e n ts in the Sixth D istrict, p er c a p ita p u b lic g o o d s a n d se rvic e s if a d d itio n a l cap ital e x p e n d itu re s b e c o m e n ecessary. O n the o th e r ha n d , u nit c o sts m ig h t be lo w e re d b y more in te n siv e use o f e x istin g cap ita l facilities. O v e ra ll, the im p a c t o f p o p u la tio n c h a n g e s o n the u n it c o sts o f p u b lic g o o d s a n d se rvices is u ncertain a n d p ro b a b ly n o t large. In this article, it's a ssu m e d that p o p u la tio n c h a n g e s h a ve n o effect o n u n it th r o u g h their e x p e n d itu re s fo r p u b lic g o o d s a n d services, h a ve r e s p o n d e d to e c o n o m ic g ro w th an d d e m o g r a p h ic c h a n g e s in the D istrict. In a d d itio n , it ask s h o w their re sp o n se h as c h a n g e d o v e r the d e ca d e . In o th e r w o rd s, has the D istric t's e c o n o m ic g ro w th p e rm itte d n o t o n ly a m o re p le n tifu l p ro v isio n o f p u b lic g o o d s a n d se rvices b u t also a m o re v ig o r o u s re sp o n se to the c h a n g in g c o n d itio n s b y the D istric t's g o v e r n m e n ts? A n d , if it is true that the D istric t's e c o n o m y h as g r o w n m o re ra p id ly than the n a tio n 's e c o n o m y , has this e n a b le d the D istric t g o v e r n m e n ts to b e c o m e in c re a sin g ly m o re v ig o r o u s in their p ro v isio n of p u b lic g o o d s relative to the ir c o u n te rp a rts in the rest o f the n a tio n ? U n fo rtu n a te ly , the record in d ic a te s that D istric t state a n d lo ca l g o v e r n m e n ts h a ve b e e n s lo w to take a d v a n ta g e o f the g ro w th ta k in g p la c e a ro u n d them . In a d d itio n , they, a p p are n tly , h a ve n o t im p ro v e d their re sp o n siv e n e ss to p u b lic n e e d s relative to o th e r state a n d lo cal costs. U n d e r this a ssu m p tio n , therefore, c h a n g e s in the p ro v isio n o f p u b lic g o o d s a n d se rvices are better reflected b y c h a n g e s in p er c a p ita e x p e n d itu re s than b y total ex p e n d itu res. In c re a sin g in c o m e , s o m e w h a t like in c re a sin g p o p u la tio n , w ill p r o b a b ly le ad to in c re a se d total ex p e n d itu res. It is a lso likely, h o w e v e r, to lead to in c re a se d p e r c a p ita e x p e n d itu re s by state a n d lo ca l go v e rn m e n ts. A s in c o m e s rise, in d iv id u a ls w ill, o f cou rse, sp e n d m o re o n p rivate g o o d s a n d save m ore. T h e y are a lso lik e ly to d e sire m o re a n d better p u b lic g o o d s. In d e e d , as their in c o m e s rise, they p r o b a b ly w ill n o t o n ly sp e n d m o re o f their in c o m e o n p u b lic g o o d s b u t w ill sp e n d a la rge r proportion o f the ir in c o m e o n them . A fte r g o v e rn m e n ts. W h a t D e t e r m in e s State a n d m a n y o f the ir d e sire s fo r p rivate g o o d s are satisfied , in d iv id u a ls w ill b e w illin g to d e v o te L o ca l E x p e n d itu re s? m o re Id e ally , the e x p e n d itu re s o f state a n d lo ca l g o v e r n m e n ts s h o u ld reflect the d e sire s a n d the p re feren ces o f the ir c o n stitu e n c ie s (or electorate s) fo r p u b lic g o o d s a n d services. T h u s, p o litic a l a ttitu des m a y h a ve p r o fo u n d effects o n state a n d lo ca l e x p e n d itu re s. R e sid e n ts o f o n e state m a y h a ve su b sta n tia lly d iffe re n t o p in io n s fro m th o se o f a n o th e r state a b o u t h o w the g o v e r n m e n t s h o u ld sp e n d p u b lic fu n d s. A state g o v e r n m e n t m a y b e m o re (or less) re sp o n siv e to a p a rtic u la r p ro b le m s im p ly b e c a u se its c itiz e n s w ish it to be so. T h us, t w o states w ith su b sta n tia lly sim ila r e c o n o m ic a n d d e m o g r a p h ic ch ara cte ristics m a y e x h ib it n o ta b ly d iffe re n t e x p e n d itu re patterns. For e x am p le, L o u isia n a has lo n g m a in ta in e d a m u c h stro n g e r w e lfa re system than h a ve its n e ig h b o r in g , a n d su b sta n tia lly sim ilar, states. G iv e n these pre feren ces, h o w e v e r, state a n d lo cal e x p e n d itu re s are lik e ly to b e str o n g ly in flu e n c e d b y n u m e r o u s o th e r factors. C o n s id e r s o m e o f the m o re im p o r ta n t ones. A n in c re a se in p o p u la tio n w ill a lm o s t c ertain ly le ad to gre ater n e e d s fo r sc h o o ls, streets, se w a g e facilities, a n d o th e r p u b lic g o o d s . C o n se q u e n tly , to be tter e d u c a tio n a l facilities, h ig h w a y s, m a ss transit, o r p o lic e a n d fire p ro te ctio n . T h e re are e x ce p tio n s, o f cou rse. A s in c o m e s increase, p e rso n s m a y p re fer p rivate to p u b lic e d u c a tio n . If in c re a se d in c o m e s are fairly e v e n ly d istrib u te d , the n e e d fo r w e lfa re e x p e n d itu re s m a y b e red uced . In ge ne ral, h o w e v e r, o n e m ig h t ex p e ct that as in c o m e s increase, p er c a p ita g o v e r n m e n t e x p e n d itu re s w ill n o t o n ly rise b u t w ill a lso rise m o re ra p id ly than in c o m e s. C e rta in c h ara cte ristics o f the p o p u la tio n are im p o rta n t d e te rm in a n ts o f p u b lic ex p e n d itu res. For ex am p le, the h ig h e r the p ro p o r t io n o f e ld e rly p e rso n s in the p o p u la tio n , the gre ater the n e e d for e x p e n d itu re s o n w e lfa re a n d p u b lic health p ro g ra m s, h o sp ita ls, a n d o th e r se rvic e s a n d facilitie s n e e d e d b y the a ge d . C o n se q u e n tly , p er c ap ita e x p e n d itu re s in the se fie ld s are lik e ly to b e h ig h e r in states w ith a relative ly la rge r p ro p o r tio n o f e ld e rly p erson s. S im ilarly , the la rge r the p ro p o r tio n o f the p o p u la tio n e n r o lle d in p u b lic sc h o o ls, the gre ater p e r c ap ita e x p e n d itu re s on e d u c a tio n are lik e ly to be. A n in c re a se in these p ro p o r tio n s m a y a lso in v o lv e in c re a se d u n it costs o f p r o v id in g these se rvice s if sig n ific a n t a d d itio n a l an incre a se in p o p u la tio n w ill a lm o s t su re ly lead to h ig h e r total e x p e n d itu re s b y state a n d lo ca l cap ita l e x p e n d itu re s are requ ired. g o v e rn m e n ts. It w o u ld a n d lo ca l e x p e n d itu re s is the d e g re e to w h ic h a g o v e r n m e n t's ju risd ic tio n is u rb a n iz e d . T h e m o re le ad to in c re a se d c o sts rem ain n o t necessarily, h o w e v e r, per capita unchanged, ex p e n d itu res. If u n it then h ig h e r total e x p e n d itu re s c o u ld m e re ly reflect c o n sta n t p er c ap ita e x p e n d itu re s. U n it costs, o f cou rse , m a y n o t rem ain u n c h a n g e d . G r o w th in p o p u la tio n 206 A n o th e r im p o r ta n t fa c to r in flu e n c in g state u rb a n iz e d the p o p u la tio n , the la rge r the sca le o f o p e r a tio n s o f at least s o m e u nits o f g o v e rn m e n ts. T h is is e sp e c ia lly true o f lo ca l go v e rn m e n ts. O r d in a rily , so m e e c o n o m ie s o f sca le a n d lo w e r M O N T H L Y R E V IE W c o s ts o f o p e r a t i o n m ig h t b e e x p e c t e d w i t h in c re a s e d u r b a n iz a t io n . In c r e a s in g u r b a n i z a t i o n , h o w e v e r , m a y a ls o b r in g in c r e a s in g c o s ts f o r p u b li c g o o d s a n d s e rv ic e s . H i g h e r e x p e n d it u r e s f o r m a s s tra n s it m a y o f f s e t s a v in g s o n h ig h w a y s . A n d s a v in g s o n h o s p ita l e x p e n d i t u r e s m a y b e o f f s e t b y in c re a s e d n e e d s f o r p u b li c h e a lth e x p e n d it u r e s . U r b a n a re a s m a y h a v e h ig h e r w e l f a r e e x p e n d it u r e s , if o n l y b e c a u s e th e w e l f a r e p r o b l e m is m o r e v is ib le . T h e s e a re b y n o m e a n s th e o n l y d e t e r m in a n t s o f s ta te a n d lo c a l e x p e n d it u r e s , b u t t h e y a re a m o n g th e m o r e i m p o r t a n t . O t h e r fa c to rs m ig h t in c lu d e th e i n f lu e n c e o f p o p u la t i o n d e n s it y o n h i g h w a y e x p e n d it u r e s . F e d e ra l g r a n t s - in -a id , e s p e c ia lly w h e n tie d to p a r t ic u la r p r o g r a m s , w i ll s u r e l y h a v e a d e c is iv e im p a c t o n m a n y e x p e n d it u r e s . I n c o m e d is t r ib u t i o n w i t h i n th e ju r i s d i c t i o n m a y b e i m p o r t a n t . F o r e x a m p le , a h ig h p r o p o r t i o n o f t h e p o p u la t i o n c o n c e n t r a t e d in l