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Inis issue: T h e S o u t h e a s t 's C u t t i n g U p T h e M o n e y S to c k D is t r ic t B u s in e s s C o n d it io n s and N e e d le s T r a d e s T h e S a n d N by W illia m o u t h e a s t 's e e d l e s D. T C u t t i n g U p r a d e s Toal C lo th in g is one item w hich is close to all of us and is so often taken for granted that w e rarely consider its contribution to ou r econom y. A pp arel m anu facturin g,1 or the cutting up and needle trades as it is called, ranks as the Southeast's largest m anufacturing em ployer, with over 245,000 w orkers in nearly 2,000 plants.2 If you can wear it, this industry m akes it— everything from ju nior's first playsuit to m en's dungarees to the skim piest bikini. In the Southeast, clothesm aking is heavily w eighted tow ard m en's and bo ys' clothing, with m en's w ork clothin g particularly important. O v e r o ne-h alf of the apparel jobs in this region are in this type of production as com pared with only slightly m ore than one quarter nationally. But clothesm aking in the Southeast is not lim ited to menswear. In Florida, m anufacture of w om e n 's outerw ear accounts for over o ne-h alf of apparel jobs (see Table 1). M iam i, the hom e of a m u sh ro o m in g w o m e n 's clothin g industry, ranks third only to N e w York City and Los A n geles as a fashion center. Growth The m ovem ent of clothesm aking out of the hom e and into the factory received its first real boost with Elias H o w e 's invention of the sew in g m achine in 1846. In the Southeast, the grow th of the apparel industry has been both internally and externally generated. In other w ords, plants have sprung up within this region, as well as having m oved here from other parts of the country, m ost notably the Northeast. A lth o u gh it is very difficult to tell h o w m uch of this grow th is from each source, since the late Fifties there seem s to have been a net shift of apparel plants to this region (see Table 2). W h ile the num ber of apparel plants with twenty or m ore w orkers declined nationally between the years 1959 and 1971, each of the six Southeastern ’According to government definitions, apparel manufacturing includes establishments producing clothing and fabricating products by cutting and sewing purchased woven or knit textile fabrics and related materials. Not included in this definition are custom tailors or dressmakers; included are all regular manufacturers of apparel items, as well as apparel contractors and jobbers. 2The Southeast is here defined as those states lying totally or partially within the Sixth Federal Reserve District— Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee. Monthly Review, Vol. L V III, No. 11. Free su b scrip tio n and a d d itio n al c o p ie s available u p o n request to the Research D epartm ent, Federal Reserve Bank o f Atlanta, Atlanta, G e o rg ia 30303. 170 N O V E M B E R 1973, M O N T H L Y REVIEW TA BLE 1 P e rc e n t D istrib u tio n of A p p arel E m p lo ym e n t (1971) Alabama Men's and Boys’ Suits and Coats Men’s and Boys’ Furnishings Women’s and Misses’ Outerwear Women’s and Children’s Undergarments Children’s Outerwear Other Apparel Items Total Georgia Florida Louisiana Mississippi Tennessee Sixth District States u. s . 3.6 1.8 8.9 N.A. N.A. 7.7 N.A. 8.5 48.9 11.1 48.0 62.3 70.3 57.7 50.8 26.5 7.9 51.4 10.6 0.0 5.6 16.3 14.7 31.1 23.5 7.6 8.5 5.7 11.6 18.4 13.0 4.2 15.3 4.7 N.A. N.A. 8.6 N.A. N.A. 3.9 1.8 12.6 10.7 4.1 N.A. 8.1 5.8 20.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 N. A. Not Available Source: County Business Patterns 1971 states had an increase in such plants. The contrast is particularly noticeable when the Southeast is com pared with one of the older apparel centers, N e w York State, w hich has show n a sharp drop in apparel manufacturers. A ll of the m ajor types of apparel m anufacturing had increases in num ber of plants. However, m en's and boys' furnishings and w o m e n 's and m isses' outerw ear increased m ost in num ber of establishm ents with twenty or m ore w orkers in the Southeast. O n a state basis, m ost of the increase in w o m e n 's apparel has been in Florida, w hile m en's and boys' clothesm aking has grow n m ost rapidly in Georgia, M ississippi, and Tennessee. W ere locational advantages responsible for plants m o vin g southw ard, as well as the plants springin g up within the South? If three different apparel manufacturers are asked w hy they located in the South, they will probably give three different answers. This labor-intensive industry w o u ld be expected to m ove to, and gro w m ost rapidly in, areas w here labor and materials are abundant and relatively cheap. Thus, the Southeast, w hich in the past had an am ple supply of labor, has been a natural location and relocation site for m any apparel plants. O n top of this abundant labor supply, the region's lack of strong union organization provided an additional advantage. Except for large firms with headquarters in the Northeast, m ost Southeastern apparel plants are nonunionized. A lso apparel plants m oved South fo llo w in g their largest supplier, textile plants. The expanding regional market w as also im portant to the Southeastern apparel industry's growth. A s em ploym ent, incom e, and purchasing pow er grew, so did dem and, particularly for the TA BLE 2 C hang e in N um ber of A p p arel P la n ts W ith 20 or More E m p lo ye e s (1959-71) Total Apparel Alabama Florida Georgia Louisiana Mississippi Tennessee District States New York U. S. + + + + + + 69 215 123 11 48 100 + 566 - 1,346 582 Men’s and Boys’ Suits and Coats + + + + + 3 2 7 2 2 6 + 18 73 - 156 Men’s and Boys’ Furnishings + + + + + + 23 15 34 7 33 36 + 148 49 + 138 Women’s and Misses’ Outerwear Women’s and Children’s Undergarments + 11 5 5 2 8 5 + 16 + 132 + 31 N.A. + 2 + 30 + + + + + + 211 - 593 84 + 36 - 127 217 Children’s Outerwear + + + + 4 19 14 1 0 4 + 40 - 166 210 N. A. Not Available Source: County Business Patterns 1959, 1971 Note: Total apparel may not add because only largest apparel classifications are shown here. FEDERAL RESERVE BANK OF ATLANTA 171 Assembly M any H and O p e r a t io n s Packing Inspection 5 To Warehouse Parts Department Cutting Each number indicates the operations per department (not including processes of storing, inspecting, and transporting from step-to-step). m ore basic nondurables such as clothing. How ever, m any Southeastern m anufacturers are q uick to point out that they produce for a national and even international market, with only one-fourth to one-half of their production sold in the Southeast. In som e cases, m igration southw ard, particularly of retired people, boosted the region's apparel industry. After living the go o d life for a few years, m any "retirees" becam e restless and started up sm all sew in g plants, w hich in som e cases m u sh ro om ed into full-scale apparel m anufacturing operations. In the early Forties, this decision 172 to com e out of retirement w as partially m otivated by the w ip in g out of savings in the Great Depression of the Thirties. This is especially true for som e of the sm all plants in the M ia m i area. A n oth er factor also m ay have played an im portant role in the grow th of the M iam i area's apparel industry. A t least for som e lines o f w o m e n 's clothing, the absence of a w inter line allow s this area to get a jum p on their northern rivals in pretesting spring and sum m er lines. This, a lo n g w ith the glam o u r of a "fu n in the s u n " atm osphere, m ay have lured som e w om e n 's apparel plants into this area. N O V E M B E R 1973, M O N T H L Y REVIEW Importance to the Southeast A lth o u gh reasons for the grow th of the Southeast's apparel industry m ay vary, doubtless the industry has been one of the basic b u ild in g blocks in the region's e co n o m ic boom . Apparel and textile plants, w hich first began to dot the Southeast in the Forties and Fifties, were som e of the first signs of rapid industrialization. Today, besides being the Southeast's largest m anufacturing em ployer, apparel