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MONTHLY REVIEW TWELFTH FEDERAL RESERVE DISTRICT APRIL 1950 Fe d e r a l R e s e r v e B a n k of S a n Fr a n c i s c o CROP PLANTINGS AN D AGRICULTURAL PROSPECTS — TWELFTH DISTRICT United States agricultural production this year, according to early estimates, will not be too far below the 1949 output. Livestock production may be slightly higher than last year while crop production will be down some. The reduction in crops, however, will not be as great as the Government would like. Mounting surpluses have resulted in the imposition of acreage allotments on a greater number of commodities. All told, the Government has called for planting cuts totaling 30 million acres. At this early stage it appears that reductions in principal crops will amount to about 10}4 million acres. Cut-back acreages are being switched to other crops and some allot ments are being ignored. T o tal Acreage allotments and price supports More so than in any other recent year, the plans of District farmers are being influenced by Government pro grams. Five important District crops will be subject to acreage allotments this year and growers must comply with these allotments to be eligible for direct price sup port. Compared with acreages planted in 1949, the Gov ernment is asking for a cut of almost 1 million in Dis trict wheat acreage, nearly half a million in cotton acre age, and smaller cuts in dry bean, rice, and potato acre ages. Total cut-backs requested in these five crops for the District amount to 2% million acres — a staggering amount of land to find new use for. By states, the total acreage reductions requested are as follows: (in thousands of acres) Arizona . . . California . . Idaho .......... Nevada . . . . Oregon . . . . U t a h ............ W ashington Twelfth District 148 547 455 6 274 133 677 2,240 In addition to acreage allotments, reductions in the price support level for some commodities have necessi tated careful consideration of alternative crops or enter prises on the part of District farmers. Support for dry peas and turkeys has been withdrawn altogether, and sup port levels for butterfat, manufacturing milk, eggs, flax seed, and dry beans have been lowered from the 1949 level. Use of the modernized parity price formula, how ever, increases the actual support price for butterfat and manufacturing milk close to last year's support prices. For some of the other commodities for which support is non-mandatory— barley, oats, grain sorghums, and soy beans— price supports have not been announced as yet. Some support for these crops can be expected but prob ably at rates somewhat lower than last year. P r ic e S u p p o r t L e v e l fo r S e l e c t e d C o m m o d i t i e s (as percent of parity )1 1949 Butterfat ........................................................................................... 90 D ry b e a n s ........................................................................................... 80 D ry p e a s .................................................................................... ......... 60 E ggs ........................................................................................... .........90 Flaxseed .................................................................................... ......... 90 Manufacturing milk ............................................................ .........90 Turkeys .................................................................................... .........90 1950 79 75 0 75 60 79 0 1The modernized parity formula applicable to 1950 increases the parity prices of butterfat, dry beans, flaxseed, and manufacturing milk and lowers the parity price for eggs. Source : United States Department of Agriculture, Production and M arket ing Administration. District crop acreage little changed With acreage allotments and reduced price support in effect for several important crops, it was anticipated that much of the District’s diverted acreage would go into feed grain production. The raising of livestock feed is a logical alternative in view of the meat demands of a greatly expanded western population. This increasing demand for meat also prompted some persons to expect and many persons to hope that a portion of the released acreage would be converted to irrigated pastures for the produc tion of livestock. Such an alternative, of course, implies a fundamental, long-range change in farming practices with considerable capital investment. The March 1 Department of Agriculture estimate of prospective plantings clearly shows the effects of acreage allotments and reduced price supports on the pattern of District cropland. All the crops for which plantings were reduced are subject to either acreage allotments or re- Also in This Issue The Federal Fiscal Position Measurements of Construction Activity Changes in Banks and Branches— Twelfth District, 1948-49 50 FEDERAL RESERVE B A N K OF SAN FRANCISCO duced price support. The shift from these crops to the feed grains and to sugar beets— another Government subsi dized crop— was much as expected. It is also evident that little if any of the diverted acreages went into per manent pasture since the total District acreage in field crops is practically the same as last year. In spite of lower prices so far this year, District farmers have planted a slightly larger total acreage of spring vege tables than they did a year ago. Asparagus, carrots, onions, potatoes, tomatoes, and cantaloupes will be more plentiful the next few months, but somewhat smaller sup plies of cabbage, cauliflower, spinach, green beans, celery, peas, and watermelons will be available. Lettuce acreage is the same as a year ago, so market supplies of this vege table should be about the same as last year during the coming months. April 1950 CITRUS PRODUCTION-TWELFTH DISTRICT, 1948-49-1949*50 Thousands 1 A s of April 1. Source : California Crop and Livestock Reporting Service, California Fruit Report, April 1, 1950. I n d i c a t e d P l a n t i n g s o f F ie l d C r o p s a s o f M a r c h 1— T w e l f t h D is t r ic t /------- Percent change--------N 1950 (000 acres) Barley .......................................................... Beans, dry edible .................................. Corn ............................................................... Flaxseed ..................................................... H ay, all ..................................................... Oats ............................................................... Peas, dry field ......................................... Potatoes ..................................................... R i c e ................................................................. Sorghums ................................................... Sugar b e e t s ................................................. W heat, spring ......................................... W heat, winter ......................................... W heat, total .............................................. 3,604 478 212 91 6,578 1,615 242 366 241 214 344 1,467 5,022 6,489 T o t a l .......................................................... 