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R eview
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FEDERAL RESERVE B A N K OF S A N F R A N C IS C O
APRIL - M AY
1946
Review of Business Conditions— Twelfth District
District business activity during the first five
months of 1946 was marked by high levels of con
sumer spending, retail sales, construction activity, and
employment in peacetime pursuits, but also by materials
shortages, strikes, and substantial unemployment. The
situation was still unsatisfactory in important sectors of
the District economy, notably in mining and lumbering
and in certain phases of transportation.
w elfth
T
Production and labor problems
Labor-management difficulties have continued to play
an important part in limiting the total volume of indus
trial employment and production in the District. Strikes
in the steel and metal working industries had been settled
before the end of the first quarter, but work stoppages in
the redwood lumber and non-ferrous mining and smelt
ing industries continued to reduce output at a time of
critical demand for materials.
Production in steel and its allied industries recovered
sharply in March, following settlement of the steel strike,
and continued at a high level in April and May. Shipyard
and other industrial activity in the San Francisco Bay
area, largely suspended since last October by the machin
ists’ strike, also got under way again late in March, off
setting to some extent the declining activity in other ship
building centers of the Coast.
The important copper and lead mining industries of the
Intermountain area were crippled by strikes for several
months. The largest copper mine in the District, located
at Bingham, Utah, has been closed since late in January,
and some of the large Arizona mines, as well as important
smelting units, were also affected. Increases in ceiling
prices for copper and lead, of 2 ^ cents and 1% cents per
pound, respectively, together with the probable extension
of the premium price on non-ferrous metals for another
year beyond June 30, were expected to make possible an
early settlement of the mine and smelter strikes and to
permit the resumption of much needed production.
Shortages of materials and assembly parts, notably
steel sheets and electrical equipment, slowed down the
operations of numerous District industrial and fabricat
ing establishments. Widespread labor difficulties in the
East accentuated some of these shortages. The railroad
strike, with its attendant embargoes and restrictions on
shipments, as well as the threatened California cannery
strike, also caused delays and losses to producers of per
ishable foodstuffs.
In spite of rapid expansion in many kinds of building
construction and an active demand for materials, the
District lumber industry during the first four months of
1946 fell far behind its rate of activity in the correspond
ing months of the past four years. Threat of a strike by
CIO unions in the Douglas fir region for a wage increase
of l2 l/ 2 cents per hour was recently averted by the ac
ceptance of a compromise offer of 5 cents, retroactive to
April 1. The redwood section of the industry still remains
largely strikebound. Recent ceiling price increases on
standard grades of Western lumber were expected to
stimulate production, but the industry is still hampered
by shortages of skilled labor and logging equipment.
The agricultural and food processing industries of the
District have encountered new problems growing out of
the international relief program with its requirement of
heavy food exports from the United States. The nation
wide scarcity of wheat and feed grains has necessitated
curtailment of milling, baking and brewing operations
and has created difficulties for poultry and livestock pro
ducers. It has also contributed to forces making for higher
consumer prices of breadstuffs, meat and dairy products.
Unemployment
With increased overall employment, unemployment has
declined from the peak that occurred around the end of the
first quarter. In California, for example, the number of
claimants for unemployment compensation and veterans’
allowances shrank from around 380,000 early in March to
under 300,000 at the end of May. Similar changes took
place in Washington and Oregon. Part of the reduction
was due to the progressive exhaustion of benefit rights,
part to normal seasonal expansion of employment, and
part to the resumption of activity by numerous industries
as a result of the settlement of labor disputes and the ensu
ing improvement in the general business outlook. Employ
ment of hired labor on farms of the three Pacific Coast
states at May 1 was reported at the highest level for that
date since prewar years.
