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Hohtkly Review FED ER A L R ESER V E Volume X X X I E d u c a tio n Atlanta, Georgia, September 30, 1946 a s a n In v e s tm e n t E c o n o m ic he opening of the schools this month has resumed foi another term an economic activity that, measured by the number of persons participating, is more important than any single industry in the Sixth District. In each of the Six States the number of people going to school exceeds the number of those working in manufacturing plants throughout the Dis trict. The number of pupils enrolled in school is also greater than the total number of persons engaged in agriculture in any of the states. Moreover, in terms of its long-run effect on the economic future of the region, the money expended on schools may yield greater returns in dollars and cents than money spent in any single industry or other type of economic activ ity. Most people who pay taxes know something about the cost of education. They are aware in a general way of the im portance of an educated population. Many have no realiza tion, however, of the direct contribution that education, by developing human resources, makes to the economic progress of their region. Business and industrial leaders have recently devised many plans that promise to expand the region’s industry. They have established research organizations, industrial foundations, port organizations, foreign trade facilities and others. Yet, the success of these plans depends on the capabilities of all the people who work with them. This relationship between human resources and economic advance is apparent to a number of organizations, including the Chamber of Commerce of the United States. Through its committee on education the chamber has published the results of studies showing the importance of education in economic progress. Within the District R. £. Gormley as president of the Georgia Bankers Association has called attention to what has been termed Georgia’s educational crisis. In circularizing a booklet, “Challenge to Georgia and Georgians,” he wrote to the members, “The educational standards of our state should and must be raised and . . . it is incumbent upon each of us to feel a personal responsibility. . . At a meeting held in New Orleans in August, editors of seven Southern newspapers urged improved educational opportunities as one of the means of forwarding the South’s economic and social progress. Organized labor has recently started a program of adult education. As promising as such interest may be, many communities neglect to consider the direct relationship between ignorance and poverty on one hand and between education and eco nomic progress on the other. In an effort to attract new in dustries to their communities, people frequently go into great detail about physical resources. They give the type, quality, T BANK OF ATLAN TA in Number 9 S ix th D is tric t P ro g re ss and quantity of raw materials; the amount of the water sup ply—its analysis and its cost; and the extent of railroad facilities. If the community is a port, they tell the depth of the channel, the number and type of dock facilities, the marine-repair facilities, and the financial services available. Prospectuses published by such communities seldom give the average educational levels of the labor forces. Information about labor is often limited to such general statements as “An adequate labor supply is available”, and education is dismissed with “The city is known for its well-equipped schools.” Yet, frequently the community’s economic position today is the result of the type of education it provided yes terday. Its economic position tomorrow will be partly de termined by how well it is educating its children today. During the war years the extent to which educational prog ress has aided the recent economic improvement in the region was clearly indicated. The degree of manufacturing expan sion in the District during that time is perhaps much better known than the number of those persons who had to change their type of work in order to make it possible. Between 1939 and the period of peak employment in 1944 the number of factory workers in the Sixth Federal Reserve District in creased more than half a million. Manufacturing employment was 1.8 times in 1944 what it was in 1939. The number of new workers was even larger because, aside from having to swell the ranks of industry, they had to replace men going into the armed forces. Although expansion was rapid, the level of efficiency was as high in the South as it was in the North, according to Richard A. Lester of Princeton University. Dr. Lester based his conclusions on information received in 1945 from 10 industrial consultants and representatives of 40 inter-regional manufacturing concerns and 8 labor unions. The majority of persons reporting to him believed that under similar circum stances of occupations, working conditions, and management, Southern workers were equal to Northern workers in efficiency and sometimes excelled them. This ability of Southern workers to do their work efficiently while greatly increasing in number was not the result of a background of industrial experience comparable with the rest of the country. Out of every 100 workers in this District only 15 worked in manufacturing plants during 1940, compared with 23 out of every 100 over the nation, This acquisition of new skills in a relatively short time was partly the result of the unusual opportunity offered by the war. Many of the war industries were large-scale activities in which it was possible to break down the complex operations into comparatively sim- 9 4 M o n t h l y R e v ie w o f th e F e d e ra l R e s e rv e B a n k o f A t la n ta f o r S e p te m b e r 1946 pie elements. There was no need for each worker to learn a One reason for the preponderance of District workers in wide range of skills. But to a greater extent it was the result the lower-paid groups is that they are working in low-wage of a public investment, begun many years before, that had paying industries. Another reason is that many of them are resulted in a better-educated population. unskilled workers. Most studies show that unskilled and semi Educational statistics give a picture of the poor prepara skilled Southern workers are more likely to receive lower tion for filling the needs of the war industries Southern wages relative to workers in identical Northern industries workers would have had if educational opportunities had than are skilled Southern workers. Wage analyses of the Bureau of Labor Statistics, for ex remained as they were in 1900, for example. The majority of them would have been unable to read and understand in ample, show that in 1945 Southeastern workers in the ma structions. As a consequence, they could not have adapted chinery industry received an average of 76 cents an hour, themselves to new occupations as quickly as they did. The compared with a one-dollar national average. The analysts chart on page 95 show that as late as 1900 only 60 percent found, however, that in the Southeast skilled workers in the of the children between the ages of five and 17 years attended industry received wages that compared favorably with those school and that they went to school on an average of only 65 received by workers in other regions. Unskilled workers for days each year. Conditions, however, improved each decade. the most part made up the group that received the relatively It was the people receiving a better education in those years low wages. A maintenance electrician in the Southeast re who were able to learn new skills and meet the needs of ceived on an average $1.03 an hour in 1945, compared with an average of one dollar for the United States as a whole. expanded industry. The wages of clerical workers in the area in some cases also Despite the phenomenal wartime increase in income, in come per person in the District is still low compared with exceeded the national average. On the other hand, a janitor that in the rest of the country. Still further advances in edu in the Southeastern machinery industry received 51 cents an hour, compared with 73 cents for the nation. In industry, as cation are necessary to overcome the problem. well as in agriculture, raising the income means both im Simply stated, under conditions of full employment the proving the efficiency of the workers and putting them in way education will increase the District’s income is by put more productive and better paying jobs. ting the people to work at better jobs; it is not by putting Education helps to develop such jobs and improve the more people to work. There is no great amount of unemploy workers in at least three ways. It creates industrial opportuni ment either in the nation or the District at present. Many of ties. It increases the ability and productivity of the workers the District’s workers, however, are employed in relatively themselves. It makes it easier for workers to change their poor-paying jobs. One reason for the poor pay in those jobs work. is that they are not productive. The educational level of the Industrial Development and Education worker explains to a great extent the type of work he does Sumner Slichter, a Harvard economist, has pointed out that and how well he does it. just as the existence of natural