o w in c o m e g r o u p s w o u l d p r o b a b l y in c re a s e th e n e e d f o r w e l f a r e e x p e n d i t u r e s a n d s ip h o n o f f r e s o u rc e s th a t th e g o v e r n m e n t m ig h t h a v e u s e d to p r o v i d e o t h e r p u b li c g o o d s . C le a r ly , th e le v e l a n d t y p e o f s ta te a n d lo c a l e x p e n d i t u r e s r e fle c t th e c o m p l e x in t e r a c t io n o f a n u m b e r o f fa c to rs w h i c h , in t u r n , r e fle c t th e p u b lic ' s n e e d s a n d p r e f e r e n c e s f o r p u b li c g o o d s a n d s e rv ic e s . T h i s a rtic le , h o w e v e r , c o n s id e r s o n l y f o u r : (1) in c o m e g r o w t h , (2) th e p r o p o r t i o n s o f th e p o p u la t i o n m a d e u p b y th o s e w h o a re e l d e r l y a n d (3) b y t h o s e w h o a re e n r o ll e d in p u b lic s c h o o ls , a n d (4) th e d e g r e e o f u r b a n iz a t io n . T h e s e f o u r a re a s a re s u f f ic ie n t to g iv e s o m e in s ig h t in t o D is t r ic t e x p e n d i t u r e p a tte rn s . T h e y a re a ls o f o u r a re a s in w h i c h c h a n g e s w i t h i n th e D is t r ic t sta te s c o n t r a s t s h a r p ly w i t h c h a n g e s in th e n a tio n d u r i n g th e 1960's. H o w h a v e th e s e f o u r fa c to rs a n d sta te a n d lo c a l e x p e n d i t u r e s c h a n g e d d u r i n g th e 1960's? T a b l e 1 c o n t a in s ra tes o f c h a n g e in th e f o u r fa c to rs a n d v a r i o u s c a t e g o r ie s o f g o v e r n m e n t e x p e n d it u r e s f o r b o t h th e D is t r ic t a n d th e n a t io n . R e a l p e r c a p ita p e r s o n a l i n c o m e is e m p l o y e d as a m e a s u re o f g r o w t h . T h e p e r c e n t a g e o f th e p o p u la t i o n o v e r 65 is u s e d to in d ic a t e th e n e e d f o r p u b li c g o o d s a n d s e r v ic e s b y th e e ld e r ly . T h e p e r c e n t a g e o f th e p o p u la t i o n l iv i n g in S ta n d a rd M e t r o p o lit a n S ta tis tic a l A r e a s (S M S A 's) p r o v i d e s a m e a s u r e o f u r b a n iz a t io n . In o r d e r to e lim in a t e d o u b l e c o u n t in g o f s ta te g ra n ts to lo c a l g o v e r n m e n t s , th e v a r io u s c a t e g o r ie s o f g o v e r n m e n t e x p e n d i t u r e s m e a s u re o n l y d ir e c t , g e n e ra l e x p e n d it u r e s p e r c a p ita . E x p e n d it u r e a n d i n c o m e d a ta h a v e b e e n d e fla t e d to e lim in a t e th e e ffe c ts o f in f la t io n d u r i n g th e d e c a d e .3 3ln c o m e p e r c a p ita data ha ve been d e fla te d P rice In d ex . FEDERAL RESERVE BANK OF ATLANTA by the C o n su m er A lt h o u g h th e D is tric t's i n c o m e le v e l p e r c a p ita is b e l o w th e n a tio n ' s , it is c a t c h in g u p . D u r i n g th e 1960's, th e D is tric t's e c o n o m ic g r o w t h c le a r ly o u t p a c e d th a t o f th e n a t io n . T h e c o m p o u n d e d a n n u a l ra te o f g r o w t h in rea l p e r c a p ita i n c o m e f r o m 1 9 6 0 t h r o u g h 1 9 6 9 w a s a b o u t 3.5 p e r c e n t in th e D is t r ic t sta te s. T h i s w a s a lm o s t 50 p e r c e n t m o r e th a n th e n a t io n a l g r o w t h ra te o f a b o u t 2.4 p e r c e n t . T h i s r e la t i v e ly g r e a t e r g r o w t h in th e D is t r ic t o c c u r r e d in b o t h th e firs t a n d s e c o n d h a lv e s o f th e d e c a d e . T h e p r o p o r t i o n o f th e p o p u la t i o n o v e r 65 y e a r s o l d a ls o in c re a s e d d u r i n g th e d e c a d e m o r e th a n t w ic e as r a p i d l y in th e D is t r ic t as in th e n a t io n . T h e e l d e r l y g r o u p ro s e f r o m 8.7 p e r c e n t o f th e D is tric t's p o p u la t i o n in 1 9 6 0 t o 9 .7 p e r c e n t in 1 96 9 . T h i s r e p r e s e n t e d a c o m p o u n d e d a n n u a l ra te o f in c re a s e in th is p r o p o r t i o n o f 1.2 5 p e r c e n t d u r i n g th e d e c a d e . In th e n a t io n , th e ra tio ro s e f r o m 9.2 p e r c e n t to 9.6 p e r c e n t o f th e p o p u la t i o n — an a n n u a l ra te o f g r o w t h o f a b o u t o n l y .5 p e r c e n t . T h e D is tric t's p o p u la t i o n in th e 1960's a ls o u r b a n i z e d a t a m o r e ra p id ra te th a n d id th e n a tio n 's . I n l h e D is t r ic t , 49 p e r c e n t o f th e p o p u la t i o n liv e d in m e t r o p o l i t a n a re a s in 1 96 0 . B y 1 9 6 9 , th is h a d ris e n t o 53 p e r c e n t — a n a n n u a l ra te o f in c re a s e o f a b o u t 0 .8 p e r c e n t . T h e ra tio in t h e n a t io n w a s 66 p e r c e n t in 1 9 6 0 a n d 68 p e r c e n t in 1 9 6 9 — an a n n u a l ra te o f in c re a s e o f 0 .2 p e r c e n t .4 In c o n tra s t, th e p r o p o r t i o n o f th e p o p u la t i o n e n r o ll e d in p u b li c s c h o o ls in th e D is t r ic t r e m a in e d a lm o s t s ta b le in th e d e c a d e . R is in g o n l y s lig h t ly , th e p r o p o r t i o n m o v e d f r o m 22.5 p e r c e n t in 1 9 6 0 to ju s t 23 p e r c e n t in 1 96 9 . T h e ra te o f in c re a s e w a s o n l y t w o - t e n t h s o f o n e p e rc e n t . In th e n a t io n , h o w e v e r , th is p r o p o r t i o n ro s e f r o m 20.2 p e r c e n t in 1 9 6 0 to 22.5 p e r c e n t in 1 9 6 9 — a 1 .2 - p e r c e n t a n n u a l ra te o f g r o w t h . T h u s , th e n a t io n , b u t n o t th e D is t r ic t , h as b e e n c o n f r o n t e d w i t h a ris in g p a rt o f its p o p u la t i o n e n r o ll e d in p u b li c s c h o o ls . H o w h a v e re a l p e r c a p ita sta te a n d lo c a l g o v e r n m e n t e x p e n d it u r e s c h a n g e d in re s p o n s e to th e s e c h a n g in g fa c to rs ? A s n o t e d e a rlie r, to ta l sta te a n d lo c a l e x p e n d it u r e s in b o t h th e D is t r ic t a n d th e n a t io n in c re a s e d m a r k e d l y o v e r th e d e c a d e . In th e n a t io n , w e l f a r e e x p e n d it u r e s ro s e m o s t r a p i d l y ( T a b le 1), f o l l o w e d c lo s e ly b y e d u c a t io n e x p e n d it u r e s . D u r i n g th e t e n - y e a r p e r io d , n o c a t e g o r y o f e x p e n d it u r e s d e c lin e d in th e n a tio n . H i g h w a y a n d s a n ita tio n e x p e n d it u r e s , h o w e v e r , in c re a s e d a t r e l a t i v e ly l o w ra te s, w i t h a ll o f th e ' A p r e fe r a b le m e a su re o f u r b a n iz a t io n w o u ld have b e e n the p e rc e n ta g e o f the p o p u la t io n liv in g in u r b a n iz e d areas, as d e fin e d b y the B u re au o f the C e n su s. M e a s u r e m e n t s fo r in te rce n sa l ye ars w e re n o t a v a ila b le , h o w e v e r , a n d the p e rc e n ta g e o f ih e p o p u la t io n liv in g in S M S A 's has b e e n used. If u r b a n iz e d areas w e re u se d to m e a su re u r b a n iz a t io n d u r in g the d e ca d e , the D is t r ic t 's g r o w t h rate o f 2.17 p e rc e n t still e x c e e d e d the n a t io n 's g r o w t h rate o f .87 pe rcent. 207 TAB LE 1 G R O W IN G PRO BLEM S AN D G R O W IN G E X P E N D IT U R E S RATES OF INCREASE 1960-1965 Real S tate and Local E xpenditures (Direct General Expenditures P er Capita) Total ............................................. Education .................................... Highways .................................... W elfare ......................................... Health and H o s p it a l .................. Police and F i r e ........................... S a n i t a t i o n .................................... Real Per Capita Personal Incom e . P ercent of Population over 65 P ercen t of Population Enrolled in School .................................... P ercen t of Population Living in SMSA’s .................................... NATIONAL 1965-1969 DISTRICT 1965-1969 1960-1969 4.82 6.25 - .68 10.28 5.22 3.30 - .93 3.50 .71 3.66 4.98 .05 5.99 3.63 2.28 .60 2.44 .48 2.32 2.87 2.12 .43 3.70 1.60 3.04 2.33 .93 3.64 8.09 - 7 .1 5 1.73 5.47 2.89 - .99 5.00 1.66 2.91 5.16 - 2 .1 1 1.01 4.48 2.17 1.06 3.51 1.25 1.44 .96 1.23 .42 .02 .24 .22 .18 .20 .42 1.16 .78 H o w R e s p o n s iv e H a v e S ta te a n d L o c a l E x p e n d it u r e s B e e n ? M e r e l y in c r e a s in g e x p e n d i t u r e s d o e s n o t in d ic a t e h o w w e l l sta te a n d lo c a l g o v e r n m e n t s h a v e r e s p o n d e d t o c h a n g in g c o n d it i o n s a r o u n d t h e m . A m e a s u r e is n e e d e d t o in d ic a t e w h e t h e r th e g o v e r n m e n t s h a v e m e t in c r e a s in g p r o b l e m s w i t h in c r e a s in g e x p e n d it u r e s . In o t h e r w o r d s , a m e a s u r e o f th e r e s p o n s e is