Although a further expansion of employment in many
lines seems probable, the shrinkage in war-stimulated
A p ril-M a y 1946
FEDERAL RESERVE BANK OF SAN FRANCISCO
18
employment is not yet complete. War industries and re
lated Government installations will probably continue to
reduce their forces, releasing additional large numbers to
the labor market. District shipbuilding activity, for ex
ample, continues to contract as the war construction pro
gram is rapidly being completed. Large layoffs have oc
curred in recent months at Vancouver and Tacoma,
Washington, and similar reductions impend at other ship
yard centers. The aircraft industry has also been com
pleting military contracts; as it becomes necessary to
shift increasingly to commercial production, a further
decline in aircraft employment may occur. Military de
mobilization is continuing, although at a diminishing rate,
along with reductions in depots, warehouse forces and
the miscellaneous services of supply. The persistent
shortage of really skilled workers, however, still handi
caps the increase of production in many lines, both indus
trial and commercial.
Retail trade and inventories
District retail trade continued at record levels, seasonal
factors considered, in April and May ; average daily sales
of department stores in those months were approximately
25 percent above the already high level of a year ago. The
largest increases in sales in leading stores of District
metropolitan areas occurred in departments selling house
hold appliances, housewares, radios, furniture, and men’s
and boys’ wear. Sales of apparel and furniture stores par
alleled the movement of department store sales. Current
high sales volume is largely attributable to the needs of
returning service men and to replacements of home fur
nishings and other durable goods that were unavailable
during the war.
Recent widespread wage increases should be men
tioned among the influences making for larger consumer
outlays. In the durable goods section of California manu
facturing industries, for example, average hourly and
weekly earnings dropped sharply in response to the re
duction of the average work week, with consequent loss
of overtime, following V-J Day. This tendency was re
versed during the first four months of 1946; while the
average work week advanced slightly (from 39.0 to 40.2
Production and Employment—
Index numbers, 1935-39
average— 100
Industrial production1
Lumber .....................................
Refined oils2 ...........................
Cement2 .....................................
W heat flour2 ...........................
Petroleum2 ..............................
Electric power2 ....................
W ith seasonal
Without seasonal
e-------- adjustment--------
t --------adjustment-------- \
,---------1946---------x
Apr. M ar. Feb.
108
106
117
—
—
—
160
148
154
153
143
176
—
—
—
403 421 424
,---------1946--------- N 1945
Apr. M ar. Feb. Apr.
110
94
84
120
210 210 203 244
168 149
137
122
135 140
176
149
131
129
128 139
397 392 389 428
Factory employment and payrolls3 4
Employment
Twelfth District
California ...................... 170
Pacific Northwest . . .
Oregon ......................
W ashington ............
Intermountain ............
Payrolls
California ........................... 321
160
294
157
285
1 Daily average.
2 1923-25 average = 100.
3 Excludes fish, fruit, and vegetable canning.
4 Indexes in process of revision.
1945
Apr.
117
—
116
169
—
434
289
605
170
321
159
293
156
282
289
605
hours per week) between January and April, average
hourly and weekly earnings increased by 5 percent and
8 percent respectively.
A gradual improvement in department store inven
tories has occurred since the beginning of the year. At the
end of last December the leading stores in the metro
politan centers of the District reported their merchandise
stocks at practically the same dollar volume as at the end
of 1944; the number of individual departments with
larger total stock values was nearly balanced by the num
ber with total stocks of lower value. By the end of May,
however, total inventory values reported by the metro
politan group of stores were nearly 10 percent larger than
at the corresponding date in 1945, while the number of
merchandise departments with higher total stock values
was about three-fourths of the total. Part of the increase
in inventory values as compared with a year ago is due to
larger physical stocks, notably in departments selling hard
goods, while part is due to price increases or to better
quality merchandise. Departments selling men’s and
boys’ wear have persistently reported low stocks, while
the most marked improvement in inventories has oc
curred in the departments selling housewares and major
household appliances.
Banking and credit
Government security holdings of District member
banks continued to decline in April and May, as additional
maturing certificates of indebtedness were retired by the
Treasury. Member bank loans increased significantly,
however. A further decrease in loans for purchasing or
carrying Government securities was considerably out
weighed by increases in business, consumer, and real
estate loans. At the end of May, loans of District member
banks are estimated to have been 36 percent above their
level of a year earlier, compared with a year-period in
crease of 27 percent at the end of March.