20,474 1949-50 +14 — 12 — 4 — 64 + 4 + 8 — 24 + 3 — 19 +20 +40 — 6 — 11 — 10 — 1 1939-48 avg. -1950 + 27 — 8 — 12 — 54 + 3 + 6 — 42 + 4 +16 +11 +32 + 3 +19 +15 + 9 Source : United States Department of Agriculture, Bureau of Agricultural Economics, Crop Production, March 20, 1950. More citrus, less deciduous fruits The large, and in some cases record, District decidu ous fruit crops of last year are not likely to be repeated in 1950. As a rule, small crops follow large crops. In addi tion, freezing temperatures during January and early February, particularly in the Pacific Northwest, caused considerable damage to some soft fruits. As a result, the Northwest peach crop is expected to be extremely short with some reduction in the area’s apricot, sweet cherry, prune, and Bartlett pear crops. Most California fruits escaped damage ; apricots, however, were hard hit by the spring frosts. For the District as a whole, smaller supplies of apples, pears, peaches, and plums and prunes are anticipated with grape production close to last year’s level. Even though production may be moderately re duced, supplies of dried prunes and raisins will probably again be larger than will readily move into normal mar keting channels. In spite of rather severe frosts during January, District citrus production will be somewhat larger than the hardhit crop of last year. On January 1 of this year, the 194950 orange crop was estimated as 13 percent greater than the 1948-49 crop; the lemon crop, 21 percent greater; and grapefruit production, which suffered the most in last year’s freeze, was expected to be up 73 percent. The total effects of the winter freeze are still indefinite al though it now seems that fruit losses may be somewhat less than indicated earlier. The April 1 estimates of pro duction place the reduction in the District orange crop, mostly in valencias, at 9 percent, in grapefruit at 6 per cent, and in lemons at 4 percent. No damage to trees has been reported. Ranges and livestock better than a year ago After beginning the year in poor condition, most Dis trict ranges are now supplying average grazing. Low tem peratures in January and early February retarded feed growth, particularly in Oregon, Washington, and Cali fornia, and some supplemental feeding was necessary. Since then, however, favorable weather has permitted improved conditions. Pastures and ranges are in much better condition than last year, and should provide ade quate spring feed. Contrary to last year, District cattle and sheep have generally come through the winter in good shape. The cold weather in the Pacific Northwest worsened their condition some, but recoveries have been good. Again this year the District lamb crop will be smaller because of the continued decrease in breeding ewes. The early unfavorable weather handicapped development of early lambs in some areas, but good recoveries have been made. Both the California and Arizona crops have made very good growth and are already going to market in volume. In the Pacific Northwest, marketings may be later than usual, owing to somewhat unfavorable March weather. Considerably more better-grade beef will have to be imported into the District during the next few months than was the case last year. Though record numbers of cattle and calves were on feed in the rest of the United States at the beginning of the year, numbers on feed in the District were 21 percent less than last year. The strong demand for finished cattle, the diffculty of securing re placement stock, and a cautious attitude by both oper April 1950 M O N T H L Y REVIEW ators and bankers on livestock feeding contributed to the District’s reduced feeding operations. Cattle prices are likely to decline seasonally until early summer when mar ketings of fed cattle will taper off. Hogs from the 10 percent larger 1949 fall pig crop began to appear on the markets in March. For the next several months the supply of hogs is expected to be larger than last year, and prices will decline seasonally. Com pared with the previous year, the 1950 spring pig crop is expected to increase about 6 percent as against a 15 per cent increase in the 1949 spring crop. A smaller increase in the fall pig crop is also likely which could mean that 1950 will be the cyclical peak in pork production. Poultry and eggs plentiful Unfavorable egg— feed and chicken— feed price rela tionships are exerting strong influence on poultry opera tions for 1950. District poultrymen indicated on February 1 their intentions to purchase 12 percent fewer baby chicks than they did in 1949. With farm flocks larger than last year and egg prices down sharply, fewer replace ments will be purchased. The effect of this smaller num ber of chickens raised will be more noticeable upon egg supplies than on meat supplies. Marketings of birds from 51 laying flocks plus the large supply of frozen poultry will assure ample white meat supplies through most of 1950. Chicken prices will undoubtedly remain below their aver age 1949 level. Egg supplies are likely to continue large for some months. Laying flocks should remain larger than a year earlier at least past mid-year. Current trends indicate a continued high rate of lay, and a large accumulation of eggs in storage will supplement fresh supplies after mid year. The expected reduction in chickens raised could not affect size of laying flocks until fall. Egg prices will continue substantially lower than a year ago, even when they rise seasonally in late summer and fall. District turkey raisers intend at present to reduce the 1950 crop by 8 percent from the 1949 output in contrast to an increase in most other areas of the country. The recent withdrawal of price support, however, may cause some further reduction in the District crop. This does not necessarily mean that total supplies of this holiday bird will be less than last year. Lots of birds from last year’s large production went into cold storage. On January 1, the Pacific Coast states had twnce the turkeys in storage they had a year earlier. White meat should be plentiful the rest of the year and prices close to present levels. THE FEDERAL FISCAL POSITION n the first quarter of this year, the Federal Govern I ment received some $1.7 billion more from the public than it paid out, an excess of receipts little more than half as large as a year earlier. Cash payments to the public were larger than a year ago, in large part because of the veterans’ insurance dividend refund. At the same time, lower cash receipts reflected primarily disappointing in come tax collections. During this period, the amount of income taxes withheld by employers was about the same as in 1949, but other income tax collections were down 16 percent from the corresponding period a year ago. As a result, the Budget Bureau recently revised its January estimates of income tax yields for the fiscal year ending June 30, 1950. The estimate of receipts from the individ ual income tax was reduced to $17.7 from $18.7 billion and corporate income taxes were placed at $11 billion in stead of $11.2 billion. Lower revenues were expected by the Bureau to have little effect, however, upon the deficit for 1950, since funds are not being spent as rapidly as had