m anufacturing is the fifth largest producer of go o d s w hen m easured by the value added in production. The industry is even m ore im portant than these statistics indicate, however. Apparel makers purchase a large quantity of go o d s and materials from the textile industry, g o o d s w hich are not counted as value added in m aking clothes. In fact, nearly 40 percent of the textile industry's output is sold as interm ediate products to the apparel industry. Because of close ties with textile suppliers, then, the grow th of the apparel industry has also benefited the textile industry, m aking clothin g's total im pact on the region's e c o n o m y m uch greater than a quick reading of statistics w o u ld indicate. C lo th e sm a kin g also generates a sizable payroll. Despite the large am ount of processed materials involved and the generally low w ages resulting from labor-intensive production techniques, annual apparel m anufacturing payrolls am oun t to over $1 billion in the Southeast; this total is surpassed by only four other types of m anufacturing industries. Characteristics The apparel industry has grow n in tandem with the Southeast's econom y, but w hile the m akeup of the region's e c o n o m y has changed dram atically, apparel industry characteristics have changed little. T h o u gh other m anufacturing has becom e m ore autom ated and capital-intensive, apparel m anufacturing has for the m ost part m aintained labor-intensive production. O f course, technical advances such as new sew ing m achines, fabric fusion, and die-cutting processes have been introduced; but m ost of these have been on a m uch sm aller scale than in other m anufacturing industries. W h y have apparel manufacturers failed to autom ate? The m any hand operations involved in m aking apparel have presented the biggest problem . A t least eighty different operations can be counted just in m aking one m an's shirt (see flow chart); and, in general, shirtm aking is m ore standardized and autom ated than m aking m ost w o m e n 's apparel. The m any different sizes, styles, and fabrics, all subject to sudden changes in consum er dem and, also have added to the difficulty of au tom ating m ost apparel m aking. In FEDERAL RESERVE BANK OF ATLANTA general, the flexible and stretchable fabrics used d o not easily lend them selves to m achine processing. The m ajor reason w hy the apparel industry has not autom ated, however, is probably that, in the past, labor has been cheap and readily available. Consequently, m anufacturers did not spend large sum s of m oney for research and developm ent of labor-saving equipm ent. A s noted, this industry has chosen to relocate production sites rather than to incur autom ation expenses. Labor intensity, here m easured as the percent payrolls are of value added, is greater for all major types of apparel m anufacturing than m anufacturing in general (see Table 3). C h ildren 's outerw ear m anufacturing is particularly labor-intensive. Capital expenditures per em ployee are also m uch less in apparel m aking than in m anufacturing generally, about one-seventh as much, and account for the industry's greater labor intensity. These 1971 figures represent only a snapshot in time, but they are representative of capital expenditures in the apparel industry. A s a result of these low levels of capital spen ding in apparel m anufacturing, both grow th and level of productivity (output per m an-hour) are less than in general m anufacturing. In turn, greater labor intensity, low er capital expenditures, and less productivity and its grow th have resulted in low er average w ages in apparel than in total m anufacturing (see Chart I). Actually, it is difficult to measure average earnings or w ages in apparel m anufacturing accurately since m ost w ork is done on a piecew ork basis. This leads to a greater spread in w ages than w ou ld otherwise be the case, but even so, the average w age remains belo w the region's m anufacturing average. Apparel m aking's low capital requirements suggest that entry into this industry is relatively TA BLE 3 Lab o r In te n s ity and C a p ita l E x p e n d itu re s (1971) Capital Payrolls as a Expenditures Percent of Per Employee Value Added District States Total Manufacturing Apparel Manufacturing Men’s and Boys’ Furnishings Women’s and Misses’ Outerwear Women’s and Children’s Undergarments Children’s Outerwear Source: 44% 54% $1,387 $ 191 55% $ 157 51% $ 231 48% 67% $ 189 $ 147 Annual Survey of Manufactures 1971 173 CHART I Apparel Manufacturing: A Low-Wage Industry 1972 avg. h r ly . e a r n in g s ( $ ) Apparel S o u rce : Total Manufacturing U .S . D e p a r t m e n t o f L a b o r easy. Indeed, the very low concentration in apparel m anufacturing, coup led with a large num ber of sm all manufacturers, attests to the ease with w hich the enterprising entrepreneur can begin operations. This easy entry, alo n g with sudden changes in fashion dem and, also makes clothesm aking a high-failure, low -profit industry, on the average. For any one firm, the profit picture m ay be bright or dism al in any one year. Boom to bust co nditio n s are prevalent in m uch of clothes m anufacturing, particularly w om e n 's garm ents w here the fickleness of fashion can make a m illion for a designer and producer one year and w ipe it out the next. O n the national scale, the industry, especially the larger m anufacturer, has vertically integrated. Large corporations have gradually co m bined both textile and apparel m anufacturing under the sam e corporate name. Som e of these have plants in the Southeast, but for the m ost part this is a region of m any independent producers. Except for Louisiana and Florida, where apparel production is concentrated in large m etropolitan areas, plants are spread throu gh ou t m ost of the region's counties, both rural and urban (see map). This differs from other parts of the country, particularly the Northeast, where m ost apparel is m anufactured in urban areas. Indeed, the enticem ent of cheap and abundant labor in rural areas is the m ajor reason for the dense cover o f apparel plants. 174 A lth o u gh Southeastern apparel m anufacturers are scattered, produ ction usually takes place on a larger scale than in other parts of the country. Em ployees per Southeastern apparel plant average 127 com pared w ith 57 nationally. This difference stems from the region's heavier concentration of m ensw ear production, w hich is usually a largerscale operation than m akin g w om ensw ear. In Florida, however, w here w o m e n 's garm ents make up m ost of apparel production, the average plant em plo ys only about one-third as m any workers as the rest of the Southeast. This difference in size of plants accounts for Florida having the largest apparel industry w hen m easured by num ber of plants, w hile G e o rgia is largest w hen ranked by num ber of jobs. The labor force en gaged in m aking clothes is, to no one's surprise, heavily w eighted tow ard w om en. In the Southeast, w om e n hold over 80 percent of apparel jobs, slightly m ore than nationally. Nearly all sew in g operations are perform ed by w om e n ; only in patternm aking and cutting are men heavily em ployed. Blacks m ake up approxim ately 13 percent of the region's apparel labor force. Because of the Southeastern po p u lation 's high proportion of blacks, it is not unexpected that the area's apparel jobs are m ore heavily w eighted tow ard blacks than is true nationally. Even so, the proportion of blacks in Southeastern apparel jobs, thou gh increasing in the past ten years, is less than in the region's total m anufacturing sector. Apparel m aking, particularly in w o m e n 's garments, has traditionally been seasonal in nature. The sum m er, spring, fall, and w inter lines, lo n g a part of ladies' fashions in this country, have been responsible for the seasonal pattern in w o m e n 's garm entm aking. O n the other hand, m en's apparel, w hich is som ew hat less fashion-oriented, generally has a less pro n oun ced seasonal pattern. In the Southeast, only Florida, with a high concentration in w o m e n 's