Demand deposits adjusted rose steadily after income
tax payments had reduced them in March. By the end of
May, they were not far below their early 1946 peak. Time
deposits continued to move persistently upward. Returns
of currency to this bank, however, continued to exceed
payments into circulation in April and May, as in the first
quarter of the year.
Distribution and Trade—
Index numbers, 1935-39
daily average= 100
With seasonal
Without seasonal
t ------- adjustment-------- \
t ------- adjustment-------->
,---------1946--------- \ 1945
Apr. M ar. Feb. Apr.
Department store sales (value)
Twelfth D is tric t................. 291 297 300
219
Southern C alifornia.......... 318 307 311
224
Northern California.......... 261 264 269
205
Portland ................................ 275 284 283
209
W estern W a s h i n g t o n .... 312 340 330
313
Eastern W ashington and
Northern Idah o............... 247 293 312
198
Southern Idaho and U tah 286 303
315
217
P h o e n ix .................................. 320 336 358
243
Carloadings (number)1
Total ....................................... 106 104 114
114
Merchandise and m isc.. 129
123
137
137
Other ..................................
79
80
85
85
,--------- 1946---------> 1945
Apr. M ar. Feb. Apr.
1 1923-25 daily average =
r Revised.
100.
287
309
258
269
321
258
276
233
251
286
253
278
225
240
271
205
208
189
197
246r
253
280
357
227
253
330
218
238
325
186
201
255
103
121
80
96
114
74
94
113
70
110
129
87
A p ril-M ay 1946
19
M O N T H L Y REVIEW
The Pattern of Postwar Manufacturing in the Twelfth District
o
a
considerable extent, Twelfth District manufac
turing employment has already returned to its prewar
T
pattern. With the exception of the aircraft and shipbuild
ing industries, which have not yet fully liquidated their
war work, the major manufacturing industries had
roughly the same relative importance in the first quarter
of 1946 as in the first quarter of 1939. It is likely that
continued military, as well as commercial, orders will
enable aircraft producers to retain part of their increased
prominence as employers.
The reestablishment of prewar relationships between
industries, which appears to have occurred with such
striking speed, was accomplished in great part by mass
layoffs in a relatively small number of very large war
plants. Aircraft assemblers and private shipyards reduced
their employment between the first quarter of 1945 and
the first quarter of 1946 by some 570 thousand, which is
more than the total number of jobs in all manufacturing
industries in the first quarter of 1939.
Despite these substantial cut-backs in war production,
Twelfth District manufacturers as a whole employed 65
percent more persons in the first quarter of 1946 than in
the like period of 1939. All of the major industries par
ticipated in this gain over pre-war employment, and a
number of them employed more than last year, near the
end of the war production effort. Apparel, printing and
publishing, and stone, clay, and glass products each in
creased more than 10 percent between the first quarters
P A T T E R N O F T W E L F T H D IS T R IC T F A C T O R Y E M P L O Y M E N T
Percent distribution in first quarter of a prewar, postwar and war year.
F /C U Æ E S .
/A /
T O T A L . rA C T O /Z Y
f> F £ W A fZ -
P O S T W A R
U /A fZ -
7.7
S .S
& €
/93 9
A L .L
G T H E - fS L
A t^ C /Z A F T
A /O /V r £L
£
E M P L O Y M E L
ALL.
A/T
OTHE«.
