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In T h i s Is s u e Southeastern Ports Loan Losses Surge in 1975 District Business Conditions M O N T H L Y E V I E W R Fe d e ra l R e s e r v e B a n k o f A tla n ta Federal Reserve Bank Of Atlanta Federal Reserve Station Atlanta, Georgia 30303 Address Correction Requested BU LK RATE U .S . P O S T A G E PAID A t la n t a , G e o r g ia P e rm it N o . 2 9 2 Fe a tu re s : Southeastern Ports.................151 Se a p o rts in th e S o u th a re p l a y i n g a b i g g e r p a r t in t h e r e g io n 's e c o n o m ic gro w th th a n e v e r b e fo re . Loan Losses Surge in 1975 . . .157 N ow Available: M em ber Estimating Sixth District Consumer Spending The second Federal in a Reserve series of Bank of At l a n t a W o r k i n g P a p e r s is n o w available copies by can request. be Single obtained by banks D is t r i c t e x p e r ie n c e d lo a n lo s s e s in 1 9 7 5 A tlanta, Atlanta, G eorgia h ig h a re 164 D e c l i n e s in e m p l o y m e n t a n d c o n tra c ts of and District Business Conditions th e Bank S ix th c o v e r t h e ir lo s s e s . m ent, Reserve th e n o w s e t t in g a s id e r e s e r v e s to w riting the R esearch D e p a rt Federal in th e v a lu e of a re D i s t r i c t 's c o n s tr u c t io n e v id e n c e th at e c o n o m ic ex 30303. Interested parties m ay p a n s i o n s l o w e d in la te s u m have their n a m e p laced o n a m e r. subscription studies requests in list the should for series. future Such i n c l u d e n am e, street address or post o f f i c e b o x n u m b e r , city, s t a t e a n d ZIP c o d e a n d s h o u ld b e sent to the a b o v e address. Review, Vol. LXI, No. 10. Free subscription and additional copies available upon request to the Research Department, Federal Reserve Bank of Atlanta, Atlanta, Georgia 30303. Material herein may be reprinted or abstracted, provided this Review, the Bank and the author are credited. Please provide this Bank's Research Department with a copy of any publication in which such material is reprinted. M o nthly Dear Subscriber: If you would like to continue receiving the Monthly Review, please return the bottom portion of this page, with the address label intact to: Information Center Federal Reserve Bank of Atlanta Federal Reserve Station Atlanta, Georgia 30303 If the address shown on the front is incorrect or has changed, please make your correc tions on the label or surrounding area. If you have already returned this form to us, please disregard this notice. v . S o u th e a s te rn P o rts by Brian D. Diitenhafer If the word "seaport" evokes images of rusty ships alongside ramshackle buildings on wooden piers and workmen who look as worn as their surroundings, you haven't visited a seaport in the Southeast recently. Today's economy demands fast, reliable transportation of raw materials and finished goods, and the Sixth District ports have modernized and expanded their ability to handle many types of cargo to meet these needs.1The presence of modern, efficient ports is vital to the continued growth and development of the Southeast, and the evi dence shows that area ports can meet the needs of local and national shippers. Despite recent growth in air cargo traffic, virtually all international shipments travel by water. Less than one-half of one percent of the weight of international shipments originating in or destined for the U. S. goes by air. Only the most valuable cargoes are routinely transported by air. Even when measured by the value of shipments, 90 percent of our international commerce travels by water. As international ’The Southeast here is defined to include those states wholly or partly in the Sixth Federal Reserve District. FEDERAL RESERVE BANK OF ATLANTA trade grows in importance to the U. S. econ omy, the importance of District ports to the region's economy increases. Who Cares? Everyone should care about ports because foreign trade is important to many communities that are not seaports. Why local industries are interested in international trade may not be immediately apparent. Indirect export relationships between industries can take three basic forms. First, local firms may supply exporters in other sections of the coun try; second, labor and other resources needed by firms directly involved in export supply are bought in the local community; and third, a gain in the national economy caused by foreign exports indirectly aids the local economy by increasing demand for other products. The community's stake in imports may be less apparent. Generally, foreign trade takes place only when the foreign goods are of a higher quality or better price than those pro duced domestically. The consumer feels the benefits of trade when he gets either better quality goods or a lower price. However, im ports may cause specific injury to a local in dustry when imports are substituted for local products. Because of the concentrated impact 151 TABLE U. S. C U S T O M S D IS T R IC T S RANKED BY V A LU E CUSTOMS DISTRICT* N ew York, N ew Y o rk N ew O rle an s, L o u is ia n a H o u sto n , T e x a s N orfolk, V irg in ia B a ltim ore, M a ry la n d S a n F ra n c isc o , C a lifo rn ia L o s A n g e le s, C a lifo rn ia P ortlan d, O re go n G a lve ston , T e x a s P h ila d e lp h ia , P e n n s y lv a n ia Seattle, W a s h in g t o n M ia m i, F lo rid a P ort A rth ur, T e xa s M o bile, A la b a m a C h a rle sto n , S o u th C a ro lin a S a v a n n a h , G e orgia C le ve la n d , O hio T a m p a , F lo rid a D uluth, M in n e s o ta W ilm in g to n , N o rth C a ro lin a B o sto n , M a s s a c h u s e t t s S a n Juan, P u e rto R ic o C h ica go , Illin o is A n c h o ra g e , A la sk a Detroit, M ic h ig a n J a c k so n v ille , F lo rid a OF TOTAL W ATERBORNE -Exports-------- --------------) (--------Rank: 1974 1 Rank: 1964 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 21 22 23 24 25 1 2 3 4 7 5 8 11 6 9 14 20 10 12 17 18 15 24 16 22 21 29 13 28 19 26 Value: 1974 ($ mil.) Value: 1964 ($ mil.) 10,793 9,613 4,809 4,725 3,555 2,953 2,541 2 ,199 2,137 1,893 1,429 1,126 1,102 1,097 798 7 66 712 701 696 527 411 4 11 384 3 00 230 185 6,062 2,373 1,124 1,015 714 784 569 445 744 5 20 290 132 461 381 163 160 274 117 254 122 126 30 3 12 32 155 55 EXPORTS AND IM P O R T S (-------------- --------Imports------------ ---------- ) Rank: 1974 1 4 8 9 5 7 2 16 12 3 6 17 13 20 18 15 23 26 32 25 11 10 19 30 24 14 Rank: 1964 1 4 8 9 5 6 3 18 23 2 15 22 30 20 14 17 13 24 33 25 7 12 11 34 16 19 Value: 1974 ($ mil.) Value: 1964 ($ mil.) 16,9 0 9 5,111 3,046 2,199 3,651 3,297 7,691 858 1,690 6,339 3,425 8 02 1,357 64 7 783 8 83 501 418 42 432 1,715 2,012 696 101 495 1,066 5,128 799 457 333 73 6 695 95 7 152 105 1,224 180 139 22 1 46 1 84 1 60 188 73 13 67 58 3 23 6 30 1 6 175 151 *1 9 7 4 d e fin itio n s of c u s t o m s d is tric ts h ave been used, e x ce p t “J a c k s o n v ille ” , w h ic h is the A tla n tic C o a s t port of the T a m p a D istrict, an d "T a m p a ", w h ic h in c lu d e s o n ly the G u lf C o a st ports of that d istrict. So u rc e : U. S. D e p a rtm e n t of C o m m e rc e FT985. o f i m p o r t s o n lo c a l in d u s t r ie s , w e u s u a lly h e a r a s c o a l a n d p h o s p h a t e , a n d a g r ic u lt u r a l m o r e a b o u t th e h a r m i m p o r t s c a u s e to lo c a l p r o d u c t s , s u c h a s s o y b e a n s a n d rice , a re n o t e c o n o m i e s a n d le ss a b o u t t h e b e n e f it s o f i n c l u d e d in t h e n u m b e r o f j o b s c r e a t e d b y o b t a i n i n g p r o d u c t s e it h e r i m p o s s i b l e o r m u c h e x p o r t s . [T h e e x p o r t s o f h o m o g e n e o u s a g r i c u l m o r e c o s t ly t o p r o d u c e d o m e s t i c a ll y . tu ra l p r o d u c t s , s u c h a s s o y b e a n s , w h e a t a n d T h e d ir e c t b e n e f it s o f f o r e i g n t r a d e a re r ic e m a k e it i m p o s s i b l e t o d e t e r m i n e p