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Monthly R eview FEDERAL RESERVE B A N K OF S A N FR A N C ISC O F E B R U A R Y 1947 Review of Business Conditions— Twelfth District he widely expected post-holiday depression in retail Ttrade failed to materialize in January or February, Department store sales in the Twelfth District, after allow ing for the usual seasonal let-down, were at about the same high levels that were experienced throughout the last quarter of 1946. Consumers spent considerably more at department stores in early 1947 than they did a year ago, although, because of price increases, they did not buy cor respondingly more goods. In both January and February, seasonally adjusted sales of District department stores remained well over three times the 1935-39 average. Apparel stores likewise sold more in January 1947 than a year ago. In terms of dollars, sales rose by five percent, but in terms of physical quantities, they probably declined somewhat. Nevertheless, the year-period gain in the dollar volume of apparel store sales was about as large in January as in the Christmas buying season. District furniture store sales increased by about onethird in dollar volume between January 1946 and January 1947. This is considerably more than either department or apparel store sales advanced.. Prices of house furnishings also rose more rapidly than the prices of apparel and many other manufactured commodities carried in department stores. However, the increase in house-furnishing prices over the year, as reported by the United States Bureau of Labor Statistics, was less than a third, suggesting that the physical volume, as well as the dollar value, of furni ture store sales may have been greater than a year earlier. Nonagricultural employment in California Manufacturing employment in California fell between December and January at about the usual prewar seasonal rate. Contraction in fruit, vegetable and fish canning ac counted for most of the loss in employment. Despite this, the number engaged in nondurable goods production as a whole was at the highest January level ever recorded. Manufacture of durable goods provided a few more jobs in January than in December, although the number of production workers declined slightly. However, employ ment increased in the so-called nonproduction group, which includes construction employees of manufacturing concerns, as well as supervisory, sales, and other office and overhead employees. Total factory employment was 12 percent higher than in January 1946, and employment in durable goods industries, which was adversely affected by labor disputes last year, gained 13 percent. Among non manufacturing industries for which current data are avail able, California public utilities employed larger numbers than in either January or December 1946, as did quarry ing and nonmetallic mining, laundries, and cleaning and dyeing. Employment in hotels and steam railway repair shops fell below both the January and December 1946 figures, while employment in trade and in petroleum producing was lower than in December but higher than a year earlier. Lack of rainfall Most of the Twelfth District experienced an unusually dry January— California, the dryest since 1920 and second dryest in 51 years of record. The consequent retardation of pastures and ranges in many sections forced supple mental feeding of livestock, but the immediate situation was relieved in late January and the first part of Febru ary. Heavy rains were still needed for deep infiltration in some of the major orchard and vineyard areas. Potential shortage of irrigation water for later use threatened some of the richest agricultural land in the District. Not only had ground water tables been insuffi ciently replenished, but lighter than average snowpacks in the mountains, especially along the western slope of the Sierra Nevada, were apparently going to be inade quate to refill all storage dams. Banking and credit For the past decade Treasury disbursements in the Twelfth District have regularly exceeded Treasury re ceipts in the first two months of each calendar year, as well as for the year as a whole. In January and February 1947, however, Treasury receipts in the District exceeded Treasury disbursements by a substantial margin. This excess of receipts over expenditures within the District is due primarily to a relatively large decrease in Treasury disbursements rather than to a relatively large increase in Treasury receipts. The pronounced decline in District manufacturing for Government use and the marked de crease in military personnel stationed within the District are probably the major factors causing a large reduction in Treasury disbursements in the District. Net Treasury receipts in the District reduce member bank reserves, whereas net Treasury disbursements increase them. The District quite regularly loses bank reserves as the result of an excess of interdistrict payments, other than 18 FEDERAL RESERVE BANK on Treasury account, over receipts. This loss of reserves also occurred in the first two months of 1947, but it was smaller than the loss in the corresponding period of any 3^ear since 1940. Reserve Bank credit increased substantially in the Dis trict during January and February 1947 to help offset the loss of reserves caused primarily by the excess of Treasury receipts over disbursements. Member bank re serves were also increased by a considerable return of currency from circulation. Government security holdings of District member banks declined moderately during the first two months of 1947. Treasury bills were sold to the Reserve Bank to obtain OF SAN FRANCISCO February 1947 reserves, while the holdings of certificates of indebtedness declined as a consequence of the partial redemption by the Treasury of the issue that matured February 1. Total loans of District member banks continued to in crease in January and February, though at a much slower rate than during the last half of 1946. This compares with a slight decrease in total loans in the first two months of 1946. Among weekly reporting member banks in the prin cipal cities, the growth of real estate loans