fashion, has a noticeable seasonal pattern in apparel jobs. Em p loym ent reaches a peak in M arch, begins to decline until reaching a July low, and then picks back up as the industry prepares for the spring and sum m er fashion season. For the rest of the Southeast, apparel jobs generally remain stable. Apparel m arketing involves m any facets w hich can only be briefly sketched here. M a n y manufacturers sell direct to retailers; others operate their ow n outlets. So m e apparel m anufacturers start by selling their product line to a large chain store, thereby assuring their m arket at least for a short span of time. O th e r apparel m akers begin strictly as contractors; that is, they do only the contract w ork for larger apparel m anufacturers and jobbers. Apparel contracting is practiced extensively in w o m e n 's dressm akin g and, as N O V E M B E R 1973, M O N T H L Y REVIEW G e o g r a p h ic D is tr ib u tio n expected in the Southeast, the largest portion of this contracting is in Florida. Foreign Trade Developments Im port com petition has been a m ajor problem facing the U.S. apparel industry. Apparel wages, though lo w com pared to other U.S. industries, are four to five times higher than in countries such as FEDERAL RESERVE BANK OF ATLANTA o f A p p Japan, H o n g Kong, Taiwan, and South Korea, w hich com pete for the dom estic market. O th er U.S. industries, despite high wages, have com peted successfully in international trade by adapting new techniques and, thereby, obtain ing large gains in productivity; but these gains have not appeared in apparel manufacturing. C onsequently, in the Sixties, net value o f apparel im ports (i.e., value of im ports m inus value o f exports) rose sharply, both in dollar 175 terms and as a percent of U.S. apparel shipments. The 1971 trade agreem ents lim iting the im ports of m an-m ade fiber and w oo l textile and apparel products, as well as currency realignments, have helped curb apparel imports, at least temporarily. Im port com petition has also affected the Southeast's apparel m anufacturers but probably less than the overall dom estic industry. M e n 's and boys' outerw ear is the m ost im portant type of apparel m anufacturing in this region, and one m ajor part of this production, m en's w ork clothing, actually is a net exporter. Furthermore, the apparel p ro d u c tion hardest hit by im port com petition, children's outerwear, is som ew hat less im portant in the Southeast than nationally or in the Northeastern states. In south Florida, the ladies' garm ent industry actually does a sizable am ount of export business with the Caribbean Islands and Central America. The picture here is som ew hat m uddled, though, since m any sew ing contract operations, attracted by labor supplies, are n ow m o vin g to these islands and countries. Financing As one m ight expect with so diverse an industry, the sources of funds used to finance growth, expansion, and everyday operations are equally as diverse. Being labor-intensive, clothesm aking does not have large capital requirements. Hence, the need for funds for start-up and expansion is not large com pared with other industries. M a n y apparel manufacturers, particularly the sm aller ones, begin operations on a shoestring, leasing the upper floor of an o ld b u ild in g or an old warehouse, leasing equipm ent (m ainly sew ing m achines), and obtain ing credit from their textile suppliers. In som e areas of the Southeast, particularly outside of Florida, local com m u n ities have enticed apparel plants to locate there by financing plant construction through industrial developm ent bonds and then leasing them to apparel manufacturers at very nom inal rates. M a n y other sources of funds are also used. The larger firms have apparently relied heavily upon equity issues and retained earnings to finance start-up and expansion here. Because o f the relatively small am ount o f start-up capital needed, personal contacts and friends are often sufficient to supply these funds. C om m e rcial banks and insurance com panies have also m ade intermediate-term loans to apparel firms. Despite all these sources of long-term funds, the ties to the Northeast garm ent centers and financial com m u n ity apparently still exist. Southeastern manufacturers d o resort to com m ercial banks in these outside areas, though Southeastern banks have played a role in regional grow th o f the apparel industry. O n ly a few Southeastern banks lend substantial am ounts to apparel manufacturers, usually specializing in this type of lending. This 176 specialization stems from high lending risks to apparel firms, w hich typically have a high failure rate. The im portant criterion for a sound apparel loan, according to one com m ercial banker, is not collateral or financial standing but kn ow le dge of the industry's ins and outs, that is, awareness of fashion, design, and the trade as well as adaptability to change. Financial statements of regional apparel m anu facturers sh ow short-term liabilities substantially ou tw e igh in g long-term liabilities, illustrating this labor-intensive industry's need for short-term funds. A num ber of sources are used, with trade credit and factoring of accounts receivable m ost prominent. Trade credit refers to the terms extended firms by their textile suppliers. W h e n firms first began to m ove south, one of their m ajor fears w as the loss of trade credit from northern suppliers. These fears were unfounded, however, since trade credit of northern and, increasingly, southern suppliers have continued to provide for short-term credit needs. M o st apparel manufacturers them selves extend short-term credit to custom ers and, consequently, create accounts receivable on their balance sheets. Credit needs resulting from these accounts receiv able vary dep en d in g upon the size o f the apparel firm involved. The larger firms are usually able to handle their ow n financing of accounts receivable, w hile the sm aller firms, w hich usually w ork on a contract basis with a larger com pany, have few if any accounts receivable and little need for such credit. It is in the m id-size range of apparel manufacturers that the need for external accounts receivable financing becom es very important. Here the "fa c to r" plays a dom inan t role as a source o f short-term funds. Factoring or "o ld line factorin g" is actually not an extension of credit at all but rather the purchase of a firm 's accounts receivable on a nonrecourse basis.3 Such a purchase then provides the firm with operating funds. Today, m any com m ercial factors (i.e., private firms specializing in factoring services) exist w hich purchase business accounts receivable but, alo n g with these purchases, provide accou nting services as well as credit analysis of retail customers. Needless to say, this package of services, alo n g with the sale o f accounts receivable, does not com e cheaply. Interest charges generally run substantially above the prim e rate, and on top of this, a com m ission or service charge running from one to one and one-half percent is usually added to cover accou nting and credit analysis services. For the interm ediate-size firm, these costs are still relatively sm all com pared with those of setting up their ow n credit analysis and accounting departments. O n ly the largest firms find it financially 3A nonrecourse purchase means that if the purchaser of goods should default in payment, the factor and not the apparel firm has to bear the loss. N O V EM BER 1973, M O N T H L Y REVIEW feasible to provide their ow n accou nting services and credit analysis. C om m e rcial factors and banks have both provided services to apparel firms. Previously, factoring was done prim arily by private com m ercial factors. Today com m ercial banks have becom e increasingly im portant in this field, either starting their ow n factoring departm ents or bu ying private com m ercial factors. Southeastern com m ercial banks have been pioneers in this field. O n e m ajor Atlanta bank becam e the first to establish a factoring departm ent back in 1939. In the past ten