r e c i s e ly e a s ily d i s c e r n e d , a t le a s t f o r th e m a n u f a c t u r i n g t h e o r i g i n o f t h e a g r ic u lt u r a l p r o d u c t s . S o it is s e c t o r . In S ix th D i s t r i c t sta te s, t h r e e p e r c e n t o f v ir t u a lly i m p o s s i b l e t o j u d g e a c c u r a t e ly th e th e m a n u f a c t u r i n g e m p l o y m e n t h a s a d ir e c t lin k e x te n t o f lo c a l e m p l o y m e n t g e n e r a t e d in th e to e x p o r t sa le s . T h e n u m b e r o f w o r k e r s i n p r o d u c t i o n o f a g r ic u lt u r a l p r o d u c t s f o r e x p o rt.] v o l v e d v a r ie s f r o m a l o w o f 5 ,3 0 0 in M i s s i s s i p p i to a h ig h o f 1 3 ,6 0 0 in G e o r g i a (s e e T a b le 3). A IN T E R N A T IO N A L T R A D E A N D T H E P O R T S to ta l o f n e a r ly 5 7 ,0 0 0 w o r k e r s in t h e S ix th D i s tric t o w e t h e ir j o b s d i r e c t l y t o e x p o r t s o f m a n u In th e d e c a d e e n d i n g in 1 9 7 5 , t h e p e r c e n t a g e f a c t u r e d p r o d u c t s . T h e s e w o r k e r s , in tu rn , o f e x p o rts fro m c o n s u m e j o c a l s e r v ic e s a n d p r o d u c t s w h ic h d o u b l e d , i n c r e a s i n g f r o m 3.8 to 7.2 p e r c e n t o f s p r e a d s t h e i m p a c t o f e x p o r t - r e la t e d e m p l o y th e G N P . I m p o r t s f r o m a b r o a d , b o t h r a w t h e U . S. e c o n o m y n e a r ly m e n t t h r o u g h o u t th e c o m m u n it y . T h e se in m a t e r ia ls a n d f i n i s h e d g o o d s , a ls o ro se , d ir e c t b e n e f it s o f f o r e i g n t r a d e a re n o t u s u a lly c o n t in u in g a tre n d t o w a r d m o r e c o m p le t e c o u n t e d b e c a u s e t h e y a r e h a r d e r t o r e c o g n iz e . T h e s e fig u re s a p p ly only to m a n u f a c t u r e d p r o d u c t s ; e x p o r t s o f m in e r a l p r o d u c t s , s u c h 152 in t e g r a t io n o f t h e w o r l d 's e c o n o m i e s . T h e v a s t m a j o r it y o f U n i t e d S t a t e s f o r e i g n t r a d e m o v e s b y w a t e r b o r n e t ra n s p o rta tio n , a n d s o u t h N O V EM B ER 1976, M O N TH LY REVIEW eastern manufacturers routinely ship approxi mately 95 percent of their exports and imports through District ports. The growth of foreign trade moving through the ports has been quite substantial. Between 1964 and 1974, the value of foreign commerce moving through southeastern ports jumped 378 percent, outstripping the 296 percent gain in total U. S. foreign commerce during the same period. (See Chart 1.) In total, District ports handled nearly 18 percent of the value of U. S. imports and exports in 1974 and 20 percent of the weight of imports and exports for the U. S. in that year. In 1974, the New Orleans-Louisiana Customs District rivaled the New York District in the value of waterborne exports. This contrasts with the performance of 10 years before, when the value of New Orleans' shipments was only approximately 35 percent of the New York total. Table 1 shows the rank of U. S. Customs Districts in 1964 and 1974. Based on the value of exports, New Orleans ranks second in the United States, and the Miami-Florida Customs District moved from 20th to 12th in exports in the 10-year period. New York retains its position as the premiere seaport for imports of waterborne commerce. Southeastern seaports service ships from all parts of the world. However, the bulk of their exports, 45 percent by weight, eventually goes to Europe or other North Atlantic ports outside the U. S. Although the Southeast is geographically near the Caribbean Basin, less than 16 percent of the export flow from southeastern ports moves to that area. Imports nearly reverse that pattern of trade. More than half (52.8 percent) of the imports flowing through the South Atlantic and Gulf Coast ports originate in Carib bean Basin countries, while imports from Europe and other North Atlantic areas account for less than 15 percent of the total. Not all the traffic moving through south eastern ports is international cargo. Interna tional freight ranges from 34 percent of the total tonnage in Baton Rouge to 64 percent in Savannah. The rest of the freight traffic through the ports is destined for either intraport areas or other U. S. ports. Movement of traffic through the Intracoastal Waterway and the in land waterways system is substantial, and all southeastern ports receive and ship a significant amount of their traffic on the inland waterways system. Even such seemingly landlocked cities FEDERAL RESERVE BANK OF ATLANTA TABLE F R E IG H T T R A F F IC 2 THROUGH S IX T H D I S T R I C T P O R T S , 1974 (sh o rt to n s) Total Tonnage H a rb o r S a v a n n a h H arbor, G eorgia C o m m o d ity R e sid u a l Fuel Oil C ru d e P etrole um G a so lin e C la y L im e sto n e P e rce n t of Total Port Tonnage 9,698,679 1,632,035 913,095 7 8 9 ,1 3 4 678 ,6 3 0 6 2 8 ,7 4 2 Ja c k s o n v ille H arbor, F lo rid a C o m m o d ity R e s id u a l Fu el Oil G a so lin e D istilla te Fu el Oil B u ild in g C e m e n t P a p e r a n d P a p e rb o a rd 14,794,938 M ia m i H arbor, Flo rida C o m m o d ity R e s id u a l Fu el Oil A sp h a lt, Tar a n d P itc h e s S ta n d a rd N e w s p rin t P a p er D istilla te Fuel Oil M a c h in e ry, E xc e p t Elec trica l 41,1 4 1 ,4 0 7 T a m p a H arbor, Flo rida C o m m o d ity P h o sp h a te R o c k G a so lin e R e sid u a l Fuel Oil C oa l a n d L ig n ite S u lp h u r, L iq u id 40,918,807 M o b ile H arbor, A la b a m a C o m m o d ity Iron Ore a n d C o n c e n tra te s C ru d e P e tro le u m C oal a n d L ig n ite A lu m in u m Ore, C o n c e n tra te s M a rin e S h e lls, U n m a n u f. 33,153,954 P a s c a g o u la H arbor, M is s . C o m m o d ity G a so lin e C ru d e P etrole um R e s id u a l F u e l Oil W h eat A sp h a lt, T a r a n d P itc h e s 16.8 9.4 8.1 7.0 6.5 13 ,073,153 Port of N ew O rle a n s C o m m o d ity C ru d e P etrole um R e sid u a l Fuel Oil C oal a n d L ig n ite G a s o lin e G ra in M e ta l P ro d u c ts 5,204,118 2,328,648 1,221,714 3 9 5 ,3 7 9 267 ,8 0 0 2,459,468 156,385 137,096 124,868 8 7,217 17,696,150 5,215,535 3,839,957 3 ,4 8 0 ,8 4 9 2,161,457 10,609,430 4,487,795 3 ,970,669 2,028,251 1,579,906 3,600,768 1,425,126 1,249,960 919,466 902,111 35.2 15.7 8.3 2.7 1.8 59.4 3.8 3.3 3.0 2.1 43.3 12.8 9.4 8.5 5.3 32.0 13.5 12.0 6.1 4.8 27,5 10.9 9.6 7.0 6.9 1 4 4 ,189,409 23,742,085 9,537,581 8,751,137 5,776,086 5,016,691 P ort of B a to n R ou ge, La. C o m m o d ity C ru d e P etrole um B a s ic C hem . & Prod. Nec. A lu m in u m O res, Cone. C orn Soybeans 59,126,282 Port of La ke C h a rle s, La. C o m m o d ity C ru d e P etrole um R e sid u a l Fu el Oil B a s ic C he m . & Prod. Nec. G a s o lin e M a rin e S h e lls, U n m a n u f. 16.5 6.6 6.1 4.0 3.5 3 4 ,712,249 So u rc e : 6,491,438 4,939,173 4 ,792,753 3,464,072 3,106,729 7 ,486,188 6,273,876 3,296,683 2,741,686 1,381,618 11.0 8.4 8.1 5.9 5.3 21.6 18.1 9.5 7.9 4.0 D e p a rtm e n t of the A rm y C o rp s of E n ginee W a te rb o rn e C o m m e rc e of the U nite d States, C a le n d a r Y e a r 1974, P a rt 1 a n d Part 2. 