was leveling off less rapidly in the early part of 1947, compared with preceding months, than that of other types of loans. Loans for purchasing and carrying securities continued their downward trend. The Postwar Trend of Hourly and Weekly Earnings in California Industries wage increases occurred in a wide range of American industries during the past year. These increases have gone far toward offsetting the reductions in hours of work and the occupational shifts that followed the end of the war. By April of 1946, average hourly earn ings of factory workers for the United States as a whole reached the highest rate ever recorded up to that time and continued to increase thereafter in each successive month of the year. The December figure of $1.14 per hour was about 10 percent above the level of January 1945, the highest rate attained in any month before 1946. Average weekly earnings, which reflect both hourly rates and aver age hours of work, advanced somewhat less. At the end of 1946, however, they were only little below the peak rates of late 1944 and early 1945, when premium pay for overtime was widely prevalent. In December 1946 average weekly earnings in manufacturing were about $46.86, as compared with a monthly average for the seven months from October 1944 to April 1945 of $47.23. ig n if ic a n t larly published on employment, payrolls, hours and earn ings.1 These data show trends of hourly and weekly earnings among manufacturing employees in California essentially parallel in recent years to those for the nation as a whole. Hourly and weekly earnings of factory wage earners in California, as in the nation at large, reached their wartime peaks in late 1944 and early 1945, when the average work week was also at a maximum. The record of employment, hours, and earnings in California manu facturing industries over the years 1939 to 1946 was as follows: 1939 1940 1941 1942 1943 1944 1945 1946 Average number of production workers (thousands) .... 276.2 .... 320.1 .... 445.0 ....678.3 ....896.5 .... 831.6 .... 619.7 ....460.9 Average hours per week 37.9 38.3 40.5 43.5 44.7 44.9 43.5 39.7 Average hourly earnings $0.73 .75 .84 1.03 1.16 1.23 1.23 1.29 Average weekly earnings $27.80 28.64 33.91 44.78 51.85 55.21 53.53 51.30 Source : California Labor Statistics Bulletin. National and state trends Data on wages comparable to those cited for the United States as a whole are not available for the Twelfth Dis trict. For California, however, monthly statistics are regu- Sharp reductions in employment and in hours of work in war industries in the last half of 1945 brought down average weekly earnings of factory employees by the end 1 See California Labor Statistics Bulletin, Department of Industrial Rela tions, State of California. Production and Employment— Index numbers, 1935-39 average—100 Industrial production1 L u m b e r ........................... Refined oils2 ................. Cement2 ........................... W heat flour2 ................. Petroleum2 ................... Electric p o w e r ............ With seasonal r-------- adjustment ------- N ,---------1946Dec. N ov. 125 , . . 130 — — 223 171 133 166 — — . . . 242 237 1945 Oct. Dec. 95 119 — — 153 146 157 130 — — 236 206 Factory employment and payrolls3 Employment Twelfth District 192r 187 California ............ . . . 192 Pacific Northw est. . . Oregon .................... Washington .......... Intermountain .......... Payrolls California ........................ 387 372r 372 1 Daily average. 2 1923-25 average = 100. 8 Excludes fish, fruit, and vegetable canning. 4 Indexes in process of revision, r Revised. 163r 298r Without seasonal -adjustment-19461945 Dec. N ov. Oct. D ec. 97 119 130 74 221 227 229 221 165 171 169 113 166 146 154 157 133 132 131 127 238 232 229 219 193 388 193r 188 373r 375 164r 298r Distribution and Trade— Index numbers, 1935-39 daily average= 100 W ith seasonal adjustment1947 ,---------1946Jan. Dec. N ov. Jan. Department store sales (value) Twelfth D istrict................... 313 317 r320 r266 Southern California............ 333 339 355 r279 Northern California............ 272 274 287 r241 Portland .................................. 276 299 287 r230 W estern W ashin gton .......... 344 366 347 r301 Eastern W ashington and Northern Idaho............... 336 306 258 264 Utah and Southern Idaho. 326 305 289 r268 P h o e n ix .................................. ... 368 364 365 319 /------- Without seasonal -adjustment 1947 ,--------- 1946Jan. Dec. N ov. Jan. 248 279 219 223 263 503 539 455 442 583 376 407 344 334 415 223 233 317 445 500 601 347 175 361 rl91 426 274 r211 r234 r l9 4 r l 86 r230 Department store stocks (value) 1 ................................ 327 334 296 183 288 r274 313 161 Carloadings (number) 2 Total ................. ....................... , 140 Merchandise and m isc.. .. 154 Other .................................. 122 121 145 r91 111 134 83 123 143 99 111 129 88 112 134 84 98 120 71 r Revised. 1 A t retail, end of month, 1935-39 average = 8 1923*25 daily average = 100. 100. 107 129 79 February 1947 of that year to approximately the levels of 1942 or early 1943, both in California and in the nation as a whole. The reductions in average hours and earnings in 1945 were somewhat greater in California than in the country at large, probably because of California’s relatively larger proportion of war workers. The average work week in California manufacturing industries shrank between the first and fourth quarters of 1945 by about one-ninth, from 45.0 hours to 40.1 hours, while the reduction in the United States as a whole was only about one-thirteenth, from 45.4 hours to 41.5 hours. Average hourly earnings during the same period declined from $1.25 to about $1.19 per hour in California, and from a little over $1.04 to slightly under $0.99 per hour in the United States, or about five percent in both cases. Average weekly earn ings fell in California from $56.24 in the first quarter to $47.66 in the final quarter, or 15 percent, and in the coun try as a whole from $47.43 to $41.00, a little under 14 percent. The year 1946 saw a reversal of the downward drift of wage payments and