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^ ■ In T h is Is s u e : ■, : ■■ '. ; :■ P r o d u c t iv it y a n d in th e : S o u t h e a s t 's B a n k in g N o t e : ■ ■: : ■' . ^ ^' C h a n g e M a n u f a c t u r in g S e c to r M u n ic ip a l B o n d s D is t r ic t B u s in e s s C o n d it io n s M O N TH LY R E V IE W F e d e ra l R e s e r v e B a n k o f A tla n ta Fe d eral Reserve B a n k O f A tla n ta Fe d e ra l R e s e rve S ta tio n A tla n ta , G e o rg ia 3 0 3 0 3 A d d re s s C o rre c tio n R e q u e s te d ; BU LK RA TE U.S. PO STA G E PAID A tla n ta , G eorgia P erm it No. 292 118 P r o d u c tiv ity a n d C h a n g e in t h e S o u th e a s t's M a n u f a c tu r in g S e c to r b y W illia m D . T o a l O utput of goods and services grows through one of two ways— more inputs are used or the way inputs are combined is changed, affecting efficiency. The most important input in the production process is labor. Changes in other inputs (e.g., physical and human capital) and changes in the way these inputs are combined influence the amount of output that a unit of labor can produce. This is called labor productivity. Labor productivity, as we might expect, has a direct bearing on real wages. High or rapidly growing labor productivity generally implies'high real wage levels or large increases in wages. There are regional differences in average levels of well-being as measured by income or wages. There are also distinct differences in regional growth patterns. The Southeast, in particular, has been struggling to close the wage or per capita income gap between itself and the rest of the nation. How much have labor productivity trends in the Southeast influenced the closing of this gap and the gap that remains? Is labor productivity low er in the Southeast than it is nationally? Has it grown more or less in this region? This article examines labor productivity in the Southeast (i.e., Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee) and its relation to the region's growth and develop ment. The analysis is prim arily descriptive, leaving for future examination the forces behind changes in labor productivity. W h ile studies have documented the Southeast's rapid economic growth over the last quarter century, few have analyzed the factors in this growth. Examining regional labor productivity w ill help us see regional growth more clearly. Note: W illia m Schaffer, Fred Tarpley, and R. L. Yobs of the Georgia Productivity C enter at the Georgia Institute of Technology contributed helpful comments and provided some data for this article. The Georgia Productivity Center, under the direction of M r. Yobs, is also analyzing labor productivity in G eorgia industries. Monthly Review, Vol. LXI, No. 8. 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. SEP TEM B ER 1976, M O N T H L Y R E V IE W Manufacturing output is an im portant part of total economic activity. In the Southeast, that sector accounts for nearly one-fourth of all nonfarm jobs, a percentage only slightly low er than nationally. The Census of Manufactures has de veloped information on labor inputs and total manufacturing output by states and regions of the nation. These data allow us to focus on labor productivity in Southeastern manufacturing, although in a lim ited way. The absence of actual regional output data for nonmanufacturing makes extending this study to other sectors difficult.1 However, the region's manufacturing has been a prime ingredient in the Southeast's rapid growth. This justifies examining the influence of labor productivity trends on this sector. Labor productivity in Southeastern manufacturing is 5 percent lower than nationally . .. . . . but average wage levels are nearly 20 percent lower, The Southeast's Productivity Gap In 1972, output per man-hour for Southeastern manufacturing was about 95 percent of labor pro ductivity for the nation's manufacturing sector.2 Thus, as late as 1972, there was a gap in labor productivity between the Southeast's and the nation's manufacturing sectors. W h ile there may be many reasons, including industry mix, for this on an aggregate basis, labor appears to produce less per unit of service in this region. It is interesting to compare the difference in labor productivity between the Southeast and the nation w ith the region's famous wage gap.3 W h ile labor productivity differs approximately 5 percent, the manufacturing wage gap between the Southeast and the nation is 19 percent, nearly three times as large in relative terms. Generally, there is thought to be a correlation between labor productivity and the wage rate. In fact, a recent government study used regional earnings per w orker as a proxy for labor productivity.4 W h y then does a large disparity exist between these two measures? First, real, not nominal, wages should be used in determ ining the wage gap. If price levels differ among regions, nominal wage levels should ’ Several economists have recently estim ated Cross State Product for nonm anufacturing sectors. These estimates can be used to exam ine productivity in sectors outside m anufacturing. See A lb ert W . N ie m i, Jr., Gross State Product and Productivity in the Southeast, The University o f North Carolina Press, Chapel H ill, 1975. ^Appendix A describes the m ethod of estim ating output per m an-hour, or labor productivity. Appendix B presents tables sum m arizing the data. 3For exam ple, see Lowell E. Callaw ay, “ The North-South W age D iffe re n tia l," The Review of Economics and Statistics, Vo l. 45, No. 3, August 1963, pp. 264-272. 4See "T h e BEA Economic Areas: Structural Changes and G row th, 1950-1973," Survey of C urrent Business, No vem ber 1975, p. 19. F E D ER A LFRASER R ESER V E BANK O F ATLA N TA Digitized for differ by more than differences in labor produc tivity. Also, the industry mix differs substantially between this region and the nation. As a result, demand for products and production relationships probably differ substantially at this aggregate level. To thoroughly analyze the disparity between productivity and wages, it w ould be necessary to look at individual manufacturing industries, labor productivity, and wages in both the Southeast and the nation.0 Such detailed analysis of wage levels and labor productivity w ill be left for future study. Trends in Southeastern's Labor Productivity Equally important as the level of labor productivity is its growth. The evidence suggests only a very uneven trend toward convergence of Southeastern and national labor productivity since 1929. The erratic upward movement in average labor produc tivity contrasts w ith the steady convergence of Southeastern average manufacturing incomes and per capita personal incomes to national levels (see chart).0 However, as late as 1972, the wage and per capita personal income gaps between the Southeast and nation remained larger than the labor productivity gap. Looking specifically at the period since 1958, output per man-hour has grown at a 4.4-percent r’Also, standard price theory says that wages should be related to m arginal labor productivity, not average labor productivity, as developed in this study. To relate average labor productivity to wage levels, w e must assume that labor's share of output is the same in both the Southeast and the nation; this may not be true. "Value added, not deflated for price changes, divided by total manufacturing em ploym ent was used as the measure of labor productivity from 1929 through 1954. This is a rough approxim ation of the measure used from 1958 through 1972, value added deflated for price increases divid ed by m an-hours. The lack of m an-hour data made a consistent measure of labor productivity impossible. 119 annual rate in the Southeast's manufacturing sector, compared w ith a 3.7-percent rate nation ally. In other words, labor productivity was rising approximately one-fifth more rapidly in the Southeast. A t the same time, manufacturing jobs have grown approximately 60 percent in the re gion, nearly three times faster than nationally. These rapid em ploym ent gains might have been expected to slow the rise in labor productivity but apparently did not. There are many possi ble reasons for the Southeast's more rapid growth in labor productivity; certainly one of the most im portant is the region's high capital spending from 1958 to 1972. In each of these years, plant and equipm ent spending per manufacturing em ployee was higher than nationally. Such spending is one way to improve labor productivity, providing more capital goods for each employee and new and improved technology w ith which to use them. The growth trend in Southeastern labor pro ductivity was uneven; it did not rise at the trend rate each and every year.7 Labor productivity was examined over three subperiods— 1958-1963, 1963-1967, and 1967-1972. It is clear that there was an acceleration in productivity growth in the South east's manufacturing sector from 1967 to 1972; ’ John Kendrick has noted the erratic pattern in labor productivity grow th at the national level. See John W . Kendrick, "P roductivity Trends: Capital and Labor,'' Review of Economics and Statistics, V o l. 38, 1956, pp. 252-253. 