153 TABLE 3 M A N U F A C T U R IN G TO JO BS D IR E C T L Y EXPORTS RELATED (1 9 7 2 ) (000) A la b a m a 7.2 G e o rgia 13.6 F lo rid a 11.9 L o u is ia n a 6.9 M is s is s ip p i 5.3 T e n n e ss e e 12.0 S ix th D istric t S ta te s 56.9 So u rc e : U. S. D e p a rtm e n t of C o m m e rc e , S u r v e y of the O rigin of E x p o rts of M a n u f a c t u r in g E s t a b lis h m e n ts in 1972. as Nashville have access to major seaports be cause of the well-developed inland waterways system of rivers and canals. The importance of inland water traffic varies from port to port. It is far more important to New Orleans, which benefits from the entire Mississippi River in land waterways system, than it is to the port of Savannah, which has only a minor large river system to serve it. The portion of traffic moving in international commerce has stayed relatively the same during the past ten years. For example, a port such as Savannah, which in 1974 considered 64 percent of its traffic as either imports or exports, had 65 percent of its traffic in the same category in 1964. The port of Pascagoula had only 27 percent of its cargo destined for international trade in 1974, while in 1964, 31 percent of its tonnage was in that classification. Total tonnage, both domestic and interna tional, moving through the ports has increased significantly in the past decade. The rate of growth varies from port to port, but the in creases range from nearly 40 percent in Pascagoula, Mississippi, to 200 percent in Miami. (See Figure 1). A great deal of the ton nage gain stems from an increase in the volume of petroleum imports moving through the ports. Even areas which produce petroleum are now net importers of oil. Consequently, residual fuel oil or crude petroleum is one of the top five products in terms of tonnage for each of the Sixth District ports. Other kinds of products, even bulk commodities for which southeastern ports are most noted, run a poor fourth or fifth to petroleum products. For ex ample, exports of clay and limestone from Savannah harbor account for only 13.5 percent 154 of the port's total tonnage, while crude oil products make up more than 35 percent. Even such a major general cargo port as New Orleans shows crude petroleum and residual fuel oils as the number one and two commodities in terms of tonnage. Ports Are Different. A coastal city identifying itself as a seaport is likely to be organized differently from other cities. Seaports attract highly specialized workers and dedicate a substantial portion of the industrial area to port-related activities. Ports offer a number of jobs in occupations peculiar to cities that specialize in moving foreign commerce. Sea ports need specialized kinds of labor to help move cargo and specialized kinds of financial and business services to aid in the complex paper work of international transactions. Cus toms brokers and foreign freight forwarders provide some of these special services and are the international traffic managers for importers and exporters. These specialized workers, although small in number, play a crucial role in moving foreign commerce. They work closely with the government officials in the Customs Bureau of the U. S. Treasury and at the Federal Maritime Commission, smoothing the way through the complex of government regulations, clearances, bank loans and insurance for producers unfamiliar with the red tape of moving goods in foreign trade. Customs brokers assist importers in selecting customs classifications and duties for each product imported, handle bonding require ments, arrange for storage, negotiate insurance and arrange for inspection services and inland distribution. Foreign freight forwarders are the export counterpart of the customs brokers and arrange for ocean and air transportation, negotiate U. S. government customs require ments, prepare invoices and assist clients in buying and selling foreign exchange, prepare drafts, and documents and arrange export packaging. This kind of service, plus ware housing, packaging, marine insurance brokerage and ship service and repair, provides job opportunities different from those of other cities. The presence of a port greatly influences the geographic arrangement of a city, with the older part of a city generally associated with the port activity. In many cases, the city owes its original existence to the availability of a good harbor. In addition, seaports have at tracted industries which process materials at N O V EM B ER 1976, M O N T H L Y REVIEW their point of transshipment from sea to land conveyance, and these industries usually cluster near the port area. Jobs in these industries are directly linked to the ports and they provide much employment beyond that outside the realm of shipping goods and running a port. Nearly every seaport in the Sixth District has conducted a special study designed to evaluate the economic impact of the port on the surrounding area. An important feature of these studies is the estimate of the number of additional jobs created in the area because of the presence of the port. Although the precise employment multiplier calculated in these studies varies from port to port, there is agree ment that the number of jobs generated is several times the number directly employed in port-related activities. For example, a study on the impact of the port of Mobile upon the Alabama economy, calculated a regional em ployment multiplier of three.2 In this way, the direct employment impact of the port, 41,994 jobs, is estimated to generate a total of 125,000 jobs in Alabama's economy and $1.3 billion in wages and farm income. The employment multiplier can be interpreted to mean that for each person directly employed in the port of Mobile activities, approximately two secondary or indirect jobs are generated. Studies, done in other places and at other times for each of the ports of the Sixth District, show similar findings. We can confidently say that the ports of the District generate employment far beyond the immediate area and far in excess of the number of people directly employed in the ports. Port Personalities. Each port in the District has a personality formed by the type of goods it handles. This personality in turn reflects the commercial and industrial nature of the area which is served by the port. Certain ports specialize in the export of commodities, such as phosphate rock in the port of Tampa. Others are noted more for general cargo and the frequency of ships calling at the harbor. Railroad freight rates are monitored by and posted with the Interstate Commerce Commis sion. In theory, goods should move through the nearest port to minimize freight charges. But because freight charges to many ports are nearly identical, distance to many of the ports in the District has less importance than the 2Prepared in 1973 by the Department of Economics, University of South Alabama. A partial list of similar studies of other District ports appears as Appendix A. FEDERAL RESERVE BANK O F ATLANTA schedule of ships docking or the specialized services offered by the port. For example, a freight shipment from the Midwest bound through a port could be handled at either Savannah or Jacksonville, depending upon the availability of a ship in harbor on the date when the shipper wants his goods to move. On the other hand, a port such as New Orleans has a large flow of commerce from a wide area moving through a very highly developed river system. Thus, the barge traffic moving down the Mississippi collects goods and commodities from the entire heartland of the United States in the river system from the Rocky Mountains to the Appalachians. In large measure, this flow of water-borne traffic by inland waterways ac counts for the popularity of the port of New Orleans and for the large volume and value of goods flowing through it. On the import side, the needs of the area served by the port have a large impact on the freight moving through it. Tampa, as another example, handles a great deal of fuel oil in bulk form from Caribbean refineries. The great demand for oil stems from an electric gene rating station, requiring large quantities of fuel oil for its operation. The port of Savannah im ports large quantities of jute destined for the carpet mills in north Georgia, where it is used as a backing for carpets and rugs. Table 2 shows a breakdown of the most important products moving through the major District ports based upon their weight. 