_____—
t y iL . P t N G
>eB L O C 'S
/^ £ L T A L .^ >
A /^ C /^ A ^ T
10.6
z.e
£
v^ S
\ v
V \
N
£. c m
10.7
Z..I
v\\
\\\\
+ 3 .3
IA -/+
£
/> je / A / T / A / G
37"£J/V£ c :
/ æ o /v £
/= > A f> E .* L
Yj
a
8.5
G LA
-ss
EL
~~~~~
~~ ——__
'■
—
^
^" —___
3.0
25
5.7
3.7
3.0
-4.6
5.Ô
“■—
-4.7
F~aoo
IS S h
17.5
\\ 2.3
e.e
\
w \
W\ N \ \ 2.7
\
\\' V\\ \\ 1.7
5.4\
\ N i.e>
1.5
< < ;o
>vV V\ Nv1 5,1
\ \
3.0
z x .
\ NN
S 23
/
/ / /
/ //
3.7
2.6
<=*.3
3*-
^\ \\ \
N\ N'
/
<£1L .
C O A t-
\ \\
\\
\N
\x
/
A f> F > A ÆL
4
6.2.
_______
rt/ze/v/Ti/Æf:
3.5
6.3
L
l/ f l
5.6
3.^-
^
Nx
S.Ô
a' o * / r £ / e / e o t s s
¿_
m e
.
t a
i s
t'A/fiEÆ.
/=»^/A/T / M C ,
£ f= * C /& L ./S /
S T O A / E i f C C . A Y 'j
/^O/V f i
y/«VG
GM5S
¿ 5 -rE .S H —
R A f*E .*Z J=*£. T J Z .O L . £1
£
CTO A
M A CT/-// AJELJS. Y f/E . X. £ ~ L .£ L <Z.J
C /-f/E .tt/C .A
Z-S
r c S A Z / s jf T < S f iZ £ Z .
A f ^ F ’A
/Sd ¿_
p -G G C s
20
FEDERAL RESERVE BANK
of 1945 and 1946. Chemicals, iron and steel and their
products, non-electrical machinery, aircraft and ship
building, and non-ferrous metals all laid off more than 10
percent of their employees over the same period.
The really striking feature of the transition from war
production to peacetime activities is that the District's
economy experienced a loss of the best paid 45 percent
of its manufacturing jobs without collapsing or, indeed,
showing any signs of distress. Various factors operating
to carry the war boom into the postwar transition period
more than offset the depressing effects of a sharp decline
in manufacturing employment. Among these factors were
higher wage rates, military termination payments, and a
disposition to spend a higher proportion of current in
come and, possibly, to draw on accumulated savings in
order to buy things not available during the war.
Manufacturing, furthermore, ordinarily constitutes a
much smaller part of the District’s economic activity than
is generally realized. Only about one out of every six
employed persons in the District was engaged in manu
facturing in April 1940. The ratio for California, 16 per
cent, increased to 34 percent at the peak of war produc
tion activity in June 1943, then fell back to 19 percent in
April 1946. The District as a whole probably experienced
a roughly similar movement.
A p ril-M ay 1946
OF SAN FRANCISCO
The West clearly has not become industrialized over
night as a consequence of the war. Return to the prewar
distribution of manufacturing activity among major in
dustries suggests also a resumption of prewar patterns
of industrial growth. Should this prove to be the case, the
processing of locally produced raw materials may con
tinue as the dominant type of manufacturing for some
time to come. The longer-term trend is for a gradual loss
in the relative importance of such resource-based indus
tries in favor of population-based industries and so-called
footloose industries. The last do not depend heavily either
on the primary processing of local natural products or on
serving a purely local population.
Among the footloose industries, those that are expand
ing nationally will find it easiest to establish western
plants. New industries, having little dependence on com
plementary manufactures and services elsewhere, and no
traditional ties, likewise will be free, if they choose, to
locate in this area. Light industries, in which capital in
vestment in unmovable installations is not great, are more
likely to relocate here than heavy industries. Finally, in
dustries or parts of industries in which most of the effi
ciencies of size can be realized with relatively small pro
ductive units can be expected to precede the great mass
production industries to the Twelfth District.