been anticipated. In fact, the reduction in receipts is ex pected to be slightly more than offset by lower expendi tures. The 1950 budget deficit was estimated at $5.4 bil lion as against a January estimate of $5.5 billion. This presumably would indicate a corresponding change in the excess of cash payments to the public over receipts from the public, that is, in the cash deficit, from $4.9 to $4.8 billion. Larger deficits indicated for 795 7 Lower revenues are now expected for the year ending June 30, 1951 as well. Assuming no change in 1951 ex penditures as outlined in the Budget Message, the revised estimate of receipts made by the Budget Bureau results in a $6.2 billion budget deficit for fiscal 1951, as against the previous estimate of $5.1 billion. The cash deficit, es timated earlier at $2.7 billion, would now be placed at $3.8 billion. The staff of the Senate-House Committee on Internal Revenue Taxation takes a somewhat more pes simistic view of 1951 tax receipts than the Budget Bu reau. It arrives at a 1951 budget deficit of $7.3 billion, also assuming expenditures as outlined in the Budget Message. This would mean a cash deficit of $4.9 billion. The administrative budget and the consolidated cash budget While the administrative or “ regular” budget tends to be given prominence, the consolidated cash budget, in which cash receipts from and cash payments to the public are related, is more significant in considering the impact of Federal fiscal operations upon the economy. In such a consolidated statement, intragovernmental transactions between the Treasury and other Federal agencies and non-cash transactions with the public are eliminated, on the one hand, while cash receipts from and payments to the public outside the regular budget accounts are in cluded, on the other. For example, social security contri butions are not reflected in net budget receipts. Yet they involve transfers of cash from private to Government hands, just as do income tax receipts from the public, which are within the budget. Similarly, both social secu rity benefits paid and the recent veterans’ life insurance dividend are outside the regular budget. Yet again, they 52 FEDERAL RESERVE B A N K OF SAN FRANCISCO involve cash payments to the public by the Government, just as do Treasury settlements with the public for goods and services purchased by the Government for accounts within the budget. Social security receipts and payments have been the largest cash items that lie outside the conventional budg et figures. Since, so far at least, social security receipts have been substantially larger than payments, the cash deficit has generally been considerably smaller than the budget deficit— or the cash surplus larger than the budg et surplus. In fiscal 1949, a budget deficit of $1.8 billion was accompanied by a cash surplus of $1 billion. In fiscal 1950, the cash deficit will be close to the budget deficit, and then in 1951 will decline relative to the budget deficit, because of the non-recurring payment of the veterans' in surance dividend in 1950. Significance of the cash deficit or surplus It is the net cash position, not the budget surplus or deficit, that indicates the ability of the Government to re tire debt held by the public (including the banking sys tem) or the necessity for the Government to borrow from the public. A budget deficit might be entirely financed, for instance, out of the surplus receipts of Federal trust (including social security) accounts. These funds would be borrowed by the Treasury and the gross Federal debt would be increased accordingly, but the Federal debt held outside of the Federal Government would be unchanged in such a case. In fact, if the net non-budget cash receipts of the Government were larger than the budget deficit, the surplus would presumably be applied to the repayment of debt held by the public, as occurred in fiscal 1949. Cash deficit, calendar year 1950 Because of the concentration of income tax collections, especially from farmers and corporations, Federal cash receipts are largest in the January-March quarter. For the current fiscal year, the $1.7 billion excess of cash receipts in the first quarter of 1950 does not quite balance the ex cess of payments, $1.9 billion, during the second half of 1949. This leaves an indicated excess of cash payments to the public approaching $4.6 billion for the second quar ter of 1950, assuming a cash deficit for the entire 1950 fiscal year of $4.8 billion. Since the veterans’ insurance refund is concentrated in the first part of 1950 and since a considerable share of the fiscal 1951 deficit undoubtedly will develop during the six months from July to Decem ber 1950, we are likely to see a considerably greater ex cess of Federal cash payments over receipts for the calen dar year 1950 than for either fiscal 1950 or fiscal 1951 as a whole. This excess of Federal cash payments will have a most important— and expansionary— effect upon the liquid asset position of the public, including its hold ings of bank deposits and currency, in the next several months. Sources of funds to finance the deficit By the end of March, the cash balance of the Treasury had been built up— and private cash balances drawn April 1950 down— by tax collections. These funds are being and will be drawn upon by the Treasury to help finance the cash deficit in the second quarter. It will be necessary also to obtain new money by issuing additional Government se curities, over and above those necessary to refund matur ing issues. To the extent that such securities are sold to the banking system, the increase in bank credit is accom panied by an increase in bank deposits— new funds are credited to the Treasurer’s account. When these funds are paid out in due course by the Government, there is a corresponding increase in bank deposits and currency in private hands. To the extent that securities are sold to non-bank in vestors and the proceeds in turn paid out by the Govern ment, funds are transferred, in effect, from investors to recipients of Government payments and there is no in crease in the money supply. Even in such a case, how ever, the public’s liquid assets, other than money, are in creased. While an increase in liquid assets other than money is generally considered to be less inflationary than an equivalent increase in the money supply, nevertheless, increased liquid asset holdings of non-bank investors are themselves likely to exert an expansionary influence on the flow of expenditures and incomes in the economy. The Federal cash deficit in the second half of the cal endar year 1949 required the Treasury to borrow from the public. Funds were raised largely through the con tinuing sale of non-marketable Treasury savings notes to non-bank buyers. There was an offsetting shift at the same time, however, of outstanding Governments, pri marily short term, from non-bank investors to commer cial banks. In effect, then, funds to meet the $1.9 billion excess of payments over receipts in the second half of 1949 were supplied to the Treasury by the banking sys tem. During the first quarter of 1950, the excess of cash re ceipts over payments was used to build up the Treasury’s