155 PORT MODERNIZATION A visitor to the ports of the Sixth District immediately sees the huge volume of new construction designed to accommodate the tremendous change in transportation tech nology, which has occurred during the past fifteen years. For example, the image of a port as a crowded warehouse area has given way to wide-open areas designed to allow the stacking of containers near the piers. Containers are strong van-like carriers which can be moved by truck, crane, ship, barge or airplane. A shipper can pack a container at his plant and have it unpacked at the ultimate destination. This saves damage which might result from multiple handling of less compact and protected ship ping crates. The efficiency of this method makes it quite popular. During the past fifteen years, the switch of conventional general cargo ships to container ships has been virtually ac complished. The restructuring of loading areas of ports, with paved open spaces near wharves for quick stacking and loading when ships are in port, is a direct result of this transition. A sizable investment by ports over the past seven years has been in facilities to accommodate container ships. In addition to the new design for piers and cargo areas, large cranes have been installed at most District ports to accom modate the handling of large containers. The ports have also changed to new bargecarrying ships that load both cargo and river barges directly onto the ships to be unloaded onto the inland waterway system at their ulti mate destination. Another relatively new development is the roll-on, roll off, or "ro-ro" van-carrying ship, which allows vans, heavy machinery and other kinds of mobile cargo to be driven directly into the ship. Ports are constantly developing specialized bulk cargo-handling facilities to accommodate the types of cargo which are most important to them. For example, Mobile harbor has a specialized bulk-handling facility for coal, while Lake Charles, Louisiana, has specialized bulkhandling facilities for grain. Form 1966 to 1972, investment in such specialized facilities totaled $26 million in South Atlantic ports and $21 million in Gulf ports. The high level of invest ment in these facilities is continuing, according to the U. S. Department of Commerce.3 Port development in District ports is pro ceeding at a pace that will allow ports to handle the cargo and the trade needs of the District economy for years to come. For ex ample, advance cargo-handling facilities, like container terminals, are still expanding. The days when pier and a cargo shed would meet the needs of a shipper are nearly gone. Large berths to accommodate vessels of increasing size and more acreage to provide container storage space are needed, as are heavy cranes and other equipment for servicing vessels. The ability of southeastern ports to provide relatively cheap and reliable transportation is the key to their future. Southeastern ports are moving to meet the needs of the region's expanding industries and are making the necessary investments to remain competitive with other areas of the nation. ■ APPENDIX A Selected Port Impact Studies Clifton, David S., "The Economic Impact of Georgia's Deepwater Ports", Industrial Development Division Engineering Ex periment Station, Georgia Institute of Technology, December 1973. Drewry, Aubrey L., Jr., "Georgia's Foreign Trade", Bureau of Business Research, College of Business Administration, The University of Georgia, Athens, Georgia, 1964. Dunphy, Loretta M., Ph.D., and Semoon Chang, Ph.D., Department of Econom ics, University of South Alabama, Mobile, Alabama, December 1974. Pender, David R., and Ronald P. Wilder, "Impact of the State Ports Authority Upon the Economy of South Carolina", Division of Research, Bureau of Busi ness and Economic Research, College of Business Administration, The Univer sity of South Carolina, September 1974. Weir, Norman E., Ph.D., "The Impact of the Port of Jacksonville on the Economy of the Community", Jacksonville Univer sity, Jacksonville, Florida, 1965. ■ 'C o m m erce T o d a y , O c to b e r 29, 1973, p. 18. 156 N O V E M B E R 1 9 76, M O N T H L Y REVIEW L o a n L o s s e s S u r g e in 1 9 7 5 b y John M. G o d f r e y Loan losses at District member banks increased sharply in 1975 and are the most visible sign of banks' most recent loan problems. While there is no way to measure some of the other problems, such as the lost income from reduced or suspended interest payments on some substandard loans that have not been written off, these losses are also undoubtedly large. Faced with heavy losses, banks have stepped up provisions for loan losses in an attempt to insure that their loan loss reserves are sufficient to cushion them against additional losses, and these additional provisions have had a major impact on bank earnings. Since banks have had several years now to properly identify all their problem loans and make sufficient provisions for any eventual losses, they should be able to hold the line on future provisions and improve their earning outlook District member banks charged off a postDepression record volume of uncollectable loans during 1975. In 1975, these banks re ported loan losses of $305.5 million, up from $200.6 million in 1974 and $101.6 million in 1973 (see Table 1). Loan losses as a percent of total loans also surged. Banks charged off 1.19 percent of loans in 1975, an increase from 0.76 percent in 1974 and an average of only 0.49 percent from 1970 through 1973 (see Table 2). The dollar volume of loan losses increased $104.9 million last year and was concentrated in several groups of banks. The large Tennessee banks accounted for $30.8 million of the $69.1 million increase (45 percent of the total) in loan losses among the large District banks. The small- and medium-sized banks in Florida ac counted for a disproportionately large part of the increase among these District banks. Of the $35.8-million rise in losses among these banks, the Florida banks added $25.3 million, or 71 percent. FEDERAL RESERVE BANK OF ATLANTA Sixth District member banks had losses proportionately greater than banks in general over the last several years; nationally, they were half as large. District banks accounted for 11.2 percent of all U. S. member banks' loan losses in 1975 and 12.6 percent in 1974, while they held only slightly over six percent of all mem ber bank loans. As a result, the losses at all member banks were 0.65 percent of loans in 1975 and 0.39 percent in 1974, just about onehalf of the loss rate experienced by District banks. In the District, loan losses were heaviest in Florida, Georgia and the District portion of Tennessee; losses were much lower in Alabama and the District parts of Louisiana and Mississippi. Member banks in Florida, Georgia and Tennessee accounted for 79 percent of the District's losses, although they had only 67 percent of the District's loans. The larger District banks generally have the higher rate of loan losses. This was true in 1975. Increased losses at the larger banks are attributed to their more active involvement in lending involving real estate, especially apart ments, condominiums, commercial properties, and land development, and the real estate investment trusts. Also, they have not been immune to increased losses on their primary customers, commercial and industrial business firms, and consumer loans. They charged off 1.34 percent of their loans, compared to the remaining banks' 1.05 percent charge-off. While loan loss rates rose for all size banks in 1975, the 48 large banks (defined here to in clude all Sixth District member banks with total loans of $100 million or more as of December 1974) continue to report loss rates approxi mately one-third higher than other banks. Seven large Tennessee banks charged off an average of 2.04 percent of their loans, the 157 TABLE 1 LOAN LO SSE S S ix t h D is t r ic t M e m b e r B a n k s ($ m i l l i o n s ) Banks Large Banks* All Other Banks D istric t 1973 1974 1975 101.6 2 0 0 .6 3 0 5 .5 63.6 130.8 199.9 38.0 69.8 105.6 A la b a m a 1973 1974 1975 13.6 21.1 26.2 6.0 10.3 12.2 7.6 10.8 14.0 F lo rid a 19 7 3 1974 1975 25.2 58.2 95.2 7 .4 23.5 35 .2 17.8 34.7 60.0 G e orgia 1973 1974 1975 32.7 68.7 87.2 27.3 56.9 69.0 5.4 11.8 18.2 L o u is ia n a * * 1973 19 7 4 1975 9.7 