resources helps businessmen District agricultural workers are the lowest-paid group. to discover opportunities for putting people to work, so does The proportion of these workers in the District is large—35 the availability of well-trained people make it easier for the percent compared with that of 18 percent for the nation. businessmen to discover attractive investment opportunities. Low productivity per worker is accounted one reason for The demand for a region’s labor depends partly on the qual the poor pay in agriculture. This low productivity, discussed ity of the supply of labor available. in the August 1944 issue of the Review, is in turn attributed Persuading outsiders to establish industries in the commu to the high ratio of population to land resources. Reducing nity is not the only way jobs are created. The job creators this ratio, so that the land supports fewer people, immediately can come from the community itself. If more light finishedbrings up the problem of how those who leave the farm are goods industries are to be established in this region, there to earn their livings. must be a greater number of these job creators. Under mod One suggested solution advocates providing the displaced ern conditions even a small business requires constant use of agricultural workers with jobs in industry. But even in in the tools provided by education. dustry there is a problem of providing more-productive and Business in an area is good, according to the United States better jobs. Though manufacturing workers in the Sixth Dis Chamber of Commerce, in the degree that people have the trict receive higher incomes than agricultural workers in gen ability to produce and the ability and desire to buy. The eral, they hold a greater percentage of jobs at lower wages, chamber’s researchers found that these factors were highest even on a national pay scale, than do manufacturing workers where schools were the best. They found it is in such regions throughout the country. The table shows the distribution of the that the average income is the highest, that retail sales are more-than-950,000 manufacturing workers in the District dur the greatest, and that rentals for homes are the highest. The tendency of income and education to vary together ing January 1946, compared with the national distribution. occurs within this region also. Within the Sixth Federal Re Percent of Manufacturing serve District there are wide variations in income. Two meas Workers in Each Group Average Sixth District United States Weekly Earnings, United States ures that show this have been chosen: per capita time deposits in all banks and per capital retail sales by counties. 16.2 36.4 $30-$34 Differences in the educational level of each county popula 15.4 27.8 35- 39 tion were determined by finding the percent of persons within 25.3 14.6 40- 44 it who had gone beyond elementary school. The chart on 9.5 30.0 45- 49 page 96 shows the wide variation from county to county. To 8.3 9.6 50- 54 determine how closely the figures on deposits and retail sales 3.4 3.5 Unclassified corresponded to the variations in educational levels, coeffi cients of correlation were computed. The relationships were 100.0 100.0 M o n t h l y o f th e F e d e ra l R e s e rv e B a n k o f A tla n ta f o r S e p te m b e r 1946 R e v ie w S IX T H D IS T R IC T E D U C A T I O N A L 9 5 P R O G R E S S Education in the District has shown marked progress in recent years. Because of its influence on income it must be further improved to bring Sixth District income up to national levels. 100 I. MORE CHILDREN 5-17 YEARS OLD WERE ENROLLED IN SCHOOL IN 1940. PERCENT CHILDREN 5-17 YEARS IN SCHOOL IN 1940 100 100 4. PART OF THE IMPROVED DISTRICT INCOME POSITION MAY BE EXPLAINED BY IMPROVED EDUCATION. F I OPIH A SIXTH DISTRICT \ r UNITED STATES 100 PER CAPITA INCOME PAYMENTS Ag p e r c e n t OF NATIONAL AVERAGE TENNESSEE 70 70 LOUISIANA GEORGIA"' ALABAMA 35 1900 1910 192 0 19 3 0 29'40'45' 1940 2. THEY ATTENDED SCHOOL LONGER EACH YEAR. 200 100 200 '29‘40'45 '29'40'45 '29'40'45 ,29'40'45 *29'40 45 5. RELATIVELY LOW INCOME PAYMENTS MAY BE EXPLAINED PARTLY BY THE LEVEL OF ADULT EDUCATION. PERCENT OF PERSONS 25 YEARS OF AGE AND OLDER WHO HAD COMPLETED GIVEN YEAR IN SCHOOL IN 1940 AVERAGE DAILY ATTENDANCE 100 UNITED STATES UNITED STATES 140 140 70 70 35 SIXTH DISTRICT 1900 2000 1910 1920 1930 1 -4 5 -6 ELEMENTARY 1940 3. TEACHERS' SALARIES ROSE BUT SHOWED LITTLE RELATIVE GAIN. 7 -8 1-3 HIGH SCHOOL 6. UNLESS SCHOOL ENROLLMENTS INCREASE, THE FUTURE ADULT POPULATION WILL BE LESS WELL EDUCATED THAN THE UNITED STATES' POPULATION. 2000 AVERAGE ANNUAL SALARY IN DOLLARS I 00 PERCENT OF PERSONS IN SCHOOL IN EACH AGE GROUP IN 1940 UNITED STATES 1400 COLLEGE 1400 70 UNITED STATES SIXTH DISTRICT 700 700 1900 1910 1920 1930 1940 35 35 5 - 6 YEARS 7 -1 3 1 4 -1 5 1 6 -2 0 2 1-24 9 6 M o n t h l y R e v ie w o f th e F e d e ra l R e s e rv e B a n k o f A t la n ta f o r S e p te m b e r 1946 found to be significant. For bank deposits the coefficient was +.45, and for per capital retail sales +.84. Although the coefficients of correlation show that there are other things besides education that explain the variations in time deposits and retail sales, they indicate that an important amount of the variation is explained by education. Per capita time de posits estimated on the basis of educational level were within $11.54 of the true figure in more than two thirds of the cases and per capita sales within $57.79 in more than two thirds of the cases. As in all studies of this kind, it is difficult to isolate the cause of the relationship. Some persons might argue that the levels of bank deposits, retail sales, and education are all caused by the same thing. Education, they might contend, is not the thing that increases income and wealth — it is the re sult of these things. To some extent this is correct. People with low incomes are often unable to educate their children, and their children in turn are thus unable to earn higher incomes. But if the educational level was the result of income, it would be the result of past income and not present in come. The measure of education was, as has been indicated, that of adults of 25 years of age and older, not of how many children were going to school at the present time. Some parents will make financial sacrifices, see that their children attend high school and perhaps college even when their incomes are comparatively low; others do not realize the importance of education even when their incomes are comparatively high. Just as there are differences in the atti tude of parents toward education, there are differences among communities in the prevailing ideas on how to use available financial resources. One community may prefer low taxes to better education. Another may prefer a new stadium to better school buildings and higher teachers9 salaries. A state may prefer to keep taxes low rather than to help communities with poor financial resources improve their schools. A commu nity’s level of income determines its ability to support edu cation. The attitude of the community determines the degree of support. Education and Worker Productivity Technical skills are, of course, important in raising the productivity of a worker and providing opportunities for in dustry. It is not so much a lack of these skills, however, that limits the advancement of the majority. It may be the lack of such a nontechnical skill, often taken for granted, as the ability to read and work with figures. At the Research Interpretation Council at the Alabama Polytechnic Institute the staff has compared the reading abil ity of Southerners measured by the years of school completed with the reading difficulty of printed materials intended to aid farmers and others. It has been found that only a small number of those people the material was intended for could understand it. To read some of the pamphlets that were is sued on improved farm practices would, according to the oouncil, require a tenth-grade education. Only about 12 per cent of Alabama’s farm population 25 years or older had completed their tenth year in school. Poorly educated children tend to take up their fathers’ lines of work even when that work is poorly paid. A study made, by the Mississippi State College, of the occupations of sons and daughters of Mississippi farmers in 1937 confirms this general conclusion. Dorothy Dickson found that in the five counties studied the lack of schooling was one reason why such large numbers of these children were working in poorly paid agricultural jobs. Sons with only eighth-grade educa tions were farming in 78 percent of the cases; only half of the high-school graduates were farming. She concluded that “Little work is available in these Mississippi farms for young people from the elementary schools except in the lower grades of agriculture which are consequently overcrowded.” Education and the Community’s Economic Prospects Those people who go to the trouble to make a careful analysis of their community’s labor supply in terms of its educational background will find much to explain their com munity’s past economic development and indicate its pros pects for the future. In one Sixth District county they will find that in 1940 half of the population of 25 years of age and older never went beyond