120 this acceleration is not as noticeable for the U. S. as a whole. It is also clear that deviations around the long-term trend in labor productivity growth are larger in the Southeast than nationally. From 1963 to 1967, output per man-hour actually grew more slowly in the Southeast than nationally but then accelerated to a pace nearly double the national rate from 1967 to 1972. W h ile we w ill not examine in detail the reasons for this unevenness in the Southeast's labor productivity advance, it is apparent that it w ould be difficult to forecast accurately the increase in manufacturing output per man-hour from such an erratic trend relation ship. Labor Productivity in M ore Detail W h ile the Southeast's manufacturing labor produc tivity appears low er than the nation's, the reason may simply lie in the different industry mix. But even more detailed analysis confirms labor produc tivity is low er in the Southeast. In 1972, labor productivity in both Southeastern durable and nondurable manufacturing was below that for the same national industries (about 6 percent lower). It is interesting and somewhat surprising to note that labor productivity in nondurable manufactur ing is higher than in durable manufacturing (about 9 1/2 percent more in the Southeast in 1972), both in the Southeast and in the nation. The con ventional view of a labor-intensive, low-productivity nondurable sector does not jibe w ith this S EP TEM B ER 1976, M O N TH LY R EV IEW s t u d y ' s f i n d i n g s . In f a c t , n o n d u r a b l e m a n u f a c t u r i n g is m o r e c a p i t a l - i n t e n s i v e t h a n is d u r a b l e m a n u fac tu rin g. T h e c a p i t a l - l a b o r ratio for S o u t h e a s t e r n n o n d u r a b l e m a n u f a c t u r i n g is o v e r 3 5 p e r c e n t h i g h e r t h a n f o r d u r a b l e s . 8 N o n d u r a b l e i n d u s t r i e s s u c h as chemicals, paper, rubber, food processing, and t e x t i l e s ( as w e l l a s p e t r o l e u m r e f i n i n g ) a r e all v e r y capital-intensive. T h e idea th at n o n d u r a b l e m a n u f a c t u r i n g is l a b o r - i n t e n s i v e is p r o b a b l y i n f l u e n c e d by th e app arel industry's capital-labor ratio an d l a b o r p r o d u c t i v i t y , t h e l o w e s t o f all m a j o r m a n u facturing. A cc e p tin g that capital-intensive industries generally have higher o u tp u t per m an-hour, then h i g h e r l a b o r p r o d u c t i v i t y in t h e n o n d u r a b l e s e c t o r is n o t q u i t e s o s u r p r i s i n g . 9 T h e rise in l a b o r p r o d u c t i v i t y ( f r o m 1 9 5 8 t o 197 2) w as a b o v e th e national p a c e for b o t h S o u th eas te rn d u r a b le an d n o n d u r a b l e m an u factu re rs. Labor p r o d u c t i v i t y h a s g r o w n in t h e 4 - p e r c e n t r a n g e in t h e region's d u r a b l e a n d n o n d u r a b l e m an u factu rin g , w i t h o u t p u t p e r m a n - h o u r r i s i n g s l i g h t l y m o r e in d u r a b l e s t h a n in n o n d u r a b l e s . A g a i n , t h e r e g i o n ' s l a b o r p r o d u c t i v i t y in b o t h t h e s e s e c t o r s h a s i n c r e a s e d e r ra t i ca l l y , g e n e r a l l y r isi ng a t a r a t e a b o v e o r c l o s e t o t h e n a t i o n ' s f r o m 1 9 5 8 t o 196 3, falling b e l o w it f r o m 1 9 6 3 t o 1 9 6 7 , a n d t h e n r i s i n g w e l l a b o v e t h e U. S. p a c e f r o m 1 9 6 7 t o 1 9 7 2 . B u t t h e u n e v e n r i s e in S o u t h e a s t e r n m a n u f a c t u r i n g l a b o r p r o d u c t i v i t y is t r u e i n b o t h d u r a b l e a n d n o n d u r a b l e goods. S o m e In d u str y D iffe re n c e s Even t h o u g h S o u t h e a s t e r n m a n u f a c t u r i n g l a b o r p r o d u c t i v i t y d o e s n o t m e a s u r e u p t o n a t i o n a l levels, s o m e selected industries sh o w higher o u tp u t per m a n - h o u r in t h e S o u t h e a s t t h a n n a t i o n a l l y ; 10 t h e y in clu de r u b b er; electrical m ach in ery ; p ap er; f u r n i t u r e ; l e a t h e r ; s t o n e , clay, a n d glass; a n d t ext il es. T o s o m e e x t e n t , t h e s e v a r i a t i o n s in l a b o r 81964 gross book value of depreciable assets was used as the measure of capital. 1964 are the latest data available from the U. S. Census on regional gross book value at the detailed industry level. !'lt is also interesting to note that the aggregate capital-labor ratio is actually higher in the Southeast than it is nationally. This contradicts the conventional view that the Southeast is a laborabundant region. This finding is discussed in several articles on regional industry location and comparative advantage. See Edwin F. Estle, "A More Conclusive Regional Test of the HecksherOhlin Hypothesis," Journal of Political Economy, Vol. 75, De cember 1967, pp. 886-888; J. R. Moroney, "Factor Prices, Factor Proportions, and Regional Factor Endowments," Journal of Political Economy, pp. 158-164, Vol. 78, January-February 1970. ,0lndustry detail is limited here to two-digit Standard Industrial Classification detail. When comparing these Southeastern industries to their national counterparts, output per man-hour may vary because at this level the industry is not homogeneous in the Southeast and the nation. In these cases, differences in labor productivity between the Southeast and the nation might be explained if 3- or 4-digit industry detail were considered. This study does not attempt such detail. FEDERAL RESERVE BANK OF ATLANTA T h e c o n c e p t o f l a b o r p r o d u c t i v i t y u s e d h e r e is output produced per m an-hour em ployed. S o m e c o n f u s i o n m a y arise, si n c e l a b o r p r o d u c t i vi t y c a n i n c r e a s e b o t h f r o m m o r e e f f i c i e n t p r o d u c t i o n an d fro m m o r e capital in p u t p e r m a n - h o u r . For this r e a s o n , e c o n o m i s t s o f t e n a d v o c a te a “ total factor p rod u ctiv ity " c o n c e p t w h ich relates o u t p u t to a w e i g h t e d su m of m a n - h o u r s a n d capit al services. Tota l f a c t o r productivity su p p o se d ly holds co nstant the i m p a c t o f a c h a n g e in t h e p r o d u c t i v e f a c t o r s m i x o n o u t p u t . I n c r e a s e s in t h i s p r o d u c t i v i t y m e a s u r e , a t l e a s t in c o n c e p t , m e a s u r e o n l y h i g h e r efficiencies from increased labor quality, tech n o lo g ical im p ro v e m e n t, a n d scale e c o n o m i e s . Because data o n regional capital are skimpy, h o w e v e r , lab o r productivity m u s t b e u s e d . It s h o u l d b e k e p t in m i n d t h a t a n y i n c r e a s e in o u t p u t p e r m a n - h o u r m a y r e s u l t p a r t l y f r o m s u b s t i t u t i n g c a p i t a l f o r l a b o r in p r o d u c t i o n , as well as f r o m h i g h e r ef fic ie nc ie s b ro u g h t on by technological change, increased scale of o p eratio n , o r im p ro v e d labor quality. At least at t h e n a t i o n a l level, s u b s t i t u t i n g capit al for labor a c c o u n t e d for o nly a b o u t o n e - e ig h th of t h e r i s e in l a b o r p r o d u c t i v i t y f o r t h e p r i v a t e n o n f a r m e c o n o m y , a c c o r d i n g to o n e analysis. See R ob ert M. Solow, "T echnical C h a n g e an d A g g r e g a t e P r o d u c t i o n F u n c t i o n , " The Review of Economics and Statistics, V o l u m e 3 9 , 1 9 5 7 , p . 3 1 6 . productivity stem from the different nature of these i n d u s t r i e s in t h e S o u t h e a s t . F o r e x a m p l e , t h e S o u th e a s t' s textile in d u str y in c lu d e s c a r p e t m an u factu rin g , w h ic h a c c o u n ts for 30 p e r c e n t of t h e r e g i o n ' s t e x t i l e o u t p u t . O u t p u t p e r m a n - h o u r is t y p i c a l l y h i g h e r in c a r p e t m a n u f a c t u r i n g t h a n f o r t e x t i l e s in g e n e r a l . In t h e s a m e m a n n e r , m a n u f a c t u r e o f t i r e s a n d t u b e s is a v e r y l a r g e s e g m e n t o f the Southeast's r u b b e r industry; labor productivity in t h i s s e c t o r is a b o v e t h e i n d u s t r y a v e r a g e . L a b o r p r o d u c t i v i t y is a l s o h i g h in t h e m a n u f a c t u r e o f c o m m u n i c a t i o n s e q u i p m e n t , a large c h u n k o f th e region's electrical m ach in ery industry. E a c h i n d u s t r y ' s d i f f e r e n t m a k e - u p in t h e S o u t h e a s t h e l p s e x p l a i n s o m e d i f f e r e n c e s in l a b o r p r o d u c t i v i t y , b u t n o t all. O t h e r f o r c e s , s u c h a s dif fe r e n t capital intensities, t h e quality a n d a g e of this capit al, sc ale o f p l a n t o p e r a t i o n , d if fe r e n t l e v e l s o f t e c h n o l o g y , a n d d i f f e r e n c e s in q u a l i t y o f m a n a g e m e n t an