15.6 2 4 .8 7.0 10.3 20.5 2.7 5.3 4.3 M is s is s ip p i* * 19 7 3 1974 1975 6.1 8.8 11.7 4.7 7.0 9.4 1.4 1.8 2.3 T e n n e s s e e ** 197 3 1974 1975 14.3 28.2 60.4 11.2 22.8 53.6 3,1 5.4 6.8 ♦ B a n k s w ith lo a n s of $ 1 0 0 ,0 0 0 ,0 0 0 a n d o v e r a s o f D e c e m b e r 1 9 7 4 * * S ix t h D istric t p ortion highest loss ratio for this group of banks in the District. Tennessee's situation was strongly influenced by two large banks that had re ported losses in excess of 3.5 percent of total loans. One of these banks subsequently failed because of additional loan losses. The seven large banks in Georgia also had a high average loss ratio of 1.69 percent. The small- and medium-sized banks in the District portion of Mississippi and Louisiana had the lowest loss ratios. Compared with other states in the District, the medium and small banks in Alabama had higher loss ratios than the large banks in the state. RECOVERIES When banks charge off a loan as a loss, they generally make a conservative estimate of the loss. That is, banks are more apt to overstate than to understate the actual amount of the loss rather than to have to make a second adjustment. In this way, they may eventually recover more from a loan than the reduced value that is carried on their books. When banks make these recoveries, the proceeds are credited back to their reserves for loan losses. From 1970 through 1973, District banks typically recovered from $20 to $30 million a 158 year in loans that had previously been charged off (see Table 3). These recoveries amounted to between one-fifth and one-third of total gross loan losses and sharply reduced the over all rate of loan losses. During the last two years, the dollar amount of recoveries has increased but not nearly as much as gross loan losses. In 1975, recoveries totaled nearly $50 million but represented only 16 percent of gross loans losses. While the ratio of recoveries to gross losses has declined, this change may be a reflection of banks' more realistic estimates of what the actual losses are when the loan is charged off. Or, the lower rate of recoveries may be symptomatic of types of loans being written off. To the extent that these loans involve foreclosures on real estate or asset swaps and banks are unable to quickly sell the property that they have taken posses sion of, several years may elapse before banks can sell property and establish their exact losses. In these cases, and if they have taken overly conservative write-offs, they may be re porting increased recoveries in the future. BANK SIZE AND LOAN LOSSES Although there was an increase in loan losses last year, most District member banks did not N O V EM B ER 1976, M O N T H L Y REVIEW TABLE 2 LO AN LO SSES S ix t h AS A PERCENT D is t r ic t OF TOTAL M em ber LO ANS Banks Banks Large Banks* Other Banks All D istrict 1973 19 7 4 1975 0.41 0.76 1.19 0.43 0.84 1.34 0.38 0.65 1.05 A la b a m a 1973 19 7 4 1975 0.42 0.57 0.67 0.34 0.51 0.58 0.51 0.65 0.78 F lo rid a 19 7 3 1974 1975 0.31 0.68 1.18 0.25 0.76 1.28 0 .3 4 0.63 1.13 G e o rgia 1973 1974 1975 0.59 1.22 1.61 0.66 1.34 1.69 0.39 0.87 1.35 L o u is ia n a * * 1973 19 7 4 1975 0.33 0.50 0.79 0.31 0.42 0.86 0.43 0.78 0.58 M is s is s ip p i* * 1973 197 4 1975 0.45 0.63 0.83 0.45 0.72 0.94 0.46 0.43 0.55 T e n n e s s e e ** 1973 1974 1975 0.42 0.74 1.63 0.43 0.81 2.04 0.38 0.53 0.63 * B a n k s w ith lo a n s of $ 1 0 0 ,0 0 0 ,0 0 0 a n d o v e r a s of D e c e m b e r 19 7 4 * * S ix t h D istric t p ortion write off an unreasonably large amount of loans. The high rate of loan losses was caused by a relatively small proportion of the District banks. While the District average rate of loan charge-offs was 1.19 percent last year, 70 per cent of the banks had losses of less than one percent (see Table 4). Furthermore, nearly one-half of the banks had losses of less than one-half of one percent. While this was a deterioration from previous years, loan losses at most banks appear quite manageable. Most banks were not confronted with large loan losses, but some banks were quite hardhit. The number of banks with losses exceeding one percent rose sharply in 1975. In 1974, only 107 of 646 member banks (17 percent) reported losses of over one percent, but during 1975, 198 of 658 banks, or 30 percent were in this category. In addition, 12 banks had severe losses of over five percent in 1975 and one moderate-sized Florida bank, with reported losses of nearly eight percent, subsequently failed. In contrast, there were only four banks with losses over five percent in 1974. Most District banks with high loan loss ratios are smaller banks. Of the 198 banks in the Dis trict with losses exceeding one percent, 127 have loans outstanding of less than $25 million, and they appear to represent the greatest FEDERAL RESERVE BANK OF ATLANTA problems. And of the 12 banks with losses over five percent, nine have less than $25 million in loans, with eight of the nine having less than $10 million in loans outstanding. One of these small banks, located in Georgia, reported losses in excess of 12 percent and was later merged into another bank to prevent its outright failure. A higher proportion of the large banks did have losses exceeding one percent, but none reported severe losses of more than five per cent. Nineteen of these 44 large banks had losses over one percent. Furthermore, twothirds of the very largest District banks— loans of over $500 million— wrote off over one per cent of their loans last year. RESERVES FOR LOAN LOSSES Reserves for loan losses help banks absorb the impact of loan losses and reduce the impact of losses on earnings and the capital structure of banks.1 For this reason, it is beneficial that reserves rose not only absolutely but relatively last year. Reserves as a percent of loans equaled 1.60 percent at the end of 1975, up from 1.48 percent at the end of 1974. This change marks an improvement over the ’See: "Accounting for Loan Charge-Offs,” this Review, August 1975. 159 TABLE 3 RESERVES FOR LO AN LO SSES S ix t h D is t r ic t M e m b e r B a n k s ($ m i l l i o n s ) 1970 1971 1 9 72 1973 1974 1975 261.6 2 66.9 277.9 3 11.0 3 5 8 .8 3 9 2 .8 51.4 55.5 60.4 78.3 175.5 302.7 + R e c o v e r ie s 18.6 25.4 30.4 29.8 36.1 48.6 + O th e r T ra n sfe r s to R e s e rv e s 25.5 20.1 27.8 41.9 28.2 0.2 357.1 3 67.9 396.5 4 61.0 598.6 744.3 88.8 83.9 82.7 101.6 2 00.6 3 0 5 .4 1.4 4.5 2.9 2.3 8.0 27.4 266.9 279.5 3 1 0 .9 357.1 3 9 0.0 411.5 1 4 ,0 9 0 1 6 ,0 8 2 2 0 ,1 51 2 4 ,5 9 7 2 6 ,3 2 2 2 5 ,6 3 2 1.60 B e g in n in g B a la n c e + P r o v is io n for L o a n L o s s e s Total R e s e rv e s — G ro ss Loan L o sse s - O t h e r T ra n sfe r s from R e se rv e s E n d in g B a la n c e TO TA L LO A N S R e s e rv e s a s % of L o a n s N et L o s s e s * N et L o s s e s a s % of L o a n s 1.89 1.74 1.54 1.45 1.48 0.63 0.52 0.41 0.41 0.76 1.19 70.2 of Loan s G ross L o sse s a s % 58.5 52.3 71.8 164.5 2 56.8 0.50 0.36 0.26 0.29 0.63 1.00 ♦ G r o s s lo s s e s m in u s re c ove rie s Note: S tru c tu ra l c h a n g e s a c c o u n t fo r the d iffe re n ce b etw e en the e n d in g b a la n c e in o n e ye a r a n d the b e g in n in g b a la n c e in the fo llo w in g year. low of 1.45 percent in 1973, but the coverage is still substantially below that experienced in the early 1970s. As a longer-run measure of protection against capital impairment, the ratio of reserves to loans is probably the most mean ingful measure. Banks typically provide for loan losses by allocating part of their income (a provision for loan losses) to a reserve for loan losses. The provision for loan losses is an expense item for the bank even though it does not necessarily involve any direct outlay by the bank at the time it is made. When a bank actually ex periences a loss when a loan is charged off, that loss is charged to the loan loss reserve. While increased provisions for loan losses directly reduce profits, loan losses do not since they