the sixth grade. They will find that 7.2 percent never went to school at all, that only 9 per cent went beyond the eighth grade, and that only 4.4 percent completed high school. On the other hand, in another county in the Sixth District they will find that at least half of the population completed elementary school and that ony 3.8 percent never went to school at all. They will find that 21.2 percent completed high school and that 10.9 percent had at least some college education. Per capita time deposits in 1941 in the first of these two counties were $ 11 and in the second $58. Per capita retail sales in 1939 in the first were $66 and in the second $261. One out of each 1,000 persons in the first county in 1940 made an income-tax return, and 19 in the second. In the first, 52 new passenger cars were sold in 1940 and in the second 95. These illustrations represent conditions in two actual counties within the Sixth District, but not the ex tremes. Comparisons of conditions in neighboring counties or states within the District, however, do not tell the whole story. In only 42 counties out of the 449 within the Sixth Federal Reserve District was the median school year com- PERCENT OF ADULTS 25 YEARS OF AGE AND OLDER WHO HAD GONE BEYOND ELEMENTARY SCHOOL IN 1940 MEDIAN OF COUNTIES IN GROUP MORE THAN 45 (9 COUNTIES) 4 0 -4 4 (18 COUNTIES) 35-39 (30 COUNTIES} 3 0 -3 4 (69 COUNTIES) m B ^ - P E R CAPITA TIME DEPOSITS 1941 PER CAPITA RETAIL SALES 1939 2 5 -2 9 (97 COUNTIES) 2 0 -2 4 (142 COUNTIES) LESS THAN (84 COUNTIES) 20 100 200 DOLLARS Per capita time deposits in 1941 and per capita retail sales in 1939 were higher in those coun ties where a greater proportion of adults 25 years of age and older had more than an ele* mentary-school education. Counties have been grouped by their educational levels, and medi ans computed for each group. 300 M o n t h l y R e v ie w o f th e F e d e ra l R e s e rve B a n k o f A tla n ta f o r S e p te m b e r 1946 pleted by persons 25 years of age and older equal to, or better than, the median of 8.4 for all persons in the United States. One indication of how well the future adult population will be educated is found in the statistics on school attend ance for 1940. There are, of course, wide variations from one county to another within the District. A smaller pro portion of persons in each age group in 1940, however, were attending school in the Sixth District than of those in the nation as a whole. Moreover, Sixth District students dropped out of school at earlier ages. Not only do fewer children in the area go to school, but they go to school for a shorter time each year. If these conditions continue, the proportions of the future adult population that has com pleted high school or college will remain comparatively low. Shorter school terms, lower attendance, lower teachers’ sal aries, and less adequate public-school properties have re sulted in a lower quality of education in the region. In December 1942 from 2.6 to 5.3 times as many men in the District as in the nation on the whole were rejected in the draft because of lack of education. The state making the worst showing was Georgia, with Florida at the top. In Louisiana 2.4 times as many men were rejected, in Alabama 3.2, in Tennessee 3.6, and in Mississippi 4.4. High school students made much better showings. In the army-navy qualification tests given in April 1943 the scores of Florida high school students were 99 percent of the na tional average. Students did 78 percent as well as students throughout the country in Louisiana, 86 percent in Florida, 88 percent in Alabama, 92 percent in Tennessee, and 94 percent in Mississippi. These data seem to indicate that, given an opportunity, students in this region can achieve as much as those in other regions. Action to overcome these deficiencies is increasing. In Florida a Citizens Committee on Education representing varied interests was appointed by the governor late in 1944. In Louisiana the state legislature has appropriated additional funds for schools. The governor of Georgia authorized funds making possible an increase in teachers’ salaries of 50 per cent above the state minimum. Similar developments are taking place in other states. Certain general problems were found in all the states. They all had (1) unequal educational opportunities in their various communities, (2 ) a shortage of adequately trained teachers, and (3) many needs for better school buildings and equipment. It was found that a solution of these problems would be chiefly financial. The Immediate Problems Even in the state with the best educational record, Florida, there is marked variation from county to county in educa tional opportunities. In 1941-42 the current expenses per pupil were less than $50 in six counties. At the other extreme expenses were $90 or more. In one of the counties 61 per cent of the white teachers had never gone beyond the second year of college and only 19 percent had four years of col lege training. Georgia statistics also show the shortage of adequately trained teachers. Recent studies show that between 1943-44 and 1944-45 Georgia elementary and secondary schools lost 6,699 teachers, or a turn-over of one third. Moreover, the greater proportion of those quitting their jobs were teachers who were best qualified. Many persons believe that the reason for this shortage of well-trained teachers is not hard to find. They point to the 9 7 $1,049 average salary paid Georgia classroom teachers in 1945, which on the basis of 52 40-hour weeks means about 50 cents an hour. Recent wage studies show that in the seamless hosiery industry in West Central Georgia, only the janitors and “loopers with less than one year’s experience” were getting hourly wages as low as that. In pulp mills all workers were better paid. Even the recent 50 percent in crease in Georgia teachers’ salaries, however, does not place the salary of an adequately trained teacher on a par with those received by others in occupations requiring equivalent training. In Tennessee a survey of elementary and high-school buildings indicated great need for repairs and new build ings. More than one half the roofs and walls needed re pairing. Foundations also needed repairs in about 60 per cent of the cases. In each state of the District there are similar conditions. The Public Investment Ahead Bettering education within the District calls both for more money and for a better distribution of that money. There is a belief that because of the importance of education to the region greater sums can be raised locally. Sacrifices in other directions if necessary, it is believed, would be fully repaid if such sacrifices mean better education. There is another belief that although education is an important influence in increasing the income of a region or community, those regions and communities needing the greatest improvements in education are those least financially able to increase support. Associated with this belief is the idea that because people do not necessarily stay in the community in which they are educated, the provision of equal educational op portunities is a state-wide or even a nation-wide responsi bility. The South has more children out of each 1,000 persons to educate than does any other region and less financial ability. This condition leads some people to conclude that Federal aid is required. Those persons opposing Federal aid to education believe that the Government subsidies would involve increased and undesirable Federal controls. Some of them believe that there are ample surpluses in the treasuries of even the poorer states to improve education. Moreover, they think that relative educational expenditures do not adequately measure financial need. They would seek improvements through a better organization of the weak school systems. Even though, despite opposition, Federal aid may be forthcoming in the future, the present community and state responsibility is still great. If the leaders in states and local communities are convinced of education’s importance, its financial support will be increased and standards improved. The cost inevitably will be greater. How willingly this cost is assumed will measure the willingness to make a public investment that will return yields in better economic and social conditions throughout the region. Raising the District’s income to a national level is some thing that will not happen in a year or two. It is a long term problem. There are now probably a sufficient number of persons with adequate educations in the District to meet the demands that may be made by an expanding industry within the next few years. What the region’s relative eco nomic standing will be 20 or 30 years hence, however, will be governed greatly by the education the region gives its children today. Ch arles T . T aylor 9 8 M W a rtim e o n t h l y R e v ie w C h a n g e s o f th e F e d e ra l R e s e rv e B a n k o f A t la n ta f o r S e p te m b e r 1946 in C o n su m e r B u y in g H a b its Several cities of the Sixth District show an unusual sea spread study in recent years. Knowledge of these buying sonal pattern in department store sales because of the major habits is of utmost importance not only to the economist and occupation of their populations. Department stores sales in business analyst but