Ownership of Demand Deposits
total demand deposits of individuals, partnerships, and corporations continued to rise from
July 1945 to January 1946, deposits of manufacturing and
mining concerns declined sharply in both the Twelfth Dis
trict and the nation. This was the first significant decline
in any major ownership category since the outbreak of
war, according to the semi-annual survey of deposit own
ership. The end of the war had no such effect upon depos
its in other ownership categories, however, all of which
continued to rise. With the shift of funds from manufac
turing and mining concerns, deposits of firms in wholesale
and retail trade and personal deposits increased even
more rapidly than in previous periods.
The reduction in bank balances in manufacturing prob
A lthough
E s t im a t e d
D is t r ib u t io n
by
O w n e r s h ip of D e m a n d
ably reflected a reduction or cessation of operations in
some war plants (with the decline in cash accompanied
by a decline in current liabilities), and increased outlays
for plant and equipment and for materials by concerns
resuming or continuing civilian production. Wholesale
and retail trade concerns, on the other hand, did not dis
burse all of their cash receipts during the period. This
probably resulted in considerable degree from the fact
that increased output of civilian goods had not reached
wholesale and retail levels in large amounts by January.
Personal deposits increased markedly despite a small
decline in income payments and increased consumer ex
penditures. The increase in farmers' deposits was sea
sonal, at least in part, but other personal accounts in
D e p o s it s o f I n d i v i d u a l s , P a r t n e r s h i p s , a n d
C o r p o r a t io n s
(millions of dollars)
r ------------
— Twelfth District—
January
July
1944
1945
---------^
July
1945
January
1946
,---------- U nited States---------- \
July
July
January
1945
1943
1946
July
1943
February
1944
Manufacturing and m ining.....................................................
Retail and wholesale trade.....................................................
Other non-financial...................................................................
1,190
1,010
740
1,190
1,030
830
1,300
1,180
880
1,320
1,420
970
1,380
1,430
940
1,210
1,730
1,050
16,500
8,000
7,100
18,400
10,900
7,800
16,100
12,600
8,300
37,000
Type of holder
Total no n-fina ncial................................................
2,930
3,050
3,350
3,710
3,750
3,990
31,600
37,100
F in a n cia l.........................................................................................
410
460
480
570
580
700
4,700
5,300
6,000
Total domestic business.........................................
3,510
i
i
3,830
4,280
4,330
4,690
36,300
42,400
42,900
Farmers .........................................................................................
Other perso n a l.............................................................................
3,340
i
i
480
1,760
580
2,100
610
2,260
690
2,820
3,300
12,500
5,200
17,800
6,000
20,400
26,400
Total p e rso n a l..........................................................
1,860
2,080
2,240
2,680
2,870
3,510
15,800
23,000
Other2 ..............................................................................................
240
260
290
320
350
410
3,500
4,200
4,700
Total deposits ..........................................................
5,440
5,840
6,350
7,270
7,550
8,610
55,600
69,600
74,100
1 N ot available separately.
2 Trust funds of banks, non-profit associations, and foreigners.
N o te : Figures will not necessarily add to totals because of rounding.
A p ril-M ay 1946
21
M O N T H L Y REVIEW
creased as much or more. Individuals apparently preferred
demand deposits to other types of liquid assets even more
strongly by January 1946 than at the end of the war.
In general, the pattern of change in deposits between
July 1945 and January 1946 among ownership categories
was similar in the Twelfth District and in the United
States. A larger percentage increase in total deposits in
the District than in the nation was accompanied, however,
by greater District percentage gains in personal deposits
other than farmers’, in deposits of trade firms, and in
deposits of financial concerns. Total deposits have in
creased relatively more in the District than in the United
States in every semi-annual survey period except Janu
ary-July 1945.
M e m b e r Bank E arn in g s a n d E xp en ses, 1 9 4 5 — T w e lfth D istrict
N
e t profits after taxes of Tw elfth District banks increased again in 1945 to a new high, 10 percent above
furnished nearly half of total earnings of District member
banks last year, as compared with 25 percent in 1940.