d the labor force also play a part in e x p l a i n i n g p r o d u c t i v i t y v a r i a t i o n s . In d u stry R a n k in g s The Southeast's ru b b er industry had the highest o u t p u t p e r m a n - h o u r in 1 9 7 2 , f o l l o w e d b y t h e 121 T a b le 1 P E R C E N T O F O U T P U T IN C R E A S E A T T R IB U T E D T O R I S E IN O U T P U T P E R M A N - H O U R (1 9 5 8 -1 9 7 2 ) S o u th east U. S. I M a n u f a c t u r in g 68.6 77.5 jr a b le M a n u f a c t u r in g 67.3 72.5 100.0 93.3 L u m b e r & W o od P ro d u c ts F u rn itu re & F ix tu re s 59.6 54.2 S to ne , Clay, & G la ss 62.3 69.2 P rim a ry M e ta ls 27.2 63.1 F a b rica te d M e ta ls 53.8 6 9 .4 N o n e le c tric a l M a c h in e r y 27.4 65.2 E le c trical M a c h in e r y 70.6 72.5 T ra n sp o rta tio n E q u ip m e n t 63.1 85.2 71.1 83.8 F oo d & K in d re d P ro d u c ts 77.3 100.0 T e xtile s 86.1 88.5 A p pa re l 57.8 76.1 55.5 7 1 .4 o n d u ra b le M a n u f a c t u r in g Paper P r in t in g & P u b lis h in g C h e m ic a ls 73.8 70.9 63.6 8 2 .6 Rubber 72.2 65.2 L e ath e r 35.1 100.0 chem ical industry; labor productivity w as lowest in a p p a r e l , w i t h l e a t h e r m a n u f a c t u r i n g o n l y s l i g h t l y be tter. T h e s e t w o in dust ries w e r e also at th e b o t t o m n a t i o n a l l y . Y e t in o r d e r o f l a b o r p r o d u c t i v i t y , t h e S outheast's industry hierarchy d o e s n o t perfectly c o r r e s p o n d t o t h e n a t i o n ' s . T h i s s u g g e s t s t h a t it is n o t a l w a y s p o s s i b l e t o t el l w h e t h e r a S o u t h e a s t e r n i n d u s t r y is h i g h o r l o w in l a b o r p r o d u c t i v i t y r e l a t i v e t o o t h e r i n d u s t r i e s b a s e d o n its n a t i o n a l r a n k i n g . 11 In d u stry L a b o r P ro d u c tiv ity T re n d s W h i l e o u t p u t p e r m a n - h o u r g r e w f a s t e r in t h e S o u t h e a s t t h a n n a t i o n a l l y in d u r a b l e s a n d n o n d u r a b l e s , this w a s n o t t r u e of e a c h of t h e 17 i n d u s t r i e s e x a m i n e d . Fi ve i n d u s t r i e s — p r i m a r y metals, nonelectrical m ach in ery , fo o d processing, 1 9 7 2 . All 1 7 S o u t h e a s t e r n i n d u s t r i e s s h o w e d a t r e n d t o w a r d f a s t e r g r o w t h in o u t p u t p e r m a n - h o u r f r o m 1967 to 1972. The av erag e deviatio n fro m g ro w th t r e n d in l a b o r p r o d u c t i v i t y w a s s u b s t a n t i a l l y h i g h e r f o r t h e 1 7 i n d u s t r i e s in t h e S o u t h e a s t c o m p a r e d t o t h o s e s a m e i n d u s t r i e s n a t i o n a l l y . It is a l s o a p p a r e n t tha t t h e m o r e d i s a g g r e g a t e d t h e analysis, t h e m o r e v a r i a t i o n t h e r e is in l a b o r p r o d u c t i v i t y g r o w t h . T h e a v e r a g e d e v i a t i o n s f r o m t r e n d in t h e 1 7 - i n d u s t r y av erag e are substantially higher, particularly from 1958 to 1963 an d from 1967 to 1972, th an they are for total d u r a b l e o r n o n d u r a b l e m a n u f a c t u r i n g . This is t r u e f o r b o t h t h e S o u t h e a s t a n d t h e n a t i o n . 1' W h i l e n o t all S o u t h e a s t e r n m a n u f a c t u r i n g i n d u s t r i e s r a i s e d l a b o r p r o d u c t i v i t y as r a p i d l y as to b acco products, and chem icals— increased labor p r o d u c t i v i t y m o r e s l o w l y in t h e S o u t h e a s t t h a n d i d their n a tio n a l c o u n t e r p a r t s f r o m 19 58 to 1972. A g a i n , h o w e v e r , a t t his d i s a g g r e g a t e d level , l a b o r p r o d u c t i v i t y a d v a n c e d very u n e v e n l y f r o m 1 9 5 8 to their national c o u n te r p a r ts , th e industries with the f a s t e s t a n d s l o w e s t g a i n s in o u t p u t p e r m a n - h o u r f r o m 1 9 5 8 t o 1 9 7 2 m a t c h e d u p c l o s e l y in t h e region's an d nation's m a n u f a c t u ri n g sectors. L u m b e r a n d w o o d p r o d u c t s h a d t h e l a r g e s t r i s e in o u t p u t p e r m a n - h o u r b o t h n a t i o n a l l y a n d in t h e S o u t h e a s t , ’’One other inference can be drawn about the ranking of labor productivity by industry. There appears to be some correspon dence between the industry capital-labor ratios and labor produc tivity. See Proposition 5 in the box for statistical tests. The in dustries with higher capital-labor ratios generally have higher labor productivity. '-This verifies the statement made by Kendrick that, in general, the greater the degree of industry disaggregation, the greater the variability among subperiods in rates of change in productivity. See Kendrick, p. 252. 122 SEPTEMBER 1976, M O N T H L Y REVIEW t h o u g h s t r o n g e r in t h e r e g i o n . T h e s a m e five i n d u s t r i e s r a n k e d h i g h e s t in l a b o r p r o d u c t i v i t y gains, b o t h na tionally a n d regionally. Besides lu m b er, th es e w e r e rubber, electrical m ach in ery , textiles, a n d t r a n s p o r t a t i o n e q u i p m e n t . T h e i n d u s t r i e s w i t h t h e s m a l l e s t i n c r e a s e in o u t p u t p e r m a n - h o u r, b o th nationally an d regionally, w e r e leather an d prim ary metals. I n d u s t r y d i f f e r e n c e s in t h e r a t e o f c h a n g e in l a b o r productivity are n o t readily ex plain ed e ith er by th e g r o w t h o f t h e r e sp e c ti v e in d u strie s o r t h e relative am ounts of expenditures on plant and equipm ent. O b v i o u s l y , m o r e i n f o r m a t i o n is n e e d e d a b o u t c h a n g e s in c a p i t a l i n t e n s i t y , t e c h n o l o g i c a l c h a n g e , a n d labor quality b e f o re th es e varying rates of change can b e explained. L a b o r P ro d u c tiv ity a n d the G r o w th o f M a n u f a c t u r in g T h e r i s e in o u t p u t p e r m a n - h o u r in t h e S o u t h e a s t ' s m an u f a c tu rin g sector has b e e n a m a jo r stim u lan t t o t h e r e g i o n ' s g r o w t h ; it h a s h e l p e d t h i s r e g i o n n arro w the w a g e and per capita in c o m e gap b e t w e e n itself a n d t h e n a t i o n . T h e f a s t e r - t h a n n a t i o n a l a d v a n c e in l a b o r p r o d u c t i v i t y h a s h e l p e d p r o p e l t h e S o u t h e a s t ' s m a n u f a c t u r i n g s e c t o r a n d its e n t i r e e c o n o m y a b o v e t h e n a t i o n a l g r o w t h r at e. O u t p u t , m e a s u r e d b y real v a l u e a d d e d , r o s e f a s t e r t h a n n a t i o n a l l y in e v e r y S o u t h e a s t e r n i n d u s t r y ex cep t t o b a c c o fro m 1958 th r o u g h 1972. H o w m u c h h a s t h e r i s e in l a b o r p r o d u c t i v i t y c o n t r i b u t e d t o t h e i n c r e a s e in o u t p u t ? Th e c o n c e p t of g ro w th a c c o u n t i n g has b e e n p o p u l a r i z e d b y E d w a r d D e n i s o n . 15 H e f o u n d t h a t a p p r o x i m a t e l y o n e q u a r t e r o f t h e r i s e in n a t i o n a l i n c o m e in t h e p o s t w a r p e r i o d c a m e f r o m i n c r e a s e d use of labor; th e r e m a i n d e r c a m e from increased output per m an-hour. Growth accounting can be d e c e i v i n g , h o w e v e r . G a i n s in o u t p u t s t e m m i n g from increased o u t p u t p er m a n - h o u r are a residual. A d v a n c e s in t e c h n o l o g y , i n c r e a s e d u s e o f c a p i t a l , i m p r o v e m e n t s in o r g a n i z a t i o n a n d m a n a g e m e n t t e c h n i q u e s , a n d i m p r o v e m e n t s in l a b o r q u a l i t y wi l l e a c h b e r e f l e c t e d in h i g h e r o u t p u t p e r m a n - h o u r . T herefore, while a p p ro x im ately th re e qu arters of t h e r i s e in n a t i o n a l i n c o m e o r o u t p u t in t f i e p o s t w a r p e r i o d c a m e f r o m a d v a n c e s in l a b o r p r o d u c t i v i t y , it is i m p o r t a n t t o r e m e m b e r t h a t m a n y different factors raised labor productivity. A r e c e n t s t u d y e s t im a t e s t h a t a p p r o x i m a t e l y 61.4 p e r c e n t o f t h e a d v a n c e in t h e S o u t h e a s t ' s m a n u f a c t u r i n g o u t p u t c a m e f r o m g a i n s in o u t p u t p e r m a n - h o u r ( h e r e , t h e S o u t h e a s t is b r o a d e n e d t o 1:1Edward Denison, Accounting for United States Economic Growth: 1929-1969, The Brookings Institution, Washington, D. C., 1974, pp. 127-130. FEDERAL RESERVE BAN K OF ATLANTA Southeastern manufacturers have spent more on capital equipment per employee than have national manufacturers; this has boosted labor productivity more rapidly in the region. i n c l u d e t h e C a ro l i n as , K e nt uc k y, Virginia, W e s t V i r g i n i a , a n d A r k a n s a s ) . 14 H o w e v e r , t h e m a n u f a c t u r i n g s e c t o r w a s n o t a n a l y z e d in d e t a i l . Table 1 sh o w s th e relative c o n trib u tio n of increased o u t p u t p e r m a n - h o u r to S o u th easte rn m anufacturing industries and contrasts these with t h o s e in t h e n a t i o n . 