to both the retailer and producer. The the Miami area are strongly influenced by the tourist season. success of production and selling plans depends largely on the Sales in the late winter and early spring months are much knowledge of the needs, desires, and the habits of individual higher there than in either the nation or the District. The esti buyers. As more knowledge of consumer buying habits is ac mated normal annual influx of 750,000 tourists in the Miami cumulated, both trade and manufacturing activity will tend area adds not only to the number of potential buyers but increases the income of the regular inhabitants. In Miami in to be further tailored to the wants of consumers. One field in the study of consumer behavior concerns the a typical prewar year $9.83 out of each $100 of department timing of purchases. Consumers habitually buy more in some store sales was made in February while in the District as a months than they do in others and these habits are more or less whole only $7.33 of each $100 was spent in that month. In regular from year to year. Although it long has been recog Jackson, Mississippi, and Montgomery, Alabama, payment to nized that consumer purchases are subject to seasonal varia farmers for cotton is usually concentrated during the fall tions, the scientific measurement of these forces has been im months, particularly September and October. While the aver age District consumer spends only $8.50 out of each $100 proved in recent years. Seasonal forces exert a great influence upon department which he spends in department stores in September, the aver store sales. Since these sales are used widely as an indicator age Jackson, Mississippi, department store customer spends of the broad trends of retail trade activity it is important that $9.58 in that month. some adjustment be made for seasonal fluctuations. By observ However, estimates of future sales based on seasonal expec ing monthly changes in sales over a period of years, it is pos tation alone would be subject to severe error in any but a sible to estimate how much of the sales-volume change is completely normal year. Although the general pattern of de caused by seasonal forces. Seasonal adjustment factors com partment store purchases tends to remain the same from year puted from these observations are applied to the unadjusted to year, certain months may increase or decrease in import index of department store sales to arrive at the adjusted index ance as selling periods with the passage of time. In the 20 published monthly in the Review. years immediately preceding World War II the seasonal The pattern of consumer buying in District department variation in department store sales became more pronounced stores may be estimated on the basis of past performance. In as holiday selling intensified and summer sales decreased. this manner it is possible to arrive at an estimate of the conDuring the war years department store sales reflected to a sumer-buying pattern in 1946. If the average consumer found greater extent the influence of timing of stock receipts than that he had spent $100 in District department stores during they did before. As a result some months changed in im the year, he would have spent differing amounts in different months. If he spends on the same pattern as he did during the portance as selling months from their prewar pattern. Christ last few years, he would have spent in January, $6.67; Febru mas sales were lost by the inability of merchants to supply ary, $7.33; March, $8 ; April, $8.58; May, $7.92; June, $7; sufficient goods to meet the unprecedented demand. Thus De July, $6.67; August, $7.33; September, $8.50; October, $8.92; cember sales were lower in proportion to the yearly level. November, $10; and December, $13.08. Thus his buying will Before the war the average department store customer spent be low in January and February, higher in the spring months, $14.58 in December out of each $100 spent yearly in depart low again in the summer, and gradually higher during the ment stores, but during the war because of his inability to fall with a peak in December. This is the general pattern. It buy all that he wanted in that month his proportional pur shows the relative amounts a consumer would spend each chases were reduced to $13.08. month out of each $100 of yearly expenditures if his purchases On the other hand, many wartime consumers increased the were determined solely by seasonal forces, rather than by proportion of their November purchases in anticipation of other influences. shortages in December. Another selling month that increased Last year the consumer-spending pattern in the District, as in importance was July, for the stock level was higher in pro in the nation, was distorted by two factors. The slump in buy portion to sales then. ing following V-E Day made the proportionate sales during Because of such departures from normal conditions sea summer months abnormally low. Furthermore, in the upward sonally adjusted indexes of department store sales based on trend of increased intensity of buying that was a general fea the prewar buying pattern do not give a satisfactory picture ture of the war years, sales were concentrated even more of wartime retail buying. Complete revision has been made, heavily in the latter part of the year than they would have therefore, in the seasonal adjustment factors for the District been if 1945 had been a normal year. index and the 13 individual city indexes. For the most part seasonal variations are caused by weather, A s soon as stocks o f merchandise are in adequate supply style, and custom. Customers tend to buy clothing and other consumers probably w ill revert to their prewar buying habits, goods in anticipation of changes in seasons. Style conscious ness makes this seasonal variation more pronounced. Septem and new seasonal adjustments in the index w ill then be neces ber sales are affected by the customary opening of school and sary. These adjustments w ill be announced in the Review as T homas R. A tkinson college, while gift occasion sales, especially those fostered by they are made,. the Christmas-gift custom, are one of the heaviest causes of This is the third in a series of articles describing the indicators of District business activity carried regularly in the Review. seasonal variations. C onsumer buying habits have been the subject of wide M o n t h l y o f R e v ie w B a n k th e F e d e ra l R e se rve B an k A n n o u n c e m e n ts o f A t la n t a fo r S e p te m b e r 1 9 4 6 99 ____________ S i » t h D i s t r i c t S t a t i s t i c s _______________ IN STA LM EN T C A S H LO A N S Volum e O utstandings T. B r o w n , of Jackson, Mississippi, has been appointed No. of Percent Change Percent C hang e • by the Board of Directors of the Federal Reserve Bank Stores Lender Report August 1946 from August 1946 from of Atlanta to fill the unexpired one-year term of the late ing August August July July Robert Strickland as representative of the Sixth Federal Re 1945 1946 1945 1946 serve District. Mr. Brown is president of the Capital National Federal credit unions......... + 25 + 72 + 60 43 + 6 State credit unions............. + 26 + 166 + 6 + 39 21 Bank, a prominent attorney, and Hinds County representative Industrial banking in the state legislature. com panies.......................... + 132 10 + 79 + 2 + 3 Industrial loan companies. 19 + 47 + 4 + 34 + 3 Two new banks were admitted to membership in the Federal — 1 Small loan com panies........ 48 + 69 + 58 + 2 + 162 34 + 169 Commercial b an k s............... + 12 + 8 Reserve System in September. The Citizens Bank of Stuart, Stuart, Florida, which was admitted on September 3, has capi R E T A IL FU R N IT U R E S T O R E O P ER A T IO N S tal stock of $30,000, reserves of $10,000, surplus of $82,700, Number Percent C hang e of A ugust 1946 from and undivided profits and deposits of $2,945,000. James H. Item Stores Reardon is president, D. S. Hudson executive vice president, A ugust 1945 Reporting July 1946 Mrs. Ruth B. Stevenson cashier and secretary, and Mrs. Carrie + 14 + 73 103 + 95 Cash sa le s......................................... 95 + 18 Bell Law assistant cashier. + 68 Instalment and other credit sa le s.. 95 + 14 + 32 102 + 3 The Farmers and Merchants Bank, “Inc.”, Brewton, Ala Accounts receivable, end of month Collections during m onth............. 102 + 48 + 6 bama, entered the system on September 16 with capital stock + 41 Inventories, end of m onth............. 81 + 8 of $50,000; surplus, reserves, and undivided profits of $63,D EPARTM EN T S T O R E S A L E S AND S T O C K S 700; and deposits of $2,092,000. The officers are A. W. AdIN V E N T O R IE S SA LES kisson, president; John R. Downs, cashier; and R. J. Murphy Percent C hang e Percent Change No. of No. of and Mrs. W. S. West, assistant cashiers. Place Aug. 1946 from Stores Hug. 31, 1946, from Stores Four nonmember banks have been added to the Federal Report Report Ju ly 31 A u g . 31 Aug. July ing ing 1946 1945 1946 1945 Reserve Par List. The Spring Hill branch of the Farmers and Merchants Bank, Mt. Pleasant, Tennessee, began remitting at ALABAMA B irm ingham .. . . 4 + 30 5 + 25 + 3 + 45 par on August 22. It has capital of $50,000, surplus and un M obile............... 