years, several So uth eastern banks or affiliates have begun offering these services. Also, m any banks, as well as financial institutions, do provide accounts receivable financ ing for apparel firms, though they do not offer "o ld line factoring” services. The Present and Beyond O v e r tw o years of strong eco n o m ic grow th and large gains in personal incom e have had a favorable im pact on both the national and Southeastern apparel industry. A return to m ore traditional fashions has also had a stabilizing im pact on the apparel industry. Apparel sales, production, jobs, and profits have risen sharply. How ever, everything is not a bed of roses for the apparel industry. Prices of textile materials have been soaring. W o o l, cotton, and synthetic fiber prices have all risen dram atically since early 1971; but despite these increased costs, apparel prices have risen less than total consum er prices. The pressure of further apparel go o d s price increases is all too real, however. Actual labor shortages are probably the biggest problem n o w facing the Southeast's apparel industry. The abundant labor w hich first brought apparel m anufacturers south has apparently dried up in m any areas. The out-m igration of people as well as the in-m ovem ent of industry has tightened Southeastern labor markets dram atically over the past twenty years. T oday shortages are reported in m any areas, with skilled workers in even shorter supply. In the M iam i area, shortages are particularly acute. C u b an refugees provided an abundant and skilled labor sup ply in the early and mid-Sixties, but this labor source has also d isap peared. So m e firms have avoided this shortage by contracting w ork to plants in the Caribbean Islands and Central Am erican countries, w here labor is m ore readily available. H om e contracting, where sew in g is done at individual residences, is also rum ored to be c o m m o n practice in certain areas, but its illegality w ill probably m ake it short-lived. W h a t are the prospects for the Southeast's apparel industry? Recent developm ents suggest the course the industry w ill follow . Both nationally and in the Southeast, the slo w in g in population grow th w hich has already occurred w ill have a depressing effect on the expansion o f clothin g expenditures. This FEDERAL RESERVE BAN K OF ATLANTA decline in fertility rates, alo n g with the changin g age structure of the population brought about by the postw ar baby boom , will also affect the co m po sition o f apparel spending. These d e ve lo p ments probably im ply an expansion of adult cloth in g production relative to the children's and infants' portion. O f course, future changes in fertility rates will greatly affect the extent of these com position al changes. G row th o f personal incom e and increased leisure time w ill affect not only the am ount, but also the co m po sition of apparel sales and output. G row th in national personal co nsum p tion expenditures is usually tied closely to incom e grow th; and apparel sales have been, in the past, a rather stable 7 percent of total retail sales. Thus, as incom e grows, we can expect apparel sales to rise in tandem. At the same time, a rising level of w ell-being, together with increased leisure and a gradual shift to a m ore service-oriented econom y, will also bring a change in cloth es-bu ying patterns. Leisure wear will probably continue to increase its share of apparel output at the expense of w ork clothing. Since w ork clothing is presently im portant to apparel m anufacturing in the Southeast, the region's industry m ay not continue its past grow th pace. There is little doubt, then, that cloth in g expendi tures will continue to grow, though possibly at a som ew hat reduced rate. The rem aining question is " W h o will meet this d e m a n d ?" W ill it be the dom estic apparel industry or foreign rivals? If the dom estic industry is to meet future dem ands, present production techniques m ust change. Labor shortages indicate that the abundant supply the industry has relied upon is n ow a thing of the past. As Southeastern labor shortages becom e m ore acute, apparel manufacturers w ill have little alterna tive than to m ove to labor-substituting capital equipm ent. This shift to m ore capital-intensive techniques and the resultant increased productivity will be necessary to meet future dem and and, at the sam e time, keep costs and prices in com petition with imports. Capital expenditures for research and the developm ent of new equipm ent will then be an im portant determ inant of the dom estic apparel industry's future. The com m ercial banking system can play an im portant role in stim ulating this m ove tow ard greater capital intensity by providin g the necessary funds. This w ill probably also im ply larger plants than at present, resulting in som e co n so lid a tion of the existing industry. As usual, the big get bigger. The Southeast's apparel industry will remain a vital co g in the region's eco n o m y in the years ahead. But its grow th, held back by slow er population grow th and less em phasis on w ork clothing, will, no doubt, be slow er than in the past and rely more on capital investm ent to meet further increases in dem and. ■ 177 T h e M by W illia m o N. n Cox, e y S t o c k III Federal Reserve policy actions in the 1970's have beco m e increasingly concerned with controlling the nation's m oney stock.1 A s a result, the pu blic has becom e increasingly interested in the m oney stock figures co m p ile d and published each w eek by the Fed. These m oney stock figures, like all national e c o n o m ic data, are im perfect estimates. They reflect co m pro m ise solutions b rid gin g differences between the e cono m ist's concepts of m one y and the m o ne y stock, on the one hand, and the availability of appropriate figures, on the other. Despite efforts of the Fed, com m ercial banks, and other reporting financial institutions, published m oney stock figures contain im perfections and inconsistencies. This article discusses som e o f them, in sim ple terms. W h a t Is M o n e y ? Conceptually, "m o n e y " is w hatever assets people are w illin g to accept as payment. The test of w hether som e thing is m oney or not m igh t be "C a n you buy you r lunch w ith it?" This acceptability o f m one y is w hat is essential; other characteristics, such as legal tender status or the issuer's integrity or b acking by gold, only serve to enhance and assure that acceptability.2 In ou r econom y, at least tw o assets m eet this criterion o f acceptability: (1) U.S. currency (and coin) in circulation, and (2) dem an d d ep o sit balances (checking accounts) at com m ercial banks. These are the tw o assets incorporated in Federal Reserve estimates o f the "n a r r o w " m oney stock, or M i. Restricting the m oney stock to these tw o assets is the first and perhaps m ost im portant co m pro m ise involved in estim ating the m oney stock. Personal checks draw n on dem an d deposit accounts are not alw ays acceptable in payment. They can be converted into currency, o f course, •"Controlling Money with Bank Reserves," this Review, April 1973. 2Acceptability is what enables money to serve as a "medium of exchange" in the economy. 