15 A p p r o x i m a t e l y 6 9 p e r c e n t o f t h e g a i n in t h e S o u t h e a s t ' s m a n u f a c t u r i n g o u t p u t from 1958 to 1972 w as attrib u ted to increased o u t p u t p er m a n - h o u r. Nationally, a b o u t 78 p e r c e n t of th e o u t p u t gain c a m e fro m h igher labor p r o d u c t i vi t y. O v e r t h i s s a m e s p a n , o u t p u t p e r m a n - H o u r h a s r i s e n m o r e r a p i d l y in t h e S o u t h e a s t . H o w c a n t h e sm aller sh are of th e o u t p u t increase attrib u ted t o h i g h e r o u t p u t p e r m a n - h o u r b e e x p l a i n e d ? It is 14Niemi, p. 45. 15Estimates of the contribution of increases in output per man-hour to output gains were calculated as follows: 1) Calculate a proxy 1972 output figure by multiplying 1958 output per man-hour by 1972 man-hours. (O/MH) i»r.x x MH 1972 = O pio7n This proxy 1972 output figure shows what output would have been in 1972 if labor productivity had not changed from the 1958 level. 2) Subtract the actual 1958 output figure from this 1972 proxy output figure. This shows the increase (or decrease) in output from 1958 to 1972 related strictly to the change in labor usage. Divide this figure by the total actual change in output from 1958 to 1972. This gives the fraction of total change in output attributed to the change in labor usage. ( o*-) (OL)= 0^72 - O 58 O 72 - O 58 3) Subtract the fraction of total change in output attributed to the change in labor usage from one and multiply by 100. This gives the percent of the change in output related to changes in output per man-hour ( o*) o* = (1 - o L) x 100 123 Statistical Analysis This b o x tests statistically s o m e o f t h e i n f e r e n c e s m a d e in t h e t e x t o f t h i s a r t i c l e . S p e a r m a n r a n k correlations are u sed to e x a m in e w h e t h e r across the 17 tw o-digit m a n u f a c tu rin g industries the rank o rd erin g s of industries, a c c o rd in g to specific characteristics, s h o w significant correspondence. Proposition 1: Is t h e r e a c o r r e s p o n d e n c e w h e n r a n k e d b y l e v e l o f o u t p u t p e r m a n - h o u r ( 19 7 2 ) b e t w e e n S o u t h e a s t e r n a n d U. S. t w o - d i g i t m a n u f a c tu rin g industries? Ye s , t h e r a n k c o r r e l a t i o n (rs = . 782) is s i g n i f i cantly different from z e r o at a high d e g r e e of c o n fid en ce. A lth o u g h the text m e n tio n s that s o m e d i f f e r e n c e s in t h e r a n k i n g s o f i n d u s t r i e s a c c o r d i n g t o l a b o r p r o d u c t i v i t y exist b e t w e e n t h e S o u t h e a s t a n d U. S., t h e y a r e m i n o r . Proposition 2: Is t h e r e a c o r r e s p o n d e n c e w h e n r a n k e d b y t h e g r o w t h ( 1 9 5 8 t o 1 9 7 2 ) in o u t p u t p e r m a n - h o u r b e t w e e n S o u t h e a s t e r n a n d U. S. tw o -digit m a n u f a c tu rin g industries? Ye s , t h e r a n k c o r r e l a t i o n (rs = . 739) is a g a i n signi fican t a n d verifies t h e text i n f e r e n c e th a t t h e industries exhibiting the m o s t rapid o u t p u t p er m a n h o u r rises f r o m 1 9 5 8 t o 1 9 7 2 m a t c h e d u p c l o s e l y in t h e r e g i o n ' s a n d n a t i o n ' s m a n u f a c t u r i n g sector. Proposition 3 : Is t h e r e a c o r r e s p o n d e n c e , w h e n r a n k e d by c a p i t a l - l a b o r ratios, b e t w e e n t h e Southeast's and nation's two-digit m anufacturing industries? Ye s , t h e r e is a v e r y h i g h r a n k c o r r e l a t i o n (rs = . 8 3 2 ) , s u g g e s t i n g t h a t t h o s e i n d u s t r i e s w hich are capital- or labor-intensive nationally a r e a l s o in t h e S o u t h e a s t . Proposition 4: Is t h e r e a c o r r e s p o n d e n c e in n o t , a s it a p p e a r s t o b e , a p a r a d o x . E m p l o y m e n t a n d o u t p u t w e r e s i m p l y r isi ng a t a f a s t e r - t h a n - n a t i o n a l c l i p in t h e r e g i o n . H e n c e , e v e n t h o u g h l a b o r p r o d u c t i v i t y g r e w m o r e r a p i d l y h e r e , it still a c c o u n t e d for a s m a l l e r slice o f t h e f a s t e r - th a n n a t i o n a l r i s e in r e g i o n a l m a n u f a c t u r i n g o u t p u t . Put a n o t h e r w a y , t h e S o u t h e a s t reli ed relatively m o r e o n i n c r e a s e s in l a b o r u s a g e t h a n o n g a i n s in labor productivity to b o o st m anufacturing output. But , in a n a b s o l u t e s e n s e , b o t h w e r e g r e a t e r - t h a n n a t i o n a l gai ns. T h e c o n tr ib u tio n s of o u t p u t p er m a n - h o u r gains fo llo w ed m u c h the s a m e pattern s for d u r a b l e and n o n d u r a b l e m a n u f a c t u r i n g as for total m a n u f a c t u r ing. W h i l e l a b o r p r o d u c t i v i t y g r e w m o r e r a p i d l y 124 ranking of Southeastern industries by o u t p u t per m a n - h o u r a n d c a p i t a l - l a b o r ratios? Ye s , t h e r a n k o r d e r i n g o f S o u t h e a s t e r n t w o digit m a n u f a c tu rin g industries a c c o r d in g to o u t p u t p e r m a n - h o u r closely c o r re s p o n d s , ac c o r d in g to th e rank co rrelatio n coefficient (rs = . 6 5 4 ) , t o t h e r a n k o r d e r i n g a c c o r d i n g t o capit al intensity. This verifies t h e i n f e r e n c e m a d e i n f o o t n o t e 11 o f t h e t e x t . F u t h e r m o r e , t h e r e is a l s o a s i m i l a r c l o s e c o r r e s p o n d e n c e (r8 = . 730) in U. S. i n d u s t r i e s r a n k e d a c c o r d i n g t o o u t p u t p er m a n - h o u r an d capital intensity. Proposition 5 : Is t h e r e a c l o s e c o r r e s p o n d e n c e b e tw e e n the rankings of Southeastern two-digit m a n u f a c tu rin g industries by o u t p u t p e r m a n - h o u r a n d by a v e r a g e w a g e levels? Ye s , t h e r a n k c o r r e l a t i o n is s t r o n g l y s i g n i f i c a n t (rs = . 6 4 9 ) , i n d i c a t i n g t h a t t h e S o u t h e a s t e r n industries with th e h ighest (lowest) levels of labor p roductivity also h av e t h e hig h est (lowest) a v e r a g e w a g e s . For n a t i o n a l t w o - d i g i t m a n u f a c t u r i n g i n d u s t r i e s , t h e c o r r e l a t i o n is a l s o s i g n i f i c a n t (rs = . 605) . Is t h e r e a c l o s e c o r r e s p o n d e n c e b e tw e e n the rankings of S outheastern tw o-digit m a n u f a c t u r i n g in d u strie s b y t h e g r o w t h (1958 t o 1 9 7 2 ) in o u t p u t p e r m a n - h o u r a n d b y t h e p e r c e n t c h a n g e ( 1 9 5 8 t o 1 9 7 2 ) in a v e r a g e w a g e Proposition 6: levels? N o , t h e r a n k c o r r e l a t i o n (rs = . 25 0) d o e s n o t indicate that the Southeastern industries with the l a r g e s t ( sm al l es t) i n c r e a s e in l a b o r p r o d u c t i v i t y a l s o h a d t h e l a r g e s t ( s m a l l e s t ) i n c r e a s e s in a v e r a g e w a g e levels. T h e r an k c o r r e l a t i o n (rs = . 3 64) is a l s o n o t s i g n i f i c a n t f o r U. S. two-digit m a n u f a c tu rin g industries. O t h e r forces are apparently influencing industry w a g e changes, s u c h a s c h a n g e s in i n d u s t r y p r i c e s . in t h e S o u t h e a s t t h a n n a t i o n a l l y in b o t h s e c t o r s , its co n tr ib u tio n to sector o u t p u t gains w e r e s o m e w h a t l es s t h a n n a t i o n a l b e c a u s e l a b o r w a s a l s o g r o w i n g m u c h m o r e r a p i d l y in t h e S o u t h e a s t . G a i n s in o u t p u t p e r m a n - h o u r w e r e slightly m o r e i m p o r t a n t f o r t h e n o n d u r a b l e s e c t o r , a c c o u n t i n g f o r 71 p e r c e n t o f t h e r i s e in o u t p u t , t h a n f o r t h e r e g i o n ' s d u r a b l e g o o d s sector, w h e r e 67 p e r c e n t of the o u t p u t rise c a m e f r o m i n c r e a s e d l a b o r p r o d u c t i v it y . By i n d u s t r y , o u t p u t p e r m a n - h o u r g a i n s a c c o u n t e d f o r all o f t h e h i g h e r o u t p u t f o r t h e S o u t h e a s t ' s l u m b e r a n d w o o d p r o d u c t s i n d u s t r y . In t h i s i n d u s t r y , l a b o r e m p l o y e d a c t u a l l y fel l f r o m 1 9 5 8 t o 1 9 7 2 . G a i n s in l a b o r p r o d u c t i v i t y p r o v i d e d t h e s m a l l e s t s h a r e o f o u t p u t g a i n s in t h e l e a t h e r SEPTEMBER 1976, M O N T H L Y REVIEW p ro d u cts, primary metals, an d nonelectrical m a c h i n e r y i n d u s t r i e s . In e a c h c a s e , t h e r e w a s a sharp co n trast with these s a m e industries nationally, w h e re labor productivity advances m a d e up over o n e - h a l f o f t h e o u t p u t g a i n s . M o s t n o t a b l e in t h e s e t h r e e i n d u s t r i e s w a s a s i g n i f i c a n t l y l o w e r l evel o f c a p i t a l s p e n d i n g p e r e m p l o y e e in t h e r e g i o n t h a n o c c u r r e d n a t i o n a l l y f r o m 1 9 5 