5 + 24 + 11 M ontgom ery---+ ‘39 + ‘39 '3 + 23 3 + 35 divided profits of $14,000, and deposits of $1,200,000. C. A. FLORIDA lacksonville---+ 35 3 4 + 35 /+ 4 + 15 Brownlow is chairman, and C. A. Whelchel president. H. N. + 52 4 3 + 47 + 12 + 11 Harrison and C. Y. Clarke are vice presidents, and A. E. O rlando............. 3 + 20 + 58 + ''6 + ’i8 3 5 + io + 48 Smith is cashier. GEORGIA + 46 A tlanta............... + 38 5 + 40 6 + 1 The Tropical State Bank, Sebring, Florida, began remitting A ugusta............. + 28 — 15 + 27 4 + 49 3 at par on September 1. It has capital stock of $25,000, surplus Colum bus......... + 16 3 + 31 M acon............... + 57 4 + 23 ”4 + *io + 42 of $80,000, undivided profits of $19,570, reserves of $9,649, LOUISIANA Baton Rouge. .. 4 + 23 4 + 21 + 7 and deposits of $3,834,187. The officers are E. D. Treadwell, + 14 + 113 New Orleans. .. 5 ,+ 28 4 + 19 + 16 president; R. 0 . Turner, executive vice president; B. F. W il MISSISSIPPI Jackson............. + 28 4 + 30 4 + 31 + 7 liams, vice president; C. L. Longbottom, vice president and TENNESSEE + 16 3 + 43 3 Bristol............... cashier; E. O. McAlister and Nandenton Ummethun, assistant + 42 + 1 — 3 C h attan o o g a... + 80 4 3 + 18 + 47 cashiers. The newly organized East Point Commercial Bank, Knoxville......... + 25 4 + 18 + 4 + ’36 N ashville........... 6 + 27 + 53 5 East Point, Georgia, began remitting at par on September 3. + 32 + 32 22 18 OTHER CITIES*.. + 12 + 7 H. W. Nix is president, L. W. Marshall vice president, and + 23 + 38 94 73 + 45 DISTRICT............. + 6 William R. Bowdoin vice president and cashier. * W hen fewer tham 3 stores; report irl a given city, the !sales or sJlocks are grouped togethe r under “ other citi<5S." The West Georgia Bank and Trust Company, Carrollton, also a newly organized bank, began remitting at par on Sep W H O L E S A L E S A L E S AND IN V EN TO R IES* tember 16. It has a capital of $100,000 and a paid-in surplus IN V E N T O R IE S SA LES of $50,000. B. F. Boykin is chairman, M. C. Roop president, Percent C hange No. of Percent C hang e No. of A u g. 1946 from P. J. Lawler vice president, and C. P. Cobb cashier. Items Aug. 1946 from Firm s Firm s J Report ing R e v is io n o f D e p a r tm o f I n d e x e n t S to r e S a le s Because im r-tim e c o n d itio n s c re a te d changes in the sea so n a l p a tte rn o f d e p a rtm e n t sto re sa le s , it has been n ecessary to revise th e sea so n a l a d ju stm e n t fa c to rs fo r th e d e p a rtm e n t sto re sa les in d e x e s . A c o p y o f th e re v is e d in dexes fo r th e D is tr ic t a n d its citie s m a y be o b ta in e d fr o m the R esea rch D e p a rtm e n t o f th is b a n k . Automotive supplies. S hoes............................ Drugs and su n d rie s.. Dry g o o d s................... Electrical g o o d s....... Fresh fruits and v eg etab les............. Confectionery........... Groceries Full lin e s................. Specialty lin e s....... B eer.............................. G eneral h ard w are.. . Industrial s u p p lie s ... Lumber and building m aterials................. Machinery, equip. and su p p lies......... Tobacco p ro d u c ts... M iscellaneous........... July 1946 Aug. 1945 7 3 8 8 6 + 22 + 179 + 6 + 19 + + + + + 4 6 + 12 — 6 — 7 + 44 + 8 + 12 + 4 70 86 12 45 129 38 8 3 13 3 + 28 — 0 + 5 + + — + + 4 — 9 + 14 3 8 17 139 + — + + 34 8 7 7 Report in g 30 19 17 47 16 A ug. 1945 5 — 2 + 44 *4 — 0 + 21 + i07 + 92 18 6 3 6 + 11 + 7 — 14 + 8 + + + + '4 — + 2 4 + 64 + 4 + 49 + 36 * Based on U. S. Department of Commerce figures. 17 67 + 1 5 59 34 26 33 + 32 + 28 + 50 100 M o n t h l y R e v ie w D is tr ic t o f th e F e d e ra l R e se rve B u s in e s s in most business fields in the District pointed to . continued gains during September. Department store trade seemed to be well on its way to a new high in the value of goods sold for the month. Business and agricultural loans have increased to a level more than half again as high as that attained in September 1945, adding their weight to the pressure toward greater inflation. Particularly is this added weight true in the case of agriculture, where activity in farm real estate has shown no signs of slowing down and in some sections had passed the 1920 inflationary levels as far back as March of this year. A decline in bank holdings of Gov ernment securities, however, has somewhat offset the force of these inflationary pressures. A c t iv it ie s Trade Department store sales continued to register increases, with the August seasonally adjusted index at 365. If September sales for all reporting department stores continue as they did during the first two weeks in September at weekly reporting stores, the adjusted index for September will be in the neigh borhood of 380, establishing a new record. In July the sea sonally adjusted index was 343, and in August 1945 it was 277. The highest rate of increase in August sales over those of a year previous was reported by Orlando’s department stores, where the increase was 58 percent compared with 38 percent for the District. Other cities showing increases above the District average were Nashville, 53; Tampa and Augusta, each 48; Miami and Chattanooga, each 47; Birmingham, 45; Bristol, 43; Macon, 42; and Atlanta, 40. Although increases in sales in District cities have been high in recent months, these increases have been exceeded by those in other Districts. For the four weeks ending September 8, sales increased over the same period in 1945 by 38 per cent at District weekly reporting stores. For the United States the increase was 43 percent. The District’s increase was ex ceeded in seven out of the other 11 Districts and equalled by two. These Districts were to some extent those where sales during the war did not expand as much as in this and other regions. Because of the wide variety of goods sold in department stores, an analysis of the relative changes in sales of the various types of goods sold indicates changes that are taking place in retail trade generally. Sales in the main store of a group of District department stores reporting their sales and stocks by departments were 28 percent larger during the first seven months of 1946 than during the first seven months of 1945. Sales increased in all departments except two— musical instruments and art needlework. Such spectacular sales in creases as 1,162 percent in cameras and 1,723 percent in mechanical refrigerators were offset by moderate increases in other lines. Often, however, those lines showing the greatest percent increases were not those that made the greatest contribu tion to the increased total of dollar volume. Sales of men’s clothing, furnishings, and shoes increased 48 percent, com pared with an 18 percent increase of women’s and misses’ items, but the former accounted for only 11 percent of the total dollar increase in sales, compared with 30 percent ac counted for by the latter. H i g h e r s a le s o f h o m e f u r n is h in g s m a d e u p 3 7 p e rc e n t o f th e B a n k o f A t la n t a fo r S e p te m b e r 1946 C o n d itio n s total increase. This increase was widely distributed among the many items required in the setting up and maintaining of a household and partly reflects the resumption of housekeeping by those who were prevented from doing so by wartime con ditions. With the exception of sales of housewares that con stituted about one fifth of the total increase of sales of home furnishings, no single line showed particular concentration. Combined sales of such items as mechanical refrigerators, other types of household appliances, and radios, whose per centage increase in sales have been spectacular, explain only 16 percent of the total dollar increase in sales of home fur nishings. A large part of the increase came from purchases of nondurable goods such as linens, blankets, draperies, and floor coverings. These figures help explain how the necessary goods could be provided for the recent expanded retail buying in the face of widely heralded reconversion difficulties. These recon version difficulties have been confined to a great extent to industries producing durable goods. Nondurable production has expanded in most lines, and the sale of these goods ac counts largely for the recent rapid expansion in buying. If more of the durable goods such as household appliances had been available, the increase in total sales might have been even larger than it was. There is the possibility, however, that an increase in this type of sales might have limited ex pansion of buying in other lines. The extent to which the present high level of consumer buying is supporting present levels of production and employ ment, especially in the nondurable-goods industries, is indi cated by the increased amounts of merchandise that have been received by Sixth District department stores during the first seven months of 1946. During this period all department stores in the District received goods estimated to have a retail value of 296 million dollars. This represents an in crease of 74 million dollars or one-third more than was re ceived during the same period in 1945. During the same interval total department store sales are estimated to have increased 25 percent, with the result that the building up of stocks exceeded the increase in sales. The demand for mer chandise by the department stores themselves