a definite trend toward increases both in hourly rates and in weekly earnings. Hours of work, on the other hand, continued to decline, though much more slowly than in 1945. The remainder of this discussion is concerned chiefly with the analysis of these tendencies as they were manifested in California industries between the final quarter of 1945 and the final quarter of 1946.1 The changes occurring over that period may be briefly summarized as follows: Average hourly earnings in creased substantially in all California industries, both manufacturing and nonmanufacturing, and reached lev els higher than any previously recorded. Average weekly earnings also increased in most industries, but by rela tively smaller amounts, because of the quite general tend ency toward shorter hours of work. The wide differences in hourly and weekly earnings that formerly existed among many industries, especially during the war, were greatly reduced. Similar reductions occurred in the differ entials in earnings formerly enjoyed by industrial workers in the San Francisco industrial area compared with those in the Los Angeles industrial area. 1 Unless the context implies the contrary, subsequent comparisons between 1945 and 1946 are to be understood as applying to the final quarters of those years. Banking and Credit— Averages of Wednesday figures (millions of dollars) Condition items of weekly reporting member banks Total l o a n s ................................................ Com ’ l., ind., and agric. loans . . . . Loans to finance transactions in : U . S. Government securities. . . Other secu rities............................. Real estate loans.................................. All other loans.................................... Total in v estm en ts.................................. U . S. Government securities.......... All other securities............................. Adjusted demand deposits.................... Time d e p o sits............................................ United States Government deposits. 1947 Jan. Change from ----- ^ .... ------ 1 9 4 6 Dec. N o v. Jan. / 1,906 1,131 + + 25 25 84 60 404 227 4,756 4,332 424 3,614 2,189 186 — — 4+ — — — — + — 11 6 11 6 151 146 5 39 Coin and currency in circulation Total (changes o n ly )............................. — Fed. Res. Notes of F . R . B. of S. F . 2,832 — — Member bank reserves................................ — 19 M O N T H L Y REVIEW 2,102 + + 84 60 + 4* — 20 — 3 + 28 + 19 — 313 — 309 __ 4 __ 590 522 93 + 7 + 22 — 233 136 3 112 _L 89 — i ,524 — 1,520 — 4 136 + 158 + — 1,393 18 46 — — 17 46 — 317 339 4 + 44 + 94 18 + __ California manufacturing industries The average volume of manufacturing employment and factory payrolls in California for 1946 as a whole were materially below the average levels of 1945, which were heavily weighted by a high rate of activity in the aircraft and shipbuilding industries during the first half of the year. By the final quarter of 1946, however, the cumu lative improvement in general business conditions had brought manufacturing employment to a point about oneeighth larger and payrolls to a point nearly one-fourth larger than during the last quarter of 1945. This improvement was accompanied by marked gains in hourly and weekly earnings. In spite of a small reduc tion in the average work week between the last quarter of 1945 and the last quarter of 1946, average hourly earnings of production workers in California manufacturing indus tries advanced by about 12.5 percent and average weekly earnings by about 11 percent. These gains carried hourly earnings to a point somewhat above, and weekly earnings to within about seven percent of, the figures for the final quarter of 1944. These figures had marked the highest previous levels attained in the state. In that quarter, how ever, average hours of work were about one-eighth longer than in the corresponding quarters of either 1945 or 1946. Average hours per week and average hourly and weekly earnings, in California manufacturing industries in the final quarter of each year from 1943 to 1946, were as follows: 1943— 1944— 1945— 1946— 4th 4th 4th 4th quarter quarter quarter quarter .......................... .......................... .......................... ........................... Average hours per week 44.5 45.3 40.1 39.6 Average hourly earnings $1.20 1.26 1.19 1.34 Average weekly earnings $53.46 57.10 47.66 52.93 Source : California Labor Statistics Bulletin. Durable and nondurable goods industries Important differences have characterized the behavior of wage changes between 1945 and 1946 in various Cali fornia industries and industry groups. The general drift has been toward a greater degree of equality in hourly and weekly earnings as contrasted with the wide differ ences prevailing during the war and, to a less extent, before the war. While average hourly and weekly earn ings at the end of 1946 were still somewhat lower in the industries producing nondurable goods than in the dur able goods industries, the marked differentials formerly enjoyed by employees in the latter category were sub stantially reduced. Most of this reduction was effected within the first few months following V-J Day and was largely the result of drastic reductions in hours of work in the war industries. During 1943, 1944, and the first eight months of 1945, average hourly earnings in the dur able goods industries exceeded those in the nondurable goods group by approximately 20 cents per hour, and average weekly earnings ranged from about $12.00 to $15.00 per week higher. In September 1945 the difference in average hourly earnings between the two groups was cut to about 13 cents per hour, and the spread in average 20 FEDERAL RESERVE BANK OF SAN FRANCISCO weekly earnings reduced to about $4.15 per week. In the final quarter of 1945 average hourly earnings in the non durable goods industries were $1.13 per hour, as against $1.23 per hour in the durable goods classification; average weekly earnings were $45.87 and $49.07 respectively. By the end of 1946, the differences were still further reduced: hourly earnings in the last quarter of 1946 were $1.30 per hour in nondurable goods industries and $1.36 in the durable goods group; weekly earnings were $51.41 and $54.13 per week respectively. The relative positions of the two groups of industries, with respect to hours and earnings in the final quarter of each year from 1943 to 1946, were as follows: Average hours Average hourly t----- per w eek------^ (------ earnings-------N 1943— 4th 1944— 4th 1945— 4th 1946— 4th N onDurable durable goods goods qu arter.. 