are charged against the loan loss reserve. At the end of 1975, reserves for loan losses at District banks totaled $411.3 million, up from $392.8 million at the beginning of the year (see Table 3). Loan loss reserves actually increased last year, in spite of record loan losses being charged against these reserves, because banks made provisions of $302.7 million to the re serves and had recoveries of $48.6 million. Other minor transfers involving these reserve accounts explain the remaining difference. If banks expect to experience higher loan losses, 160 they generally increase their provisions for losses. In 1974, gross loan losses exceeded pro visions for losses by $25.1 million, but in 1975 gross losses were nearly equal. Some of the relative improvement in the coverage of reserves to loans, however, re sulted from a decline in loans rather than the increase in reserves. In two of the states with large loan losses— Florida and Georgia— onehalf or more of the relative improvement oc curred because loans declined. In the other state with large losses, Tennessee, there was a relative improvement in reserves because reserves rose 12 percent and loans rose only slightly. While the protection afforded by loan loss reserves has improved as measured by the ratio of reserves to loans, by another measure they have deteriorated rather sharply. In the early 1970s, reserves exceeded net loan losses by approximately five times in any one year. By 1974, the coverage had dropped to only two and one-half times and in 1975 to even less, about one and one-half times. This deteriora tion shows that without massive provisions in a year like 1975 when losses are large, loan loss reserves would be nearly depleted. Making these massive provisions for loan losses in order to maintain adequate reserves had a major impact on District bank earnings. N O V EM B ER 1976, M O N T H L Y REVIEW TABLE 4 D IS T R IB U T IO N LO A N -L O SS OF R A T IO D IS T R IC T AND M EM BER BANKS OF LOAN S IZ E P O R T F O L IO BY 1975 L o a n *L o s s R atio Loans Under .25 .25 - .50 .50 - .75 .75 - 1.00 1.00 - 5.00 Over 5.00 ($ m illio n s) U n d e r 10 Total 102 55 26 17 65 8 2 73 10- 25 45 48 33 13 53 1 193 25- 50 23 23 18 11 37 0 112 50 - 1 0 0 6 6 6 3 12 3 36 1 0 0 - 5 00 1 5 9 7 13 0 35 O ver 5 0 0 1 1 0 1 6 0 9 178 138 92 52 186 12 658 TOTAL TABLE RESERVES FO R 5 LO AN LO SSES 1975 S ix t h D is t r ic t M e m b e r B a n k s ($ m i l l i o n s ) Louisiana* Mississippi* Tennessee'1 Alabama 392.8 58.5 129.0 83.7 49.0 21.8 50.8 P ro v is io n fo r Loan L o sse s 302.7 22.8 92.3 92.5 24.1 10.3 60.7 48.6 6.2 14.3 13.1 4 .4 2.2 8.4 0.2 0.0 0.1 0.0 0.1 0.0 0.0 744.3 87.5 235.7 189.3 77.6 34.3 119.9 3 05.4 26.2 95.2 87.1 24.8 11.7 60.4 27.4 .2 8.1 15.6 .7 .3 2.5 411.5 61.1 132.4 86.6 52.1 22.3 57.0 R e c o v e rie s T ra n sfe r s to R e s e rv e s TOTAL G ro ss Loan L o sse s O th e r T ra n sfe rs from R e s e rv e s E n d in g B a la n c e Florida Georgia District B e g in n in g B a la n c e "D ist r ic t portion In 1975, earnings, as measured by income after taxes but before securities gains or losses, totaled $296 million, down from $373 million the year before. This $77-million drop in earn ings was more than offset by the $127-million increase in one expense item, provision for loan losses. The overall drop in bank earnings was partly tempered by a sharp savings in income tax liabilities from net payments of $53 million in 1974 to net credits of $6 million in 1975. PROSPECTS FOR FUTURE LOAN LOSSES District member banks were hit hard by loan losses in 1975. In making provisions for loan losses in order to maintain adequate loan loss reserves, banks experienced sharply lower FEDERAL RESERVE BANK OF ATLANTA earnings. The outlook for the southeastern banks does look brighter, however. After two years of exceptionally heavy loan charge-offs, most banks have probably identified their most serious loan problems and made adequate provisions for most subsequent charge-offs. Tight credit standards and an improving econ omy should boost the quality of new loans they are making. If this is true, banks should not be faced with the need to make massive provisions in 1976. In the future, banks may not need to make large additions to their reserves for protection against loan losses. Reserves can expand in line with the growth in loans and reduced provisions for loan losses in turn should have a positive impact on future bank earnings. ■ 161 S ix t h D i s t r i c t S ta tis tic s S e a s o n a lly A d ju ste d ( A ll d a t a a r e in d e x e s , u n l e s s i n d i c a t e d o t h e r w is e . ) Latest Month 1976 One Month Ago Two Months Ago One Year Ago Unemployment Rate (Percent of Work Force)*** . . . . Aug. Average Weekly Hours in Mfg. (Hrs.' - Aug. SIXTH DISTRICT INCOME AND SPENDING M anufacturing Income . . . . . . . Aug. Farm Cash Receipts . . . . . . . . July Crops ................................... . . . . July Livestock ........................... . . . . July Instalm ent Credit at Banks*/ * (Mil. $) New Loans .......................... . . . . July Repayments ...................... . . . . July Retail S a l e s .......................... ................. July 138.3 287.7 480.3 215.6 138.8 228.0 290.4 211.8 138.2 326.2 367.2 292.3 123.1 268.2 417.5 204.5 819 723 146.3 824r 779r 145.6r 815r 751r 142.9r 106.7 97.3 98.1 95.9 96.5 96.3 98.9 106.0 104.5 96.3 106.2 97.7 98.9 97.1 95.3 98.8 105.0 93.7 95.3 94.9 91.1 92.9 94.6 103.0 100.9 91.7 83.9 91.2 92.8 94.7 100.0 94.5 105.5 104.7 96.3 88.4 89.6 98.4 95.8 108.2 93.4 108.9 79.7 104.4 107.6 112.9 116.9 105.8 117.5 97.5 7.8 7.4 7.4 9.1 3.8 40.5 190 184 195 65.3 148.3 146.7 126.9 149.3 128.2 146.1 129.6 164.4 150.8 161.2 134.0 139.6 104.2 3.8 40.5 205 175 234 79.3 86.3 148.1 147.3 129.7 146.2 133.3 145.4 129.4 163.1 149.7 160.7 135.6 137.3 102.5 3.9 40.7 183 170 196 75.3 88.4 149.5 149.0 133.7 150.1 135.9 145.4 132.0 162.5 150.2 161.9 135.7 138.7 5.0 39.9 154 129 178 73.5 91.8 142.4 144.1 128.0 140.3 124.5 134.2 127.8 160.2 140.0 142.9 127.3 141.4 157.4 254.5 150.5 157.7 253.5 147.2 161.3 253.7 146.7 111.4 147.1 227.1 133.7 . Aug. . Aug. 275 220 272 218 270 219 264 224 . Aug. . Aug. . Aug. 235 195 373 234 194 346r 237 343 INCOME M anufacturing I n c o m e ...........................Aug. . Aug. Farm Cash Receipts . . . . . July 140.2 304.9 138.7 391.2 125.9 285.8 86.6 111.8 90.9 98.2 96.3 108.5 94.5 109.7 80.3 104.2 108.3 112.7 116.6 106.5 6.9 40.7 6.6 40.9 7.9 40.1 . Aug. , Aug. . Aug. 295 242 332 294 243 319 293 247 322 264 225 282 Farm Cash Receipts . Aug. , July 139.2 442.4 135.5 240.1 134.8 255.7 410.5 . Aug. 109.0 97.9 111.0 9.6 41.0 121.2 112.2 102.2 112.8 121.0 EMPLOYMENT . Aug. . Aug. , Sept. 110.8 61.7 98.6 109.9 97.5 111.9 62.3 99.2 . Aug. . Aug. 9.6 41.1 9.2 40.9 . Aug. . Aug. . Aug. 295 262 402 . July 128.2 264.8 202.8 131.0 261.5 116.5 229.1 102.5 94.5 105.6 72.5 106.2 103.0 95.9 105.7 72.7 115.7 102.2 95.6 104.8 70.6 100.2 6.6 6.2 M anufacturing Unemployment Rate (Percent of Work Force)*** 109.2 98.3 60.7 107.8 109.3 94.0 111.8 71.0 100.1 11.0 39.7 FINANCE AND BANKING 101.8 88.6 108.5 84.9 103.0 106.8 284 257 367r 278 258 348r 286 249 327r 112.8 115.2 106.2 117.0 90.5 100.0 133.0 EMPLOYMENT Nonfarm E m p lo y m e n t ...................... M anufacturing ............................... N o n m a n u fa c tu rin g .......................... C o n s t r u c t io n ............................... Farm Employment ........................... Unemployment Rate (Percent of Work Force) . . . . Average Weekly Hours in Mfg. (Hrs.) . Aug. . Aug. Sept. . Aug. . Aug. 40.0 40.1 Member Bank L o a n s ........................... . Aug. Member Bank D e p o s i t s .................. . Aug. Bank D e b i t s * * ................................... 