n e e d e d . E c o n o m is t s e m p l o y a m e a s u r e o f r e s p o n s iv e n e s s th a t t h e y c a ll " e la s tic ity ." E s s e n tia lly , th is is th e ra tio o f t w o p e r c e n t a g e c h a n g e s . S u p p o s e , f o r e x a m p le , th a t p e r c a p ita i n c o m e in c re a s e d b y 2 p e r c e n t in a y e a r a n d s u p p o s e th a t s ta te a n d lo c a l e x p e n d it u r e s a ls o in c r e a s e d b y 2 p e r c e n t . In th is ca se, th e e la s t ic it y o f s ta te a n d lo c a l e x p e n d i t u r e s w i t h r e s p e c t t o p e r c a p ita i n c o m e w o u l d b e o n e o r u n it y . T h i s w o u l d in d ic a t e th a t th e p r o v i s i o n o f p u b li c g o o d s a n d s e r v ic e s h a d r o u g h l y k e p t p a c e w i t h t h e g r o w t h a n d d e v e l o p m e n t o f th e e c o n o m y . If, h o w e v e r , s ta te a n d lo c a l e x p e n d it u r e s h a d in c r e a s e d b y 2 p e r c e n t , a n d p e r c a p ita i n c o m e b y 4 p e r c e n t , th e e la s t ic it y w o u l d b e o n l y o n e -h a lf . In th is c a se , th e g r o w t h in v it a l p u b li c g o o d s a n d s e r v ic e s w o u l d n o t h a v e k e p t a b re a s t o f th e g r o w t h in t h e e c o n o m y . T h e g o v e r n m e n t s w o u l d p r o b a b l y n o t h a v e ta k e n a d v a n t a g e o f th e e c o n o m ic g r o w t h to p r o v id e m o re o r b e tte r p u b li c g o o d s a n d s e r v ic e s .5 1960-1965 2.73 3.97 .64 2.69 2.38 1.48 1.71 1.61 .30 in c re a s e c o m i n g in th e firs t h a lf o f th e d e c a d e . A m o n g D is t r ic t s ta te a n d lo c a l g o v e r n m e n t s , e d u c a t io n e x p e n d i t u r e s e x p a n d e d m o s t r a p id ly , f o l l o w e d c l o s e l y b y h e a lth a n d h o s p it a l e x p e n d it u r e s . H i g h w a y e x p e n d i t u r e s a c t u a lly d e c lin e d in re a l te rm s , as d id s a n ita tio n e x p e n d it u r e s d u r i n g th e s e c o n d h a lf o f th e d e c a d e . 208 1960-1969 T h e e la s tic itie s o f v a r i o u s c a t e g o r ie s o f D is t r ic t s ta te a n d lo c a l g o v e r n m e n t e x p e n d it u r e s w i t h re s p e c t t o re a l p e r c a p ita in c o m e a n d , w h e r e r e le v a n t , t h e t h r e e o t h e r fa c to rs u n d e r c o n s i d e r a t i o n a re s h o w n in T a b l e 2. T o t a l e x p e n d i t u r e s o f D is t r ic t s ta te a n d lo c a l g o v e r n m e n t s d id n o t in c re a s e as r a p i d l y as p e r c a p ita i n c o m e d u r i n g t h e S ix tie s , r e s u lt in g in an e la s t ic it y o f to ta l e x p e n d i t u r e s b y D is t r ic t sta te a n d lo c a l g o v e r n m e n t s w i t h re s p e c t t o p e r c a p ita in c o m e o f less t h a n o n e . In th e firs t h a lf o f th e d e c a d e , h o w e v e r , e x p e n d i t u r e s d id r o u g h l y k e e p p a c e w i t h rea l in c o m e g r o w t h . ( E la s tic ity w a s u n i t y o v e r t h e p e r io d 1 9 6 0 -1 9 6 5 .) B u t f r o m 1 9 6 5 1 9 6 9 a n d f o r th e d e c a d e as a w h o l e , in c o m e g r o w t h e x c e e d e d t h e g r o w t h in e x p e n d i t u r e f o r p u b li c g o o d s a n d s e rv ic e s . T h u s , it a p p e a r s th e g o v e r n m e n t s in th e D is t r ic t d id n o t ta k e fu ll a d v a n t a g e o f r a p i d l y g r o w i n g in c o m e s in o r d e r to i m p r o v e o r e x p a n d p u b li c g o o d s a n d s e rv ic e s . In c o n t r a s t t o t h e o v e r a l l p ic t u r e , e d u c a t io n e x p e n d i t u r e s in th e D is t r ic t h a v e g r o w n m o r e r a p i d l y th a n i n c o m e . ( E la s tic ity w i t h re s p e c t t o p e r c a p ita in c o m e is g r e a t e r th a n o n e .) In th e firs t h a lf o f th e d e c a d e , th e s e e x p e n d i t u r e s g r e w 2 0 p e r c e n t m o r e r a p i d l y t h a n in c o m e . In th e s e c o n d h a lf t h e y g r e w 6 0 p e r c e n t m o r e r a p id ly . r’T h e m e a s u r e m e n t s e m p lo y e d in th e text rep re ser ‘ '■t best, a h i g h ly s im p lif ie d use o f the e la s t ic ity c o n c e p t. T h e y are the ratio s o f the c o m p o u n d e d a v e r a g e a n n u a l rates o f g r o w t h in d e fla t e d state a n d lo c a l e x p e n d it u r e s to the c o m p o u n d e d a n n u a l rates o f g r o w t h in the in d e p e n d e n t v a r ia b le (e.g., real p e r c a p ita p e rs o n a l in c o m e ). T h e y are c o m p u t e d in d e p e n d e n t ly fo r the w h o l e d e c a d e a n d the tw o h a lv e s. N o e ffo r t is m a d e to e x c lu d e the e ffe cts o f v a r ia b le s o th e r th an th e in d e p e n d e n t v a r ia b le . T h e y are, th e re fo re , to t a l— n o t p a rt ia l— e la st ic itie s. W h e r e a s m o re s o p h is t ic a t e d e c o n o m e t r ic t e c h n iq u e s m ig h t b e u se d to d e te r m in e c a u sa lity , n o su c h in fe r e n c e can b e d r a w n fr o m the d ata in the text. MONTHLY REVIEW TA B LE 2 D IS T R IC T E L A S T IC IT IE S Type of Governm ent Expenditure Total ................................ Education ..................... Highways ....................... Welfare ........................... H ealth and Hospital . . Police and Fire ............ Sanitation ..................... Real Personal Income Per Capita 1960196519601965 1969 1969 1.0 1.2 .9 .2 1.6 .7 1.3 .7 1.6 - 1.4 .3 1.1 .6 - .2 .8 1.5 - .6 .3 1.3 .6 .3 Proportion of P opulation over 65 1960196519601965 1969 1969 19601965 6.8 .5 4.0 T h u s , th e r e la t iv e g r o w t h in e d u c a t io n e x p e n d it u r e s a c c e le r a t e d t h r o u g h o u t th e S ix tie s . S ta te a n d lo c a l e x p e n d i t u r e s o n h e a lth a n d h o s p it a ls in th e D is t r ic t g r e w m o r e r a p i d l y th a n i n c o m e , b u t t h e y s l o w e d r e la t iv e t o in c o m e g r o w t h in th e s e c o n d h a lf o f th e d e c a d e . A f t e r g r o w i n g m o r e r a p id ly th a n re a l in c o m e d u r i n g th e firs t f i v e y e a r s o f th e S ix tie s , s a n it a t io n e x p e n d it u r e s a c t u a lly d e c l in e d in re a l t e r m s in t h e s e c o n d f iv e y e a rs . T h e g r e a t e r g r o w t h in e d u c a t io n a l, a n d h e a lth a n d h o s p ita l e x p e n d it u r e s w a s a p p a r e n t ly a c h ie v e d , a t le a s t p a r t ia lly , t h r o u g h m u c h s l o w e r g r o w t h in o t h e r e x p e n d it u r e s . T h i s is e s p e c ia lly t r u e o f h i g h w a y e x p e n d it u r e s . F r o m 1 9 6 0 t o 1 9 6 5 , th e s e e x p e n d i t u r e s g r e w a lm o s t as r a p i d l y as i n c o m e b u t a c t u a lly d e c l in e d in rea l te r m s in th e la tte r h a lf o f th e d e c a d e . R e a l e x p e n d i t u r e s o n p o lic e a n d fir e p r o t e c t io n , a lt h o u g h g r o w i n g at an a c c e le r a t in g p a c e d u r i n g t h e d e c a d e , d id n o t g r o w as r a p i d l y as re a l i n c o m e . W e l f a r e e x p e n d it u r e s , t o o , g r e w fa r m o r e s l o w l y th a n re a l in c o m e . T h e y in c re a s e d a t a ra te o n l y 2 0 p e r c e n t as r a p id ly as p e r c a p ita in c o m e g r o w t h in th e firs t h a lf o f th e S ix tie s a n d 30 p e r c e n t as r a p i d l y in th e s e c o n d h a lf. T h u s , d e s p it e s o m e i m p r o v e m e n t in th e p e r io d f r o m 1 96 5 t o 1 9 6 9 , it is c le a r th a t D is t r ic t g o v e r n m e n t s still c h o s e t o a llo c a t e v e r y little o f th e S o u th ' s r a p i d l y g r o w i n g p e r c a p ita in c o m e to w e l f a r e p r o g r a m s . O f c o u r s e , th e in c re a s e in re a l in c o m e m a y h a v e o ff s e t s o m e o f th e n e e d f o r w e lf a r e . N e v e r t h e le s s , t h o s e S o u t h e r n e r s w h o w e r e n o t s o fo r t u n a t e as t o f in d s t e a d y e m p l o y m e n t a n d a s u f f ic ie n t in c o m e m a y h a v e s h a re d v e r y little in th e o v e r a l l p r o s p e r i t y in c re a s e s o f th e D is t r ic t . W h a t a b o u t th e im p a c t o f a g e d is t r ib u t io n a n d u r b a n i z a t i o n o n sta te a n d lo c a l e x p e n d it u r e s in th e D is tric t? W h a t r e s p o n s e d id D is t r ic t g o v e r n m e n t s s h o w t o c h a n g e s in t h o s e fa c to rs ? C o n s i d e r th e im p a c t o f th e a g e d is t r ib u t i o n o f th e p o p u la t i o n o n w e l f a r e a n d h e a lth a n d h o s p ita l e x p e n d it u r e s . T h e D is tric t's g o v e r n m e n t s p e r f o r m e d s o m e w h a t b e t t e r in th is a re a . A l t h o u g h in th e FEDERAL RESERVE BANK OF ATLANTA Proportion of Population Enrolled in Public Schools 1.0 3.3 .8 3.6 19651969 404.5 19601969 Proportion of Population Living in SMSA’s 19601965 19651969 19601969 5.5 3.1 3.7 1.0 1.5 1.3 2.5 .8 2.8 1.4 21.5 3.8 7.2 - firs t h a lf o f th e S ix tie s , w e l f a r e e x p e n d it u r e s e x p a n d e d o n l y h a lf as r a p i d l y as th e a g e d p o r t io n o f th e D is tric t's p o p u la t i o n , in th e s e c o n d h a lf t h e y e x p a n d e d at th e s a m e ra te ( T a b le 2). T h u s , as t h e d e c a d e p r o g r e s s e d , it a p p e a rs th a t D is t r ic t g o v e r n m e n t s b e c a m e m o r e r e s p o n s iv e t o t h e p r o b l e m s o f th e a g e d . E x p e n d it u r e s f o r h e a lth a n d h o s p it a ls p r e s e n t a b e t t e r re c o r d . T h e s e e x p e n d it u r e s g r e w f o u r t im e s as r a p i d l y as th e a g e d p o r t io n o f th e p o p u la t i o n f r o m 1 9 6 0 t o 1 96 5 . A lt h o u g h th e e la s t ic it y s lip p e d in th e s e c o n d h a lf o f th e d e c a d e , it r e m a in e d a r e s p e c t a b le t h re e . E d u c a t io n e x p e n d it u r e s a re , t o s o m e e x t e n t , d e t e r m i n e d b y t h e s iz e o r p e r c e n t a g e o f th e p o p u la t i o n e n r o ll e d in p u b li c s c h o o ls . T h e e la s tic itie s o f D is t r ic t g o v e r n m e n t s ' e x p e n d it u r e s w i t h re s p e c t t o c h a n g e s in th is p r o p o r t i o n a p p e a r to b e q u it e la rg e ( T a b le 2). T h e n u m b e r s , h o w e v e r , a re d e c e p t iv e l y la rg e a n d m is le a d in g b e c a u s e th e p r o p o r t i o n o f th e D is tric t's p o p u la t i o n e n r o ll e d in p u b li c s c h o o ls c h a n g e d v e r y little o v e r th e d e c a d e . It w o u l d b e m o r e p r o p e r t o c o n c lu d e , t h e r e f o r e , th a t th e in c r e a s in g e x p e n d it u r e s f o r e d u c a t io n b y D is t r ic t g o v e r n m e n t s re fle c t a r e s p o n s e t o o t h e r fa c to rs . F o r e x a m p le , it is l ik e ly th a t th e la rg e in c re a s e in e d u c a t io n a l e x p e n d it u r e s in th e D is t r ic t re fle c ts a n e f f o r t t o i m p r o v e th e q u a li t y o f th e e d u c a t io n a l s y s te m . D is t r ic t g o v e r n m e n t s p r o v i d e a g o o d r e c o r d in t h e ir r e s p o n s e s t o in c r e a s in g u r b a n iz a t io n . W e l f a r e e x p e n d it u r e s ro s e as r a p i d l y as t h e p a c e o f u r b a n iz a t io n in th e firs t h a lf o f th e d e c a d e a n d 50 p e r c e n t m o r e r a p i d l y in th e s e c o n d h a lf. T h u s , it a p p e a rs th a t as th e p a c e o f u r b a n iz a t io n q u ic k e n e d , t h e g r o w t h in w e lf a r e e x p e n d it u r e s a ls o k e p t u p . T h i s p e r f o r m a n c e m a y b e e v e n b e tte r, h o w e v e r , f o r s e v e ra l re a s o n s . M u c h o f t h e D is tric t's p o v e r t y is ru ra l r a th e r th a n u r b a n . T h e g r o w t h o f S o u t h e r n c itie s m a y h a v e c r e a te d n e w jo b s a n d n e w p r o s p e r it y fo r fo r m e r ly p r o v e r t y - s t r i c k e n ru ra l re s id e n ts . In c re a s e s in w e lf a r e n e e d s in u r b a n a re a s, t h e r e f o r e , m a y h a v e b e e n s o m e w h a t o ff e s t b y d e c l in i n g ru ra l 209 w e l f a r e n e e d s . T h u s , in c r e a s in g u r b a n iz a t io n m a y n o t h a v e in d u c e d a g r e a t e r o v e r a ll n e e d f o r w e lf a r e e x p e n d it u r e s . It is a ls o p o s s ib le th a t th e g r o w t h o f D is t r ic t c itie s m a y h a v e b e e n o f a n a t u r e to p r o d u c e e c o n o m ie s o f s c a le in w e l f a r e o p e r a t io n s . A n y o f th e s e a d d it io n a l fa c to rs m ig h t h a v e c o u n t e r a c t e d th e u s u a l e x p e c t a t io n th a t w e lf a r e e x p e n d i t u r e s ris e w i t h in c r e a s in g u r b a n iz a t io n . T h e g r o w t h o f p o li c e a n d fir e e x p e n d it u r e s , o n th e o t h e r h a n d , o u t p a c e d th e g r o w t h o f u r b a n iz a t io n . In th e firs t h a lf o f th e d e c a d e , p o li c e a n d fir e e x p e n d i t u r e s g r e w a lm o s t f o u r t im e s m o r e r a p i d l y t h a n u r b a n a re a s, b u t t h e y s lip p e d t o g r o w o n l y 10 p e r c e n t m o r e r a p i d l y in th e s e c o n d h a lf. T h e g r o w t h o f s a n ita tio n e x p e n d i t u r e s g r e a t ly e x c e e d e d u r b a n g r o w t h in th e firs t h a lf o f th e d e c a d e . F r o m 1 9 6 0 t o 1 9 6 5 , h o w e v e r , rea l s a n ita tio n e x p e n d i t u r e s a c t u a lly d e c lin e d w h i l e u r b a n i z a t i o n p r o c e e d e d at a ra p id c lip . T h i s f a ilu r e ( o r in a b ilit y ) t o r e s p o n d has, d o u b t le s s l y , c o m p o u n d e d th e p r o b l e m s o f w a t e r a n d a ir p o ll u t io n in m e t r o p o l i t a n a re a s, a n d it h a s a lm o s t s u r e l y w o r s e n e d th e q u a li t y o f u r b a n life . T h e v e r y s k e t c h y e v id e n c e in d ic a t e d b y th e e la s tic itie s in T a b l e 2 s u g g e s ts th a t, in g e n e ra l, D is t r ic t sta te a n d lo c a l g o v e r n m e n t s m a y n o t h a v e b e e n v i g o r o u s l y r e s p o n s iv e in th e 1960's to c h a n g in g c o n d it i o n s a r o u n d t h e m . In m a n y a re a s w h e r e p r o b l e m s h a v e b e e n g r o w i n g , e x p e n d it u r e s t o a lle v ia t e th e p r o b l e m s h a v e g r o w n m u c h less r a p id ly . D is t r ic t g o v e r n m e n t s , h o w e v e r , h a v e s h o w n s o m e a re a s o f r e s p o n s iv e n e s s , s u c h as h e a lth a n d h o s p it a l e x p e n d it u r e s . M o r e o v e r , e v e n t h o u g h th e p r o p o r t i o n o f th e p o p u la t i o n e n r o ll e d in p u b li c s c h o o ls d id n o t g r o w s ig n if ic a n t ly in t h e d e c a d e , sta te a n d lo c a l e d u c a t io n e x p e n d it u r e s g r e w r a p id ly . T h e s e in c r e a s e d e x p e n d i t u r e s h a v e s u r e ly ra is e d th e q u a li t y o f th e e d u c a t io n a l s y s te m in th e D is t r ic t , w h i c h h a d p r o b a b l y b e e n u n f o r t u n a t e l y lo w ’ f o r m a n y y e a rs . In th is c a se , th e e x p e n d i t u r e s w e r e m a d e , at le a s t p a r t ly , in r e s p o n s e t o a n o ld p r o b l e m , if n o t a g r o w i n g o n e . O t h e r S ta te a n d L o c a l G o v e r n m e n t s R e sp o n d M o re Q u ic k ly Is s lu g g is h r e s p o n s e t o c h a n g in g c o n d it i o n s r e s tric te d t o D is t r ic t sta te a n d lo c a l g o v e r n m e n t s , o r h a v e sta te a n d lo c a l g o v e r n m e n t s in o t h e r p a rts o f th e c o u n t r y b e e n e q u a ll y s lu g g is h ? H a v e o t h e r g o v e r n m e n t s ta k e n b e t t e r a d v a n t a g e o f ris in g in c o m e s in o r d e r t o i m p r o v e t h e ir p r o v i s i o n o f p u b li c g o o d s a n d s e rv ic e s ? In o t h e r w o r d s , h o w h a v e D is t r ic t sta te a n d lo c a l g o v e r n m e n t s p e r f o r m e d r e la t iv e t o s ta te a n d lo c a l g o v e r n m e n t s in th e n a t io n as a w h o l e , a n d w h a t fa c to rs m a y h a v e le d t o a n y d if fe re n c e s ? T o m e a s u r e th e re la t iv e p e r f o r m a n c e o f g o v e r n m e n t s in th e D is t r ic t a n d th e n a t io n , th e 210 e la s tic itie s in T a b l e 2 h a v e b e e n d i v i d e d b y th e c o r r e s p o n d i n g e la s tic itie s f o r all s ta te a n d lo c a l g o v e r n m e n t s in th e n a t io n . A v a l u e o f m o r e th a n o n e w o u l d in d ic a t e th a t D is t r ic t g o v e r n m e n t s h a v e r e s p o n d e d t o c h a n g in g D is t r ic t c o n d it i o n s m o r e v i g o r o u s l y th a n s ta te a n d lo c a l g o v e r n m e n t s in t h e n a t io n h a v e r e s p o n d e d t o c h a n g in g n a t io n a l c o n d it i o n s . A v a l u e o f le ss th a n o n e w o u l d in d ic a t e less v i g o r o u s r e s p o n s e in t h e D is t r ic t . T a b l e 3 c o n t a in s th e s e r e s p o n s e r a t io s .6 T h e re s u lts a re n o t f a v o r a b l e f o r D is t r ic t g o v e r n m e n t s . A p p a r e n t l y , in o n l y o n e c a se h a v e D is t r ic t g o v e r n m e n t s ' e x p e n d i t u r e s b e e n as q u i c k t o re fle c t in c o m e c h a n g e s as h a v e t h o s e o f all sta te a n d lo c a l g o v e r n m e n t s . T h e