45.1 42.0 quarter. . 46.5 42.1 quarter. . 39.8 40.4 quarter.. 39.6 39.6 Durable goods $1.24 1.31 1.23 1.36 N ondurable goods $1.04 1.09 1.13 1.30 Average weekly ------ earnings------N on Durable durable goods goods $56.19 $43.76 46.05 61.05 49.07 45.87 54.13 51.41 Source: California Labor Statistics Bulletin. Two factors were mainly responsible for the improved relative position of employees in the nondurable goods industries with respect to average earnings. One is the circumstance that the longer wrork week, which formerly characterized many of the durable goods industries and which largely accounted for the premium wage rates and high weekly earnings enjoyed by workers in those indus tries during the war, has practically disappeared. During the 16-month period from September 1945 to December 1946, the average work week was more often longer in the nondurable goods group. The second factor is that wage increases since V-J Day were proportionately larger in the nondurable goods industries than in those produc ing durable goods. In fact, increases in average hourly earnings were already taking place in the nondurable goods industries in the last quarter of 1945 and continued at a relatively rapid rate through 1946. Variations among industries The 48 individual manufacturing industries for which statistics are available differed greatly in the extent to which they were affected by changes in hours and earn ings between the final quarters of 1945 and 1946. Twelve industries reported a longer work week in 1946, 36 a shorter week. Only four experienced reductions in weekly earnings, which amounted in no case, however, to more than about three percent. Every industry without excep tion reported increased hourly earnings, varying from as little as one percent to as much as 27 percent. These 48 industries are here broadly classified in three general groups on the basis of their differences with respect to changes in hours of work and in hourly and weekly earn ings between 1945 and 1946: 1. Industries with increases in hours of work and in creases in both hourly and weekly earnings. (Six durable goods and six nondurable goods indus tries.) February 1947 2. Industries with reductions in hours of work, rela tively small increases in hourly earnings, and either decreases or small increases in weekly earnings. (Eight durable goods and six nondurable goods industries.) 3. Industries with reductions in hours of work but having substantial increases in both hourly and weekly earnings. (Nine durable and 13 nondurable goods industries.) The influence of materially longer hours was apparent in relatively few cases, notably in beet sugar refining, in fruit and vegetable canning and preserving, and in tire and tube production. Smaller increases in working hours occurred in the logging and sawmill and the men’s and boys’ tailored clothing industries. In these five industries both hourly and weekly earnings advanced sharply over those of the previous year; the increases ranged from 14 to 23 percent for hourly earnings, and from 21 to 32 per cent for weekly earnings. The other seven industries hav ing a longer work week in 1946, but with increases in no case exceeding a fraction of an hour, reported hourly and weekly earnings within the general range of 10 to 18 per cent above those of 1945. These industries were: confec tionery, furniture, structural clay products, iron and steel foundries, aircraft and parts, men’s and boys’ work and sport garments, and pottery. At the other extreme was the group of 14 industries where marked reductions in hours or lagging wage ad vances held gains in weekly earnings to a moderate figure or even resulted in a decline below the 1945 level. Com paratively large reductions in working hours for the industries in this group occurred in the meat products, cement, beverages, petroleum refining, grain mill prod ucts, and glass and glassware industries. Smaller reduc tions in the work week occurred in steel mills and in industries producing machinery1, sheet metal products, hardware, industrial chemicals and tobacco products. In none of this group of industries did average hourly earn ings advance more than about 13 percent above the 1945 figure. Weekly earnings ranged from as much as 6.5 per cent over 1945 in the chemical industry to about three percent below 1945 for the hardware, beverages, and to bacco industries. The intermediate group of 22 industries experienced reductions in working hours between 1945 and 1946, ranging from a fraction of an hour to nearly four hours per week. In every instance, however, both hourly and weekly earnings were larger than in 1945, in some cases by quite substantial amounts. Relatively large increases in earnings in this group occurred in fish canning, news paper and periodical publishing, book and job printing, shipbuilding and repair, structural steel, tin cans and tin ware, engines and turbines, dairy products, bakery prod ucts, textile fabrics, women’s and children’s clothing, and in millinery. These 12 industries reported increases over 1945 in hourly earnings of from 13 to 18 percent, and in 1 Under the caption “ machinery” are included the three machinery-making industries other than electrical machinery and equipment. February 1947 M O N T H L Y REVIEW weekly earnings of from 10 to 15 percent. The remain ing 10 industries of the group reported somewhat smaller gains; they had increases in hourly earnings, however, of from 9 to 16 percent, which sufficed to maintain weekly earnings at levels of about 7 to 10 per cent above those of 1945. This group included planing mills, nonferrous metals foundries, and the industries producing automo biles and automobile equipment, paints and