balance in its General Fund, in view of the cash deficits to come, and there was little change in the publicly-held Federal debt. New money borrowing through marketable issues was begun again by the Treasury on April 13, when $100 million more in Treasury bills were issued than were necessary to refund the maturing issue. A c cording to the Secretary of the Treasury, this procedure will be continued for the present, and it may be that other new financing, apart from the sale of savings bonds and savings notes, will not be necessary during this fiscal year. The savings bonds “ Independence Drive” will take place from May 15 to July 4. It remains to be seen what securities will be issued to meet the expected cash deficit after June. THE SA Y IN G S BONDS “ INDEPENDENCE DRIVE” The Treasury Department has announced a new savings bond drive, the “ Independence Drive,” which is to take place from May 15 to July 4. The national quota is $650 million, in Series E bonds. The last previous drive, the “Opportunity Drive,” took place last year at approximately the same time. April 1950 M O N T H L Y REVIEW 53 MEASUREMENTS OF CONSTRUCTION ACTIVITY A It takes time to build a house, a bank, or a bridge. It s soon as the war was over, many people began thinkl ing about building such things as factories, highmay be months, or even years, between a man’s first de ways, houses, dams, schools, churches, and bridges. cision to build a house or a business building and the Building materials gradually became available (but cost date it is finally put into use. The acquisition of the land, ly), and before many months had passed a large-scale the decisions as to the design, and the drawing of the building boom was underway. It is still going on at a plans are likely to consume a great deal of time before great rate. At least, so it appears. But just how does one any actual construction is started. In most urban com munities and in many rural places, the plans must be ap measure the level of building activity ? The level of construction activity and its changes from proved by the local authorities who, in turn, issue a one time-period to another are very important as a de building permit. A contract is then signed by the owner terminant of the over-all level of business activity and its and the contractor who receives the job of building the changes. Over the last 20 years, new construction ex house. If all goes well, the start of construction soon takes penditures have made up an average of 42 percent of place, and the work begins to be put in place. Eventually gross private domestic investment. The task of measur the building is completed and our man is at last ready to ing construction, however, is not an easy one. The news undergo the laborious process of moving in. Information is available on the five stages of construc papers are constantly reproducing figures obtained from one source or another, but the careful reader may find tion activity italicized above, and will be discussed in much to confuse him in the figures. One day he may read some detail in the following sections. In addition, data on page 1, “ Building permits fall sharply from last are available on construction employment, which also month.” Turning the page he may find, “ Housing starts throw light on the general condition of the construction rise 10 percent.” The following day he may discover on industry. Information regarding the related areas of con the back page, “ Construction activity highest on record,” struction costs, real estate prices, housing finance, and and if he lives east of the Rocky Mountains he may also housing supply is not treated in this article. find an item on the same page, “ Construction contracts Collection of construction data is also complicated by awarded show no change from last month.” He will note differences from area to area. Permits are not required that some figures refer to total private construction, in many rural areas and there are no local facilities for others to private residential construction, and still others collecting data on construction in these areas; yet some of to public or private nonresidential construction. He may these areas are within commuting distance from large also note that the time-periods involved may differ con cities and at the present time are engaging in a vast siderably from report to report. On the next few pages, amount of residential building. Most cities and many we shall attempt to explain briefly the meaning of these counties issue building permits and report them to the various measures of construction activity. Bureau of Labor Statistics, but a number of smaller ur ban places do not report. Since the degree of coverage Major problems involved in measuring varies from area to area, the combined data on the level construction activity of construction in the nation as a whole are likely to be The construction industry, unlike, say, the automo more reliable than data for states or counties. Figures on bile industry, is one whose end product is so varied that relative changes in the level of construction in states and many different categories must be set up and output counties from one period to another are likely to be more measured within each category. Houses are in one group, reliable than figures on the absolute level. Construction highways in another, factories in another, and so on. In activity tends to follow the same course in non-reporting addition, the very wide differences within these group as in reporting areas. Also, construction activity for which ings must be reckoned with. For example, a large apart data are not regularly available is usually a relatively ment house erected in San Francisco has little in com small part of the total. mon with a one-bedroom summer cottage in the High Sierras. Dollar terms are, therefore, the most practicable Building permits common denominator in which to express measures of Building permit data are collected by the Bureau of total construction activity. Some individual types of con Labor Statistics of the United States Department of La struction, of course, can be measured in physical terms. bor from the great majority of localities issuing them. Housing is the most important area for which more or These include about 2,500 urban areas,1 representing 85 less comparable data are readily available in terms of percent of the total urban population of the United States, number of dwelling units as well as value. This is of par and 2,600 rural areas throughout the nation. Information ticular interest at the present time when the number of is obtained from the permits on dollar authorizations of dwelling units has been increasing relative to dollar fig nonresidential and residential construction by type of ures because of the shift toward lower-cost houses. Even structure, and on the number of dwelling units authorhere, it is impossible to separate distinctly the effects upon dollar totals of (1 ) lower costs and (2 ) lesser qual 1 Urban areas are defined by the Bureau of the Census as all incorporated places of 2,500 population or more in 1940 and by special rule, a small ity. number of unincorporated civil divisions. 