r e s p o n s e o f D is t r ic t e x p e n d i t u r e s f o r s a n it a t io n d u r i n g t h e d e c a d e w a s a b o u t 20 p e r c e n t g r e a t e r th a n th e r e s p o n s e o f all s ta te a n d lo c a l g o v e r n m e n t s . In a ll o t h e r ca ses, D is t r ic t g o v e r n m e n t s w e r e s l o w e r t o ta k e a d v a n t a g e o f ris in g i n c o m e s d u r i n g t h e S ix tie s th a n th e s ta te a n d lo c a l g o v e r n m e n t s in th e n a t io n . T h e r e s p o n s e o f D is t r ic t h e a lth a n d h o s p it a l e x p e n d i t u r e s t o r is in g in c o m e s , h o w e v e r , w a s a lm o s t 9 0 p e r c e n t as g r e a t as a ll sta te a n d lo c a l g o v e r n m e n t s , W i t h r e g a r d t o e d u c a t io n a l e x p e n d it u r e s , th e r e s p o n s e w a s 75 p e r c e n t as g re a t. F o r p o li c e a n d fir e p r o t e c t i o n , it w a s 65 p e r c e n t . T h e r e s p o n s e o f w e l f a r e e x p e n d i t u r e s t o ris in g i n c o m e s in t h e D is t r ic t w a s o n l y a b o u t 12 p e r c e n t as g re a t as t h e n a t io n a l fig u r e . T h is in d ic a t e s a g a in th e a p p a r e n t r e lu c t a n c e o f D is t r ic t g o v e r n m e n t s t o c h a n n e l m u c h o f t h e a re a 's r a p i d l y ris in g in c o m e s in t o w e l f a r e - o r i e n t e d p r o g r a m s . W e l f a r e e x p e n d i t u r e s b y s ta te a n d lo c a l g o v e r n m e n t s in th e n a t io n as a w h o l e w e r e a b o u t e ig h t t im e s m o r e r e s p o n s iv e t o ris in g p e r c a p ita i n c o m e th a n w e r e w e l f a r e e x p e n d i t u r e s b y D is t r ic t g o v e r n m e n t s . T h e s e ra tio s s t r o n g l y s u g g e s t, t h e r e f o r e , th a t D is t r ic t g o v e r n m e n t s h a v e b e e n m u c h s l o w e r t h a n s ta te a n d lo c a l g o v e r n m e n t s in o t h e r r e g io n s t o ta k e a d v a n t a g e o f r is in g in c o m e s in o r d e r t o i m p r o v e p u b li c g o o d s a n d s e rv ic e s . It a ls o a p p e a r s th a t, in g e n e r a l, D is t r ic t g o v e r n m e n t s d id n o t i m p r o v e t h e ir r e c o r d as th e d e c a d e p r o g r e s s e d . O n l y in th e e d u c a t io n a l f ie ld d id t h e ir in c o m e r e s p o n s iv e n e s s i m p r o v e re la t iv e t o th e n a t io n b e t w e e n t h e firs t a n d s e c o n d h a lv e s o f th e d e c a d e . D u r i n g th e y e a r s 1 9 6 0 -1 9 6 5 , D is t r ic t e d u c a t io n e x p e n d i t u r e s w e r e o n l y a b o u t h a lf as r e s p o n s iv e t o i n c o m e c h a n g e s as w e r e n a t io n a l e x p e n d it u r e s . In th e s e c o n d h a lf o f th e 1960's, h o w e v e r , t h e y w e r e a lm o s t 90 p e r c e n t as r e s p o n s iv e . S o m e o f th e n a t io n a l in c re a s e in e d u c a t io n e x p e n d i t u r e s u n d o u b t e d l y r e s u lt e d f r o m a n in c r e a s in g p r o p o r t i o n o f t h e p o p u la t i o n r,ln se ve ra l case s o f n e g a tiv e e la st ic itie s, th e se c r u d e ra tio s b e c o m e n e a rly m e a n in g le s s a n d are o m it t e d . MONTHLY REVIEW TAB LE 3 R A T IO O F D IS T R IC T E L A S T IC IT Y T O N A T IO N A L E L A S T IC IT Y Type of Governm ent Expenditure Total ................................ E ducation ....................... Highways ....................... . . Welfare ........................... Health an d Hospital . . Police an d Fire ........... . S anitation ......................... . Real Personal Incom e Per Capita 1960196519601965 1969 1969 .59 .48 2.25 .12 1.07 .76 1.17 .50 .89 — .12 .73 .64 — .53 .75 — .12 .87 .65 1.20 Proportion of Population over 65 1960196519601965 1969 1969 2.52 .06 .51 e n r o ll e d in p u b li c s c h o o ls . T h i s is a p p a r e n t ly n o t t r u e in t h e D is t r ic t . T h i s p h e n o m e n o n w o u l d t e n d t o o v e r s t a t e th e n a t io n a l r e s p o n s e t o ris in g in c o m e s . T h u s , t h e D is tric t's r e la t iv e r e s p o n s iv e n e s s t o in c o m e c h a n g e s p r o b a b l y e x c e e d e d e v e n th e 9 0 - p e r c e n t fig u r e . In o t h e r a re a s, th e D is t r ic t a p p e a r s to h a v e f a r e d m o r e p o o r l y . F o r e x a m p le , in th e h e a lth a n d h o s p it a l a n d in th e p o lic e a n d fir e e x p e n d i t u r e c a t e g o r ie s , t h e D is t r ic t g o v e r n m e n t s ' r e s p o n s iv e n e s s t o i n c o m e g r o w t h s e e m s t o h a v e fa lle n fa r t h e r b e h i n d th a t o f t h e ir n a tio n a l c o u n t e r p a r t s . In w e l fa re , th e r e la t iv e r e s p o n s e r e m a in e d a c o n s t a n t 12 p e rc e n t . T h e D is t r ic t g o v e r n m e n t s d id n o t fa re m u c h b e t t e r w h e n r e s p o n s e s t o fa c to rs o t h e r th a n i n c o m e a re c o n s id e r e d . O n th is c o u n t , t o o , t h e ir r e c o r d a p p a r e n t l y s h o w e d little i m p r o v e m e n t o v e r th e d e c a d e . F o r e x a m p le , t h e r e s p o n s iv e n e s s o f w e lf a r e e x p e n d i t u r e s t o in c re a s e s in th e a g e d p r o p o r t i o n o f th e p o p u la t i o n w a s a b o u t 16 t im e s g r e a t e r in t h e n a t io n , a n d n o s ig n if ic a n t c h a n g e o c c u r r e d d u r i n g th e d e c a d e . E x p e n d it u r e s f o r p o lic e a n d fir e p r o t e c t io n b y D is t r ic t g o v e r n m e n t s w e r e o n l y a b o u t h a lf as r e s p o n s iv e t o in c r e a s in g u r b a n i z a t i o n as w e r e n a t io n a l g o v e r n m e n t s in th e p e r io d 1 9 6 0 -1 9 6 5 , a n d o n l y o n e - s e v e n t h as r e s p o n s iv e in t h e s e c o n d h a lf o f th e d e c a d e . T h e r e s p o n s e o f D is t r ic t g o v e r n m e n t s ' e x p e n d it u r e s o n s a n ita tio n t o in c r e a s in g u r b a n i z a t i o n w a s re s p e c t a b le w h e n c o m p a r e d w i t h t h e ir n a t io n a l c o u n t e r p a r t s in th e firs t h a lf o f t h e d e c a d e , b u t fa ile d t o k e e p p a c e o v e r th e d e c a d e . S o m e C o n c lu d in g O b s e r v a t io n s T h u s , j u d g i n g b y a v a r i e t y o f d if f e r e n t m e a s u re s u s e d in th is s t u d y , sta te a n d lo c a l g o v e r n m e n t s in t h e D is t r ic t h a v e b e e n s l o w t o r e s p o n d to c h a n g in g c o n d it i o n s a r o u n d th e m . O n l y in th e a re a s o f e d u c a t io n a n d h e a lth a n d h o s p it a l e x p e n d it u r e s h a s t h e ir p e r f o r m a n c e b e e n as v i g o r o u s as o n e FEDERAL RESERVE BANK OF ATLANTA Proportion of Population Enrolled in Public Schools 1960196519601965 1969 1969 .07 .45 .06 .48 62.23 Proportion of Population Living in SMSA’s 1960196519601965 1969 1969 .44 .12 .20 .08 .03 .04 .57 .92 .14 .25 .47 5.38 — m ig h t e x p e c t . In th e a re a s o f s a n ita tio n a n d p o lic e a n d fir e p r o t e c t io n , t h e ir r e s p o n s iv e n e s s t o s o m e , b u t n o t a ll, c h a n g in g c o n d it i o n s h as b e e n re s p e c ta b le . T h e i r r e c o r d w i t h re s p e c t t o w e lf a r e e x p e n d it u r e s s e e m s u n e n v ia b le , at b e st. T h e s lu g g is h n e s s o f D is t r ic t g o v e r n m e n t s ' re s p o n s e is e s p e c ia lly n o t ic e a b le w h e n c o m p a r e d w it h th e a c t iv it ie s o f g o v e r n m e n t s in th e n a t io n as a w h o l e . In o n l y a f e w is o la te d in s ta n c e s d id th e D is t r ic t g o v e r n m e n t s e q u a l th e p e r f o r m a n c e o f t h e ir c o u n t e r p a r t s in th e n a t io n . F u r t h e r m o r e , th e t o r p i d i t y o f D is t r ic t g o v e r n m e n t s ' re s p o n s e c o n tra s ts m a r k e d l y w it h th e ra p id g r o w t h o f th e D is tric t's e c o n o m y d u r i n g th e 1960's. W h i l e th e D is tric t's e c o n o m y s e e m s to h a v e c a u g h t u p s o m e w h a t w i t h th e re st o f th e n a t io n d u r i n g th e d e c a d e , th e D is tric t's g o v e r n m e n t s a p p a r e n t ly d id n o t. I n d e e d , it s e e m s th a t e x p e n d it u r e s o f s ta te a n d lo c a l g o v e r n m e n t s w e r e n o t a le a d in g o r d r i v i n g f o r c e in th e D is tric t's e c o n o m ic g r o w t h . It a p p e a rs , ra th e r, th a t t h e y h a v e la g g e d b e h in d its g r o w t h . T h e re a s o n s f o r th is a re u n d o u b t e d l y c o m p le x a n d a re n o t th e c o n c e r n o f th is a rtic le . T w o o b v i o u s p o s s ib ilit ie s s ta n d o u t , h o