256 195 432 M anufacturing I n c o m e ...........................Aug. Farm Cash R e c e ip t s ............................... July 112.8 6.1 90.4 104.0 75.7 102.3 40.3 8.4 39.5 257 198 407 248 204 406 244 192 353 142.2 200.8 142.1 209.4 145.1 596.7 127.5 259.4 105.1 101.2 105.9 101.9 67.8 105.4 100.7 106.3 102.7 71.8 105.6 101.4 106.4 105.7 76.7 104.2 100.3 105.0 100.5 71.4 7.7 40.9 7.8 41.2 7.3 41.8 7.6 41.1 244 205 280 FINANCE AND BANKING EMPLOYMENT Nonfarm E m p lo y m e n t...........................Aug. M anufacturing ....................................Aug. N o n m a n u fa c tu rin g .............................. Aug. C o n s t r u c t io n ....................................Aug. Farm Employment ............................... Sept. Unemployment Rate (Percent of Work Force)*** . . . . Aug. Average Weekly Hours in Mfg. (Hrs.) . Aug. FINANCE AND BANKING 141.6 267.9 200 EMPLOYMENT Manufacturing Non m anufacturing 7.0 40.5 Bank Debits* 223 193 307 112.8 116.4 106.5 119.2 91.9 88.0 FINANCE AND BANKING Loans* All Member B a n k s ...................... Large Banks .................................... Deposits* All Member B a n k s ...................... Large Banks .................................... Bank Debits*/** ............................... One Year Ago 739 711 130.5 106.1 96.8 97.8 95.4 94.9 97.3 98.6 106.0 104.8 95.4 87.0 90.9 98.1 95.0 108.0 91.6 109.0 80.3 104.3 107.8 TWO Months Ago FINANCE AND BANKING EMPLOYMENT AND PRODUCTION Nonfarm Employment . . . . • Aug. M anufacturing ...................... • Aug. Nondurable Goods . . . . • Aug. F o o d ................................... Textiles .......................... * Aug. Apparel .......................... • Aug. Paper ............................... . Aug. Printing and Publishing - Aug. C h e m i c a l s ...................... • Aug. Durable G o o d s .................. • Aug. Lbr., Woods Prods., Furn. & Fix.. Aug. Stone, Clay, and Glass . . . . Aug. Primary M e t a l s ...................... . Aug. Fabricated M e t a l s .................. ■ Aug. M a c h i n e r y ............................... . Aug. Transportation Equipment . Aug. N o n m a n u fa c tu rin g ........................... . Aug. C o n s t r u c t i o n ........................... . Aug. Transportation ...................... . Aug. T r a d e ........................................ . Aug. Fin., ins., and real est. . . . Aug. S e r v i c e s ................................... . Aug. Federal Government . . . . . Aug. State and Local Government • Aug. Farm E m p lo y m e n t............................... . Sept. Unemployment Rate (Percent of Work Force) . . . . . Aug. Insured Unemployment (Percent of Cov. E m p .).................. • Aug. Average Weekly Hours in Mfg. (Hrs.) • Aug. Construction C o n t r a c t s * .................. . Aug. R e s id e n tia l........................................ . Aug. All o t h e r ............................................ . Aug. Cotton C o n su m p tio n * *...................... . July Petroleum P r o d u c ti o n ...................... . Aug. . July M anufacturing Production . . . . Nondurable G o o d s ........................... . July Food ........................................ . July Textiles ................................... . July Apparel .................................... . July Paper ........................................ . July Printing and Publishing . . . July Chemicals ............................... . 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 Metals . . . . . . July Nonelectrical Machinery . . . July Electrical Machinery . . . . July Transportation Equipment . July One Month Ago Latest Month 1976 . Aug. . Aug. . Aug. M anufacturing I n c o m e ...........................Aug. Farm Cash R e c e i p t s ............................... July 220 220 242 250 295 275 295 245 159.0 279.3 157.7 276.6 220 158.6 344.6 136.0 279.3 EMPLOYMENT . . . . . 162 Aug. Aug. Aug. Aug. Sept. 109.0 98.2 113.8 121.7 108.2 110.0 98.8 115.0 118.4 117.7 109.3 99.0 113.8 123.1 116.7 107.6 96.8 112.3 120.8 110.1 . Aug. * Aug. • Aug. . Aug. 106.8 99.2 110.4 99.4 78.3 107.2 106.9 98.6 73.5 109.7 99.2 87.4 100.0 110.6 101.1 103.8 95.0 108.0 87.5 67.8 N O V E M B E R 1976, M O N T H L Y REVIEW One Two Month Months Ago Ago Latest Month 1976 Unemployment Rate (Percent of Work Force)*** . . . Average Weekly Hours in Mfg. (Hrs.) Aug. Aug. FINANCE AND BANKING Member Bank L o a n s * ...........................Aug. Member Bank D e p o s its * ...................... Aug. Bank Debits*/** ................................... Aug. One Year Ago Latest Month 1976 EMPLOYMENT Nonfarm E m p lo y m e n t...................... . M anufacturing ...................... . . . N o n m a n u fa c tu rin g ......................... . C o n s t r u c t io n ............................... . Farm Employment ........................... . Unemployment Rate (Percent of Work F o r c e ) ................. . Average Weekly Hours in Mfg. (Hrs.) ,. 7.7 39.5 277 245 330 274 241 327 286 256 322 136.2 256.2 136.7 335.0 122.4 167.0 On* Year Ago Aug. Aug. Aug. Aug. Sept. 103.7 94.5 108.4 80.7 78.3 103.9 95.1 108.5 80.4 73.5 103.8 95.8 107.9 76.2 87.4 102.3 91.5 107.8 92.4 67.8 Aug. Aug. 7.2 40.5 6.7 40.6 6.4 40.8 9.0 40.2 FINANCE AND BANKING Member Bank Loans* . . . . . . . Aug. Member Bank Deposits* . . . . . . Aug. Bank D e b i t s * / * * ...................... . . . Aug. 271 228 322 273 229 284 277 235 306 272 218 267 261 226 267 136.2 247.8 One TWO Month Months Ago Ago TENNESSEE . Aug. July Farm Cash Receipts *For Sixth District area only; other totals for entire six states ***Seasonally adjusted data supplied by state agencies. Note: *Daily average basis tPrelim inary data r-Revised N.A. Not available All indexes: 1967 = 100, except mfg. incom e, em ploym ent, and retail sales, 1972 = 100. Sources: M anufacturing production estim ated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. income and hours, and unemp., U.S. Dept, of Labor and cooperating state agencies; cotton consumption, U.S. Bureau of Census; construction contracts, F. W. Dodge Div., McGraw-Hill Information System s Co.; pet. prod., U.S. Bureau of Mines; farm cash receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes calculated by th is Bank. ’Data have been bench m arked and new trading day factors and seasonal factors com puted using December 31, 1974 and June 30, 1975 Report of Condition data as bases. D e b its to D e m a n d D e p o s it A c c o u n ts I n s u r e d C o m m e r c i a l B a n k s in t h e S i x t h D i s t r i c t ( In T h o u s a n d s o f D o l l a r s ) Percent Change August 1976 July 1976 August 1975 Percent Change Year to August date 1976 8 mos. from 1976 July Aug. from 1976 1975 1975 August 1976 8 mos. from 1976 July Aug. from 1976 1975 1975 5 5 1 2 4 1 + 1 + 19 + 11 + 11 + 16 + 16 - 1 +30 + 8 819,986 410,238 - 5 - 1 + 14 +34 + 10 + 9 5,721,135 126,915 454,105 1,366,658 1,004,816 311,182 4,650,630 111,127 381,442 1,375,618 811,103 275,700 933,334 551,035 987,013 553,832 + + + - + 29 + 14 +21 Bartow-LakelandWinter Haven Daytona Beach . . Ft. LauderdaleHollywood . . . Ft. Myers . . . . Gainesville . . . Jacksonville . . . MelbourneTitusville-Cocoa Miami .................. O r l a n d o .................. Pensacola . . . . Sarasota . . . . T allahassee . . . Tampa-St. Pete W. Palm Beach . 2,312,952 423,060 284,740 . 7,850,354 2,231,504 413,116 282,135 6,639,983 1,718,094 350,047 240,730 4,683,920 + 4 + 2 + 1 + 18 +21 + 18 +68 +35 +28 + 1 + 5 +31 414,236 9,086,437 2,013,894 753,304 468,802 . 1,179,965 . 4,451,016 . 1,181,886 434,802 8,746,786 1,900,325 764,597 500,813r 1,052,835 4,586,188 1,226,125 388,511 6,863,257 1,562,267 511,494 472,517r 1,016,175 4,258,811 1,003,868 - 5 + 4 + 6 - 1 - 6 + 12 - 3 - 4 + 7 +32 +29 +47 - 1 + 16 + 5 + 18 + 3 + 15 + 19 +38 + 2 + 3 + 8 + 6 Albany .................. A t l a n t a .................. A u g u s t a ................. Columbus . . . . Macon .................. Savannah . . . . 210,082 25,035,432 848,398 573,225 819,230 1,439,498 204,945 23,808,021 825,159 543,208 818,129 1,459,306 184,743 19,988,137 572,449 478,190 848,542r 1,003,360 + + + + + - 3 5 3 6 0 1 + 14 +25 +48 +20 - 3 +43 + 7 + 15 + 13 + 11 + 3r +39 Alexandria . . . . 