54 FEDERAL RESERVE B A N K OF SA N FRANCISCO ized. Data on Federally financed projects are compiled from reports obtained from other Federal agencies. While building permit data are basic to any assess ment of construction activity, their use is subject to sev eral limitations. First, they greatly understate the total level of building activity since many areas do not issue building permits. Farm areas, for example, are left out entirely. Second, they are a measure of intentions, not of work actually started, and they reveal nothing about the time schedule of construction work. There may be a long lag between the time the permit was issued and the start of construction, or the permit may lapse entirely. Third, the building permit generally understates the cost of the finished building, in recent years by as much as 25 per cent,1 and the degree of understatement is not neces sarily the same from area to area or from time to time. Finally, the task of compiling such a large number of re ports is a long one, and the figures are not released until about two months after the end of the month covered. This monthly building series covers authorized urban building only, and includes detailed national figures, less detailed regional data, and summary figures on residen tial and nonresidential authorizations for larger cities. About a month later, the Bureau issues a report on resi dential and nonresidential building authorized by civil divisions in each state, for both urban and rural nonfarm areas. These figures are merely listed, however, and are not compiled into totals for states or regions. For a few major areas in this District (the San Francisco Bay area, the Los Angeles Metropolitan area, and the Seattle area), the regional office of the Bureau of Labor Statis tics publishes advance reports on building permits, both urban and rural. The figures on building permits are a part of the report on housing starts (described below). Throughout the nation, many private agencies collect building permit data and issue reports on them. For the Twelfth District states, for example, The Tim berm an publishes in W estern B u ild in g monthly figures on the total number and value of permits issued in cities and counties of the eleven western states, British Columbia, and the Territory of Hawaii. The data are not broken down into type of construction. The Da ily Pacific Builder, published by the F. W . Dodge Corporation, gives total value figures for permits issued in the Twelfth District. Housing starts In order to provide a measure of residential construc tion actually begun in all nonfarm areas, the Bureau of Labor Statistics estimates monthly the number of per manent nonfarm dwelling units2 started. Building permit 1 Housing and H om e Finance Agency, Office of Housing Economics, Housing Statistics Handbook , 1948, p. 17. 2 The dwelling unit is defined by the Bureau of Labor Statistics as a per manent dwelling place containing permanent cooking facilities, i. e., the minimum built-in facilities essential to housekeeping. The dwelling-unit count represents the number of families planned for in the construction of new permanent housekeeping dwellings. Permanent prefabricated houses made of new materials are included. Temporary units and dwellings such as trailers, house-boats, and sheds are not included, nor are accommoda tions in transient hotels, dormitories, and clubhouses. (Buildings containing these accommodations are classified as nonhousekeeping residential.) L iv ing accommodations in nonresidential buildings are included only when the living unit is as important as the nonresidential part of the building. April 1950 data provide a starting point, supplemented by field sur veys and periodic on-the-spot checks in nonpermit-issuing areas and by actual counts of publicly-financed housing. Permit data are adjusted on the basis of periodic stud ies in sample localities of the time elapsed between issu ance of permit and start of construction, and also of the extent to which permits are not used. In 1948, only 1 percent of the permits issued were allowed to lapse, com pared with over 7 percent in 1945. Nearly 60 percent of the dwelling units are started in the month the permit was issued and 94 percent by the end of the second month. Every three months, results of field surveys of new home building in nonpermit-issuing areas in a sample of 96 rural counties become available. On the basis of this information plus an actual count of publicly-financed housing units, the total number of new nonfarm dwelling units started nationally is estimated. The sampling error is considered by the Bureau of Labor Statistics to be small.1 While the final estimates of housing starts are made quarterly, a preliminary monthly estimate of total non farm housing starts, based on permits issued by a signifi cant sample of permit-issuing cities and other areas, is available about the middle of the month following the month covered. The revision of this estimate has seldom reached 10 percent and usually amounts to less than 4 percent. Most of the revision is due to the estimates of starts in rural nonpermit-issuing areas, which generally are revised upward as the quarterly survey results are obtained.2 Because of sampling difficulties, these figures are avail able only for the nation as a whole and for certain major metropolitan areas where permit data are virtually com plete. In this District, data on dwelling units started in the San Francisco Bay area, the Los Angeles Metro politan area, and the Seattle area are prepared and re leased by the regional office of the Bureau of Labor Sta tistics, located in San Francisco. In addition to data on the num ber of dwelling units started in the nation, the Bureau prepares monthly fig ures on the estimated construction costs of these dwell ing units. Private construction costs are based on the value of building permits, adjusted for understatement of costs. Public construction costs are based on contract values or estimated construction costs for individual proj ects. For metropolitan areas, an “ average construction cost,” released in the monthly report on housing starts, covers only cost of labor, materials, and subcontracted work and that part of the builders’ overhead chargeable directly to the construction project. It excludes sales profits, selling cost, the cost of land and site improvexT o use the example given by the Bureau of Labor Statistics, if the esti mate were 50,000, the chances are about 19 out of 20 that an actual enu meration would produce a figure between 48,000 and 52,000. The urban estimate is the most reliable (sampling error, 1 percent), because of the nearly complete reporting; the rural permit-issuing segment is somewhat less so (1.6 percent) ; and the rural nonpermit-issuing segment is the least reliable (9.5 percent). 2 For a detailed description of the sampling and estimating procedure for both the preliminary and the revised estimate, see “ Estimating National Housing V olu m e,” Monthly Labor Review, October 1949, pp. 413-414. April 1950 R E S I D E N T I A L C O N S T R U C T I O N - U N I T E D S T A T E S , 1947-49 (in millions of dollars) started. 