8 t o 1 9 7 2 . A n d , as n o t e d earlier, pr im a ry m e ta ls a n d no n e le c tr ic a l m a c h i n e r y h a d s l o w e r - t h a n - n a t i o n a l g a i n s in o u t p u t per man-hour. C o n c lu s io n W e have seen that increased o u tp u t per m a n -h o u r h a s b e e n a p r i m a r y i n g r e d i e n t in t h e g r o w t h o f t h e S o u t h e a s t ' s m a n u f a c t u r i n g s e c t o r ; t h i s , in t u r n , h a s stim u lated the region's entire e c o n o m i c b ase and h e l p e d w a g e s a n d i n c o m e s a p p r o a c h n a t i o n a l levels in t h i s r e g i o n , t h o u g h a g a p still r e m a i n s . W h i l e labor productivity or o u tp u t per m a n - h o u r grew m o r e r a p i d l y in t h e r e g i o n t h a n it d i d n a t i o n a l l y , its p e r c e n t a g e c o n t r i b u t i o n t o t h e t o t a l m a n u f a c t u r i n g o u t p u t g a i n w a s l es s h e r e s i m p l y b e c a u s e m a n u f a c t u r i n g l a b o r e m p l o y e d also has risen at a f a s t e r - t h a n - n a t i o n a l clip. W e h a v e p r o v i d e d f e w an sw ers w h y th e region's labor productivity rose m o r e rapidly than nationally. T h ese q u es tio n s r e m a i n . H o p e f u l l y , f u r t h e r a n a l y s i s wi l l p r o b e i n t o th e i m p a c t capital s p e n d i n g , c h a n g i n g capital intensities, im p ro v e d tech n o lo g ies, an d labor q u a l i t y h a v e h a d in t h e S o u t h e a s t ' s r i s e in m a n u f a c t u r i n g l a b o r p r o d u c t i v i t y . It is w o r t h w h i l e m e n t i o n i n g o n c e m o r e that the driving thrust b e h i n d e c o n o m i c g r o w t h is n o t s i m p l y t h e r i s e in labor p roductivity b u t th e basic influences b e h in d t h i s r i se. P u s h i n g t h e a n a l y s i s a s t e p f u r t h e r , t h e exten t to w h ich th e region's co m m e r c ia l banks have fin an ced th e capital sp e n d i n g w h ich h e l p e d raise S o u t h e a s t e r n l a b o r p r o d u c t i v it y n e e d s to b e e x a m i n e d . A n d finally, a n d po ss i b l y m o s t i m p o r t a n t o f al l, t o w h a t e x t e n t h a v e t h e g a i n s in t h e r e g i o n ' s labor productivity b e e n translated into higher w a g e s f o r its w o r k i n g f o r c e ? W e n o t e d h e r e t h a t , w h i l e a l a b o r p r o d u c t i v i t y g a p d o e s a p p a r e n t l y still e x i s t b e t w e e n t h e S o u t h e a s t a n d t h e n a t i o n , it is a m u c h s m a l l e r g a p t h a n r e m a i n s in a v e r a g e m a n u f a c t u r i n g w a g e l ev e l s . W h y is t h i s s o ? D o d i f f e r e n c e s in i n d u s t r y m i x, u n i o n i z a t i o n , c o s t o f living, o r p r o d u c t d e m a n d s b e t w e e n t h e S o u t h e a s t an d th e nation explain th ese differences? T hese q u e s t i o n s d e m a n d f u r t h e r analysis. Appendix A Calculation of Labor Productivity Measures O u t p u t p er m a n - h o u r for the South east's m a n u f a c t u r i n g s e c t o r w a s c a l c u l a t e d u s i n g C e n su s of M a n u fa c t u r e s d a t a . T h e o u t p u t m e a s u r e u s e d w a s v a l u e a d d e d a s r e p o r t e d in t h e C e n s u s . S i n c e v a l u e a d d e d is in d o l l a r t e r m s , s o m e d e f l a t i o n m e t h o d m u s t b e u s e d t o o b t a i n a m e a s u r e o f real o u t p u t . W h o l e s a l e price indices w e r e c o n s t ru c t e d for each tw o -digit s ta n d ard industrial classified S o u th easte rn i n d u s t r y . T h e m e t h o d u s e d w a s t o w e i g h t U. S. three-digit w h o le s a le price indices (published by t h e U. S. B u r e a u o f L a b o r S t a t i s t i c s ) b y t h e i m p o r t a n c e o f e a c h S i xt h D i s t r i c t t h r e e - d i g i t i n d u s t r y ( e. g. , b r o a d w o v e n f a b r i c s ) in e a c h t w o d i g i t i n d u s t r y ( e. g. , t e x t i l e s ) . F o r t h e y e a r s 1 9 5 8 , 1963, a n d 1 9 6 7 ,1 9 6 3 w eights w e r e used. H o w ev er, for 1972, n e w w eig h ts b as ed o n 1972 v a l u e - a d d e d d ata w e r e used. Thi s c o n s t r u c t e d m e a s u r e o f real o u t p u t s u f f er s f r o m a t l e a s t t w o d e f i c i e n c i e s . First, t h e 1 9 6 3 m at er i al s co s ts ar e a si z ab l e p o r t i o n of t h e total p ro d u ct, the value of s h ip m e n ts differ significantly f r o m t h e v a l u e a d d e d in p r o d u c t i o n . N e v e r t h e l e s s , s i n c e it is f e l t t h a t v a l u e a d d e d is a b e t t e r m e a s u r e of o u tp u t than are shipm ents, the technique o u t l i n e d a b o v e w a s u s e d t o o b t a i n real o u t p u t . M a n - h o u r d a t a w e r e o b t a i n e d f r o m t h e C e n su s o f M a n u fa c tu re s. W e e k l y h o u r s ' d a t a c o v e r o n l y p roduction workers. To obtain m an-hours, these w eek ly h o u r data w e r e m u ltiplied by total e m p l o y m e n t ( p ro du ctio n w o rk ers plus supervisory w o r k e r s ) . T h u s , it w a s a s s u m e d t h a t t h e l e n g t h o f the w o r k w e e k w as th e s a m e for n o n p r o d u c t i o n w o r k e r s a s it w a s f o r p r o d u c t i o n w o r k e r s . T h i s is u n d o u b t e d l y i n c o r r e c t . B u t s i n c e t h i s m e t h o d w as used for o b tain in g m a n - h o u r s for b o th the S o u t h e a s t a n d t h e n a t i o n , t h e e r r o r is a c o n s i s t e n t o n e a n d s h o u l d n o t su b s t a n t i a l l y al te r t h e analysis. O u t p u t per m a n -h o u r or labor productivity t h r e e - d i g i t v a l u e - a d d e d w e i g h t s w e r e u s e d in constructing the 1958 and 1967 two-digit w holesale price indices. W h ile n e w w eig h ts for 1958 an d 1967 c o u l d h a v e b e e n c o n s t r u c t e d , t h e results w o u l d a p p a r e n t l y h a v e c h a n g e d v e r y little b a s e d o n s o m e sa m p le calculations using different weights. S e c o n d , w h o l e s a l e p r i c e i n d i c e s , u s e d in d e f l a t i n g v a lu e a d d e d , relate to total in d u stry s h i p m e n t s r a t h e r t h a n o n l y v a l u e a d d e d . In i n d u s t r i e s w h e r e factors w e r e th en o b t a i n e d by dividing the m an h o u r d a t a in to t h e d e f l a t e d v a l u e - a d d e d d a t a . This w a s d o n e for e a c h t w o - d i g i t S t a n d a r d Industrial Classification. To o b tain d u rab le, n o n d u r a b l e , an d total m a n u f a c t u r i n g o u t p u t p e r m a n - h o u r , d a ta w e r e s u m m e d o v er th e a p p r o p ria te industries an d th en the s u m m e d m a n - h o u r d ata w e r e divided into FEDERAL RESERVE BANK OF ATLANTA the s u m m e d deflated v a l u e - a d d e d data. 125 Appendix B T a b l e A -1 M A N U F A C T U R IN G O U T P U T P E R M A N -H O U R (1 9 7 2 ) Southeast as % Of U. S. Total M a n u f a c t u r in g D u ra b le M a n u f a c t u r in g L u m b e r & W o od P ro d u c ts F u rn itu re & F ix tu re s Stone, Clay, & G la s s P rim a ry M e ta ls F a b rica te d M e ta ls N o n e le c tric a l M a c h in e ry Electrical M a c h in e ry T ra n sp o rta tio n E q u ip m e n t 94.6 93.3 98.4 109.0 104.6 94.3 88.2 74.2 152.3 85.2 N o n d u ra b le M a n u f a c t u r in g Foo d & K in d re d P ro d u c ts T o b a c c o P ro d u c ts T extile M ill P ro d u c ts A p p a re l an d R elate d P ro d u c ts P a p e r & A llie d P ro d u c ts P r in t in g & P u b lis h in g C h e m ic a ls Petrole um & R elated P ro d u c ts Rubber L e ath e r 93.6 81.9 44.8 102.5 83.4 126.9 82.8 98.0 — 242.0 106.8 T a b le A -2 A N N U A L P E R C E N T C H A N G E IN O U T P U T P E R M A N - H O U R D u ra b le M a n u f a c t u r in g S o u th e a s t U. S. L u m b e r & W o od P ro d u c ts S o u th e a s t U. S. F u rn itu re & Fix tu re s S o u th e a s t U. S. Stone, Clay, & G la ss S o u th e a s t U. S. P rim a ry M e ta ls S o u th e a s t U. S. F a b rica te d M e ta ls S o u th e a s t U. S. N o n e le ctrica l M a c h in e ry S o u th e a s t U. S. Electrical M a c h in e ry S o u th e a s t U. S. T ra n sp o rta tio n E q u ip m e n t S o u th e a s t U. S. N o n d u ra b le M a n u f a c t u r in g S o u th e a s t U. S. Food & K in d re d P ro d u c ts S o u th e a s t U. S. T o b a c c o P ro d u c ts S o u th e a s t U. S. T e xtile s S o u th e a s t U. S. A p pa re l S o u th e a s t U. S. 126 19 67-19 19 5 8 -1 9 7 2 1 9 5 8 -1 9 6 3 1 963-1 967 4.4 3.7 4.5 4.2 1.4 2.9 6.8 3.9 4.6 5.4 4.3 0.6 2.3 7.1 3.7 6.4 3.7 2.9 14.6 7.1 Total M a n u f a c t u r in g S o u th e a s t U. S. 3.5 8.5 5.0 4.5 2.2 2.1 2.5 6.7 2.2 3.3 2.5 3.0 2.7 1.8 2.2 4.7 2.6 4.4 - 6.1 1.5 2.8 - 0.2 3.4 3.3 3.3 2.1 2.8 4.5 3.9 3.6 1.7 3.4 5.1 2.6 - 3.4 2.6 2.6 4.8 6.9 4.7 3.9 6.3 4.6 3.7 12.1 3.8 4.6 4.3 7.0 6.9 - 1.3 - 0.3 7.1 5.5 4.3 4.1 4.0 4.1 2.1 3.8 6.6 4.2 3.3 3.5 4.4 4.6 2.0 2.9 3.3 2.8 2.3 4.4 1.7 4.5 3.9 3.5 8.2 5.1 6.3 5.3 5.4 4.5 6.8 5.2 6.9 6.1 3.8 3.1 3.5 2.5 1.9 2.7 5.7 4.1 3.9 2.8 0.7 1.6 1.7 3.4 SEPTEMBER 1976, M O N T H L Y REVIEW T a b le A - 2 ( c o n t ’d ) P a p e r & A llie d P ro d u c ts S o u th e a s t U. S. P r in t in g & P u b lis h in g S o u th e a s t U. S. C h e m ic a ls S o u th e a s t U. S. Rubber S o u th e a s t U. S. L e a th e r S o u th e a s t u. s. 1958-1972 1958-1963 1963-1967 1967-1972 3.9 3.2 4.5 3.4 3.3 3.1 3.6 3.1 2.8 2.8 1.1 2.3 2.7 3.7 4.5 2.6 4.1 5.5 2.9 6.2 - 0.2 4.1 9.1 5.9 7.6 4.6 2.5 3.9 1.0 5.5 17.1 4.7 1.3 1.1 1.1 0.2 - 1.0 2.1 3.5 1.2 T a b le A -3 L E V E L O F O U T P U T P E R M A N -H O U R B Y R A N K (1 9 7 2 ) Southeast Rubber U. S . 