varnishes, heating and plumbing supplies, paper, converted paper products, knit goods, leather goods, and electrical ma chinery and equipment. Regional differences The different sections of the state appear to have bene fited somewhat unequally from the general increase in manufacturing wages between 1945 and 1946. The Los Angeles industrial area made greater relative gains, both in hourly and weekly earnings, than the San Francisco Bay industrial area. This result is probably associated with the continuance into peacetime of a substantial volume of employment in the relatively well-paid aircraft and aircraft parts indus tries in the Los Angeles area, in contrast with the more complete liquidation of the highly paid wrar industries, notably shipbuilding, in the San F'rancisco area. In part, however, the improved status of the Los Angeles area with respect to industrial earnings is due to the mainte nance of a somewhat longer work week in that area. Aver age hours of work in both areas were about 40 per week in the last quarter of 1945; by the final quarter of 1946, the average work week had dropped in the Los Angeles area to about 39.5 hours per week and in the San Fran cisco area to 38.9 hours. Average hourly earnings were almost identical in the two areas— about $1.20 per hour in 1945 and $1.35 per hour in 1946— with a small but diminishing differential in favor of the San Francisco area. The differential in average weekly earnings, how ever, formerly characteristic of the San Francisco indus trial area, was completely wiped out. Whereas in prewar years this differential amounted to some $2.00 per week and increased during the war to over $5.00 per wreek, it 21 had been reduced by the final quarter of 1945 to about 35 cents per week. In the last quarter of 1946 the advantage was actually in favor of the Los Angeles area, where average weekly earnings in all manufacturing industries were about $53.45 per wreek as compared with about $52.60 in the San Francisco area. Nonmanufacturing industries The upward trend of wages and the downward drift of working hours in 1946 were not limited to the manu facturing industries. Average hourly earnings in a group of 12 nonmanufacturing industries in California in creased between the final quarters of 1945 and 1946 within a range of 5 to 26 percent. Hours of work were reduced in most of the group; average weekly earnings advanced, however, in eight of these 12 industries by 10 percent or more and in three of the remainder by smaller amounts. Only in the crude petroleum producing industry was the reduction in hours large enough to bring weekly earnings below the level of the previous year. In general, the increases in hourly and weekly earnings in the nonmanufacturing industries roughly paralleled those which occurred in manufacturing. The largest rela tive gains in weekly earnings were in retail trade, in motion picture production, and in quarrying and nonmetallic mining; marked increases in hourly earnings occurred in electric railway and bus operation, in retail trade, in telephone and telegraph operation, in motion picture production, in quarrying and mining, and in steam railroad repair shops. The smallest gains, considering hourly and weekly earnings together, occurred in whole sale trade, in hotels, and in laundering, cleaning and dye ing establishments. Total employment and total pay rolls advanced in California nonmanufacturing industries much more than in the manufacturing industries between 1945 and 1946, reflecting the redistribution of the labor force since the end of the war. N o te : Material in mimeographed form will be supplied on request, show ing average hours per week, average hourly earnings, and average weekly earnings in the final quarters of 1945 and 1946 for each of the 48 manufac turing and 12 nonmanufacturing industries of California discussed in the foregoing article. Production G oals for Agriculture— 1947 n l ik e the remainder of the American economy, agricultural production promises to continue on a U near-war footing at least for the current year. In recom mending 1947 goals for crop and livestock production, the Secretary of Agriculture gave the following four rea sons for this near-maximum production policy : (a) high domestic demand as a result of high industrial employ ment; (b ) the need for American agricultural products abroad; (c ) the desirability of building up domestic re serves, which, for some commodities, were badly depleted during the war; and (d ) the contingency of less favor able weather and consequent lowrer yields than in recent years. Needless to say, however, the urgency of continued maximum production does not apply to all agricultural commodities in equal measure. Crop production goals for the United States Final 1947 goals for the country as a whole call for the planting of 357 million acres of crops, compared with 346 million actually planted in 1946. While the total acreage goal differs from last year’s actual acreage by only three percent, the difference is considerably greater for some types of crops, reflecting official efforts to bring agricul tural production into greater conformity with estimated requirements. Increases are proposed for barley, rye, dry beans, sorghum grains, soybeans, flaxseed, cotton, sugar FEDERAL RESERVE BANK 22 beets and sugar cane, sweet potatoes, hay, and cover crop seeds. The increase suggested for flaxseed, 86 percent, is the greatest relatively, and that for cotton, 4.8 million acres, is the greatest in absolute terms. Proposed expan sion of the acreage devoted to oil seeds and sugar crops reflects persisting shortages of edible and drying oils, especially the latter, and of sugar, in American markets. The proposed increase of cotton acreage is based on re duced stocks and on the possibility of somewhat larger 1947 C r op G o a l s a n d 1946 P l a n t i n g s — U n it e d S t a t e s (in t h o u s a n d s of acres) Food grains and legum es................................................... Feed grains and forage....................................................... Oil and fiber crops................................................................. Sugar crops ............................................................................. Vegetables ................................................................................ T o b a c c o ....................................................................................... Goals for 1947 Planted in 1946 77,222 165,303 42,183 1,396 7,258 1,854 77,477 166,300 33,647 1,229 7,630 1,967 Total cultivated crops ................................................... 295,216 H ay and seed crops ............................................................ 61,524 288,250 57,559 Total excluding grass and legume seeds............... 356,740 345,809 exports. Reductions in acreage are suggested for wheat, dry peas, corn, oats, peanuts, potatoes, burley tobacco, and truck crops both for the fresh market and for proc essing. The Secretary of Agriculture wTarned farmers that planting in excess of the goals for potatoes, peanuts, and burley tobacco might result in over-production and serious marketing difficulties. Potatoes, the only one of these three crops grown in volume in the Twelfth Dis trict, were over-produced in 1946 and received extensive Government price support. Livestock and livestock products goals With few exceptions, national goals for livestock and livestock products call for moderate reductions compared with actual performances in 1946. The 1947 goals for pigs and sheep, and for milk production, however, ex ceed 1946 figures. If these goals are attained, 23.4 billion pounds of meat will be produced in 1947, or 1.5 billion pounds more than in 1946. The 1947 livestock goals were 1947 G o a l for L i v e s t o c k a n d L i v e s t o c k P r o d u c t s a n d A c t u a l 1946 F ig u r e s — U n it e d S t a t e s 1947 Goals Cattle and calves on farm, Dec. 31, thousand h e a d ... 78,500 14,861 Beef cows on farm, Dec. 31, thousand head................... M ilk cows on farm (average for year), thousand head 24,418 Sows to farrow : Spring, thousand head........................... 9,162 Fall, thousand head .............................not available Pigs saved: Spring, thousand head.................................... 58,000 Fall, thousand head ......................................... 32,000 Stock sheep and lambs on farm, Dec. 31, thousand head 35,299 Chickens raised, thousand h e a d .............................................. 677,110 Turkeys raised, thousand head .............................................. 40,666 Milk production on farm, million lbs.................................... 120,406 E g g production on farm, million doz.................................... 4,200 1946 Actuals 81,050 16,360 24,479 8,087 4,633 52,324 29,100 32,542 677,166 41,013 119,900 4,655 announced before actual 1946 production of milk and eggs and end of year livestock population were known. As actual figures differed considerably from the estimates1 used in establishing goals, expectations regarding the attainment of these goals have to be correspondingly revised. 1Assumed figures were (in thousand head) : cattle 80,200, beef cows 15,673, and sheep and lambs 35,200. Assumed production of milk was 119 billion pounds and of eggs 4,480 million dozen. OF SAN FRANCISCO February 1947 Price support The chief instrument by wThich the Government influ ences agricultural and livestock production is the system of price supports, which was developed in prewar years and greatly expanded during the war. Under existing legislation, the present price support policy— applying to about 160 commodities— continues until the end of 1948. There are three groups of commodities entitled to support: “ basic” commodities, which are corn, wheat, cotton, tobacco, rice, and peanuts for nuts; so-called “ Steagall” commodities, the most important of which are hogs, eggs, chickens over 3.5 pounds live weight, turkeys, milk, butterfat, dry peas and dry beans of specified types, flaxseed, and potatoes; and a large number of “ other” commodities, among which wool, sugar beets and sugar cane, barley, and sorghum grain are currently included. While support for “ basic” and “ Steagall” commodities is mandatory, the support of “ other” commodities is per missive. The minimum Government-guaranteed price commonly is 90 percent (for upland cotton 92.5 percent) of the parity price at the beginning of the marketing year for individual commodities. The Government has, how ever, supported and may continue to support such com modities as sugar beets, sugar cane, and wool at a level far above parity. Prices originally wrere supported for the purpose of raising farm income, which had been disproportionately depressed during the thirties. In the war years, the major objective of price support, and promises of continued price support, was expansion of agricultural production. The so-called consumer subsidies, making it possible to give farmers a monetary reward for producing certain prod ucts despite price ceilings below the incentive level, were a variation of this. As demand for agricultural products reverts to peacetime levels, maintenance of farm income can be expected to replace expansion of production as the chief end of agricultural price supports. Under these con ditions, acreage limitations may become an essential part of the program. Since the peak of the war effort, only two limitation programs have been announced. The first, applying to dried peas in 1945, encountered strong op position and was revoked. The second, announced re cently, applies to the 1947 potato crop. The Government supports prices by three methods: nonrecourse loans to producers at the guaranteed per centage of parity; marketing agreements between pro ducers, their organizations, or dealers, and the Com modity Credit Corporation; and outright purchases in regular market channels. Nonrecourse loans to produc ers are the mandatory type of support for “ basic” com modities. These loans, however, may be supplemented by direct purchase, as in the case of peanuts, and of wheat in Georgia and South Carolina, where suitable storage facilities are lacking. Support through loans is also prac ticed in the case of some nonperishable “ Steagall” com modities. For