2 Value of new residential construction put in place. 3 Value of resi dential construction authorized in urban areas. 4 Number of new perma nent nonfarm dwelling units started. 5 Number of new dwelling- units au thorized in urban areas. ments, and such expenses as architectural and engineer ing fees. It is quite different, therefore, from permit valu ation or sales price. Construction contracts awarded Though the F. W . Dodge Corporation does not com pile figures on construction contracts for the Twelfth District states, no survey of available information on con struction activity would be complete without a brief de scription of their reports. The Corporation compiles monthly reports of data submitted by its field agents in the 37 states east of the Rocky Mountains on construction contracts awarded. The reports cover residential, nonresidential, public works, and utilities construction. The figures include new construction, additions, and alterations. They generally include force-account work, except when performed with mass-purchased materials not earmarked for specific projects at the time of purchase. Maintenance work and shipbuilding are not included. The Dodge Corporation does not adjust the data for undercoverage in the reporting states, and does not at tempt to estimate construction in the 11 western states not covered. The figures on nonresidential construction are generally believed to be based on a more complete coverage than the residential figures.1 McGraw-Hiirs E n gineering N e w s R ecord publishes weekly figures on engineering construction contracts, public and private, throughout the nation. The F. W . Dodge Corporation’s Da ily Pacific B u ild er lists contracts awarded in California but does not compile totals. The Southw est B u ild e r lists contracts awarded in western states. 1 H ousing and H om e Finance Agency, Housing Statistics Handbook, p. 18. 55 M O N T H L Y REVIEW Construction put in place The Department of Commerce and the Department of Labor jointly prepare estimates of the “ value of construc tion activity,” which is a measure of the value of con struction work put in place during a given period. The value of work put in place is generally defined by these agencies as equivalent to the cost of materials installed plus estimated expenditures for labor and overhead dur ing the period, though it is not calculated in this way. It covers both residential and nonresidential building, and is based on estimates of work started and contracts awarded. These estimates are translated into value of work put in place on the basis of average construction patterns. The estimates cover the building of all kinds of struc tures, such as buildings, bridges, dams, and the like. Other kinds of construction covered are the following: highways, air fields, railroad lines, electric power lines, telephone lines, petroleum pipe lines, fences, windmills, reservoirs, water and sewer systems, docks, flood walls, irrigation systems, and canals. Excluded from the estimates are certain operations that are integral parts of particular industries, such as oil-well drilling, mining operations (except for the con struction of buildings above ground), and such farm operations as terracing and irrigation and drainage ditches. Because of inadequate information, certain types of construction have had to be excluded. They are the following: tourist courts and cabins, dormitories (except those Federally financed), major additions, alterations, and conversions to private residential buildings, pri vately-owned sewer systems, some public- and privatelyowned toll roads and bridges, park and playground con struction and non-Federal conservation and development work in the years prior to 1946, and all the various types of construction undertaken by the Atomic Energy Com mission. V A L U E O F R E S ID E N T IA L A N D T O T A L C O N S T R U C T I O N T W E L F T H D IS T R IC T , Q U A R T E R L Y , 1947-49 (in millions of dollars) 1947 1948 1949 1 Value of total construction put in place. 2 Value of new residential con struction put in place. 3 Value of total construction authorized in urban areas. 4 Value of residential construction authorized in urban areas. N o te : Fourth quarter 1949 figures for construction put in place are as follow s: total, $782 million; residential, $355 million. 56 April 1950 FEDERAL RESERVE B A N K OF SAN FRANCISCO The value of work put in place includes the value of equipment which is an integral part of a structure, such as heating, plumbing, lighting equipment, and elevators. Furnishings and equipment relating to the purpose for which the building was constructed are not included. Ex cluded, therefore, are such items as telephone switch boards, hospital beds, manufacturing machinery, and office safes. The estimates of the value of private residential build ing put in place are based on the housing-start figures of the Bureau of Labor Statistics, described above. Private nonresidential construction estimates are derived from the F. W . Dodge Corporation figures on construction contracts awarded. These are adjusted to take account of the 11 western states not covered and for underreporting. Federal regulatory agencies, trade associations, and indi vidual companies report on privately-financed public util ity construction; the Department of Agriculture estimates farm construction ; and Federal construction agencies re port on Federal construction. Unlike the figures on housing starts, these figures can not be measured for reliability. However, it appears that at least for the year-to-year changes the direction and order of magnitude are approximately correct. The monthly figures are less reliable, since the data used in estimating them are less comprehensive. Most reliance can be placed in the figures for Federally-financed public construction, and, in general, for privately-financed pub lic utility construction. Least reliable are the figures on maintenance and repair and on farm construction.1 Expenditures on maintenance and repair, however, are very important components of total construction activity. Over the past 20 years, expenditures for maintenance and repair have accounted for one-third of total construction expenditures. The figures on construction put in place are available on an annual basis from 1915 to date, and by months from 1 Department of Commerce, Bureau of Foreign and Domestic Commerce, Construction Division, Construction and Construction Materials, Statistical Supplement, M ay 1949. For a special feature on Raps in construction ac tivity data, see that publication for December 1949. 