178 N O V E M B E R 1973, M O N T H L Y REVIEW but so can m any other assets, like passbook savings accounts, w hich nevertheless are ex cluded from the narrow m oney stock. W e shall return to this question. A ggre gatin g the nation's m oney assets into the nation's m oney stock is m uch m ore than a long addition problem . In the econo m ist's concept, the m oney stock shou ld include only m oney assets of those w hose spen ding and investm ent decisions are influenced by the am ount of their holdings. For this reason, m oney assets held by com m ercial banks, the Federal Reserve System, and the U. S. Treasury are excluded. The "n a r ro w " m oney stock defined and p ublished by the Fed, therefore, represents the currency and dem and deposit h oldin gs of individuals, businesses, nonbank financial institutions, state and local governm ents, and foreigners. Currency as M o n e y Everyone agrees that currency and coin serve as m oney in our econ om y and that the pu blic's h oldin gs shou ld be included in the m oney stock. But even in this situation, there are som e dif ferences between the concept we w ou ld like to m easure and the published estimates of that concept. First, the basis of the currency com p on e n t is the am oun t o f currency and coin outstanding (as show n on the books of the Treasury and the Federal Reserve Banks) rather than the am ount of currency actually circulating as money. The difference arises because som e unkn ow n am ount has been destroyed or otherwise lost to the public. Second, since m oney assets of com m ercial banks sh ou ld not be included in the m oney stock, their h o ldings of "va u lt c a sh " m ust be deducted. The only direct m easurem ent of vault cash held by banks that are not m em bers of the Federal Reserve System com es but twice a year, however; so this deduction has to be estimated from m em ber-bank data. D e m a n d D e p o sits as M o n e y Conceptually, the w ay to m easure the dem anddeposit or checking-accoun t com p o n e n t of the m oney stock is to contact each U.S. com m ercial bank and ask it to report the am ount of dem and deposits on its b o oks ow n ed by everyone except other com m ercial banks and the U.S. Treasury. M e m b e r banks supply m uch of this inform ation w hen they prepare their reserve requirements report.3 For non m em ber com m ercial banks, however, just as in the case of vault cash, 3"Meeting Reserve Requirements,” this Review, October 1973. FEDERAL RESERVE BANK OF ATLANTA the necessary dem and deposit inform ation is avail able only twice a year and, again, m ust be estimated using statistical techniques. This is a significant difficulty. M e m b e r bank reports and non m em ber bank estimates, as m entioned, reflect the total dem and deposits of individuals, businesses, state and local governm ents, foreigners, and nonbank financial institutions. But even this definition includes som e dem and deposit balances which, conceptually, shou ld not be in the m oney stock. N on-Treasury G overn m ent accounts are counted. A lso included are som e fore ign-ow ned deposits w hich are not likely to influence our dom estic econom y; but dollar dem and deposits at overseas banks, w hich m ay well exert such an influence, are excluded.4 M a n y business dem and deposits, moreover, are used as com pen satin g balances against loans and are not, therefore, available for use. Similarly, m any individuals maintain extra balances in their personal checking accounts to qualify for "fr e e " checking account services. It is questionable w hether these balances shou ld be included in the m oney stock. In practice, however, there is no w ay of m easuring the size or changes in these im m ob ilized balances, so they are included. The "C a s h Ite m s" D e d u ction If paym ents were transferred from one dem and deposit to another sim ultaneously (in the sense that the payer's checking account were debited at the same time on the sam e day the paiyee's account were credited), then there w o u ld be no tim ing problem s associated with the dem and deposit com p o n e n t of the m oney stock. But in practice, m ost such paym ents are m ade by checks credited to the depositor's account one or m ore days before they are deducted from the check-writer's account. D u rin g this period when checks are in transit, dem and deposits bein g trans ferred are do u ble-co u nted in the dem and deposit com p on e n t of the m oney stock. C hecks m ovin g through the transit process are called "cash items in the process of collection ." For the m ost part, m em ber banks report these am ounts to the Fed as part of their reserverequirement calculations. In the Fed's com pilation of m oney-stock dem and deposits, it deducts these "cash item " totals in an attem pt to com pensate for the d o u b le -co u n tin g problem .5 The com pensation is far from perfect, however, for several reasons. First, the "cash item s" 4The money stock also includes the deposits held by foreign central banks at Federal Reserve Banks. r,The deduction also includes Federal Reserve float. 179 ESTIMATES OF THE M O N E Y ST O C K A c c o rd in g to Federal Reserve estimates, the nation's narrow lydefined m oney stock averaged $263.9 billion, on a seasonally ad justed basis, d u ring the m onth of A u gu st 1973. This table illustrates (1) the co m po n e n ts from w hich the estimate w as derived, and (2) the further estim ation o f broader definitions o f m oney. The estim ation begins with the G R O S S D E M A N D D E P O S IT S at U. S. com m ercial banks, as reported by banks w hich are m em bers of the Federal Reserve System, and as estimated for those w hich are not members. From these gross dem an d deposits are subtracted, Bil. $ 258.0 first, domestic INTERBANK D E M A N D DEPOSITS, as re ported by member banks and as estimated for non members, and, ( “ ) 27.6 second, U. S. GOVERNM ENT D E M A N D DEPOSITS, as shown by the records kept for the U. S. Treasury by the Federal Reserve, thereby yielding an estimate of (-) 4.0 ( = )226.< P R IV A T E D E M A N D D E P O S IT S . This estimate is further m odified. . . . . . to exclude ADJUSTED CASH ITEMS in an attempt to eliminate double-counted demand deposits (see article), . . . (~) 20.5 . . to exclude FEDERAL RESERVE FLOAT for the same reason, . . . ( — ) 5.4 . . . and to include FOREIGN DEPOSITS AT THE FEDERAL RESERVE BANKS. ( + ) 0.3 The resulting figure is the M O N E Y S T O C K . Seasonal "ty p ic a l" A u gu st behavior adju sted" estimate of the far right. To this is added D E M A N D D E P O S IT C O M P O N E N T O F THE adjustment, w hich is designed to allo w for in previous years, produces the "se aso n a lly dem and deposit co m p o n e n t show n at the . . . . . . the amount of CURRENCY A N D C O IN outside the Treasury, the Federal Reserve Banks, ard vaults of com mercial banks. This addition results in . . . . . . the N A R R O W L Y -D E F IN E D O R M i M O N E Y S T O C K , seasonally adjusted (right) and unadjusted (left). For a broader m easure of the m oney stock, one can add . . . . . . the TIME A N D SAVINGS DEPOSITS AT C O M M ER C IA L BANKS (excluding their large-denomina ion "negotiable" certificates of deposit) to get. . . . . . the M 2 M O N E Y S T O C K , seasonally adjusted and unadjusted. For an even broader measure, one can add estimates of . . . . . DEPOSITS AT SAVINGS A N D LOAN ASSO C IA T IO N S A N D M UTU AL SAVING BANKS to get, finally . . . the M , M O N E Y S T O C K . Source: August 1973 Federal Reserve Bulletin (Table A-16, where possible, otherwise estimated or forced from Tables A-12, A-18). Totals may not add because of rounding. Seas. Adj. ( = ) 200.8 ( + ) 60.0 ( = ) 260.7 + 2 8 6 .3 ( = ) 547.0 ( + ) 315.8 ( = ) 862.8 204.2 59.7 263.9 2 8 6 .6 550.5 315.9 866.4 include checks draw n on all dem and deposit accounts, not just those dem and deposit accounts included in the m oney stock. They also include other inappropriate items, such as m oney orders, redeem ed savings bonds, and food stamps. Second, the cash items do not include certain checks deposited into Treasury tax-and-loan ac counts m aintained by Federal Reserve Banks but not yet deducted from the check-writers' dem and deposit accounts. A third difficulty is that som e checks in transit are not picked up in "cash item s" at all but are instead reflected in interbank cor respondent accounts. Ironically, such checks used to be roughly offset by another accounting practice called "rem ittance bias," w hich disap peared as a result of regulatory changes in N ovem be r 1972.