w e v e r . First, th e g e n e r a lly c o n s e r v a t iv e p o lit ic a l n a t u r e o f th e D is t r ic t sta te s m a y e x p la in m a n y o f th e re s u lts . T h e e le c to ra te s o f th e s e g o v e r n m e n t s m a y s i m p l y p r e f e r t o b e less a g g re s s iv e in p r o v i d i n g m a n y p u b lic g o o d s a n d s e r v ic e s th a t a re o f t e n p r o v i d e d b y o t h e r g o v e r n m e n t s . S e c o n d , g o v e r n m e n t s in th e D is t r ic t sta tes, as in m o s t S o u t h e r n sta tes, e m p l o y ta x s y s te m s th a t a re g e n e r a lly r e g re s s iv e . T a x r e v e n u e s w i l l n o t in c re a s e as r a p i d l y as i n c o m e s o l o n g as re g r e s s iv e ta x s y s te m s a re e m p l o y e d . T h u s , th e D is tric t' s g r o w t h d u r i n g th e d e c a d e a lm o s t s u r e ly d id n o t a u t o m a t ic a lly g e n e r a t e s u ff ic ie n t a d d it io n a l r e v e n u e to fin a n c e e x p e n d it u r e s th a t w o u l d h a v e k e p t p a c e w i t h th e g r o w t h . E ith e r o f th e s e fa c to rs c o u l d e x p la in th e re s u lts o f th e 1960's. T h e y m a y a ls o m e a n th a t th e e x p e r ie n c e o f th e 1970's w i ll n o t b e g r e a t ly d i f f e r e n t . ^ 211 B A N K IN G S T A T IS T IC S Billion $ D E P O S IT S - 2 7 — 11 Net Dem and — — 24 10 Aj — 7 .5 — 15 — 14 -6 .5 A. /v — 9 — 5 .0 — 7 — 4.6 — 4 .2 i i i i i J i i i i i i I i i i i i DJ J i i i J 1970 LATEST M ONTH PLOTTED: SEPTEMBER i i i I i D J J 1971 J D J 1970 DJ 1971 N o t e : A ll fig u r e s are s e a s o n a lly a d ju ste d a n d c o v e r all Sixth D is t r ic t m e m b e r b an k s. ‘ D a il y a v e r a g e fig u r e s S I X B T H A D I S T N " F i g u r e s are fo r the last W e d n e s d a y o f e a ch m o n th . R I C K T I N G N O T E S R E A L E S T A T E L E N D IN G Million $ Farm -1 2 0 0 M ulti-fam ily \ 1-4 fam ilies _n > Nonfarm Nonresidential J -9 0 0 -6 0 0 -3 0 0 1970 1971 A la . 1970 1971 Fla . 1970 1971 Ga. 1970 1971 La* 1970 1971 M is s * 1970 1971 T e n n .* *Sixth District portion N o t e : D a ta s h o w n are fo r D is t r ic t m e m b e r b a n k s a n d are c a t e g o r iz e d June 30th C a ll R e p o r t data. 2 1 FRASER 2 Digitized for by typ e of c o lla t e r a l u se d . F ig u r e s are b a se d on MONTHLY REVIEW D IS T R IC T B A N K S : R EA L E S TA TE L O A N S U n l i k e t h e m a j o r i t y o f o t h e r lo a n c a t e g o r ie s , w h i c h h a v e e x h i b i t e d s lu g g is h b e h a v i o r , re a l e s ta te lo a n s h a v e in c r e a s e d s h a r p ly a t D is t r ic t m e m b e r b a n k s . In fa c t, as o f J u n e 3 0, rea l e s ta te lo a n s w e r e u p 14 p e r c e n t o v e r t h e y e a r - a g o le v e l, a n d d a ta f r o m th e la rg e w e e k l y r e p o r t in g b a n k s in d ic a t e th a t th is g r o w t h h a s c o n t i n u e d t h r o u g h O c t o b e r . If th e c u r r e n t e x p a n s io n in b u i l d i n g c o n s t r u c t io n c o n tin u e s , th is g r o w t h in rea l e s ta te le n d i n g w i l l n o t b e s h o r t liv e d . A n i n - d e p t h l o o k a t th e J u n e 3 0, 1971 C a ll R e p o r t d a ta ( b y t y p e o f lo a n c o lla te ra l u s e d ) re v e a ls th a t th e v o l u m e o f lo a n s s e c u r e d b y m u l t i - f a m i l y re s i d e n t ia l p r o p e r t ie s w a s t h e fa ste s t g r o w i n g c a t e g o r y , in c r e a s in g 2 4 p e r c e n t o v e r t h e J u n e 3 0, 1 9 7 0 le v e l. A l l o t h e r t y p e s o f re a l e s ta te le n d i n g a ls o s h a re d in th e g r o w t h ; th is e x p a n s io n r a n g e d f r o m 6 p e r c e n t in lo a n s s e c u r e d b y f a r m la n d t o 1 6 p e r c e n t in lo a n s s e c u r e d b y n o n f a r m - n o n r e s i d e n t i a l p r o p e r t y ( h o te ls , c h u r c h e s , h o s p ita ls , c lu b s , lo d g e s , e tc .). D e s p it e d if f e r e n t ra te s o f g r o w t h e x h i b i t e d b y i n d i v i d u a l re a l e s ta te lo a n c a t e g o r ie s , t h e ir p r o p o r t io n a t e s h a re s w e r e o n l y s l i g h t l y a ffe c t e d . L o a n s s e c u re d b y n o n fa rm -n o n re s id e n tia l p r o p e r t y w e n t u p o n l y o n e p e r c e n t b u t c o n t i n u e d t o m a k e u p th e la rg e s t s h a re o f lo a n v o l u m e . L o a n s s e c u r e d b y o n e t o f o u r - f a m i l y re s id e n c e s , h o w e v e r , d r o p p e d d o w n a p e r c e n t . In b o t h t h e D is t r ic t a n d in e a c h i n d iv i d u a l D is t r ic t s ta te , lo a n s s e c u r e d b y fa r m la n d a ls o d e c l in e d a b it. A s u p p le m e n t a l r e p o r t a tta c h e d t o t h e J u n e 3 0, 1971 C a ll R e p o r t in d ic a t e d th a t p e r m a n e n t f i n a n c in g m a k e s u p t h e b u l k o f b a n k rea l e s ta te le n d i n g ; o n l y a b o u t 2 0 p e r c e n t o f to ta l re a l e s ta te lo a n s w e r e u s e d t o fin a n c e o n - s it e c o n s t r u c t io n in p ro c e s s . P r io r t o th is s u r v e y , t h e r e s p e c t iv e a m o u n t s o f l o n g a n d s h o r t - t e r m b a n k f in a n c in g w e r e u n k n o w n . N o w w e k n o w th a t th e b u lk o f m u l t i - f a m i l y re s i d e n t ia l lo a n s w a s o f a s h o r t - t e r m n a t u r e — w i t h 60 p e r c e n t o f t h e lo a n s b e in g u s e d f o r o n - s it e c o n s t r u c t io n . O n t h e o t h e r h a n d , t h e b u l k o f lo a n s f o r o n e t o f o u r - f a m i l y d w e l l i n g u n its a n d f o r n o n f a r m - n o n re s id e n tia l p r o p e r t ie s w a s o f a p e r m a n e n t n a t u r e — FEDERAL RESERVE BANK OF ATLANTA R IS E S H A R P L Y REAL ESTATE LOANS FOR ON-SITE CONSTRUCTION IN PROCESS Alabama Florida Georgia Louisiana* Mississippi* Tennessee* District Amount ($ millions) P ercent of Total Real Estate Loans 50.8 176.6 156.5 103.5 32.4 51.8 571.6 13.1 15.1 26.6 28.4 19.9 15.5 19.0 ‘ District portion w i t h o n l y 14 p e r c e n t a n d 21 p e r c e n t , r e s p e c t iv e ly , u s e d f o r s h o r t - t e r m fin a n c in g . N o t a ll t h e c o n s t r u c t io n lo a n s th a t b a n k s m a k e a re rea l e s ta te lo a n s ; s o m e a re c la s s ifie d as c o m m e rc ia l a n d in d u s t r ia l lo a n s . T h e d is t in g u is h in g c r it e r io n is w h e t h e r o r n o t th e c o n s t r u c t io n lo a n is s e c u r e d b y a m o r t g a g e . T h o s e s e c u r e d b y m o r t g a g e a re c la s s ifie d as rea l e s ta te lo a n s ; t h o s e th a t a re n o t s e c u r e d b y m o r t g a g e a re c la s s ifie d as c o m m e rc ia l a n d in d u s t r ia l lo a n s . T h e s u p p l e m e n t a r y r e p o r t s h o w e d th a t t h o s e c o n s t r u c t io n lo a n s c la s s i fie d as c o m m e r c ia l a n d in d u s tria l lo a n s a m o u n t e d to $ 1 4 7 m il l i o n b y m id -1 9 7 1 a n d a c c o u n t e d f o r 3 p e r c e n t o f to ta l c o m m e r c ia l a n d in d u s t r ia l lo a n s a t D is t r ic t m e m b e r b a n k s . T h i s p e r c e n t a g e v a r i e d f r o m .3 p e r c e n t in th e D is t r ic t p o r t io n o f L o u is ia n a to 7.6 p e r c e n t in th e D is t r ic t p o r t io n o f T e n n e s s e e . C o n s t r u c t io n lo a n s o f p r iv a t e ly o w n e d , n o n f a r m n o n r e s id e n t ia l p r o p e r t ie s a c c o u n t e d f o r 55 p e r c e n t o f th e $ 1 4 7 m il l i o n in c o n s t r u c t io n le n d in g . M u l t i f a m il y re s id e n tia l c o n s t r u c t io n lo a n s m a d e u p 27 p e r c e n t , a n d lo a n s f o r o n e - t o f o u r - f a m i l y re s id e n tia l c o n s t r u c t io n w e r e r e s p o n s ib le f o r 18 p e r c e n t . T h u s , th e b u lk o f c o n s t r u c t io n l e n d i n g h a d b e e n c e n t e r e d o u t s id e th e re s id e n tia l a re a . J O S E P H E. R O S S M A N , JR . 213 Sixth District Statistics S e a s o n a lly A d ju ste d (A ll d a ta Latest Month 1971 a re One Month Ago in d e x e s , Two Months Ago in d ic a t e d o th e r w is e .) One Year Ago SIXTH DISTRICT Latest Month 1971 Unemployment Rate (Percent of Work ForceJt............. Sept. Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Sept. IN COM E AND SP END ING Sept. Aug. Aug. Aug. 137 127 144 121 137r 110 56 131 137 135 167 130 131 114 117 115 Sept. Sept. 404 361 411 370 381 364 341 304 Sept. Nonfarm Employmentt . . . . Sept. Manufacturing .................... Sept. Nondurable Goods . . . . Sept. Food .......................... Sept. T e x t i l e s ....................... Sept. Apparel ....................... Sept. Paper .......................... Sept. Printing and Publishing . Sept. C h e m i c a l s .................... Sept. Durable G o o d s ................. Lbr., Wood prods., Furn. & rix. Sept. Sept. Stone, Clay, and Glass Sept. Primary M e t a l s ............. Sept. Fabricated Metals . . . . Machinery, Elec. & Nonelec. . Sept. Sept. Transportation Equipment Sept. Nonmanufacturing ............. Sept. C o n s t r u c t io n ................ Transp., Comm., & Pub. Utilities Sept. Sept. Trade .......................... Sept. Fin., ins., and real est. . . Sept. S e r v i c e s ....................... Sept. Federal Government . . . State and Local Government . Sept. Sept. Farm E m p lo y m e n t.................... Unemployment Rate Sept. (Percent of Work ForceJt • • • Insured Unemployment Sept. (Percent of Cov. Emp.) . . . . Sept. Avg. Weekly Hrs. in Mfg. (Hrs.) . Sept. Construction Contracts* . . . . Sept. R e s id e n t ia l.......................... Sept. All O t h e r .............................. Aug. Electric Power Production-** . . Aug. Cotton C o n su m p tio n **............. Petrol. Prod, in Coastal La. and Miss.* "Oct. July Manufacturing Production . . . July Nondurable G o o d s ................ July Food .............................. July T e x t i l e s .......................... July Apparel .......................... July Paper .............................. Printing and Publishing . . July July C h e m i c a l s ....................... July Durable G o o d s .................... July Lumber and W o o d ............. July Furniture and Fixtures . . . July Stone, Clay and Glass . . . July Primary M e t a l s ................ July Fabricated M e t a l s ............. July Nonelectrical Machinery . . July Electrical Machinery . . . . July Transportation Equipment 112 106 107 102 103 104 107 116 105 104 100 104 102 113 160 100 115 108 113 114 120 117 102 121 82 112 105 106 102 103 104 104 115 105 104 100 103 101 112 159 104 114 107 113 114 119 116 101 120 87 112 106 107 102 104 104 105 115 105 104 100 103 105 113 159 101 114 109 112 114 119 116 101 120 88 111 107 107 104 106 102 108 115 107 105 99 107 104 113 167 108 112 103 111 112 117 116 100 117 89 4.8 4.8 4.7 4.6 2.8 40.7 176 184 168 170 89 127 253 218 177 243 278 199 166 261 295 174 177 166 210 241 386 614 389 3.0 40.4 172 137 206 165 85 134 245 208 166 236 261 193 167 261 291 168 182 166 198 239 379 616 382 Manufacturing Payrolls . . . . Farm Cash R e c e ip t s ................ C r o p s ................................. L iv e sto c k .............................. Instalment Credit at Banks* (Mil. $) New Loans .......................... Repayments ....................... u n le s s One Month Ago Two Months Ago 5.3 40.5 One Year Ago 5.1 40.1 FINANCE AND BAN KIN G Member Bank L o a n s ....................... Sept. Member Bank D e p o s i t s .................Sept. Bank D e b i t s * * ..............................Sept. 152 143 279 153 143 290 147 141 283 136 124 240 141r 105 143 147 138 106 FLORIDA EM PLO YM EN T A N D PRODUCTION FIN AN CE AND BANKING Loans* All Member B a n k s ................ Large Banks ....................... Deposits* All Member B a n k s ................ Large Banks ....................... Bank D e b its* /** ....................... 3.0 40.3 225 226 225 165 86 128 256 220 176 250 274 198 164 261 299 184 180 164 201 246 430 612 391 3.0 40.7r 133 181 85 167 90 123 257 222 180 247 283 200 167 261 300r 179 180 169 208 244 400 630 392 Sept. Sept. 158 146 156 144 153 141 142 133 Sept. Sept. Sept. 149 133 338 148 132 339r 145 130 341 131 120 282 EMPLOYM ENT Sept. Sept. Sept. Sept. Sept. 122 109 124 126 99 121 109 124 129 103 122 109 124 132 110 120 110 122 128 99 Sept. Sept. 4.0 40.5 3.9 40.8r 3.8 40.9 3.7 40.8 Member Bank L o a n s ....................... Sept. Member Bank D e p o sits.................... Sept. Bank D e b its* *................................. Sept. 170 168 368 168 167 367 167 163 371 152 145 302 Manufacturing Payrolls .................Sept. Farm Cash R e c e i p t s ....................... Aug. 135 113 133 130 125 93 Unemployment Rate (Percent of Work Forceit . . Avg. Weekly Hrs. in Mfg. (Hrs.) FIN AN CE AN D B AN KIN G EMPLO YM ENT Nonfarm Employmentt . . . . Manufacturing .................... N on m a n u factu 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 ForceJt . . . Avg. Weekly Hrs. in Mfg. (Hrs.) . . Sept. . Sept. . Sept. . Sept. , Sept. 112 103 115 106 83 111 104 115 105 93 111 102 115 106 82 110 105 113 94 87 , Sept. , Sept. 4.4 40.1 3.9 40.4 4.3 40.4 4.0 39.0 . Sept. . Sept. . Sept. 152 132 392 152 134 397 149 133 403 135 118 326 Sept. . Aug. 129 167 134 147 133 122 129 166 . . . . . Sept. Sept. Sept. Sept. Sept. 104 100 105 82 71 104 100 105 80 80 104 100 105 80 77 104 101 105 84 71 . Sept. . Sept. 6.9 40.8 6.7 42.7 6.5 42.2 6.5 41.8 . Sept. . Sept. . Sept. 142 144 255 139 138 257 135 135 249 130 123 209 . Sept. . Aug. 140 143 142 153 141 156 131 126 . Sept. . Sept. . Sept. 110 110 110 103 81 110 112 109 103 78 110 112 109 103 96 109 109 109 110 93 FINANCE AN D BANKING Farm Cash Receipts EM PLO YM EN T Nonfarm Employmen Manufacturing Nonmanufacturing Avg. Weekly Hrs. in Mfg. (Hrs.) . FIN AN CE AND B AN KIN G M IS S IS S IP P I INCOM E Manufacturing Payrolls . . . . Farm Cash R e c e i p t s ................ Sept. Aug. 136 136 134 162 134 157 133 123 EMPLO YM ENT Nonfarm E m p lo y m e n tt............. Manufacturing .................... Nonmanufacturing ............. C o n s t r u c t io n .................... Farm Em p loy m e n t.................... Sept. Sept. Sept. Sept. Sept. 106 106 106 106 74 106 105 106 106 83 106 106 106 107 79 105 109 103 85 81 144 135 Unemployment Rate ALABAMA 214 Manufacturing Payrolls .................Sept. Farm Cash R e c e ip t s ....................... Aug. EMPLO YM ENT Manufacturing . Sept. MONTHLY REVIEW Latest Month 1971 Unemployment Rate (Percent of Work Force)t • • • Avg. Weekly Hrs. in Mfg. (Hrs.) . One Two Month Months Ago Ago One Year Ago Latest Month 1971_____ One Month Ago Two Months Ago One Year Ago EMPLOYMENT . Sept. . Sept. 5.1 40.8 5.3 40.5 5.2 40.3 5.0 40.4 . Sept. . Sept. . Sept. 161 144 327 163 145 342 158 146 315 143 130 290 . Sept. . Aug. 137 116 138r 55 140 138 130 130 FIN AN CE AND BAN KIN G Sept. Sept. Sept. Sept. Sept. 111 106 114 110 91 110 105 113 108 90 111 107 113 110 89 109 107 110 98 94 . Sept. , Sept. 4.7 39.9 4.7 40.3 4.6 40.5 4.8 39.4 Member Bank L o a n s * ................. . Sept. Member Bank D e p o s it s * ............. . Sept. Bank D e b its* /**.......................... . Sept. 161 141 338 152 136 341 145 128 285 Nonfarm E m ploym entt................ Manufacturing ....................... N onm anufacturing.................... C o n s t r u c t io n ....................... Farm E m ploy m e n t....................... Unemployment Rate (Percent of Work ForceJt . . . . Avg. Weekly Hours in M fg (Hrs.) . . . . . . FINANCE AND BAN KIN G •Daily average basis for entire six states fPreliminary data r-Revised 154 139 316r N.A. Not available Note: Indexes for co n stru ctio n co n tracts, cotton consum ption, em ploym ent, farm c a s h receipts, loans, deposits, petroleum production, and payrolls: 1 9 6 7= 100. All o ther indexes: 1957-59=100. Sources: Manufacturing production estimated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. payrolls and hours, and unemp.t 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.; petrol, prod., U.S. Bureau of Mines; industrial use of elec. power, Fed. Power Comm.; farm cash receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes calculated by this Bank. Debits to Demand Deposit Accounts Insured Commercial Banks in the Sixth District (In T h o u s a n d s of D o lla rs) Percent Change Percent Change Year to Sept. date 1971 9 mos. from 1971 Aug. Sept. from 1971 1970 1970 Year to Sept. date 1971 9 mos. from 1971 Aug. Sept. from 1971 1970 1970 Sept. 1971 Aug. 1971 Birmingham . . . 2,368,856 Gadsden . . . . 82,562 Huntsville . . . 235,136 M o b i l e ............. 774,917 Montgomery . . . 457,515 Tuscaloosa . . . 150,344 2,307,711 83,834 246,571 805,109 525,753 145,903 2,000,990 75,173 204,819 640,619 383,659 137,681 + 3 — 2 — 5 — 4 13 ■ ;c Ft. Lauderdale— Hollywood . . Jacksonville . . Miami ............. O r la n d o ............. Pensacola . . . Tallahassee . . . Tam p a-St. Pete. . W. Palm Beach . 1,149,509 . 2,856,196 . 4,149,616 999,924 332,223 412,959 . 2,510,458 698,317 1,206,404 2,506,061 4,295,277 996,622 338,023 420,808 2,507,598 689,591 _ A l b a n y ............. 148,413 A t l a n t a ............. . 9,310,682 Augusta . . . . 380,108 Columbus . . . 356,387 Macon ............. 