1939. Total construction activity is shown broken down into private and public new construction, work relief, and maintenance and repair, and includes detailed classifica tions within these major categories. These data are also available adjusted for seasonal variation and for price changes. They are to be found in the publication C o n struction and Construction M aterials, published monthly by the Construction Division of the Bureau of Foreign and Domestic Commerce. It is released at the end of the month following the month covered. An advance report for the nation is released two to three weeks earlier. In addition, quarterly figures may be obtained by state from 1939. Completions There are no over-all data on the number or value of buildings or projects actually completed.1 For some areas, to be sure, data may be available that approximate the number of residential units completed, if public utility companies compile and release the number of new resi dential connections. These figures may understate the number of dwelling units completed in any area, however, since remodeling of existing structures into additional dwelling units may not be reflected in them. No value figures on completed new construction are available in any convenient form. Construction employment Among the other indicators of construction activity is construction employment. The Bureau of Labor Statis tics maintains a series on national employment in contract construction. Most states, in cooperation with the Bureau of Labor Statistics, issue figures on construction employ ment in their releases on nonagricultural employment. Some states— California, for example— issue separate re ports on construction employment, including a section on hours and earnings. In the Twelfth District, monthly figures are available for construction employment in all states except Idaho. 1 D ata on completions were available from the Bureau of Labor Statistics for 1946 and 1947, but the series was discontinued in 1948. CHANGES IN BANKS AN D BRANCHES— TWELFTH DISTRICT, 1948-49 h e substantial postw ar grow th in number o f banking offices continued in 1 949; residents o f the T w elfth percent o f all bank assets, w ere operating 1,296 branches, A total o f 1,819 banking offices (b o th unit and branch) District had 52 m ore offices in which to do their banking N umber or Branch B anks - T welfth D istrict T than they did in 1948 . A t the sam e tim e the num ber of banks declined b y o n e ; the increase in banking offices over the y e a r w a s m ade up entirely of a record increase in the num ber of branches. In 1949 , seven banks becam e branch banks fo r the first tim e and one branch bank w a s absorbed A f , 1 , 1 , b y another. A total of 53 m ore branches existed at the end r A r i z o n a ............................. California ........................ I d a h o ........................ of 1949 than a y e a r earlier. O f these, 42 w e re additional Oregon offices of p revio u sly e xistin g branch banks. B y w a y of com parison o ver the past decade, 64 branch banks, w ith Washington * 79 percent of total bank assets, w e re Operating 1,086 branch offices in 1940; in 1949, 89 branch banks, with 86 31.1948 and 1949 Number of branches December Banks operating Twelfth District ....... M em .ranCN onm em .A ' M em b errateNonmembei "1949e 1948 1^949e194? r m 9anki94? ^ m 9 nki948 2 2 3 3 35; 321 112 102 23 6 4 *. 9 51 1 Includes 9 Eleventh 22 18 18 6 2 i 3 8 \ 8 4 4 48 38 35 8873 48 II 8613 45 8i 120 113 1,213 i,i 67 45 5 44 3 \ \ 10 10 83 76 District branches of Twelfth District banks, IiS& dS 3 S t S & t e b ™ 2 T ches °£ Twdfth DUtrict banks' April 1950 T o t a l A s s e t s of M e m b e r a n d N o n m e m b e r B r a n c h T w elfth D is t r ic t , D e c e m b e r 31, 1948 and Member -branch banks1949 1948 319,086 : $ 324,098 ; 11,922,354 11,655,607 322,176 323,154 144,144 146,095 1,133,002 1,140,080 224,827 231,924 1,491,471 1,509,572 Banks NUMBER OF BANKING OFFICES—TW ELFTH DISTRICT, 1940-49 1949 (in thousands) Arizona California ., Idaho .......... Nevada Oregon — , U tah ............ W ashington Twelfth District . 57 M O N T H L Y REVIEW Nonmember -branch ban ks1948 1949 45,874 49,363 $ 799,636 813,077 25,742 18,507 9,811 10,496 29,123 33,975 7,100 6,860 206,363 216,353 Branch bank as percent of all bank f— assets— n 1949 1948 97.8 94.5 88.3 89.1 74.1 77.1 88.5 88.3 84.8 81.1 39.7 38.7 77.4 76.9 .$15,597,277 $15,290,313 $1,155,866 $1,116,414 85.9 84.7 were serving customers in 1949, compared with 1,647 in 1940. At the end of 1949, 523 banks were in existence in the Twelfth District, a decline of one from the previous year, and a decline of 44 from 1940. Twelve new banks were established in 1949 and 13 banks were consolidated or absorbed. Of the latter, 12 became branches of existing banks. Of the 12 new banks established, eight were in California, two in Oregon, and two in Washington; no new banks were established in the four intermountain states of the District. Of the new banks established dur ing the year, five are members of the Federal Reserve System. Seven member banks and six nonmembers dis appeared through absorption or consolidation in 1949. Two existing state banks were admitted to membership in 1949, one of the banks representing a consolidation with a member and a nonmember bank. One bank with drew from membership in order to establish a branch without meeting the System’s capital requirements. Assets of all active banks in the District have increased from $6.9 billion at the end of 1940 to $19.5 billion in N o t e : The number of branch banking offices includes head offices of branch banks. 1949. The 1949 figure is an increase of $141 million over 1948. In the years since the war, however, the increases in bank assets have levelled off after sharp gains every year from 1940 to 1945. Branch bank assets accounted for 85.9 percent of the total assets of all banks in the seven Twelfth District states in 1949, compared with 84.7 per cent in 1948. There are almost as many nonmember as member banks in the District, but, at the year-end, member banks operated 80 percent of all Twelfth District banking of fices and continued to hold about 90 percent of all bank assets. N u m b e r a n d T o t a l A s s e t s of a l l B a n k s — T w e l f t h D is t r ic t D ecember 31, 1948 and 1949 (assets in thousands) t------ — —A ll banks —................. — r-Num ber-^ ,-------------- A s s e ts --------------\ 1949 1948 1949 1948 Arizona 7 8 $ 381,930 $ 386,042 Calif orni: 213 210 14,110,860 14,285,575 Idaho . 47 452,536 43 459,555 Nevada 8 8 176,902 174,263 Oregon 72 72 1,384,993 1,433,227 Utah . . 599,422 55 55 601,653 2,229,502 125 2,208,566 124 Twelfth District . . . 523 524 $19,513,091 $19,371,955 1 Includes three out-of-state branches. --------- aMember banks /-Num ber-^ -A s s e t s 1949 1948 1949 1948 4 $ : 4 330,082 $ 324,763 119 115 13,024,266 12,862,9 36 25 27 389,590 398,098 6 6 162,121 160,265 32 29 1,251,691 1,305,187 31 31 507,837 503,030 53 53 1,863,279 1,852,516 267 268 $17,528,866 $17,406,795 .