has, therefore, been greater than the demand for merchandise by the cus tomers of those stores. Stores customarily receive more goods during the first seven or eight months of each year than are sold during that period, with the value of sales exceeding receipts of goods during the remainder of the year. In the first seven months of 1945 merchandise received had a value of 8 percent greater than the value of the goods sold. In the corresponding months of 1946 goods received had a value 15 percent greater than that of goods sold. Part of the increase in goods received may be the result of efforts of the stores to restore sales-stock ratios to their prewar relationships. Anticipation of a high level of sales in the fall and winter months may be also indicated by the continued high level of merchandise received. In August merchandise received was 1.1 times the value of the sales of that month compared with a ratio of 98 percent for August 1945. Outstanding orders at a selected group of de partment stores were reported to be 25 percent higher than they were a year previously. M o n t h l y R e v ie w o f th e F e d e ra l R e se rve B a n k o f A t la n t a The release of the Department of Commerce estimates of income payments by states for 1945 makes possible a more careful analysis of the changes that occurred in the District’s income during the war years and that provided the basis for the accumulation of liquid assets and the expansion of retail buying. The expansion in income is not especially significant, since it was going on throughout the country. It is significant, however, that the District’s income position increased rela tive to that of the United States. Understanding the causes for this improvement may help in determining how permanent it will be. I ncome P ayments to I ndividuals Six th D istrict S tates Total Income Payments ( Millions of Dollars) Alabama Florida Georgia Louisiana Mississippi Tennessee Six States Continental U. S. 1929 1940 1941 1942 1943 1944 1945 802 763 1,037 1,419 1,743 1,902 1,980 695 900 1,062 1,464 2,082 2,283 2,387 956 986 1,241 1,632 2,110 2,336 2,369 862 847 1,066 1,400 1,846 1,967 1,931 544 444 630 881 1,079 1,147 1,159 905 927 1,221 1,508 1,951 2,202 2,353 4,764 4,867 6,257 8,304 10,811 11,837 12,179 82,617 75,852 92,269 115,301 139,285 149,660 152,704 Percent Change in Total Income Payments 1941 + 36 Alabama + 18 Florida + 26 Georgia 26 Louisiana + 42 Mississippi + 32 Tennessee + 29 Six States 22 Continental U.S. 1940 to 1942 + 86 + 63 + 66 + 65 + 98 + 63 + 71 + 52 1943 1944 1945 + 128 + 149 + 160 + 131 + 154 + 165 + 114 + 137 + 140 + 118 + 132 + 128 + 143 + 158 + 161 + 110 + 138 + 154 + 122 + 143 + 150 + 84 + 97 + 101 1943 to 1944 + 9 + 10 + 11 + 7 + 6 + 13 + 9 + 7 1944 to 1945 + 4 + 5 + 1 — 2 + 1 + 7 + 3 + 2 1944 677 950 730 788 541 768 745 1,133 1945 700 996 745 785 556 813 769 1,150 Per Capita Income Payments (Dollars ) 1929 305 Alabama 484 Florida 329 Georgia 415 Louisiana 273 Mississippi 349 Tennessee 349 Six States Continental U.S. 680 1940 1941 268 359 471 531 315 389 357 433 202 283 317 413 316 398 575 693 1942 1943 482 602 684 879 507 654 549 722 396 483 659 513 518 666 862 1,040 Per Capita Income Payments Percent of National Per Capita Income Alabama Florida Georgia Louisiana Mississippi Tennessee Six States Continental U. S. 1929 1940 1941 1942 1943 1944 1945 61 56 58 60 47 52 45 79 85 84 87 82 77 71 64 65 59 63 55 56 48 70 64 69 62 62 68 61 4S 48 35 41 46 46 40 60 63 68 71 55 60 51 67 64 66 55 60 57 51 100 100 100 100 100 100 100 Source: U. S.Department of Commerce fo r S e p te m b e r 1 94 6 101 The total of income payments to individuals, according to the Department of Commerce, is a measure of the income received by the residents of each state. It covers wages and salaries, proprietors’ income, property income, and other types of income. These payments in 1945 amounted to 12.2 billion dollars in the six states of the District. Measured on a per capita basis the payments were $769 for the Six States in 1945 compared with $316 in 1940. The degree of improve ment varied from state to state as indicated on the table given on this page. In each state, however, the percent increase in income payments was much higher than for the United States as a whole. Income payments for the United States doubled between 1940 and 1945 while District income payments were two and a half times as large. Since the income payments are measured in dollars, the increasing price level has had something to do with the gen eral expansion in income. That increase, however, did not apply any more to the District than to the nation as a whole except that the rise in agricultural prices was an important contribution to the Sixth District expansion. Part of the expansion during the war years was the result of a continua tion of a trend already apparent before the war began. Total income payments in the District in 1940 were higher than in 1929 by 2.2 percent, in contrast with the decline in total United States income payments of 10.8 percent. The growth of manufacturing in the region was the prin cipal factor explaining this increase from 1929 to 1940. It continued during the war years. Because pay rolls in war manufacturing industries in the District in the last quarter of 1945 were estimated to make up only 4.9 percent of total income payments in contrast with 9.7 percent for the United States, the expansion may be relatively permanent. Another reason for the increase in District payments was the greaterthan-national increase in military payments. In the last quar ter of 1945 military payments in the Sixth District states, in cluding pay to military personnel, mustering-out payments, and family allowances and allotments, were 16.3 percent bf total income payments, contrasted with 9.7 percent for the United States as a whole. A continuation of this advance in relative income position depends greatly on how well the national economy maintains full production. Expanding or full employment in the District will do much to replace the amounts that will be lost from a decrease in military payments. An expanding economy is also favorable to agriculture since farm prices are particularly sensitive to depressed business conditions. Despite the in creased importance of manufacturing, agricultural income looms large in the total of the District’s income payments. Finance Federal financing has ceased to be an important factor in the expansion of bank deposits and currency. The retirement of debt chiefly through the reduction of the Treasury’s cash bal ance has changed the trend of the continuous wartime increase in total bank deposits. The Treasury’s retirement of two bil lions dollars in certificates maturing September 1, part of which were owned by the banks, and the promised reduction planned for October are being reflected in member-bank state ments. Sixth District weekly reporting member-bank statements reflected these changes during August and the first part of September. Treasury-certificate holdings declined to 374 mil- 1 0 2 M o n t h l y o f R e v ie w th e F e d e ra l R e s e rve S ix t h D is t r ic t S t a t is t ic s CONDITION OF 20 MEMBER BANKS IN SELECTED CITIES (In Thousands o! Dollars) Percent Change Sept. 18 Aug. 21 Sept. 19 Sept. 18,1946,from Item 1946 1945 Aug. 21 Sept. 19 1946 1945 1946 Loans and investments— 4- 3 Total.......................... 2,049,421 2,073,645 1,981,920 — 1 Loans—total................... 508,262 507,593 331,852 ;+ 0 i+ 53 Commercial, industrial, + 53 and agricultural loans.. 270,642 259,431 176,606 + 4 Loans to brokers and dealers in securities... 9,705 — 14 — 8 8,961 10,383 Other loans for pur chasing and carrying + 69 securities............... ... 92,875 106,265 54,882 — 13 Real estate loans........... 37,935 36,124 24,191 + 5 + 57 3,172 Loans to banks.............. 3,511 1,763 + 11 .+ 99 94,338 92,218 64,705 •+ 2 .4- 46 Other loans.................. Investments—total........... 1,541,159 1,566,052 1,650,068 — 2 —.7 U. S. direct obligations... 1,382,179 1,404,339 1,505,488 — 2 — 8 Obligations guaranteed by U. S.................... 1,659 1,660 1,638 + o *+ 1 Other securities........... 157,320 160,054 142,942 — 2 + 10 Reserve with F. R. Bank... 359,781 372,527 363,772 — 3 — 1 Cash in vault............ ..... 30,702 30,249 30,140 + 1 + 2 Balances with domestic banks......................... 162,527 149,068 139,937 4- 9 Demand deposits adjusted. 1,408,518 1,394,539 1,280,419 4- 1 + !2 Time deposits.................. 453,760 453,573 403,290 + o + +2 13 2 U. S. Gov't deposits.......... 153,964 191,656 199,630 — 20 — — 11 Deposits o! domestic banks. 458,493 458,200 516,896 j+ 0 — 62 Borrowings..................... 1,500 3,800 4,000 — 61 Place DEBITS TO INDIVIDUAL BANE ACCOUNTS (In Thousands ol Dollars) Percent Change No. of Aug. Aug. 1946 from Banks Aug. Report 1946 1945 Aug. ing 1945 Isis ALABAMA Anniston........ Birmingham... Dothan.......... Gadsden....... Mobile.......... Montgomery... FLORIDA Jacksonville... Miami........... Greater Miami* Orlando........ Pensacola..... St. Petersburg. Tampa........... GEORGIA Albany.......... Atlanta.......... Augusta........ Brunswick..... Columbus..... Elberton........ Gainesville*... Griffin*.......... Macon........... Newnan........ Rome*........... Savannah....... Valdosta....... LOUISIANA Baton Rouge... Lake Charles.. New Orleans.. MISSISSIPPI Hattiesburg__ Jackson......... Meridian....... Vicksburg..... TENNESSEE Chattanooga... Knoxville....... Nashville....... SIXTH DISTRICT 32 Cities........ UNITED STATES 334 Cities....... 3 6 2 3 4 3 20,684 252,338 9,533 13,890 93,603 59,499 19,386 242,185 8,562 14,224 96,326 53,385 17,377 4* 7 + 5? 178,791 '+ + 51 7,108 4- 11 •+ 24 10,398 — 2 i+ 10 104,413 — 3 — 32 38,276 4- 11 -J- 55 3 7 11 2 3 3 3 213,253 169,718 230,155 39,490 29,056 38,343 86,779 200,859 178,551 246,225 41,685 28,435 40,879 87,126 168,849 123,889 164,066 26,089 28,948 24,575 69,705 — — — + — — 2 4 3 2 4 2 3 2 3 2 3 4 2 11,900 657,587 44,584 8,117 48,759 3,137 11,442 9,294 49,638 8,010 17,203 74,210 23,925 11,882 633,898 55,011 8,584 46,615 2,752 10,679 8,212 51,381 8,981 16,835 74,275 14,027 8,781 472,354 32,357 11,171 36,981 1,798 * * # * 44,401 5,669 * * 77,430 20,970 + o 4- 36 ,+ 4 + 39 — 19 4- 38 — 5 — 27 *+ 5 4- 32 4- 74 •+ 14 + 7 ** ** 4- 13 — 3 4- 12 — 11 4* 41 * * + 2 — 0 — 4 3 3 7 61,765 23,053 522,194 58,361 21,927 605,870 4- 71 40,005 4- 6 16,291 •+ 5 402,592 — 14 2 4 3 2 14,800 91,768 26,562 20,787 14,185 87,618 26,014 22,252 4 4 6 114,157 97,677 234,305 112,810 98,102 249,507 4+ + — 5 7 5 2 6 0 4 5 2 7 + 26 + 37 + 40 4- 51 4- 0 4* 56 4- 24 4444- 14 54 42 30 4444- 34 45 52 61 80,922 4- 1 4- 41 122,777 — 0 — 20 188,730 — 6 4- 24 108 3,163,121 3,215,655 2,466,200 — 2 4- 28 ... 82,728,000 91,416,000 73,208,000 — 10 + 13 * N o t in c lu d e d in S ix th D istr ic t tota l * * N o t a v a ila b le ______________________ FRASER Digitized for 11,051 63,098 17,525 12,879 4- 6 B a n k o f A t la n t a fo r S e p te m b e r 1 9 4 6 lion dollars on September 18, more than 5 percent below the level of four weeks previously. The holdings of Treasury bills also declined during the same period by 17 percent and in other Government-bond holdings by 2 percent. Although there was slight increase in the holdings of Treasury notes, total Government securities were 2 percent below what they were in the previous month. Government deposits at reporting member banks continued to decline all through August and September. On September 18 they were 20 percent lower than a month previously and 23 percent lower than a year ago. Demand deposits adjusted showed little change during the month. With the influence of Government financing removed as a factor in expanding the purchasing power, expansion is now chiefly dependent on other factors. Expansion in private credit such as bank loans, open accounts, consumer credit, and new capital issues is the determining factor governing the amount of deposits and currency. This expansion together with possibly a greater use of deposit and currency now in existence constitute the present chief financial pressures on the price level. Business and agricultural loans at weekly reporting mem ber banks in this District have shown only moderate increases from week to week, but the gradual increase had raised them on September 18 to a level 53 percent higher than they were a year ago. They have risen 9 percent since the first of the year. There has also been an increase of 57 percent in real estate loans although the amount of such loans does not con stitute a large part of the banks’ total loans. Other types in cluding consumer loans have remained relatively stable since the first of the year but were 46 percent higher in September 1946 than in the same month in 1945. The amount of this bank’s Federal Reserve notes in circulation has remained rela tively stable in recent months, and beginning with the week ending August 28 the total outstanding each week has been less than the total outstanding at the end of the corresponding weeks in 1945. Although the factors tending toward an expansion in de posits and currency have been moderate in recent months in the District, demand deposits other than those of the Federal Government appear to have been used to a greater degree than formerly. The index of the turnover of bank deposits is determined by dividing the volume of debits during the month by the average amount of deposits, converting this to a yearly basis and comparing it with the 1935-39 average. The index thus measures the average use of bank deposits. It has been rising since the first of the year, with the increase amounting to 11.3 percent. During the same period demand deposits adjusted rose 10.2 percent. The index of turnover of 68 in August is higher than at any time during 1945. With deposits so much greater than they were in 1935-39, the inflationary potential of these deposits is very great if they are used to the same degree as they were during the base period. C. T. T. Industry and Employment Industrial production, which showed marked gains in July in all six states of the District, continued to improve in August, according to preliminary estimates. In some cen ters activity was approaching wartime peaks. In both in dustry’s position at the end of the summer and its future pros pects, however, grounds for optimism were apparent. A l though no accurate count is available, reports show that in M o n t h l y R e v ie w o f th e F e d e ra l R e s e rve B a n k o f A t la n t a every state scores of new business enterprises, both industrial and commercial, were established during the year following V-J Day, and especially in 1946. More than 140 new manu facturing plants were reported for Alabama in the first half of 1946, and 130 new manufacturing concerns were an nounced for the Atlanta area alone in the first eight months. During August employment in the Sixth District reflected these various factors that were operating on both the na tional and district business scene. New peacetime records were set, and even the wartime peaks were approached, par ticularly in Georgia and Louisiana. Unemployment continued high, however, especially in Florida and Tennessee, where the influx of war workers had not been materially offset by their return to their home areas. Veterans constituted most of the male unemployed, but the re-entry of women into the labor market added to the total number in some cities. All indications were that the economy had passed safely over the hump of immediate postwar unemployment. The open ing of school would bring about withdrawals from the labor force of many teen-agers and veterans. Payments to veterans of unemployment compensation under the GI Bill of Rights were showing a tendency to decline. Except for a slight, 5 percent, recession during the mid dle of the month, blast furnaces and steel mills operated at capacity during most of August. Iron foundries in the northern Alabama-Tennessee area escaped a serious reduc tion in operations when the CPA changed its allocations of pig iron. Operations in machinery-manufacturing and nonferrous-metals plants showed little change during the month. Shipyard activity, one of the industries hardest hit at the war’s end, began to show a revival in August, with a promise of even greater activity. Limited construction of special merchant types, conversion of war-cargo vessels, repair ser vices, and shipbreaking accounted for this change. This last operation was part of a nation-wide program to reduce ob solescent ships in order to partially offset the serious short age developing in a scrap-hungry steel industry. Cotton-textile-mill activity, which had fallen off in June and July, recovered sharply in August. Cotton consumption and spindle hours were up 10 to 20 percent throughout Alabama, Georgia, and Tennessee. The garment and apparel industry experienced more modest gains. In the construction industries the full force of pent-up demand has not yet been unleashed to bring about the long promised employment upswing. Activity continued at high levels in most centers despite the builders’ misundering of Government policies, which they considered unduly restrictive, and their opposition to them. Lumber, nails, cast-iron soil pipe, plumbing fixtures, and vitreous ware were difficult to secure for some projects. In the lumber industry the labor shortage was less acute than formerly, but the poor quality of available labor and competition from agriculture were limiting factors. A l though the weather was more favorable for logging opera tions than it had been, critical shortages of trucks, tractors, sawbits, and parts slowed operations because of the neces sity for constant repairs. Shortage of available pine stump age was forcing some mills into hardwoods, and both farmers and pulpwood producers were reported to be switching from pulpwood to saw logs because of the greater return. Mining output and employment continued the improve ment shown in July. Employment in trade, transportation, f o r S e p te m b e r 1 946 1 0 3 S ix t h D is t r ic t In d e x e s DEPARTMENT STORE SALES* Adjusted*4 Unadjusted Aug. July Aug. Aug. July Aug. 1946 1946 1946 1945 1946 1945 DISTRICT............. Baton R ouge. . . Birmingham___ C h attan o o g a... Jackson............. Jacksonville---Knoxville........... Miami................. M ontgom ery... N ashville........... New O rleans. . . Tampa........... 