certain other commodities, of which sugar beets are an example, a fixed price is set at the beginning February 1947 23 M O N T H L Y REVIEW In broad terms, 1947 production goals recommended by the states in the District reflect the Department of Agri culture’s suggestions for the country as a whole, but there are many differences which take account of special con ditions in the District’s agriculture and its performance in 1946. For example, while national goals call for a reduction in planted acreage of wheat, corn, and oats, District goals allow a slight expansion. Both national and District goals propose increases in rye, sorghum grain, tame hay, dry beans, flaxseed, sugar beets, cotton, and alfalfa seed, and decreases in dry peas and potatoes. of the planting year and the Government pays a subsidy equal to the difference between the market price and the guaranteed price. The Department of Agriculture expects that marketing conditions in 1947 for the bulk of commodities entitled to price support will make Government intervention un necessary. Price support operations in 1947 are definite, however, for sugar beets and sugar cane, and flaxseed. W ool support operations will end April 15 unless re newed by Congress. The Government is already buying eggs, powdered milk, and poultry in order to maintain guaranteed prices, and similar support is almost certain for potatoes. The proposed cut in California early potatoes, amount ing to 35 percent of the 82,000 acres planted in 1946, is the largest reduction proposed for any crop in any state of the District. In 1946, early potato growers in California overplanted their goal by 28 percent. Since early potatoes, which at Government support prices gross 400 to 600 dollars per acre, are by far the most profitable crop in Production goals for the Twelfth District The accompanying table shows 1947 production goals for the Twelfth District by states for individual com modities compared with actual accomplishment in 1946. 1947 C om pared w it h F arm P r o d u c t io n G o a l s — T w e l f t h D is t r ic t A c r e a g e P l a n t e d , L i v e s t o c k P o p u l a t i o n , or P r o d u c t i o n , 1946 , ----- Twelfth Field crops District----- > 1 9 4 7 goal as % of 19 4 6 actual Ariz. Calif. Idaho Nev. Ore. Utah Wash. Total B a r le y ....................................................... 1947 1946 160 161 1 ,8 0 0 1 ,8 7 0 285 291 24 24 250 232 159 132 135 115 2 ,8 1 3 2 ,8 2 5 99 .6 C o r n .......................................................... 1947 1946 41 41 70 67 32 28 4 3 42 40 30 28 32 26 251 233 1 0 7 .7 ( th o u s a n d s of acre s) H ay, t a m e .............................................. 1947 19461 290 311 1 ,9 0 0 1 ,8 8 1 985 985 180 173 850 815 525 510 915 918 5 ,6 4 5 5 ,5 9 3 1 0 0 .9 Oats .......................................................... 1947 1946 28 26 550 554 191 158 12 12 400 384 48 52 270 141 1 ,4 9 9 1 ,3 2 7 1 1 3 .0 1947 19461 — — 16 12 Sorghum, g r a in .................................... 1947 1946 70 73 140 110 W heat 1947 1946 30 29 800 737 18 15 — 377 287 150 119 — .— __ — — — — — 153 163 — 21 27 — 92 122 168 168 3 3 45 52 16 20 250 254 — .— — — 95 91 — — 180 157 160 145 390 359 — — — — ■— 1947 1946 15 14 160 106 — __ — — 1947 19461 44 46 25 22 30 23 — 1947 19461 — — 16 17 75 40 — 1947 1946® 464 438 546 595 1947 1946 51 44 1947 524 462 4 4 61 55 33 33 760 630 2 1 ,2 0 0 1 9 ,1 3 1 3 ,8 0 0 3 ,5 6 2 100 91 3 ,7 0 0 3 ,7 1 2 300 249 239 6 ,0 7 7 5 ,8 3 4 ..................................................... Beans, d r y .............................................. 1947 1946 Peas, d r y ................................................ 1947 1946 Potatoes, I r i s h .................................... 1947 1946 Rice .......................................................... 1947 1946 Sugar b e e t s ........................................... 1947 1946 Cotton 1947 19462 ..................................................... Flaxseed ................................................ Other legume and cover crop seeds 10 10 5 7 — — — 6 6 .— — 38 38 — — 1 ,3 0 0 1 ,1 9 1 — — .— 20 22 — 8 9 78 75 1 0 4 .0 — — 210 183 1 1 4 .8 2 ,7 5 0 2 ,6 4 0 6 ,2 0 0 6 ,0 1 2 1 0 3 .1 7 6 4 4 556 431 1 2 9 .0 __ 235 252 409 442 9 2 .5 49 56 378 428 8 8 .3 ___ — 1 ,0 0 0 1 ,0 8 5 — 300 308 — — — 250 254 9 8 .4 — 22 20 50 46 17 16 364 330 1 1 0 .3 ___ _ —- — __ — 1 1 10 7 — 42 46 — 550 504 1 0 9 .1 177 122 1 4 5 .1 151 144 1 0 4 .9 — 10 6 382 349 1 0 0 .5 1 1 ___ — 281 286 146 198 193 260 326 304 135 157 137 130 1 ,9 4 7 2 ,0 8 2 93 .5 830 824 220 220 19 18 231 231 110 335 335 1 ,7 9 6 1 ,7 8 4 1 0 0 .7 112 1,855 1,050 1 ,9 3 0 325 6 ,9 6 3 1 0 3 .7 1 ,1 0 9 550 514 729 1 ,9 7 4 775 25 1,518 12 11 364 26 26 6,716 165 156 1 0 5 .8 2 ,6 7 0 2 ,3 5 8 8 ,2 4 0 7 ,4 8 5 4 1 ,6 2 0 3 7 ,0 4 9 1 1 2 .3 3 ,5 2 8 2,1 0 0 2 ,0 1 3 1 ,8 5 0 1 ,5 9 0 1,500 9,600 106.5 1 ,3 1 0 9 ,0 1 3 1.356 1,331 682 680 2 ,1 0 1 11 ,8 7 7 1 1 ,6 0 7 — Livestock ( in th o u s a n d s ) Beef cows on farm, Dec. 3 1 ......... M ilk cows, average number Stock sheep and lambs on farm, Dec. 3 1 ................................................ Sows to farrow, Spring...................... 19463 1947 1946 Chickens ra ise d .................................... 1947 1946 1947 1946 M ilk production (m i llio n p o u n d s )............................. 1947 1946 255 4 4 23 450 355 50 42 4,500 1,298 114 1 ,2 7 6 103 2,144 1 Harvested acreage. 2 In cultivation July 1. 3 District goal based on preliminary estimates of 1,961,000 beef cows and 7,671,000 sheep and lambs as of December 31, 1946. N o t e : Since adoption of state goals some changes have been made in national goals. These changes are not reflected in this table. 