— -Nonmember banks— ^-Number-> -A s s e t s 1949 1948 1949 1948 3 4 $ 51,848 $ 61,279 94 95 1,261,309 1,247,924 18 20 62,946 61,457 2 2 14,781 13,998 43 40 133,302 128,040 24 24 93,816 96,412 72 71 366,223 356,050 256 256 $1,984,225 $1,965,160 Member bank as percent of all bank /'~assets-> 1949 1948 86.4 84.1 91.2 91.2 86.1 86.6 91.6 92.0 90.4 91.1 84.4 83.9 83.6 83.9 89.8 89.9 58 F E D E R A L R ESER VE B A N K OF S A N April 1950 F R A N C IS C O B U S IN E S S IN D E X E S — T W E L F T H D IS T R IC T 1 (1935-39 average = 100) Y ear an d m onth In d u stria l p ro d u c tio n (ph ysical v o lu m e )1 P etro le u m * Lu m ber C rude Refined C e m e n t Lead3 W heat C op p er3 flour3 T o ta l C ar C a li D ep’ t D ep’t m f’g fo rn ia loadin gs store store R etail stock s (n u m E le c tr ic e m p lo y fa cto ry sales food power m e n t 4 payrolls4 ber)* (value)a (value) * p rices3 148 77 46 62 67 83 106 113 88 110 120 142 141 137 136 109 130 141 144 138 129 83 78 76 77 92 94 105 110 99 98 102 110 125 137 144 139 147 149 147 127 90 84 81 81 91 98 105 103 103 103 110 116 135 151 160 148 159 162 167 110 74 48 54 70 68 117 112 92 114 124 164 194 160 128 131 165 193 211 202 171 104 75 75 79 89 100 118 96 97 112 113 118 104 93 81 73 98 107 103 160 75 33 26 36 57 98 135 88 122 144 163 188 192 171 137 109 163 153 140 106 101 89 88 95 94 96 99 96 107 103 103 104 115 119 132 128 133 116 104 83 82 73 73 79 85 96 105 102 112 122 136 167 214 231 219 219 256 284 303 1949 January_____________ February____________ M arch ______________ April________________ M a y _________________ June_________________ Ju ly........ ....................... August---------------------September__________ October_____________ November___________ Decem ber___________ 115 115 131 141 143 146 136 135 140 139 147 149r 151 152 153 152 149 148 146 144 144 141 140 140 174 170 176 169 170 174 162 165 166 158 161 156 176 173 195 212 215 219 217 209 208 200 200 196 112 107 120 124 126 118 98 93 84 77 89 105 108 129 169 167 159 138 131 121 136 136 145 140 128 118 102 82 100 104 108 109 108 104 101 89 1950 January_____________ February____________ J 36 1 ' ‘ 121r 131 140 139 161 157 178 179 123r 118 168 164 104 91 1 9 2 9 ................ 1931 — .......... 1932................. 1 9 3 3 -............... 1934................. 1935.................. 1936.................. 1937.................. 1 9 3 8 -............... 1939................. 1940................. 1941................. 1942............... .. 1943.................. 1944................. 1945................. 1946.................. 1947................. 1948............... .. 1 9 4 9 -............... ” 88 100 112 96 104 118 155 230 306 295 229 175 184 189 186 111 73 54 53 64 78 96 115 101 110 134 224 460 705 694 497 344 401 430 425 135 91 70 70 81 88 103 109 96 104 110 128 137 133 141 134 136 142 134 126 112 92 69 66 74 86 99 106 101 109 119 139 171 203 223 247 305 330 353 332 134 110 86 78 83 88 96 108 101 107 114 137 190 174 179 183 238 300 346 323 132 0 1 0 4 .0 8 9 .8 8 6 .8 9 3 .2 9 9 .6 1 0 0 .3 1 0 4 .5 9 9 .0 9 6 .9 9 7 .6 10 7 .9 13 0 .9 1 43.4 142.1 1 46.3 167.4 2 0 0 .3 216 1 2 0 9 .6 300 297 295 303 304 315 299 310 308 306 299 306 185 185 187 189 189 188 186 186 185 185 183 182 430 423 412 412 415 419 423 429 437 435 421 424r 105 103 118 126 134 139 120 138 138 124 129 128 342 314 329 335 340 335 329 333 326 337 319 339 321 327 342 331 320 313 302 309 333 330 331 315 2 1 7 .9 21 4 .1 2 1 3 .3 2 1 5 .6 2 1 1 .0 2 0 9 .9 2 0 6 .3 2 0 5 .7 2 0 7 .3 2 0 5 .5 2 0 5 .7 2 0 2 .5r 322 313 179 182 417 421 96 108 316 323 323 339 2 0 6 .4 2 0 4 .1 B A N K IN G A N D C R E D IT S T A T IS T IC S — T W E L F T H D IS T R IC T (amounts in millions of dollars) C o n d itio n ite m s o f all m e m b e r b a n k s 7 Year an d m o n th L o an s D em and U .S . an d G ov’t d eposits d isco u n ts secu rities a d ju s te d 3 1929 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 T o ta l t im e dep osits 2,239 1,898 1,570 1,486 1,469 1,537 1,682 1,871 1,869 1,967 2,130 2,451 2,170 2,106 2,254 2,663 4,068 5,358 6,032 5,925r 495 547 601 720 1,064 1,275 1,334 1,270 1,323 1,450 1,482 1,738 3,630 6,235 8,263 10,450 8,426 7,247 6,366 7,016r 1,234 984 840 951 1,201 1,389 1,791 1,740 1,781 1,983 2,390 2,893 4,356 5,998 6,950 8,203 8,821 8,922 8,655 8,536r 1,790 1,727 1,618 1,609 1,875 2,064 2,101 2,187 2,221 2,267 2,360 2,425 2,609 3,226 4,144 5,211 5,797 6,006 6,087 6,255r 1949 February March April M ay June July August September October November December 5,910 5,899 5,811 5,738 5,762 5,707 5,729 5,853 5,873r 5,919 5,925r 6,306 6,208 6,230 6,357 6,330 6,548 6,846 6,863 6,909r 6,944 7 ,0 16r 8,330 8,147 8,157 8,154 8,006 8,139 8,221 8,273 8,317r 8,511 8,536r 6,097 6,102 6,109 6,112 6,179 6,179 6,170 6,186 6,196r 6,157 6,255r 1950 January February March 5,901 5,893 5,946 7,123 6,999 6,923 8,620 8,311 8,167 6,244 6,262 6,303 B an k ra te s o n short-term b u sin ess loans* M e m b e r b a n k reserves an d related i t e m s 10 R eserve b an k c red it11 + — + + + 3.20 + + * 3 .2 7 ’ + 3.24 + 3.14 + + 3.16 + + 3.36 34 21 42 2 7 2 6 1 3 2 2 4 107 214 98 76 9 302 17 13 4 15 6 8 0 20 30 13 2 12 40 48 5 2 C o in an d C o m m e rcia l T reasu ry cu rren cy in o p era tio n s13 o p era tio n s12 c irc u la tio n 11 0 — 154 — 175 — 110 — 198 — 163 — 227 — 90 — 240 — 192 — 148 — 596 -1 ,9 8 0 - 3 ,7 5 1 - 3 ,5 3 4 - 3 ,7 4 3 -1 ,6 0 7 — 443 + 472 — 931 — — — — — — — + — + + — — " 7 34 127 202 53 213 194 41 95 21 32 92 34 223 23 154 234 150 257 219 454 157 276 245 420 hi,000 -2,826 -4,486 -4,483 -4,682 h i,329 630 482 + 378 + + + + + + + + + 19 6 109 94 5 130 40 37 92 2 30 5 7 204 R eserves B a n k d ebits index 31 c itie s3»13 (1935-39 « 100)* 6 48 + 30 + 18 4 + 14 + 38 + 3 20 + 31 + 96 + + 227 + 643 + 708 + 789 + 545 326 — 206 — 209 65 - 175 147 142 185 242 287 479 549 565 584 754 930 1,232 1,462 1,706 2,033 2,094 2,202 2,420 1,924 146 97 68 63 72 87 102 111 98 102 110 134 165 211 237 260 298 326 355 350 — — 4 31 11 37 0 16 1 9 7 16 8 2,308 2,299 2,264 2,128 2,063 1,997 1,832 1,837 1,831 1,854 1,924 344 364 354 345 351 344 332 336 351 349 376 62 10 16 1,892 1,848 1,842 354 360 373 + + — + + + — — + “ 1 All monthly indexes but wheat flour, petroleum, copper, lead, and retail food prices are adjusted for seasonal variation. Excepting for department store sta tistics, all indexes are based upon data from outside sources, as follows: Lumber, various lumber trade associations; Petroleum, Cement, Copper, and Lead, U .S. Bureau of Mines; W heat flour, U .S. Bureau of the Census; Electric power, Federal Power Commission; Manufacturing employment, U.S. Bureau of Labor Statistics and cooperating state agencies; Factory payrolls, California State Division of Labor Statistics and Research; Retail food prices, U .S. Bureau of Labor Statistics; and Carloadings, various railroads and railroad associations. 2 Daily average. 8 N ot adjusted for seasonal variation. * Excludes fish, fruit, and vegetable canning. Factory payrolls index covers wage earners only. 5 A t retail, end of month or year. 8 Los Angeles, San Francisco, and Seattle indexes combined. 7 Annual figures are as of end of year; monthly figures as of last Wednesday in month or, where applicable, as of call report date. 8 Demand deposits, excluding interbank and U.S. G ov’t deposits, less cash items in process of collection. M onthly data partly estimated. 9 New quarterly series beginning June 1948. Average rates on loans made in five major cities during the first 15 days of the month. 10 End of year and end of month figures. 11 Changes from end of previous month or year. iaMinus sign indicates flow of funds out of the District in the case of commercial operations, and excess of receipts over disbursements in the case of Treasury operations. 13 Debits to total deposit accounts, excluding inter bank deposits. p— preliminary. r— revised.
@FedFRASER