1 4 C h e m ic a ls 2 Elec trical M a c h in e ry 1 3 Paper 4 8 9 T ra n sp o rta tio n E q u ip m e n t 5 3 Stone, Clay, & G la ss 6 11 T obacco 7 2 P r in t in g 8 6 Foo d P r o c e s s in g 9 5 P rim a ry M e ta ls 10 12 Fa b rica te d M e ta ls 11 T e x tile s 12 10 13 N o n e le ctrica l M a c h in e r y 13 7 L u m b e r & W ood P ro d u c ts 14 14 F u rn itu re & F ix tu re s 15 15 L e ath e r 16 17 A p p a re l 17 16 T a b le A - 4 G R O W T H (1 9 5 8 -1 9 7 2 ) O F O U T P U T P E R M A N -H O U R B Y R A N K Southeast L u m b e r & W ood P ro d u c ts Rubber 2 3 4 5 4 T ra n sp o rta tio n E q u ip m e n t 5 C h e m ic a ls 2 6 7 F u rn itu re & F ix tu re s 7.5 P a p e r & A llie d P ro d u c ts 7.5 A p p a re l 1 3 Elec trical M a c h in e r y T e x tile s U. S. 1 9 Fa b rica te d M e ta ls 15 11 12 1.0 10 Stone , Clay, & G la s s 11.5 14 Food & K in d re d P ro d u c ts 11.5 8 P r in t in g & P u b lis h in g 13 13 T o b a c c o P ro d u c ts 14 6 N o n e le c tric a l M a c h in e r y 15 9 L e ath e r P rim a ry M e ta ls FEDERAL RESERVE BANK OF ATLANTA 16 17 17 16 127 BANKING STATISTICS CREDIT* Loans & Investments /N/ - A/ /\/ — L o a n s (Net ) /V Other Securities — — U.S. Gov' t . Securities rJ a / 1 1 1 1 1 1 I I 1 1 1 l l 1 l 1 I l l 11 i 1 1 1 1 1 1 1 1 1 1 1 1974 1975 1976 LATEST MONTH PLOTTED: JULY Note: Seas. adj. figures covering Dislrirt member banks. S I X T H D I S T R I C T B A N K I N G *Figures are for the last Wednesday of each month **Daily average figures N D T E S B a n k s R e d u c e M u n ic ip a l H o ld in g s IN C O M E R E P O R T O F D IS T R IC T M E M B E R B A N K S , 1 9 7 5 * ($ thousand) Florida Georgia Louisiana Total operating income . . . . . . . 5 2 9 ,7 2 4 1,240,911 7 8 0 ,2 9 9 4 5 3 ,6 2 8 186,091 4 9 4 ,6 5 4 3,68 5 ,3 0 7 Total operating expense 4 5 2 ,4 6 4 1,165,254 739 ,5 2 0 393,151 159,663 4 8 5 ,4 4 3 3 ,395,495 77,2 5 9 75,657 40,7 7 8 60,4 7 6 2 6 ,4 2 7 9,211 3 8 9 ,8 0 8 Interest on obligations of states and political subdivisions .......................... .............. 53,933 126 ,4 7 9 Applicable income taxes 10,192 . . . . . . Income before income taxes and securities gains or l o s s e s .......................................... . . . . .............. - 14,092 - M ississippi Tennessee District Alabama 4 2 ,686 41,2 3 5 16,601 36,4 7 7 317,411 7,061 9,861 4 ,012 - 9,061 - 6,149 *12/75 data from Income and Dividends Report 128 SEPTEMBER 1976, M O N T H L Y REVIEW In the ea rly Seven tie s, D istric t m e m b e r b a n k s ' h o ld in gs o f m u n ic ip a l o b lig a tio n s a d v a n c e d at an a n n u a l rate o f 16 percent. R ecen tly, h o w e v e r, the in a b ility to u tilize tax-e x e m p t in c o m e has c a u se d b a n k s to re d u ce their b o n d h o ld in g s in an a tte m p t to g e n erate taxable in c o m e to m e e t h ig h e r expenses. S ix t h D is t r ic t M e m b e r B a n k s ’ M u n ic ip a l O b lig a t io n s Bil. $ R e ce n t d e v e lo p m e n ts c o n tin u e to p o in t o u t the re c e ssio n 's severe im p a c t o n D istric t ban ks. T h e re ce ssio n sh a rp ly re d u c e d e a rn in gs, w e a k e n e d lo an d e m a n d , a n d c o n trib u te d to m u c h h ig h e r lo an losses. B a n k s h ave ad ju ste d to the se p re ssu res b y m a k in g su b sta n tial a d ju stm e n ts to b o th sid e s o f their b a la n c e sheets. M u n ic ip a l b o n d p o r tfo lio s re flect ju st su c h a c h an ge . D u r in g the Sixties a n d early Seven tie s, D istric t m e m b e r b a n k s a d d e d large a m o u n t s o f m u n ic ip a l o b lig a tio n s to their p o rtfo lio s. In D e c e m b e r 1959, they h e ld o n ly $774 m illio n o f m u n ic ip a l o b lig a tio n s; b y the e n d o f 1974, h o ld in g s to ta le d $6,461 m illio n , an a n n u a l increase o f 16 percent. B a n k s had g o o d in ce n tiv e s to b u y m u n ic ip a ls. B a n k p ro fits w e re rising, a n d m u n ic ip a l o b lig a tio n s w e re a so u rc e o f in c o m e e x e m p t fro m in c o m e taxes. Federal and so m e state F rom the e n d o f 1969 to m id -1 9 7 4 , D istric t m e m b e r b a n k s ' h o ld in g s o f m u n ic ip a ls rose $3.5 b illio n , o r 119 percent. F lorida b a n k s led the D istric t; their h o ld in g s in cre a se d $1.7 b illio n , o r 136 percent. T h e se b a n k s a c c o u n te d fo r a b o u t o n e -h a lf the total D istric t gain. M is s is s ip p i b a n k s a d d e d o n ly a b o u t $160 m illio n o f the b o n d s. T h e re m a in in g states each a d d e d fro m $370 m illio n to $510 m illio n in m u n ic ip a ls d u r in g this p eriod . T h e recession that b e g a n in 1973 reversed these a c q u isitio n s. T h e g ro w th in b a n k s ' p u rc h a se s o f tax-e x e m p t se cu rities s lo w e d in 1973 a n d p e a k e d in m id -1 9 7 4 . S in c e then, they h a ve d e c lin e d n early 8 percent. In 1974, b a n k s fac e d strain ed liq u id ity p o sitio n s. T h erefore , th e y re d u c e d their p u rc h a se s o f lo n g -te rm b o n d s a n d eve n b e g a n liq u id a tin g so m e h o ld in g s . In 1975, sh a rp ly h ig h e r p ro v isio n s for lo an lo sse s cut in to net in c o m e , c u ttin g b a c k the n e e d fo r tax-e x e m p t in c o m e . Alabam a Florida Georgia Louisiana* M ississippi* T en n essee* ‘ D istrict Portion Only for o p e r a tin g expe nses. G e n e ra lly , a b a n k w ill have taxable in c o m e if b e fo re -ta x in c o m e a n d se cu rities g a in s o r lo sse s (i.e., total o p e r a tin g in c o m e less total o p e r a tin g expe nses) e x ce ed the interest re c e iv e d fro m m u n ic ip a l b o n d s. For Florida, G e o rg ia , a n d T e n n e sse e ban ks, this w a s clearly n o t the case in 1975; o n an a gg re g a te basis, they h ad n o taxable in c o m e . A n d so m e in d iv id u a l b a n k s u n d o u b t e d ly face d this sa m e situ a tion in 1974. A s a result, they m ig h t be expe cted to re d u ce their m u n ic ip a l b o n d h o ld in g s a n d in crease o th e r e a rn in g assets su c h as lo a n s o r U . S. G o v e r n m e n t se curities. B a n k s in these thre e states have d e c id e d ly re d u c e d their m u n ic ip a l h o ld in g s. In Florida, w h e re the b e fo re -ta x in c o m e a n d se cu ri ties g a in s o r lo sse s w e re $50 m illio n less than the interest o n m u n ic ip a ls, h o ld in g s d r o p p e d the m ost. O b v io u s ly , b a n k s in G e o r g ia a n d T e n n e sse e w ere less p re sse d to re d u ce tax-e x e m p t in c o m e a n d a d d taxable in c o m e ; h o ld in g s have d e c lin e d less in these states. H o w e v e r, s o m e in d iv id u a l b a n k s in these tw o states w e re likely u n d e r c o n sid e r a b le pressure. JO HN M. G O D FREY T h e re d u c tio n in m u n ic ip a ls is cen te red at Florida ban ks, w h e re h o ld in g s h ave d e c lin e d $404 m illio n , o r 20 percent. G e o r g ia b a n k m u n ic ip a l p o r tfo lio s are d o w n $61 m illio n ; th o se in L o u isia n a a n d T e n n e sse e are o ff m u c h less. A la b a m a b a n k s have a d d e d $112 m illio n o f the o b lig a tio n s ; a n d h o ld in gs are up $34 m illio n in M is s is s ip p i d u r in g 1975. B a n k s' m u n ic ip a l b o n d h o ld in g s h a ve d r o p p e d b e c a u se t u m b lin g p ro fits have re d u c e d the n eed fo r tax-free in c o m e . For b a n k s to use m u n ic ip a l b o n d in c o m e to the best a d v a n ta ge , p o r tfo lio s m u st ge n e rate s o m e taxable in c o m e . A n d in n o case d o e s a b a n k w a n t to use tax-e x e m p t in c o m e F E D E Rfor A L FRASER R E SE R V E B A N K O F A T L A N T A Digitized 129 S ix t h D i s t r i c t S ta tis tic s Seasonally Adjusted (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 MonthsAgo One Year Ago Unemployment Rate (Percent of Work Force)*** . . . . June Average Weekly Hours in Mfg. (Hrs.) . June S IX T H D IS T R IC T INCOME AND SPENDING M anufacturing Income . . . . . . . June Farm Cash Receipts . . . . Crops ................................... . . . . May Livestock .......................... . . . . May Instalm ent Credit at Banks*/ 1 (Mil. $) New Loans .......................... . . . . June Repayments ...................... . . . . June Retail Sales .......................... ................. May 138.1 326.2 367.2 292.3 138.6 184.8 216.9 187.3 136.8 189.7 292.6 171.5 118.2 199.3 333.7 94.1 820 775 143.9 812 748 141.5 752 708 144.0 727 746 128.2 Nonfarm Employment . . . . . June M anufacturing ...................... . June Nondurable Goods . . . . . June F o o d ................................... . June Textiles .......................... . June Apparel .......................... . June Paper ............................... . June Printing and Publishing . June C h e m i c a l s ...................... . June Durable G o o d s .................. . June Lbr., Woods Prods., Furn. Fix. June Stone. Clay, and Glass . . . . June Primary M e t a l s ...................... . June Fabricated M e ta l s .................. . June M a c h i n e r y ............................... . June Transportation Equipment . June N o n m a n u fa c tu rin g .......................... . June Construction .......................... . June Transportation ...................... . June T r a d e ........................................ . June Fin., ins., and real est. . . . June S e r v i c e s ................................... . June Federal Government . . . . . June State and Local Government . June Farm E m p lo y m e n t............................... , June Unemployment Rate (Percent of Work Force) . . . . . June Insured Unemployment (Percent of Cov. E m p .) .................. June Average Weekly Hours in Mfg. (Hrs.) . June Construction C o n t r a c t s * .................. . June R e s id e n tia l........................................ . June All O t h e r ............................................ . June Cotton C o n su m p tio n * * ...................... . Apr. Pertroleum Production */** . . . . . June Manufacturing Production . . . . . May Nondurable G o o d s .......................... . May Food ........................................ . May Textiles ............................... . May Apparel ................................... Paper ................................... Printing and Publishing . . . May C h e m i c a l s ............................... . May Durable G o o d s ............................... . May Lumber and W o o d .................. . May Furniture and Fixtures . . . . May Stone, Clay, and Glass . . . May Primary M e t a l s ...................... . May Fabricated M e ta l s .................. . May Nonelectrical Machinery . . . May Electrical Machinery . . . . May Transportation Equipment . May 107.4 98.8 100.5 98.2 97.5 99.0 99.2 104.5 104.7 96.6 89.4 91.6 96.8 96.3 108.3 93.3 117.0 105.9 117.2 85.1 106.9 98.3 99.6 98.6 97.0 98.9 99.8 105.0 104.8 96.8 89.2 91.6 97.9 96.7 108.4 94.8 109.6 81.1 104.3 108.1 113.1 116.9 105.4 118.9 84.7 7.4 8.3 8.1 8.7 3.9 40.6 183 170 196 75.4 88.4 149.8 149.3 133.6 149.9 135.9 145.6 132.0 161.8 150.3 161.3 135.8 137.5 102.7 112.9 161.8 254.7 146.8 3.8 40.9 235 176 292 3.7 40.0 150.2 150.9 133.9 148.9 133.8 145.3 132.8 165.0 149.3 161.1 135.4 136.3 102.5 113.0 162.9 248.7 145.4 101.6 6.5 39.7 205 134 275 56.2 91.7 141.5 142.9 134.2 138.7 119.9 131.1 125.9 157.6 139.5 140.7 120.7 139.3 99.1 112.7 161.8 241.8 145.4 148.7 241.1 126.9 . June . June 270 219 265 218 264 219 264 224 . June . June June 200 237 230 187 332 228 193 345 220 106.3 97.7 99.0 97.9 95.0 98.8 99.9 105.2 104.7 96.1 88.4 89.7 98.2 96.1 108.2 91.9 109.0 78.7 104.2 107.9 112.8 100.8 88.2 110.1 83.3 104.6 108.6 113.4 117.3 106.2 118.7 82.8 210 180 239 76.4 88.5 150.4 152.2 133.7 152.4 137.8 144.5 133.8 165.0 147.4 158.1 137.0 133.1 104.9 92.8 94.0 95.9 88.5 90.6 93.4 103.2 100.1 91.2 82.2 91.0 93.1 93.6 103.4 88.6 108.7 87.0 103.5 107.1 111.8 115.2 105.2 115.4 78.5 111.6 FINANCE AND BANKING 343 191 306 A LA B A M A INCOME Manufacturing Incorr Farm Cash Receipts 1 3 0FRASER Digitized for One Year Ago 6.6 40.8 7.2 40.5 6.8 40.4 7.3 39.1 293 247 322 280 241 316r FINANCE AND BANKING Member Bank L o a n s ............................... June Member Bank D e p o s its ...........................June Bank D e b i t s * * ........................................June 279 236 327 264 133.5 255.0 119.2 124.5 109.8 94.0 112.3 74.8 77.0 221 287 FLORIDA Manufacturing I n c o m e .......................... June Farm Cash R e c e ip ts ............................... May 133.4 255.7 136.1 204.6 109.4 98.5 111.2 61.2 80.3 111.6 61.6 75.8 112.3 63.0 73.8 9.6 40.6 10.9 40.9 40.2 10.4 39.6 281 249 362 288 244 314 EMPLOYMENT Nonfarm E m p lo y m e n t...........................June M anufacturing ....................................June N o n m a n u fa c tu rin g ...............................June C o n s t r u c t io n ................................... June Farm E m p lo y m e n t................................... June Unemployment Rate (Percent of Work Force)*** . . . . June Average Weekly Hours in Mfg. (Hrs.) . June 109.8 99.1 11.0 FINANCE AND BANKING Member Bank L o a n s ...............................June Member Bank D e p o s i t s ...................... June Bank D e b i t s * * ........................................June 278 258 346 280 254 343r GEORGIA INCOME Manufacturing I n c o m e ...........................June Farm Cash R e c e ip ts ............................... May 133.0 261.5 135.4 195.2 129.0 183.8 109.6 197.2 102.3 95.7 104.9 70.5 90.4 103.0 96.7 105.5 72.5 89.1 103.3 96.9 105.7 74.9 84.0 100.1 6.1 40.2 6.9 40.9 6.8 8.0 39.4 39.2 248 204 405 249 194 408r 250 197 417r EMPLOYMENT Nonfarm E m p lo y m e n t...........................June Manufacturing ................................... June N o n m a n u fa c tu rin g .............................. June C o n s t r u c t io n ................................... June Farm Employment ............................... June Unemployment Rate (Percent of Work F o r c e ) ..................June Average Weekly Hours in Mfg. (Hrs.) . June 89.0 104.4 76.4 103.7 FINANCE AND BANKING Member Bank L o a n s ............................... June Member Bank D e p o s i t s ...................... June Bank D e b i t s * * ........................................June 239 193 361 LOUISIANA INCOME Manufacturing I n c o m e ...........................June Farm Cash R e c e ip ts ............................... May 143.9 596.7 143.4 159.3 142.6 158.1 126.4 323.5 106.6 106.9 101.7 107.9 108.4 79.2 104.9 100.4 105.8 104.2 72.6 7.9 41.1 7.3 40.5 EMPLOYMENT Nonfarm E m p lo y m e n t...........................June Manufacturing ................................... June N o n m a n u fa c tu rin g ..............................June C o n s t r u c t i o n ................................... June Farm Employment ............................... June Unemployment Rate (Percent of Work Force)*** . . . . June Average Weekly Hours in Mfg. (Hrs.) . June 105.4 101.1 106.2 105.6 78.4 101.8 107.6 107.4 79.7 7.3 41.9 FINANCE AND BANKING Member Bank L o a n s * ...........................June Member Bank D e p o s its * ...................... June Bank Debits*/** ....................................June 250 220 295 240 216 268 237 213 270 246 205 271 153.5 344.6 155.8 194.1 151.7 181.7 128.6 293.1 107.0 101.1 109.8 99.2 64.5, 107.6 107.7 101.7 102.7 92.8 107.5 96.1 59.6 MISSISSIPPI . June . May 139.4 391.2 136.4 227.3 141.6 208.3 117.4 310.9 EMPLOYMENT Nonfarm Employment Manufacturing . . Nonmanufacturing Construction . . Farm Employment . . Two Months Ago INCOME EMPLOYMENT AND PRODUCTION Loans* All Member Banks Large Banks . . . Deposits* All Member Banks Large Banks . . . Bank Debits*/** . . One Month Ago Latest Month 1976 . . . . . June June June June June 109.5 98.9 114.2 123.1 83.0 109.7 99.5 114.2 123.1 91.9 110.4 101.0 114.6 123.0 93.9 106.1 95.4 110.9 116.6 72.3 INCOME M anufacturing I n c o m e ...........................June Farm Cash R e c e ip t s ............................... May EMPLOYMENT Nonfarm Employment M anufacturing . . Nonmanufacturing Construction . . Farm Employment June June June June June 101.6 110.4 102.2 71.3 110.6 103.0 62.6 SE P T E M B E R 1976, M O N T H L Y R E V IE W Latest Month One Month Ago Two Months Ago Unemployment Rate (Percent of Work Force)*** . . . . June Average Weekly Hours in Mfg. (Hrs.) . June FINANCE AND BANKING Member Bank L o a n s * .......................... June Member Bank D e p o s its * ......................June Bank Debits*/** ................................... June One Year Ago Latest Month One Two Month Months Ago Ago June June June June June 103.8 95.6 108.0 67.1 94.3 104.2 96.0 108.4 78.1 97.0 105.4 • 97.4 109.5 . June . June 6.4 40.8 7.2 41.0 7.0 39.8 40.0 FINANCE AND BANKING Member Bank L o a n s * .......................... June Member Bank D e p o s its * ...................... June Bank Debits*/** ................................... June 277 235 306 269 226 273 268 227 281 271 218 257 EMPLOYMENT Nonfarm E m p lo y m e n t...................... Manufacturing ............................... 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.) 7.5 39.1 286 256 322 266 238 303 252 232 301 260 219 266 . . . . . 