365 412 363 370 397 360 444 361 356 381 358 456 301 433 343r 380r 378r 313r 376r 330r 426r 336r 320r 335r 333r 419r 286r 427r 277r 306r 307r 263r 280r 286r 343r 317r 261r 269r 275r 310r 243r 298r 321 404 327 325 353 331 391 332 296 255 319 410 262 376 275 304 318 269 312 264 364 276 250 238 270 335 229 354 244 299 277 231 249 263 302 292 217 180 245 279 212 260 DEPARTMENT STORE STOCKS Adjusted** Unadjusted Aug. July Aug. Aug. Aug. July 1946 1946 1945 1946 1946 1945 DISTRICT............. A tlanta............... Birmingham---M ontgom ery... N ashville......... New O rle a n s... 270 430 214 324 458 250 267 430 231 290 508 222 187 296 165 233 336 117 292 419 215 321 457 235 275 416 209 232 439 203 202 288 166 231 336 109 LUMBER PRODUCTION* Adjusted*'k Unadjusted June July June July July July 1946 1946 1945 1946 1945 1946 SIX STATES , , A labam a........... G eorgia............. Louisiana.......... M ississippi........ T ennessee........ 119 115 91 150 87 128 163 130 129 108 145 90 135 197 109 140 65 145 63 96 149 COTTON CONSUMPTION* Aug. Aug. July 1946 1946 1945 TOTAL................... A labam a........... G eorgia............. T ennessee........ 162 171 161 129 143 145 145 118 137 140 137 ...125 MANUFACTURING EMPLOYMENT*** June July July 1945 1946 1946 SIX STATES......... A labam a........... G eo rg ia............. Louisiana.......... M ississippi........ T ennessee........ 135 142 107 131 134 133 147 135 139r 112r 130r 134r 141 145r CONSUMERS4PRICE INDEX July June July 1946 1946 1945 ALL ITEMS... F ood........... C lo th in g ... R ent........... Fuel, elec., and i c e .. Home fur nishings. Misc........... Purchasing pow er of dollar___ 134 162 120 129 139 121 121 134 136 93 165 95 142 193 132 136 103 154 91 128 224 122 165 66 160 69 107 176 COAL PRODUCTION* Aug. Aug. July 1946 1946 1945 164 171 164 173 152 163 i49 i42 i27 GASOLINE TAX COLLECTIONS Aug. July Aug. 1946 1946 1945 152 157 134 145 139 144 193 158 172 140 158 151 174 169 115 119 97 112 110 126 140 ELECTRIC POWER PRODUCTION* July June July 1946 1946 1945 134 150 142 114 SIX STATES. Hydro generated. Fuel generated. 153 133 143 130 ANNUAL RATE OF TURNOVER OF DEMAND DEPOSITS Aug. July Aug. 1946 1946 1945 .73 .75 144 170 153 n.a. 137 150 153 115 113 112 154 132 .69 CRUDE PETROLEUM PRODUCTION IN COASTAL LOUISIANA AND MISSISSIPPI Aug. July Aug. 1946 1946 1945 Unadjusted.. 224 218 210 Adjusted**... 224 218 210 U n ad ju sted .. A djusted**... Index**......... 260 251 269 273 278 228 244 216 323 15.4 17.5 67.5 16.3 17.3 66.8 13.3 15.2 58.6 *Daily average basis **Adjusted for seasonal variation ***1939 monthly average—100; other indexes, 1935-39=100 r Revised n.a.Not available 1 0 4 M o n t h l y R e v ie w o f th e F e d e ra l R e s e rve government, and service fields showed slight increases in most areas reported on during the last month. The harvesting of early maturing crops such as tobacco and peanuts brought an upturn in agricultural employment. Indications are, however, that mechanization and other laborsaving practices encouraged by wartime labor shortages have wrought a permanent change in agricultural employ ment, which therefore cannot be expected to reach prewar levels. The food-processing industries began in August to bring about the seasonal upturn in employment in Louisiana and Georgia. This trend will continue and spread to other states, especially Florida, when the bumper citrus harvest begins this fall. Seasonal factors were also just beginning to bring about the usual upturn in the fertilizer and vege table-oil-processing industries. C. H. D. Cotton Decreased production prospects characterized the cotton crop during August for the District as well as for the cotton belt, with the 1946 crop estimate the smallest since 1921. Estimates on September 1 by the Crop Reporting Board of the Department of Agriculture for both the District and the nation were lower than those of August 1. The present crop will be about one-fourth smaller than the 1939-44 average. The only state in the District with good cotton prospects is Tennessee, which had a reported crop condition on Sep tember 1 of 80 percent of the long-time average. Reports of ginning show 124,948 bales ginned prior to September 1 in the District and 531,503 in the United States. Comparison of these figures with the 1935-44 ginning aver age shows the District lagging, with only half as many bales reported by September, 1 as in the five-year average, while the national output stayed substantially the same. Generally favorable weather in late August, with resulting good picking conditions, contributed to a high quality of samples from this year’s crop. Of the cotton ginned prior to September 1, the percentage of the amount classed as mid dling and above was 94.3 in Mississippi, 71.5 in Louisiana, 70 in Georgia, and 56 in Alabama. Average staple lengths of the 1946 crop were about 1/32" longer than those for the corresponding date last year. Cotton prices attained a new 26-year high on September 30, with an average quotation of 38.19 cents from the 10 spot markets. Cotton prices remained fairly steady around 36 cents from August 8 through the earlier days of Sep tember. Farm Real Estate The Southeastern states as a group led all other areas in the percentage increase in farm-land value per acre from the 1935-39 average to July 1946, according to the Bureau of Agricultural Economics. In the Sixth District, Tennessee, Georgia, and Mississippi had more than doubled their aver ages, while increases in Alabama, Louisiana, and Florida ranged from seven eighths to two thirds. The July 1 index (1912-14 = 100) of average value per acre of farm real estate also showed the Southeastern geo graphical division leading in increase. The East Central division, containing Tennessee, Alabama, and Mississippi, held the highest index in the nation, 218, 19 points over its 1920 peak. The South Atlantic division, containing Florida and Georgia, had an index of 197, only one point short of its 1920 high. The national index of 147 was 23 points, or 13.5 percent, short of its 1920 high. Activity in the farm real estate market was indicated by B a n k o f A t la n t a fo r S e p te m b e r 1946 the increase in the volume of voluntary sales of farm land in the United States for the 12-month period ending in March 1946. The estimated number of voluntary sales and trades was 54.9 per 1,000 of all farms, as compared to 51.5 for 1945, 55.9 for 1944, and 48.8 for 1919. Speculation was evidenced by the fact that about one seventh of all sales during the first quarter of 1946 were resales of tracts held two years or less. Many transfers were effected by full cash payments or large down payments. In spite of the large number of cash transactions, however, heavy debt existed on many newly acquired farms during the first quarter of 1946. Commer cial banks were especially active in extending farm credit, as indicated by their rise as sources of farm loans from 21 percent of the total in the first quarter of 1945 to 26 percent for the same period of 1946. One third of all credit-financed sales showed a remaining debt of three fourths of the buy ing price, with debt on many farms greater than the previous full value in 1941. Farm Product Prices Farm-product prices reached the highest point ever recorded on August 15. The farm price index (1909-14=100) for mid-August was 249, an increase of four points over the July index which equaled the highest index number pre viously recorded, in May 1920. Sixth District farmers were especially favored in the up ward trend of farm prices because two of their leading cash crops showed price increases well above the composite. The cotton and cottonseed price index on August 15 was 271, but only small amounts of cotton were being sold by farmers in the District at that time. Tobacco, with market ing fairly complete in the flue-cured belt of the District, brought a record high price with an index of 388. Meat animals and dairy products had indexes on August 15 of 294 and 257, respectively. Less favored products were fruits, at 203; poultry and eggs, 199; and commercial truck crops, 162. At the same time record high prices were set by commodi ties necessary to farm production, such as feed, fertilizer, and farm machinery. The mid-August index of 214 showed prices the farmers had to pay five points higher than those of July and 34 points above the July 1945 index. Farmers have operated on a favorable parity ratio since August 1941 by selling their products at prices relatively higher than they paid for commodities bought. The indexes for these two quantities were on par with each other at that time. On July 15 the parity ratio was 123, equal to the previously recorded high of September 1942. The August 15 index showed a one-point decline, due to a relatively greater increase in the prices farmers pay. Since 1914 farm ers have had a favorable price relationship on only two occasions, both of which were the results of war. The nature of farm price activities of the immediate future is problematical. Figures on post-World War I prices, how ever, show clearly the operation of an unfavorable parity ratio. Farm prices declined from a high of 244 in May 1920 to the lowest point of the decade, 113, in May 1921, whereas the annual index of prices paid by farmers declined only from 201 to 152 in approximately the same period. Though the latter was a decline of considerable proportions, it was not nearly as severe as that of the selling price of farm commodities. C. F. R., Jr.
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