° Thus, the cash items deduction does not com pensate for the d o u b le -co u n tin g produced by these payments. Som e new problem s in estim ating the m oney stock appeared in the 1970's. A substantial portion of m easured "cash item s" resulted from certain transactions of international banks, w hich did not reflect d o u b le -co u n tin g in the m oney stock's dem and deposit portion. To reduce these distortions, the Federal Reserve revised the m oney stock definition in 1970 and 1973.7 This difficulty illustrates the dynam ic nature of m oney definition, for these international cash items were unim portant ten years ago. In like manner, we can expect future changes in accou nting and financial practices to bring changes in the Fed's definitions and m easurem ent procedures. Broader Estimates of M o n e y Thus far we have focused on the "n a r ro w " or M i m oney stock, w hich incorporates currency and dem and deposits to the exclusion of all other financial assets. M a n y econom ists have argued that various other assets should be included in the m oney stock, either because they are accept able as paym ent under som e circum stances and therefore function as m oney or because they are regarded as close substitutes for dem and deposits and currency. R ecognizin g this disagreem ent about w hich assets shou ld be included in the m oney stock, the Federal Reserve has taken an eclectic approach by publishing, a lo n g with m onthly estimates of narrow m oney stock, tw o broader estimates of m oney called M 2 and M 3. The M 2 estimate includes M i assets and, ex- 6Federal Reserve Bulletin, February 1973. ’Federal Reserve Bulletin, December 1970 and February 1973. FEDERAL RESERVE BANK OF ATLANTA cept for large-denom ination negotiable certificates of deposit (C D 's), all time and savings deposits at com m ercial banks. M a n y econom ists have argued that these deposits are close su b stitutes for m oney because high interest rates, increasing consum er sophistication, and new ways of shifting funds have induced individuals to put their m oney into interest-bearing time deposits rather than interest-free dem and deposits. A t the same time, however, a gro w in g proportion of c o n sum er time deposits have m oved out of liquid p assb ook accounts into time certificates, which the consum er cannot convert to a dem and deposit or currency w ithout incurring a penalty. The third and broadest definition of the m oney stock, M 3, continues this b u ild in g-b lo ck approach by inclu ding not only M L>, but also d e posits at savings and loan associations and mutual savings banks. These assets are generally regarded as being close substitutes for currency and dem and deposits and, in tw o states, can be directly transferred between depositors through the use of "n e go tia b le orders of w ithdraw al." A lth ou gh conceptually the M s definition should not include dem and deposit balances held by savings and loan associations and mutual savings banks, they are included. This chain of close substitutes could be extended further, of course. Large-denom ination bank C D 's, Treasury bills, and sim ilar "m o n e y m arket" assets substitute for currency and dem and deposits in som e instances. M o n e y orders and nonbank traveler's checks function as money. But none of these assets, as yet, have been in cluded in any of the Fed's m oney-stock measures. Finally, there are credit cards w hich are w idely accepted as paym ent and function to a consider able extent as money. Credit card activity is excluded from the m oney stock, however. Paym ent with a credit card does not involve the transfer of an asset, as w hen paym ent is m ade with currency or check; instead it involves the assum ption of a liability. The M o n e y Stock Estimates In describing the m oney stock estimates published by the Fed each week, w e have not touched on the problem s involved with ble ndin g diverse data from different financial institutions covering different time periods. Neither have w e m entioned the form idable problem of seasonal adjustm ent of the m oney stock. (The Fed publishes its estimates both before and after such adjustment.) These further difficulties sim ply reinforce the im plication of the previous discussion, w hich is that the published m oney stock figures sh ou ld be regarded as imperfect estimates— adequate esti mates, hopefully, but im perfect nevertheless.■ 181 S i x t h D i s t r i c t S t a t i s t i c s Seasonally Adjusted (A ll d a ta a re in d e x e s, u n le s s in d ic a t e d o th e rw ise .] L a t e s t M onth O ne M onth Ago Tw o M o nth s Ago One Year Ago O ne M onth Ago S e p t. S e p t. 4.1 4 1.1 4 .2 4 0 .7 S e p t. S e p t. S e p t. 225 191 2 06 M a n u fa c tu rin g P a y ro lls ................................Sep S e p t. F a rm C a sh R e c e i p t s ............................................ Aug. U n e m p lo ym e n t R a te (P e rc e n t o f W o rk F o rc e ) . . Avg. W e e k ly H rs. in M fg. (H rs .) S IX T H D IS T R IC T IN C O M E A N D S P E N D IN G ......................... M a n u fa c tu rin g P a y ro lls F a rm C a sh R e c e i p t s ...................................... C r o p s ..................................................................... L iv e s to c k In s ta lm e n t C re d it a t B a n k s * / ' (M il. $) N ew L o a n s ......................................................... R e p a y m e n ts .................................................. L a te s t M onth S ep t. Aug. Aug. Aug. 166 210 163 243 162 217 267 198 161 180 189 191 150 138 140 142 S e p t. S e p t. 735 624 6 77 r 5 68 r 686 588 583 502 Sep t. S ep t. S ep t. S ep t. S ep t. S ep t. Sep t. S ep t. S e p t. S ep t. S e p t. S ep t. S ep t. S ep t. S ep t. S ep t. S ep t. S e p t. S ep t. S ep t. S ep t. S e p t. S e p t. S e p t. S e p t. 125.8 113.2 112 .0 9 9.8 109.2 111.3 111.2 124.8 107.5 117.3 110.2 121.7 113.0 127.2 143.6 108.0 130.2 135.4 122.6 132.6 138.0 135.3 1 00.9 132.8 82.1 125.9 113.5 111.8 100.1 109.3 110.9 110.7 124.5 106.8 117.7 L 10.6 121.5 112.4 127.0 143.9 109.5 130.3 134.0 122.3 131 .9 137.1 135.0 99.9 135.6 8 3.8 125.6 113.9 111 .9 101.1 110.1 111.1 111.3 123.5 107.4 116.5 110.4 120.2 108.9 126.8 141.9 108.3 129.7 132.2 121.9 132.1 136.6 134.2 9 9.3 134.3 85.5 121.4 112.2 111.0 102.6 108.1 110.2 109.9 120.6 105.7 113.7 109.1 116.1 110.5 120.6 132.8 108.5 124.7 126.9 117.4 125.7 131.1 130.7 100.5 127.5 83.7 S ep t. 3.7 3.7 3.7 3.9 S e p t. S e p t. S ep t. • S e p t. S e p t. D ec. Aug. S ep t. J u ly J u ly J u ly J u ly J u ly J u ly J u ly J u ly J u ly J u ly J u ly J u ly J u ly J u ly J u ly J u ly J u ly 1.7 4 1.0 241 293 190 188 79 113 297 244 188 293 291 225 159 309 360 203 192 203 253 286 485 829 448 1.8 4 0.7 283 288 278 187 82 114 301 245 189 291 298 224 161 310 367 203 193 206 253 288 472 870 462 1.8 4 0.6 242 281 204 186 84 115 292 242 188 286 291 223 161 308 352 198 191 206 241 289 452 797 447 2.1 4 1.3 217 3 14 123 168 78 128 275 235 185 271 282 220 161 295 323 198 188 182 213 267 449 713 405 S e p t. S e p t. 242 213 243 2 29 238 223 193 179 S ep t. S ep t. S e p t. 200 176 244 198 174 2 52 r 198 175 246 174 154 199 S e p t. Aug. 165 266 160 266 157 205 149 157 S ep t. S ep t. S ep t. S e p t. S e p t. 115.6 113.1 116.8 123.8 70.5 115.9 113.0 117.2 120.3 6 9.9 115.3 112.7 116.5 118.9 7 2.4 112.4 110 .9 113.1 118.1 7 2.4 Tw o M o nth s Ago O ne Year Ago 4 .3 4 0 .4 4 .8 4 1 .2 224 190 211r 2 19 190 2 14 183 168 181 166 185 165 2 79 164 197 146 140 143 .5 1 2 1 .9 147 .7 182 .8 1 0 2 .4 144 .4 121 .6 148.8 181.8 106.1 1 43 .8 1 20 .8 148 .2 179 .9 1 1 3 .8 134.1 116 .7 1 37 .5 1 60 .4 105 .5 2.7 4 1 .0 2.7 4 0 .6 2.7 4 0 .8 3 .0 4 1 .4 277 233 283 273 230 306 268 2 30 284 213 197 227 163 153 156 176 159 174 149 115 S e p t. S e p t. S e p t. S e p t. S e p t. 123.1 108 .6 129.7 130.2 8 5.2 122.7 109.2 129.0 128 .6 87.1 121.2 108.5 127.7 127.5 82.1 120.1 108.1 1 25 .6 125.7 8 3 .9 S e p t. S e p t. 3 .5 4 0 .9 3 .7 4 0.3 3 .8 4 0.6 3 .8 4 1 .2 S e p t. S e p t. S e p t. 234 182 282 241 183 278 2 39 185 261 190 157 209 S e p t. Aug. 153 3 19 150 211 149 159 139 173 S e p t. S e p t. S e p t. S e p t. S e p t. 113.3 104.6 115.1 9 5.2 7 3.3 113.2 104.7 115.0 9 3.9 7 5.9 113.2 104.2 1 15.0 9 3 .4 7 4.5 1 11.4 1 04.0 1 12.9 93.1 7 5 .9 S e p t. S e p t. 6 .2 4 1.7 6 .2 4 1.7 5.6 4 1 .9 5 .9 4 2.6 S e p t. S e p t. S e p t. 218 171 179 224 171 191 2 14 172 192 167 158 163 S e p t. Aug. 187 249 184 238 182 202 164 161 S e p t. S e p t. S e p t. S e p t. S e p t. 123.2 1 26.6 121.6 113.5 7 6.3 122 .4 126.3 120.7 113.3 7 1.5 1 21 .2 126.4 118.9 110.0 8 2.6 1 18 .8 1 23.3 1 16.8 111.3 8 2.9 F IN A N C E A N D B A N K IN G Bank D eb its* E M P L O Y M E N T A N D P R O D U C T IO N N o n farm E m p l o y m e n t ................................ M a n u fa c tu rin g ............................................ N o n d u ra b le G o o d s ............................... F o o d ............................................................... T e x t i l e s ................................................... A p p a re l ................................................... P a p e r ......................................................... P rin tin g an d P u b lis h in g . . C h e m i c a l s ............................................ D u ra b le G o o d s ...................................... L b r ., Wood P ro d s ., F u rn . & F ix S to n e , C la y , an d G la s s . . . P r im a ry M e t a l s ................................ F a b ric a te d M e t a l s ......................... M a c h i n e r y ............................................ T ra n sp o rta tio n E q u ip m e n t N o n m a n u fa c t u r in g ...................................... C o n s t r u c t i o n ...................................... T ra n sp o rta tio n ................................ F in ., in s ., and real e st. . . . S e r v i c e s .................................................. F e d e ra l G o v e rn m e n t . . . . S ta te and L o c a l G o v e rn m e n t F a rm E m p lo y m e n t ............................................ U n e m p lo ym e n t R ate (P e rc e n t of W o rk F o rc e ) . . . . In su re d U n e m p lo ym e n t (P e rc e n t of C ov. E m p . ) ......................... A vg. W e e kly H rs. in Mfg. (H rs .) . . C o n s tru c tio n C o n t r a c t s * ......................... R e s i d e n t i a l ......................................................... A ll O th e r ......................................................... E le c tr ic P o w e r P ro d u c tio n ** . . . C otto n C o n s u m p t i o n * * ............................... P e tro le u m P r o d u c t i o n * * ......................... M a n u fa c tu rin g P ro d u c tio n . . . . N o n d u ra b le G o o d s ...................................... F ood ......................................................... T e x t i l e s .................................................. A p p a re l .................................................. Paper ......................................................... P r in tin g and P u b lis h in g . . C h e m i c a l s ............................................ D u ra b le G o o d s ............................................ Lu m b e r and W o o d ......................... F u rn itu r e an d F ix t u r e s . . . S to n e , C la y , a n d G la s s . . . P r im a ry M e t a l s ............................... F a b ric a te d M e t a l s ......................... N o n e le c tric a l M a ch in e ry . . E le c t r ic a l M a c h in e ry . . . T ra n sp o rta tio n E q u ip m e n t F IN A N C E A N D B A N K IN G L o a n s* A ll M e m b er B a n k s ...................................... L a rg e B a n k s .................................................. D e p o sits* A ll M em b er B a n k s ...................................... La rg e B a n k s .................................................. B a n k D e b its * / * * ............................................ A LA B A M A EM PLO YM EN T N o n fa rm E m p l o y m e n t ......................................S S e p tt. M a n u fa c tu rin g ...................................................S t S e p t. N o n m a n u f a c t u r in g ............................................ S Sep e p t. C o n s t r u c t i o n ...................................................S S ep e p t. F a rm E m p lo y m e n t ...................................................S S e p tt. U n e m p lo ym e n t R a te (P e rc e n t of W ork F o r c e ) ......................... S e p t. t Avg. W e e k ly H rs. in M fg. (H rs .) S e p t. F IN A N C E A N D B A N K IN G M em b er B a n k L o a n s ......................... . S e p t. . S e p t. . S e p t. M a n u fa c tu rin g P a y ro lls ................................S e p t. F a rm C a sh R e c e i p t s ............................................ Aug. EM PLO YM EN T N o n m a n u fa c tu rin F a rm E m p lo y m e n t U n e m p lo y m e n t R a te A v g . W e e k ly H r s . in M fj F IN A N C E A N D B A N K IN G M em b er B a n l1 B a n k D e b its* L O U IS IA N A EM P LO YM EN T N o n fa rm E m p lo y m e n t . . . . M a n u fa c tu rin g ................................ N o n m a n u fa c t u r in g ......................... C o n s t r u c t i o n ................................ F a rm E m p lo y m e n t ................................ U n e m p lo ym e n t R a te (P e rc e n t of W o rk F o rc e ) . . Avg. W e e k ly H rs. in Mfg. (H rs .) F IN A N C E A N D B A N K IN G M em b er B a n k L o a n s * . . . . M em b er B a n k D e p o sits* . . . B a n k D e b i t s * / * * ...................................... M IS S IS S IP P I IN C O M E M a n u fa c tu rin g P a y ro lls ......................... F a rm C a sh R e c e i p t s ...................................... EM PLO YM EN T N o n fa rm E m p l o y m e n t ............................... M a n u fa c tu rin g ...................................... N o n m a n u fa c tu rin g . . . C o n s t r u c t i o n ............................................ F a rm E m p lo y m e n t . . . . 182 EM P LO YM EN T N O V E M B E R 1973, M O N T H L Y REVIEW One Month Ago L ate st Month U nem ploym ent Rate (P ercent of Work Force) . . Avg. W eekly Hrs. in Mfg.(Hrs.) Two Months Ago One Year Age Late st Month Two M onths Ago One Y ear Ago EM PLO YM EN T . Sept. . Sept. 3.8 40.3 3.9 40.6 4.1 40.5 3.9 40.7 . Sept. . Sept. . Sept. 239 204 204 236 196 200 225 193 227 198 173 183 F IN A N C E AND BAN KIN G B an k D eb its*/* One Month Ago Sept. Sept. Sept. Sept. , Sept. 121.8 110.2 128.3 120.7 93.7 121.9 111.2 127.8 119.7 96.3 123.1 114.8 127.7 119.7 93.2 120.3 113.3 124.2 121.4 90.8 , Sept. . Sept. 3.0 41.0 3.1 40.7 3.4 40.5 3.2 41.2 Sept. Sept. , Sept. 225 185 213 226 182 205 221 182 191 190 167 177 U nem ploym ent Rate Avg. W eekly H rs. in Mfg. (Hrs.) TEN N ESSEE FIN A N C E AND BAN KIN G IN COM E M anufacturing P a y r o l l s ..............................Sept. Farm C a sh R e c e i p t s ...................................Aug. 169 217 166 197 163 155 148 202 *F o r Sixth D istrict area only; other to tals for entire six states tP re lim in a ry data “ Daily averag e b asis N.A. Not av a ilab le Note: Ind ex es fo r bank d eb its, co n stru ction co n tracts, cotton con su m p tion, e m p loym en t, farm ca sh re ceip ts, loans, petroleum production, and p ayro lls: 1967 = 100. All o ther in d ex e s: 1957-59 - 100. So u rce s: M anufacturin g production e stim ated by th is B an k; nonfarm , mfg. and non mfg. em p., mfg. p ayro lls and hours, and unem p., U .S. Dept, of Labor and cooperating state ag e n cie s; cotton co n su m p tio n, U .S. B ureau of C e n su s; con stru ction co n tracts, F . W. Dodge Div., M cGraw-Hill Inform ation Sy ste m s Co.; petrol, prod., U .S . B ureau of M ines; ind ustrial use of e le c. power, Fed. Power Com m .; farm ca sh receip ts and fa rm em p., U.S.D .A. Other indexes based on data collected by th is B an k. All indexes ca lcu la te d by th is B an k. ■Data benchm arked to Ju n e 1971 Report of Condition D e b i t s t o D e m a n d D e p o s i t A c c o u n t s In s u r e d C o m m e r c ia l B a n k s in th e S ix t h D is t r ic t (In T h o u s a n d s o f D o lla r s ) Pe rce n t Change Pe rce n t Change Septem b er 1973 August 1973 3,086,684 70,477 272,821 912,034 550,598 201,345 Bartow -LakelandW inter Haven 649,942 371,981 Daytona B each Ft. LauderdaleHollywood . . . 1,593,570 Ft. M yers . . . . 270,910 G a in e sv ille . . . 225,854 Ja ck so n v ille . . . 3,661,377 MelbourneTitu sville-Co co a 348,832 Miami .................... . 6,031,794 . 1,310,936 O rlando . . . . Pe n saco la . . . . 394,474 Saraso ta . . . . 