402,998 Savannah . . . . 382,397 Baton Rouge . . . 1,016,313 Lafayette . . . . 203,934 Lake Charles . . 192,365 New Orleans . . . 3,344,605 Sept. 1970 STANDARD METROPOLITAN STATISTICAL AREAS Biloxi—Gulfport Jackson . . . . + 18 + 10 + 15 +21 + 19 + 9 + 15 +12 + 8 + 5 + 18 + 13 1,028,649 2,051,455 3,556,012 791,350 284,050 201,776 2,052,451 600,651 5 + 12 + 14 +39 3 + 17 • 0 +26 _ 2 + 17 — 2 +105 + 0 +22 + 1 + 16 + 13 + 18 +23 + 17 +23 +53 + 16 + 11 138,817 9,304,513 383,185 351,170 399,230 394,017 133,668 7,685,679 310,648 304,422 344,976 323,903 + 7 + 0 1 ■ 1 + 0 - 3 + 11 +21 +22 + 17 + 17 + 18 + 9 + 15 +17 +15 + 13 + 17 966,646 198,716r 177,222 3,257,025 784,380 169,624 166,151 2,707,782 + + + + 5 3 9 3 +30 +20 +16 +24 +20 + 11 + 10 + 15 - 6 + 6 + 14 + 10 + 14 _2 188,186 960,763 191,221 1,025,981 178,156 844,064 Chattanooga . . . 1,004,214 Knoxville . . . . 702,783 Nashville . . . . . 2,247,395 948,273 697,181 2,310,568 874,360 580,665 1,866,335 + 6 + 1 - 3 + 15 +21 +20 + 12 + 15 + 9 OTHER CEN TERS Anniston Dothan Selma 90,575 122,623 54,165 89,654 115,375 54,858 79,097 103,145 51,776 + 1 + 6 - 1 + 15 + 19 + 5 + 7 +22 + 5 Bartow . . . . Bradenton . . Brevard County Daytona Beach Ft. Myers— N. Ft. Myers . 32,957 115,188 231,881 100,888 32,264 104,057 220,686 123,782 34,672 95,323 208,846 96,639 + 2 + 11 + 5 -1 8 - 5 +21 + 11 + 4 + + 144,888 151,203 131,544 - + 10 +21 'Includes only banks in the Sixth District portion of the state FEDERAL RESERVE BANK OF ATLANTA 4 0 12 1 9 tPartially estimated Sept. 1971 Gainesville Lakeland . . Monroe County Ocala . . . St. Augustine St. Petersburg Sarasota . . Tampa . . . Winter Haven Aug. 1971 Sept. 1970 150,019 186,731 46,366 122,687 25,833 614,255 180,357 1,311,109 95,479 151,347 191,713 48,045 128,953 25,554 620,381 188,483 1,295,809 99,022 117,819 151,754 40,436 99,219 22,743 479,034 159,017 1,098,598 73,131 Athens Brunswick Dalton Elberton Gainesville Griffin LaGrange Newnan Rome . . Valdosta 170,248 75,514 143,135 16,034 99,727 53,476 31,656 37,083 108,816 79,192 176,586 71,772 146,109 16,519 105,526 52,351 46,044 33,867 106,230 84,461 Abbeville . . Alexandria Bunkie . . . Hammond New Iberia Plaquemine Thibodaux 15,564 164,693 7,306 53,653 45,607 12,223 28,245 15,695 160,821 7,268 50,742 48,027 13,787 29,564 Hattiesburg Laurel . . . Meridian . . Natchez . . Pascagoula— Moss Point Vicksburg . . Yazoo City 92,611 48,439 82,524 46,058 91,188 52,047 91,429 46,272 88,416 58,576 38,168 120,824 56,718 35,649 84,975 55,007 36,448 118,443 121,896 188,272 105,708 119,238 180,764 96,372 101,091 177,476 Bristol . . . Johnson City Kingsport . . District Total Alabama^ . . Florida} . . Georgia* . . Louisianat* M ississip p i* Tennesseet* . . + + - 1 3 3 5 1 1 4 1 4 +27 +23 +15 +24 +14 +28 +13 +19 +31 +24 +18 +14 +16 + 4 +28 + 7 +10 +19 121,913 54,343 125,516 20,885 91,791 46,374 22,931 31,662 93,834 71,014 - 4 + 5 - 2 - 3 -5 + 2 -3 1 + 9 + 2 - 6 +40 +39 +14 -2 3 + 9 +15 +38 +17 +16 +12 +43 +21 +14 -1 5 +5 +15 +38 +11 +11 + 8 14,269 156,640 7,493 44,214 42,285 12,941 24,160 - 1 + 2 + 1 + 6 - 5 -1 1 - 4 + 9 + 6 + 5 + 7 - 2 + 6 +21 +13 + 8 +12 - 6 - 2 +17 +13 77,107 + 2 55,450 - 7 72,726 - 1 0 45,085 - 0 +20 +34 -1 3 + 3 +13 + 5 + 2 + 4 -2 7 + 4 + 3 + 6 + 7 + 5 +13 +11 +10r +12 + 2 + 4 +23 +21 + 6 +19 +14 + 5 . . 49,994,182 49,983,116r 41,711,409 + 0 +20 + 15 5,879,819 16,294,002 13,738,725 . . 5,854,603 . . 2,136,054 . . 6,090,979 5,064,417 5,935,106 16,221,507 13,360,414 13,883,066 11,454,344 5,724,139r 4,799,449 1,891,172 2,259,900 5,141,613 5,959,398 + + + + 16 +22 +20 +22 +13 + 18 +11 +18 +15 + 14 +14 + 12 1 0 1 2 5 2 tEstimated 215 District Business Conditions 1957-59 = 100 Seas. Ad j Bank Debits \ Construction Contracts 1967=100 Seas. Ad) Farm Cash Receipts / ■' 6-M o. Moving average i i i i i I i i i i I 1969 1970 1971 1969 1970 *Seas. adj. figure; not an index Latest plotting: Septem ber— except mfg. production, Ju ly, and farm receipts, August A s if in s p ir e d b y a u t u m n ' s b r ig h t b u r s t fa r m e m p l o y m e n t p o s t e d a s t r o n g g a in a u t o sa le s c o n t i n u e d t o c l i m b r o b u s t l y ; e x p e c t e d b u t is c o n t r i b u t i n g t o w e a k e r t h e la r g e r b a n k s is s till w e a k . o f c o l o r , t h e S o u th e a s t's e c o n o m i c p ic t u r e is a ls o b r ig h t e r . N o n in S e p t e m b e r ; c o n s u m e r in s t a lm e n t c r e d it e x p a n d e d v i g o r o u s l y ; a n d c o n s t r u c t i o n c o n t r a c t v o l u m e s u r g e d . A r e c o r d c r o p h a r v e s t is a g r ic u lt u r a l p ric e s . C o m m e r c ia l a n d in d u s t r ia l lo a n d e m a n d at In S e p t e m b e r , a s h a r p g a in in n o n f a r m e m p l o y m e n t o c c u r r e d in f i v e o f t h e s ix r e p o r t in g sta te s. A n in d u s tria l d is p u t e in M is s is s ip p i's s h i p b u i l d i n g in d u s t r y a c c o u n t e d f o r th a t state's n o n f a r m e m p l o y m e n t d r o p . N o n m a n u f a c t u r i n g is still p r o v i d i n g m o s t o f th e e m p l o y m e n t s tr e n g t h , w i t h th e t ra d e a n d s e r v ic e in d u s t r ie s s h o w i n g la rg e e m p l o y m e n t g a in s . Ju ly ' s m a n u f a c t u r in g p r o d u c t i o n d e c lin e d f o r th e firs t t im e in s e v e n m o n t h s , s in c e b o t h d u r a b le a n d n o n d u r a b l e p r o d u c t i o n fe ll. In S e p t e m b e r , c o n s u m e r in s t a lm e n t c r e d it o u t s t a n d in g a t c o m m e r c i a l b a n k s p o s t e d a s iz a b le a d v a n c e . T h e g a in w a s b r o a d l y b a s e d , w i t h all t y p e s o f c r e d it c o n t r i b u t i n g t o th e g r o w t h . S a le s o f d o m e s t ic a l l y p r o d u c e d a u t o m o b i l e s in S e p t e m b e r w e r e e x t r e m e l y g o o d , e a s ily s u r p a s s in g th e y e a r - a g o m a rk . S p e c ia l fa c to rs , p a r t ic u la r ly th e a v a ila b ilit y o f n e w m o d e l ca rs a t o ld p ric e s a n d th e p r o p o s e d e x c is e ta x re b a te , h e a v i ly in f lu e n c e d th e s t r o n g sa le s p e r f o r m a n c e . P ric e s o f a g r ic u lt u r a l p r o d u c t s d r o p p e d f u r t h e r in S e p t e m b e r b u t r e m a in e d s u b s t a n t ia lly a b o v e t h e le v e l o f a y e a r a g o . P ric e s o f c o r n , v e g e t a b le s , h o g s , a n d s o y b e a n s r e g is te re d m a j o r d e c lin e s , re fle c t in g in c re a s e d p r o d u c t i o n a c c o m p a n ie d b y s o m e w e a k e n in g in d e m a n d . P r e li m i n a r y d a ta f o r O c t o b e r in d ic a t e s t r o n g e r p ric e s f o r h o g s b u t d e c i d e d l y w e a k e r p ric e s f o r e g g s a n d b r o ile r s . C r o p h a r v e s t in g p r o c e e d e d at a ra p id p a c e w h e r e w e a t h e r p e r m it t e d . A r e c o r d h a r v e s t o f m o s t c r o p s is a n t ic ip a t e d . A S e p t e m b e r s u r g e p u s h e d t h ir d - q u a r t e r c o n s t r u c t io n c o n t r a c t s s o m e w h a t a b o v e s e c o n d - q u a r t e r a w a r d s a n d 2 7 p e r c e n t a b o v e t h e y e a r - a g o le v e l. T h e re s id e n tia l s e c t o r a c c o u n t e d f o r n e a r l y a ll o f th is in c re a s e . D e p o s i t i n f lo w s a n d lo a n c o m m i t m e n t s a t s a v in g s a n d lo a n a s s o c ia t io n s s l o w e d s l ig h t ly in S e p t e m b e r , b u t m o r t g a g e le n d i n g p ic k e d u p . H o m e m o r t g a g e ra te s a re n o w s l i g h t l y b e l o w t h e ir m id s u m m e r le v e ls . S t r o n g e r d e p o s i t i n f lo w s a t D is t r ic t m e m b e r b a n k s c o n trib u te d to re d u c e d b a n k b o r r o w in g s f o r re s e rv e p u rp o s e s . D e m a n d d e p o s i t g a in s w e r e s h a r p ly s t r o n g e r a t th e s m a lle r b a n k s , w h i l e i n f lo w s o f c o n s u m e r s a v in g s d e p o s it s a t a ll b a n k s c o n t i n u e d w e a k t h r o u g h la te O c t o b e r . A t t h e la r g e r b a n k s , b u s in e s s lo a n s w e r e d o w n , w i t h th e la rg e s t d e c lin e s a p p e a r in g in th e s e r v ic e in d u s t r ie s , t r a n s p o r t a t io n f ir m s , t e x t ile , a p p a r e l, a n d le a t h e r g o o d s m a n u fa c tu re rs . F u r t h e r liq u id a t io n s o f U . S. G o v e r n m e n t s e c u ritie s r e s u lt e d in a n e t d e c lin e in to ta l m e m b e r b a n k s e c u r it y h o ld in g s . N O TE: Data on w hich statements are based have been adjusted when possible to elim inate seasonal influences. 216 M O NTH LY REVIEW November 1971
@FedFRASER