86.6 99.9 One Year Ago 102.1 90.9 107.7 90.9 86.6 8.6 TENNESSEE INCOME M anufacturing Income . . . . Farm Cash Receipts June May 335.0 136.4 176.3 135.2 182.7 *For Sixth District area only; other totals for entire six states ***Seasonally adjusted data supplied by state agencies. Note: 118.3 59.1 **Daily average basis fPreliminary data r-Revised N.A. Not available All indexes: 1967 = 100, except mfg. incom e, em ploym ent, and retail sales, 1972 = 100. Sources: Manufacturing production estim ated by this Bank; nonfarm, mfg. and non mfg. emp., mfg. income and hours, and unemp., U.S. Dept, of Labor and cooperating state agencies; cotton consumption, U.S. Bureau of Census; construction contracts, F. W. Dodge Div., McGraw-Hill Information Systems Co.; pet. prod., U.S. Bureau of Mines; farm cash receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes calculated by this Bank. 'Data have been bench marked and new trading day factors and seasonal factors computed using December 31, 1974 and June 30, 1975 Report of Condition data as bases. D e b 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 Percent Change Year May 1976 June 1975 5,040,740 108,110 388,963 1,405,973 808,450 290,776 - 0 + 14 + 16 + 9 + 7 + 7 + 13 +24 +28 - 0 + 32 + 4 + 9 + 18 + 16 + 0 + 37 + 8 897,504 465,318 860,168 504,695 + 8 + 16 + 13 + 7 + 11 + 4 . 2,224,709 414,637 323,934 . 6,341,067 2.304,168 380,788 256,675r 5,638,669 1,918,830 429,811 255,230 5,175,591 - 3 + 9 + 26 + 12 + 16 - 4 + 27 +23 + 30 - 2 + 3 + 25 513,315 8,334,074 2,082.657 789,052 662,668 933,833 4,712,939 1,332,697 420,796 7,783,197r 1,698,816 694,240 573,543 1,094,360 4,317.697r 1,197,159 446,646 7,122,879 1,793,555 555,674 529.270 923,522 4.461,600 1,148,943 +22 + 15 + 3 + 17 + 12 + 16 + 19 +42 +37 +25 + 4 + 1 + 2 + 6 + 8 + 16 + 6 970.144 541,357 . . 227,625 105,772 196,108 83,779 + 0 - 4 +16 +22 +22r 5,712.768 116,749 430,353 1,281,138 990,783r 281,667 231,324 93,975 235,591 52,996 . 1,094,095 2,528,123 197,944 91,400 210,602 39,257 1,028,625 2,318,154 206,629 111,344 232,388 45,712 1,007,793 2,397,802 + 17 + 3 + 12 +35 + 6 + 9 + 12 -1 6 + 1 + 16 + 9 + 5 + + + + 170,947 126,230 206,803 31,471 180,970 79,902 40,074 54,176 163,228 117,989 171,838 126,361 175,354 33,915 176,753 68,614 40,517 52,344 172,566 114,581 + 18 + 12 + 13 . 202,272 141,826 233,025 36,218 199,061 84,838 41,889 58,013 179,317 131,159 + 18 + 12 +33 + 13 + 13 +24 + 3 + 11 + 4 + 14 + 15 + 9 +25 +25 + 15 + 13 + 17 + 14 + 13 + 11 + 7 + 23 + 14 + 16 -1 5 + 9 + 11 . . . . . . . . . . . . 22,589 14,702 124,181 96,695 22,228 61,815 20,525 13,440 108,090 99,708 25,958 69,176 17,843 15,5X9 109,770 79,719 31,840 63,106 + 10 + 9 +15 - 3 -1 4 +27 - 5 + 13 + 9 - 4 - 5 -11 -3 0 - 2 -1 4 - 2 171,021 104,366 139,870 68,726 168,937 93,132 137,983 66,849 150,610 76,735 146,063 57,990 + 1 + 12 + 1 + 3 + 14 +36 - 4 + 19 + 17 + 19 + 8 + 17 170,601 98,585 60,893 170,536 85,553 42,439 178,376 78,338 46,321 + 0 + 15 +43 - 4 +26 +31 + 2 . . Bristol . . . . Johnson City . . Kingsport . . . 217,439 182,487 413,043 201,624 167,585 370,279 160,285 172,604 357,896 + 8 + 9 + 12 +36 + 6 + 15 +41 + 7 +23 + 8 + 16 +13 11,290,839 28,560,313 28,590,053r 10,553.298 3,587,516 10,286,099 + 5 + 8 + 8 + 11 + 9 + 11 + 15 + 14 + 16 + 12 +25 +11 Bradenton . . Monroe County Ocala . . . . St. Augustine St. Petersburg . Tampa . . . . Athens . . . . Brunswick . Dalton . . . . Elberton . . Gainesville . Griffin . . . . LaGrange . . Newnan . . Rome . . . . Valdosta . . Abbeville . Bunkie . . Hammond New Iberia Flaquemine Thibodaux . . . . . Albany .................. 225,553 A t l a n t a ................. . 24,467.462 Augusta . . . . 779,746 Columbus . . . . 552.658 Macon .................. 884,768 Savannah . . . . . 1,578,570 193,491 22.818,830 697,840 516.535 792,062 1,298,548 206,184 21,279,670 635,161 486,451 830,340r 1,032,010 + 17 + 7 + 12 + 7 + 12 +22 + 9 + 15 +23 + 14 + 7 + 53 + 7 + 15 + 5 + 11 + 6r +38 Alexandria 342,602 Baton Rouge . . . 2,115,615 Lafayette . . . . 490,502 Lake Charles . . 328,959 New Orleans . . . 6,666,615 340,490 1,860,471 427,304 319,247 5,913,269 325,209 2,117,172 423,931 279.884 5,688,240 + 1 + 14 + 15 + 3 + 13 + 5 - 0 + 16 + 18 + 17 + 8 + 1 + 13 + 12 + 11 Biloxi-Gulfport . . 390,515 Jackson . . . . . 2,170,418 376,749 2,014,927 305,432 1,678,959 + 4 + 8 +28 +29 + 19 DISTRICT TOTAL . . 107,514,516 99,285,826r Chattanooga . . . . 1,396,409 Knoxville . . . . . 1,905,797 Nashville . . . . . 4,993,958 1,402,389 1,499,549 4,599,211 1,237,107 1,493,517 4,255,918 - 0 +27 + 9 + 13 +28 + 17 + 4 + 6 + 8 137,163 123,400 + 19 +33 + 17 Alabama . Florida . . Georgia . . LouisianaMississippiTennessee3 . . 12,947,326 32,566,958 . . 33,246,065 . . 11,837.690 . . 4,477,951 . . 12,438,526 12,330,190r 30,149,914r 30,881,209r 10,662,298 4,095,681 11,166,534 3THER CENTERS Anniston . . . . 163,532 +21 Hattiesburg . Laurel . . . . Meridian . . Natchez . . PascagoulaMoss Point Vicksburg . . Yazoo City . . . . . . . . . . . . . . . . . . CO 228,385 101,885 . . . . . . . . 00 June 1975 Dothan Selma Birmingham . . . . 5,686,324 Gadsden . . . . 133,532 Huntsville . . . 499,149 M o b i l e ................. 1,399,821 Montgomery . . . . 1,063,332 Tuscaloosa . . . 302,658 . . May 1976 1976 from 1975 STANDARD METROPOLITAN STATISTICAL AREA' Bartow-LakelandWinter Haven Daytona Beach Ft. LauderdaleHollywood . . Ft- Myers . . . . Gainesville . . . Jacksonville . . . MelbourneTitusville-Cocoa Miami .................. O r l a n d o ................. Pensacola . . . . Sarasota . . . . Tallahassee . . Tampa-St. Pete W. Palm Beach June 1976 to June date 1976 6 mos. from 1976 May June from 1976 1975 1975 00 June 1976 June 1976 from May June 1976 1975 Year +21 + 10 + 6 + 5 + 7 + 10 + 11 +21 + 4 -22 1 6 9 8 +21 +12 +22 +11 + 14r +16 + 8 + 19 +21 +10 'Conforms to SMSA definitions as of December 31, 1972. -District portion only. FEDERAL RESERVE BANK OF ATLANTA 131 D i s t r i c t B u s in e s s C o n d i t i o n s *Seas. adj. figure; not an index Latest plotting: June, except mfg. production, April, retail sales and farm cash receipts, M ay. T h e e c o n o m y s h o w e d m ix e d b e h a v io r. M o s t D istric t in d u strie s re p o rte d jo b lo sse s, b u t retail sa le s in c re ase d d e sp ite a slig h t d e c lin e in m a n u fa c t u r in g in c o m e . In flo w s o f c o n s u m e r sa v in g s s lo w e d a n d c o n stru c tio n a ctivity d ip p e d , b u t h ig h e r c ro p p ric e s im p r o v e d the e c o n o m ic o u t lo o k fo r farm e rs. B o th the u n e m p lo y m e n t rate a n d n o n fa r m e m p lo y m e n t d e c lin e d in June. A statistical quirk in fluenced the change in the u n em p loym en t rate. M an u factu rin g jobs again decreased, with both durable and n ondurable industries sharing losses. O n ly printing and publishing, paper, and prim ary metals show ed jo b gains. N on m an u factu rin g e m p loym ent w as also weak, except for an increase in Federal G o vern m e nt jobs. W e e kly earnings declined slightly as the factory w orkw eek becam e shorter. M a n u f a c t u r in g in c o m e fell s lig h tly d u r in g June, b u t retail sale s rose, re fle ctin g str o n g in c o m e g a in s d u r in g p re v io u s m o n th s. D epartm ent store sales d e clined, and new auto registrations dro pp ed du ring M ay. The rise in June's retail sales suggests that strength may have also returned to auto and depart m ent store sales. C o n s u m e r s ' sa v in g s d e p o s it in flo w s w e a k e n e d at D istric t m e m b e r b a n k s in June a n d early July. This is in contrast to nearly tw o years of strong consum er time and savings deposit gains at District banks. Bank lending m aintained a m oderate advance at the sm all- and m edium -size banks, w hile security loans continued to rise at the larger banks. District Digitized for 1 3 2FRASER banks reduced their h o ld in g s of securities, m ostly Treasury issues, in June. In c re a se d c ro p p ric e s a n d g r o w t h in c a sh receip ts fro m liv e sto c k m a rk e tin g s b r ig h te n e d e c o n o m ic p ro sp e c ts fo r farm e rs. C ro p receipts were raised by recent price hikes for soybeans, cotton, wheat, and vegetables, but the total vo lu m e still lagged behind 1975's co m parable level. The lag w as m ost severe in G e o rgia and Louisiana. Production prospects were unusually favorable for all crops except cotton. Broiler placem ents contin u ed to exceed year-ago levels, but the m argin narrow ed in late July. A t the end of June, bank loans in agricultural areas were one-eighth above year-ago levels. T h e v a lu e o f c o n str u c tio n c o n tra c ts d ip p e d sh a r p ly in June. Residential contracts declined m oderate ly for the second m onth in a row. O f the region's six states, only A lab a m a sh ow ed gains in the value of residential contracts du rin g those tw o m onths. Nonresidential contracts fell sharply after ju m p in g in M ay. D e p o sit inflow s at savings and loan associa tions slow ed in M a y and June but appear to have com e back strongly in July. Residential m ortgage rates ceased their upw ard drift. SEPTEMBER 1976, M O N T H L Y REVIEW
@FedFRASER