1944 and 86 percent above 1940. Th e increase over 1944
A fter declining somewhat from 1941 through 1944,
was much smaller, however, than the year-period gain in
earnings on loans increased slightly last year. Substan-
either 1944 or 1943. Although total net profits after taxes
tial amounts of loans for purchasing and carrying G ov-
increased in dollar volume in 1945 over 1944, they de-
ernment securities, associated to a large degree with war
dined to 12 percent of total capital accounts in 1945 from
loan drives, and an increase in commercial, industrial, and
12.5 percent in 1944. This decline in relative profits resuited from a greater year-period increase in capital
consumer loans in the latter part of the year contributed
to this gain. Earnings from other sources, including serv-
accounts (1 4 percent) than in profits ( 1 0 percent).
.
Current earnings ana expenses
ice charges on deposit accounts and trust department
earnings, continued to rise.
„
, .
j
.
-
During the war years, the expansion in Government
security holdings of banks much more than offset the de-
Current expenses, except for taxes other than on net
income, also continued to increase in 1945. Total salary
an(j wag e payments, which rose steadily throughout the
cline in interest rates and accounted for most of the in-
war period, increased 13 percent last year, more than in
crease in bank earnings.
any 0f the previous four years. Interest on time and sav-
Interest and dividends on
„
^
,,
Earnings and Expenses of Member Banks
1 9 4 0 -4 5 __T w elfth District
(millions of dollars)
lnterest and dividends on
securities
...........................................
ings deposits, after declining in the period 1940-43, rose
j u
i • m /ic t ^
i ^±
moderately m 1944 and sharply in 1945. In the last two
years, the marked growth in time deposits more than out-
1940
1941
1942
1943
1944
1945
4 4 .5
4 5 .2
5 4 .5
8 6 .2
1 1 1 .8
1 3 8 .4
98.i
Although total current expenses have risen steadily
1.5
i .5
i.6
Interest and discount on loans.. io4.o lis.o
SToans1charges.and fees °.n
112.4
94.5
93.i
weighed any further decline in rates.
a 1,1
1»
¿. a
i
j_
i
•
±.
jm
i.6
during the past five years, they have risen considerably
ss
94
ioi
12 3
142
14 8
6.8
7.o
6.9
7.6
8.9 10.2
15.8 15.9 13.8 17.1 19.2 22.6
------- ------- ------- ------- ------- ------Total earnings..................... 179.6 192.5 199.2 219.2 248.8 285.7
Salaries and wages................... 54.5 59.1 64.9 69.1 74.6 84.4
29.7
39.3
interest on time deposits.......... 3i.4 30.2 28.5 25.6
^ess rapidly than total earnings. A s a result, net current
earnings of District member banks in 1945 were more
, ... , .
.
,
* *r
. i
-tr\AA
than double their 1940 level and 16 percent above 1944.
r>
•
1
j
j
Hj.
Recoveries on loans and recoveries and profits on se. ,
. . .
t
jA
i
cunties were substantial last year, in the past, there has
other expenses^11. ?n.ne* .inc°m.e.2
generally been some net loss on non-current account, but
Seaciountsarges °n deposit
Trust department earnings.......
Other earnings1 .......................
30.‘2
3 i .'7
36.4
39^4
44^0
49^3
Total expenses**.................. {n 1944 and 1945> net returns from so-called non-current
Net current earnings23............
50.3
55.8
60.9
75.6
93.2 105.4
items added to profits.
Recoveries on loans..................
Losses on loans.........................
4.4
12.9
9.7
13.4
6.0
9.8
7.3
6.0
7.2
14.3
N e t profits after taxes
*
RsKuritiesan.d.!>™^^on. .........
19.4
i 6-2
8.9
9.3
is.6
i9.s
T axes on net income absorbed one fourth of profits
S a S - o f e :'.:....:
i.l
12.0
4
0.4
+ ’ :!
before income taxes in 1945 and were 4 0 percent larger
Total »e. charge-offs............ ~75 ~
” 51 ~ 3 +T7 + X i
Net pros« brf«« ¡»co™
..................... 52.1
72.3
93.5 108.S
.
me
t/ci
ioo 27.9
970
Taxes on net incom
e2.........................