363,420 Baton Rouge . . . 2,221,969 502,481 Lafayette . . . . 325,456 Lake Charles . . New Orleans . . . . 6,190,613 364,717 2,126,090 489,590 360,544 5,992,304 315,029 1,909,241 396,936 280,792r 5,990,043 - 0 + 4 + 3 + 3 + 15 + 16 +27 + 16 + 3 + 9 + 3 + 15 + 13 + 8 371,632 2,432,062 375,171 2,411,902 281,550 1,847,085 - 1 + 1 +32 +32 +22 +21 Chattanooga . . . . 1,362,705 1,888,389 Knoxville . . . . 5,557,553 Nashville . . . . 1,357,950 1,916,801 4,799,057 1,286,858 1,529,949 4,390,548 + 0 - 1 + 16 + 6 +23 +27 + 4 + 10 + 10 3 +21 +16 Biloxi-Gulfport . . Jackson .................. OTHER CENTERS Anniston . . 154,682 August 1976 D o t h a n ...................... Selma ...................... STANDARD METROPOLITAN STATISTICAL AREAS2 Birmingham . . . . 5,987,793 Gadsden . . . . 126,885 Huntsville . . . . 460,064 M o b i l e .................. 1,391,314 Montgomery . . . 967,329 Tuscaloosa . . . 307,196 Year 150,092 -10 242,467 95,043 July 1976 231,954 92,364 B r a d e n to n .................. 201,996 213,098 Monroe County . . 89,525 87,765r O c a l a .......................... 220,482 222,625 St. Augustine . . . 52,566 51,181 St. Petersburg . . . 1,111,518 1,122,776 Tampa ...................... 2,363,859 2,437,604 August 1975 214,832 + 83,184 + 179,107 79,392 189,228 44,033 1,023,950 2,304,020 + + - 5 +13 +16 3+1 4 + 1 8 5 2 1 3 1 3 +13 +13 +17 +19 + 9 + 3 + 4 —18 + 2 + 8 + 9 +8 A t h e n s ...................... B ru n s w ic k .................. Dalton ...................... E lb e r to n ..................... Gainesville . . . . Griffin ...................... L a G r a n g e .................. N e w n a n ...................... R o m e .......................... V a ld o s ta ..................... 181,787 122,449 240,336 34,227 199,691 85,560 46,380 54,493 173,216 127,131 200,177 132,231 189,423 34,516 215,093 81,532 42,693 56,546 171,885 132,193 161,578 123,705 178,518 30,070 175,654 68,906 38,627 46,432 175,809 114,763 - 9 +13 +14 - 7 - 1 +7 +27 +35 + 2 4 1+ 1 4 + 22 7+ 1 4 +1 4 + 5+2 4 +13 + 9 + 2 0 +16 - 4 +17 +15 + 1 - 1 + 9 - 4 +11 +10 A b b e v i l l e .................. B u n k i e ...................... H a m m o n d .................. New Iberia . . . . Plaquem ine . . . . T h ib o d a u x .................. 20,168 12,213 98,671 96,393 27,448 63,844 19,332 14,764 107,404 105,816 28,844 63,741 18,143 15,939 114,399 78,208 27,185 61,361 + 4 +11 -1 7 -2 3 - 8 -1 4 - 9 +23 5 + 1 + 0 + 4 H attiesburg . . . . Laurel ...................... Meridian .................. N a t c h e z ..................... PascagoulaMoss Point . . . V ic k s b u rg ................. Yazoo City . . . . 179,311 99,598 159,367 71,699 173,169 105,934 147,344 63,833 150,536 84,495 127,313 56,064 + 4 +1 9 + 1 4 - 6 +18 +19 + 8 +25 + 9 +12 +28 +18 163,819 87,266 44,901 169,275 95,781 55,737 182,045 - 3 - 1 0 + 0 74,671 - 9 +17 +20 37,368 - 1 9 +20 +1 0 Bristol'1 ..................... Johnson City . . . K i n g s p o r t .................. 233,922 174,277 399,227 237,071 181,066 397,410 DISTRICT TOTAL 124,747r 173,946 314,725 + . . 110,458,542 106,373,332r 89,553,583r + + 9 - 7 - 6 +13 -1 2 - 2 1 +88 +48 4 + 0 + 4 0 +27 +23 4 Alabama .................. 13,055,432 12,710,762 10,821,582 + 3 F l o r i d a ...................... 34,499,304 33,021,070r 27,031,156r + 4 G e o r g i a ..................... 33,918,525 32,653,073r 26,974,569r + 4 Louisiana' . . . . 11,500,724 11,228,392 10,551,715r + 2 + M ississippi1 . . . . 4,653,614 4,632,110 3,710,758 + 0 Tennessee' . . . . 12,830,943 12,127,925 10,463,803 + 6 + 23 + 14r +21 +28 +26 9 +25 +23 +12 +16r + 17r + 8r + 19 +11 'Conforms to SMSA definitions as of December 31, 1972. ^District portion only. ^Changes reflect structural changes in series. FEDERAL RESERVE BAN K O F ATLANTA 163 D is t r ic t B u s in e s s C o n d i t i o n s T h e S o u th e a st's e c o n o m ic e x p a n sio n falte re d in late su m m e r. E m p lo y m e n t d e c lin e d o v e ra ll a n d p e r fo r m e d w e a k ly in m o st sectors. In c o m e s a n d c o n s u m e r s p e n d in g a d v a n c e d o n ly slig h tly . T h e v a lu e o f c o n str u c tio n co n trac ts d e c lin e d . P o o r w e a th e r is ta k in g its to ll o n a gric u ltu re . B u sin e ss lo a n d e m a n d re m a in s w eak. T h e u n e m p lo y m e n t rate rose slig h tly in A u g u s t, w h ile total n o n a g r ic u ltu r a l e m p lo y m e n t d e cre ase d . M a n u f a c t u r i n g e m p l o y m e n t d e c l i n e d in b o t h d u r able an d n o n d u r a b l e industries. A pparel industry j o b s i n c r e a s e d f o r t h e f i r s t t i m e in f i v e m o n t h s . N o n m an u f a c tu rin g e m p l o y m e n t gains slo w e d , alth o u g h co n s tru ctio n jobs rose for the s e c o n d straight m o n t h . W e e k ly earn in g s grew , b u t the factory w o r k - w e e k remained unchanged . Manufacturing production i n c h e d u p w a r d in J u l y , w i t h t h e g a i n s c e n t e r e d in the tran spo rtatio n e q u i p m e n t industries. D u r i n g July, total retail a n d d e p a r tm e n t store sa le s s h o w e d o n ly slig h t in crease s. G a i n s f r o m a y e a r a g o f o r d e p a r t m e n t s t o r e s a n d f o r all r e t a i l e r s w e r e v e r y s t r o n g t h r o u g h A p r i l ; in m o r e r e c e n t m o n t h s , s a le s g r o w t h s t a b il i z e d at l o w e r rates. Even w i t h a d e c l i n e in Jul y, n e w a u t o r e g i s t r a t i o n s c o n t i n u e t o i n c r e a s e , c o m p a r e d t o l as t y e a r ' s l e v e l . M a n u f a c t u r i n g i n c o m e , w h i c h d e c r e a s e d s l i g h t l y in A u g u s t , h a s b e e n v i r t u a l ly c o n s t a n t s i n c e F e b r u a r y . T h e v a lu e o f c o n str u c tio n c o n trac ts fell in A u g u s t. Although residential contract awards increased m o d e r a t e l y o v e r July figures, th e n o n - r e s i d e n t i a l sector sh o w ed a considerable decrease. The value o f n o n r e s i d e n t i a l c o n t r a c t s w a s d o w n in e a c h s t a t e Note: b u t T en n ess ee. Flows into savings a n d loan associa t i o n s s l o w e d in A u g u s t a n d e a r l y S e p t e m b e r , a n d m o r tg a g e interest rates drifted d o w n w a r d . D r y w e a th e r th r o u g h S e p te m b e r h a s re d u c e d c ro p d e v e lo p m e n t a n d a cc e le ra te d sa le s o f b e e f cattle. P r i c e s o f f a r m p r o d u c t s d e c l i n e d in A u g u s t , a n d p relim inary d ata s h o w c o n t i n u e d re d u c tio n s for b o t h l i v e s t o c k a n d c r o p s in S e p t e m b e r . H o w e v e r , cotton an d to b a c c o prices remain considerably h i g h e r t h a n 1 9 7 5 's c o m p a r a b l e levels. Prices o f m e a t a n i m a l s a r e d o w n as m a r k e t i n g s h a v e i n c r e a s e d , partially b e c a u s e of d ro u g h t-s tric k e n pastures. Loans a t b a n k s in a g r i c u l t u r a l a r e a s c o n t i n u e d t o s h o w brisk g r o w t h f r o m y e a r - e a r l i e r levels t h r o u g h m i d September. M e m b e r b a n k d e p o s it g a in s re m a in stro n g . T i m e a n d sa vings d e p o s i t in f lo w s w e r e large, a l t h o u g h th e larger ban k s r e d u c e d th e v o l u m e of m o n e y m ark et certificates of dep o sit. Business loan d e m a n d has not in c r e a s e d at t h e lar ge r b a n k s , as s h o w n by t h e d ip in l o a n s o v e r t h e m i d - S e p t e m b e r c o r p o r a t e i n c o m e tax p a y m e n t d a t e . D i s t r i c t b a n k s h a v e b e e n l ar g e p u r c h a s e r s o f U. S. T r e a s u r y s e c u r i t i e s a n d , in a n a t t e m p t to g e n e r a t e h ig h e r returns, have b e e n a d d i n g m o s t l y i n t e r m e d i a t e m a t u r i t y c o u p o n issues. Data on w hich statem en ts are based have been ad justed w henever p o ssib le to elim in a te se a so n a l influences. 164 N O V EM B ER 1976, M O N T H L Y REVIEW