427,248 756,027 T a lla h a s s e e . . . T am pa-St. Pete . 2,945,382 W. Palm B ea ch . 1,094,774 .................... Albany A t l a n t a .................... Augusta . . . . C o lum bu s . . . . Macon .................... Sa v an n ah . . . . A lexandria . . Baton Rouge . Lafayette . . . . Lak e C h a rle s . New O rlea n s . . . . . . . Biloxi-Gulfport . . Ja ckso n . . . . Chattanooga . . . Knoxville . . . . N a shville . . . . TH ER C E N T E R S Anniston . . . . . Septem b er 1973 2,946,912 86,094 261,306 878,565 496,033 168,911 -1 0 -2 6 -1 0 -1 8 -1 5 -1 2 + 5 -1 8 + 4 + 4 + 11 + 19 + 17 + 12 + 16 + 14 +21 + 27 537,024 342,110 -1 6 -1 1 + 21 + 9 + 25 + 24 1,792,969 310,066 255,148 4,473,763 1,438,348 223,965 194,598 3,017,220 -1 1 -1 3 -1 1 -1 8 + 11 +21 + 16 +21 + 15 + 34 + 22 + 24 441,574 7,012,022r 1,726,967 458,445 496,229 1,039,437 4,095,161 1,229,556 335,656 4,914,849 1,179,575 356,157 341,505 546,053 2,823,042 817,312 -2 1 -14 -24 -1 4 -1 4 -2 7 -2 8 -1 1 + 4 + 23 + 11 + 11 + 25 + 38 + 4 + 34 + 25 + 29 + 23 + 12 + 46 + 45 + 24 + 38 3,419,883 94,719 304,522 1,114,594 649,516 229,371 771,170 419,204r 180,662 15,248,845 476,968 387,222 532,673 470,462 197,582 16,565,116 579,611 447,232 562,126 540,088 162,943 10,902,473 420,688 390,459 437,722 420,133 - 9 - 8 -1 8 -1 3 - 5 -1 3 + 11 + 40 + 13 - 8 + 20 + 12 + 18 +41 + 18 + 10 + 19 + 19 230,081 1,092,846 253,437 202,961 3,619,812 252,073 1,325,293 275,046 228,681 4,197,218 201,833 1,002,584 229,605 190,117 3,473,298 - 9 -1 8 - 8 -1 1 -1 4 + 14 + 9 + 10 + 7 + 4 + 18 + 13 + 19 + 10 + 12 225,059 1,182,087 256,273 1,408,506 215,613 1,076,601 -1 2 -1 6 + 4 + 10 + 18 + 22 1,271,195 841,070 3,309,938 1,379,980 943,944 3,481,033 964,233 745,035 2,736,730 - 8 -1 1 - 5 + 19 + 13 + 12 + 27 r + 20 +21 96,095 109,770 93,706 -1 2 + 3 + 12 1 D istrict portion only r-Revised F ig u re s fo r som e a re a s d iffer slig h tly from p relim in ary fig ures p ublished “ Conform s to SM SA d efin itio n s a s of Decem b er 31, 1972. FEDERAL RESERVE BAN K OF ATLANTA August 1973 Septem b er Aug. Sept. 1973 1972 1972 from 1972 141,601 64,232 - 8 -1 2 + 32 + 13 + 34 + 26 126,079 52,954 145,832 31,086r 726,117 1,369,727 —19 -2 8 -1 5 -1 4 - 7 -1 5 + 16 + 19 + 20 +21 + 28 + 26 + 30 + 28 + 33 + 20 + 36 +21r 182,408 110,657 195,560 21,888 143,651 77,261 41,900 50,318 147,597 98,668 150,850 69,154 151,198 17,190 105,929 56,575 31,385 49,988 128,550 87,228 -2 5 -2 1 - 7 - 3 -11 -11 + 34 + 15 -14 - 5 - 9 + 27 + 20 + 23 + 21 + 22 + 79 + 16 - 1 + 7 + 11 + 23r + 19 + 4 + 28 + 24 + 30 + 34 + 14 + 12 16,138 9,470 78,257 55,005 25,102 33,114 15,636 10,290 87,140 61,087 26,605 42,243 15,448 8,718 58,099 50,019 14,576 34,047 + 3 - 8 -1 0 -1 0 - 6 -2 2 + 4 + 9 + 35 + 10 + 72 - 3 + 5 + 23 + 36 + 13 + 61 + 15 . . 114,301 60,482 107,923 53,279 131,620 72,749 121,143 54,852 112,619 62,295 112,006 48,586 -1 3 -1 7 -1 1 - 3 + 1 - 3 - 4 + 10 + 20 + 17 + 16 + 7r . . 136,139 69,499 43,661 86,593 69,595 38,930 135,940 57,297 38,417 +57 - 1 + 12 + 0 +21 + 14 + 8 + 24 + 10 B ristol . . . . Johnson City Kingsport . . . 101,723 154,220 243,330 115,391 176,756 267,978 119,099 136,450 212,975 -1 2 -1 3 - 9 -1 5 + 13 + 14 - 8 + 17 + 17 Dothan STAN DARD M ETR O PO LITA N ST A T IS T IC A L A R E A ** Birm in gham . . . Gad sden . . . . H u n tsville . . . M o b i l e .................... Montgomery . . . T u scalo o sa . . • Year to Sep tem b er d ate 1973 9 m os. from Year to Sep tem b er date 1973 9 mos. 1973 Septem b er Aug. Sept. from 1973 1972 1972 1972 . . . . Bradenton . . Monroe County O cala St. Augustine St. Petersburg . Tam pa . . . . Athens . B ru n sw ick Dalton . Elberton G ain e sv ille Griffin . LaG rang e Newnan Rom e . V aldosta . . . . . . . . . . . . . . . . . . . . . . Abbeville . . B un kie . . . . Ham m ond . New Iberia . P laq uem in e . Thibodaux . H attiesburg . Lau rel . . . . M eridian . . N atchez . . PascagoulaM oss Point V icksb urg . . Yazoo City . D istrict Total A labam a . Florid a . . Georgia . . Lo u isia n a ' M iss is s ip p i1 T en n e sse e1 . . . . . . . . . . . . 187,360 72,419 203,298 81,984 145,978 63,193 175,298 37,743 928,202 1.719,245 180,894 87,611 207,291 43,947 1,001,026 2,023,327 136,913 87,804 182,193 21,174 128,504 68,931 56,177 58,068 126,781 93,737 . . . 68,031,903 7 6,888t068r 57,007,751 -1 2 + 19 + 26 . . 7,423,130 22,708,650 20,746,600 . 6,523,218 . 2,683,967 . 7,946,338 8,492,754r 6,884,239 2 7,035,026r 18,886,800 22,525,134 15,873,460 6,126,864 7,572,819 2,901,233 2,507,491 8,445,954 6,728,897 -1 3 -1 6 - 8 -1 4 - 7 - 6 + 8 + 20 +31 + 6 + 7 + 18 + 18 + 26 + 34 + 20 + 17 + 20 . . . . . . . . . . n "B a n k D eb its and Deposit Tu rn o v e r” by Board of Governors of the Fed eral R eserve System . 183 D i s t r i c t B u s i n e s s C o n d i t i o n s The Southeastern e c o n o m y continues to gro w but at a m ore deliberate pace than earlier this year. Job gain s are spotty, but the u n em p lo ym en t rate rem ains low. C o n su m e r sp e n d in g and bank le n d in g c o n tinue to gro w at a m oderate pace. Increased livestock m arketings and forecasts o f abu ndan t crop p ro du ction p ro du ced declines in agricultural prices. C o n stru ction contract activity eased in Septem ber. A mixture of gains and losses netted little change in nonfarm ing to purchase n on au tom otive c o nsum e r goods, e m plo ym ent d u rin g Septem ber. A la however, w as particularly strong, although all cate bama, Florida, and Tennessee registered declines in gories except auto len ding had gains exceeding the nonfarm jobs, w hile sm all gains occurred in G e o r previous month. Sales indicators also sh o w a slo w gia, Louisiana, and M ississippi. The m ost noticeable ing in the im portant auto category but at a level losses were in state and local governm ent e m p lo y above last year's. D epartm ent store sales in m ajor ment, particularly in Florida. The u nem ploym en t m etropolitan areas resum ed their strong grow th fo l rate either rem ained unchanged or declined in all lo w in g a sum m er pause. District states. Scattered evidence suggests m anufacturing production has slowed. that G ro w th of bank deposits m oderated in Septem ber as a result of a sharp reduction in large-de- Agricultural prices fell sharply in Septem ber as nom in ation C D 's . N e w loan extensions at reporting hogs, broilers, and soybeans declined 20 percent or m ore from their A u gu st levels. Prices of nearly banks have also m oderated som ew hat, though takedow ns on previously com m itted lines of credit all livestock items registered m ore m oderate de creases, but cotton, cottonseed, and rice prices m ade partially offsetting advances. Bountiful crop rem ained strong. Various banks had reduced their forecasts and increased livestock m arketings have custom ers has rem ained firm. Bank b o rro w in g from produced co ntin u in g price reductions through m id- the Federal Reserve has slow ed, though purchases October. A s of O c to b e r 1, only of Federal funds have not yet abated. Louisiana's rice crop, w hich suffered storm dam age, w as forecast to be substantially below m onth-earlier projections. In m id-O ctob er, broiler placem ents were exceeding the levels of a m onth ago. Farm cash receipts c o n tinue to sh ow substantial gains from year-earlier levels. prim e rate for national custom ers to 93A percent by m id-O ctob er, but the rate for m ost local loan The value o f construction contract aw ards fell m oderately. H o u sin g contract values in Septem ber stayed at the levels of the past tw o m onths, w hile nonresidential aw ards were dow n from last m onth 's record levels. Florida continues to lead the area in expansion of residential construction; Louisiana and C o n su m e r instalm ent credit continues to expand at m ore m oderate rates than early in the year. Lend M ississip p i have experienced declin in g contract aw ards in this sector over the year. Note: Data on which statements are based have been adjusted whenever possible to eliminate seasonal influences. 184 N O V E M B E R 1973, M O N T H L Y REVIEW
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