..
10.5
16.1
19.9
------ ------- ------- ------- ------- ------Net profits after taxes.............. 43.5 46.5 41.6 56.2 73.6 80.9
than in.1944; T h ere were no changes in rates, but the
P«>P°rt>°n of total income: obtained from tax exempt
securities continued to decline and more banks
probably
.
\
J
entered excess profits tax brackets. Despite the increase
• •
,
,
r,
.
j -l -i rv
in income taxes, net profits after taxes increased by 10
i r on o
*11*
A 11
percent to a new peak of 8 0 .9 million dollars.
r
r
.
lo ta l dividends paid in 1945 increased relatively more
m AA
j- j
,
r,
.-t
, r
Over 1944 than did net profits. Over the past five years,
however, dividends have not kept pace with profits. From
i 0/lr> ,1 _____ i i 0/1A
1 ___
i j- •j
j
£ t \- *. ■ ±
iy4U tfirOUgn 1944, total annual dividends of District
member banks ranged between only 23.6 and 25 8 million
.
°
.............
T
dollars, and rose to 2 9.9 million in 1945. In each of the
three years 1940-42, slightly more than half of the profits
after taxes were paid out in cash dividends, but in 1944
and 1945, less than 4 0 percent were distributed.
0 0 ,1 ?,S
°
1°'.t +
8.2
14.6
Cash dividends......................... 24.2 24.8 23.7 23.6 25.8 29.9
277
277
274
273
270
272
Number of banks.....................
...........
.......................
,
.
1 Service charges and fees on loans included in other earnings in 1940-41.
2Taxes on net income included in taxes other than on net income in
1940-41.
J
3Recurring depreciation on banking house, furniture, and fixtures included
in other net charge-offs in 1940-41, and in other expenses in 1942-45.
Note: Effects of changes in number of banks upon comparability of figures
is negligible. Figures may not add to totals because of rounding.
securities increased more, both relatively and in dollar
amount, than any other source of earnings in 1945, as
they had in each of the three previous years. This source
22
FEDERAL RESERVE BANK
INDUSTRIAL PRODUCTION
A p ril-M ay 1946
OF SAN FRANCISCO
National Sum mary of Business Conditions
PHYSICAL VOLUME SEASONALLY ADJUSTED, 1955-39-100
Released M ay 27, 1946— Board of Governors o f the Federal Reserve System
n d u s t r ia l
output declined somewhat in April and the early part of May owing to the
coal strike. Employment in the economy as a whole, however, continued to expand in
IApril.
The value of retail trade was maintained at record levels and commodity prices
rose further.
Federal Reserve indexes. Groups are expressed
in terms o f points in the total index. Monthly fig
ures, latest shown are for April.
EMPLOYMENT IN NONASRICULTURAL ESTABLISHMENTS
Bureau of Labor Statistics’ estimates adjusted for
seasonal variation by Federal Reserve. “ Other”
includes transportation, public utilities, finance,
service and miscellaneous. Proprietors and do
mestic workers excluded. Latest month shown is
April.
I
n d u s t r ia l
P
r o d u c t io n
The Board’s seasonally adjusted index of industrial production declined 2 percent in
April and was at 164 percent of the 1935-39 average. The drop in coal output after April 1
and the resultant curtailment in operations in some industries were offset in part by sub
stantial increases in activity in the automobile and electrical machinery industries follow
ing settlement of wage disputes in the latter part of March.
Production of durable manufactures as a group rose 3 percent in April. Iron and steel
production declined about 6 percent; decreased output of pig iron and open hearth and
bessemer steel was partly offset by a sharp rise in electric steel production. In May
activity at steel mills continued to decline as a result of coal shortages and during the
past two weeks has averaged only about 50 percent of capacity.
The number of passenger cars and trucks assembled in April was 80 percent greater
than in March, and there also were substantial increases in activity in the railroad
equipment industry and in output of many types of electrical equipment. Production of
lumber and stone, clay, and glass products was maintained at the March level, which was
above the same period last year.
Output of most nondurable goods was maintained in April at about the March level.
Activity at cotton mills declined slightly, owing to reduced coal supplies, but output at
other textile mills advanced further. The number of animals slaughtered under Federal
inspection continued to decline sharply in April. Otitput of flour and bakery products
decreased somewhat in April and is expected to decline substantially in May as a result
of the stringent wheat supply situation.
Minerals production declined by a fourth from March to April, reflecting primarily
the drop in bituminous coal output There was also a further reduction in output of
metals, while crude petroleum production increased in April and early May. On May 13
bituminous coal production was resumed under a temporary work agreement, and during
the week ending May 18 output was 70 percent of the pre-strike weekly rate.
Value of construction contracts awarded rose sharply in April, according to reports of
the F. W . Dodge corporation. The increase reflected a very large expansion in awards
for private residential construction to a record level; awards for most other types of
private construction were maintained at recent high levels.
E
m plo y m e n t
Nonagricultural employment continued to gain in April notwithstanding the bituminous
coal strike, and unemployment decreased by about 350,000. Manufacturing employment
rose by about 400,000 largely because of settlement of major labor disputes, and con
struction employment showed a further large gain.
WHOLESALE PRICES
C
o m m o d it y
P
r ic e s
Price ceilings on grains were increased substantially on May 13 and ceilings for a
number of nonagricultural products have also been raised during the past month. Recent
price increases for industrial products have usually been between 10 and 20 percent.
Recent advances announced for automobiles were smaller than these amounts but they
were in addition to price increases made earlier this year.
Retail prices of most groups of commodities continued to show small advances in April
and the consumers’ price index increased one-half percent to a point 3 percent higher
than in A p r il 1945.
D i s t r ib u t i o n
Bureau of Labor Statistics indexes. W eekly figures,
latest shown are for week ending April 27.
GOVERNMENT SECURITY HOLDINGS OF BANKS IN LEADING CITIES
BILLIONS0
BONOS t- *
CEflTIFfCATES
fN - J V .
4
NOTES 1
M
-/—
BILL
(939
(940
1941
1942
1943
(944
I
N s jv
1945
:
1946
Excludes guaranteed securities. Data not available
prior to February 8,1939; certificates first reported
on April IS, 1942. Wednesday figures, latest shown
are for April 24.
Retail sales continued at a high rate in April and the first half of May. During the past
four weeks department store sales have been one-third larger in value than in the cor
responding period of 1945.
Freight carloadings declined sharply in April, reflecting chiefly the drop in coal ship
ments. Shipments of most manufactured products continued to increase until the week
ending May 18. In that week interruptions in freight service resulted in large decreases
in loadings of manufactured products but bituminous coal shipments were resumed, and
total loadings increased slightly.
B a n k Credit
Treasury deposits declined, reflecting disbursements in excess of receipts, and deposits
subject to reserve requirements increased during April and the first three weeks of May.
Reserve balances increased less than required reserves, and excess reserves declined to
about 700 million dollars on May 22. Federal Reserve holdings of Government securities,
which declined substantially in the early months of the year, have increased somewhat
since the middle of April.
Member bank holdings of Treasury bills, certificates, and notes declined in April and
the first half of May, while holdings of Treasury bonds increased further. Loans at
member banks in leading cities declined, reflecting largely reductions in loans for pur
chasing and carrying Government securities.
In the latter part of April the Reserve Banks, with the approval of the Board of Gov
ernors, eliminated the wartime preferential discount rate of about one-half of one percent
on advances to member banks secured by Government obligations due or callable in not
more than one year. The regular discount rate on advances secured by Government
obligations or eligible paper remains at one percent.
Yields of Government securities, which declined in the early weeks of the year, rose
sharply in the latter part of April and early in May.
@FedFRASER