10 2 .3 24 FEDERAL RESERVE BANK the area in which they are grown, the incentive for heavy planting would continue in the absence of penalties or other offsets. The same tendency for overplanting pro posed potato goals exists, perhaps in less extreme form, in other states of the District. The Department of Agri culture has stated, however, that price support will be given only to growers who plant within their acreage allotments. The entire production of farmers who plant in excess of their allotments becomes ineligible for Gov ernment price assistance. National goals propose also a reduction in the acreage of vegetables both for the fresh market and for processing, but state goals have not been established in the District. Judging from reports on District acreages of winter vege tables, a reduction in the total acreage planted to truck crops is very probable. No price support for vegetables is contemplated in 1947. The greatest relative increase in acreage, both in the country as a whole and in the District, has been sug gested for flaxseed. The national goal is 186 percent of 1946 acreage, and the District goal is 145 percent. To promote this increase the originally announced support price was increased from four dollars to six dollars per bushel. Outside of the Twelfth District, the Department of Agriculture would like to see the reduced acreage of spring wheat in Minnesota and the Dakotas shifted to flax. In the District, most of the flax is grown in the Imperial and the San Joaquin Valleys in California. Here the shift will probably be at the expense of barley and perhaps other grains. District acreage planted to flax seed as of January 1, 1947, however, is only 144,000 OF SAN FRANCISCO February 1947 acres, compared with 122,000 acres in 1946 and with the goal of 177,000 acres. Most District farmers are in a very favorable position in respect to production plans, since they have at their disposal many profitable choices. According to the De partment of Agriculture, many western potato growers, for example, could also raise dry beans or sugar beets, and the price prospects for both of these crops are excel lent. Washington, Oregon and Idaho pea growers have a favorable alternative in wheat. Flaxseed prospects also seem very good, both in California and Arizona. Sugar beet growing in 1947 is especially attractive. In Califor nia, the limiting factor in sugar beet growing now lies in the capacity of processing plants. There are quite a number of differences between na tional and District goals for livestock and livestock prod ucts in 1947. Both programs suggest a decline in beef cows and increases in pigs and milk. While the national program proposes a small decrease in milk cows and in chickens and turkeys, the District program proposes a slight increase in the number of milk cows and a consider able increase in the number of chickens and turkeys. The reduction in turkey production in 1946 in the country at large occurred almost entirely in the three Pacific states. The number of sheep and lambs at the end of 1946 is smaller than the suggested goals for both the country as a whole and for the District. The national goal calls for a decrease of egg production. Except for California, where an increase in egg production from 154 to 175 million dozen is proposed, no state of the District has established a goal for eggs. 24 A FEDERAL RESERVE BANK INDUSTRIAL PRODUCTION OF SAN FRANCISCO February 1947 National Summary of Business Conditions Released February 27, 1947— Board of Governors of the Federal Reserve System output reached a new record peacetime level in January— one-sixth higher than at the beginning of last year. Dollar volume of retail sales during January and the early part of February was substantially larger than in the same period last year, reflecting mainly increased prices. Prices of agricultural commodities have risen in recent weeks, following earlier declines, and prices of building materials have shown further increases. I n d u str ia l I n d u s t r i a l P r o d u c t io n Federal Reserve index. Monthly figures, latest shown are for January 1947. W H O LES A LE PRICES Total output at factories and mines in January was at a rate of 188 percent of the 1935-39 averages, according to the Board’s seasonally adjusted index, as compared with 181 in December and with the previous peacetime peak of 183 in November. The large rise in January reflected chiefly sharp gains in output of coal, iron, and steel. Pro duction of these materials had been curtailed in November and December owing to the bituminous coal work stoppage. Production of iron and steel in January was in the largest volume since May, 1945. Steel mill operations averaged 93 percent of capacity and were at a slightly higher sched uled rate during the first three weeks of February. Output of building materials was maintained at an unusually high level for this season, and activity in the nonferrous metals, machinery, and transportation equipment industries was maintained close to the December rate. Production of nondurable goods was at a rate of 177 percent of the 1935-39 average in January as compared with 173 in November and December. Activity in the chemicals, foods, and paper and printing industries reached new postwar peak rates in January, while output of most textile and leather products was below earlier peak rates. Output of bituminous coal, after being curtailed in November and December, increased in January to the highest level in twenty years and wras 9 percent above a year ago. Pro duction of metals advanced somewhat, while output of anthracite and crude petroleum declined slightly. E mployment Bureau of Labor Statistics’ indexes. W eekly figures, latest shown are for week ending February 15,1947. Employment in manufacturing and most other nonagricultural industries continued to show little change in January, after allowing for the usual seasonal variation. The num ber of persons unemployed increased further to a level of 2,400,000. C o n s t r u c t io n MEMBER BANKS IN LEADING CITIES Value of construction contracts awarded, as reported by the F. W . Dodge Corporation, increased by one-fourth in January following a marked decline during the preceding seven months. About one-half of the increase was accounted for by public nonresidential construction, reflecting chiefly large awards for veterans’ hospitals. Residential con tracts expanded by one-third due principally to awards for several large apartment proj ects. D is t r ib u t io n Demand deposits (adjusted) exclude U . S. G o v ernment and interbank deposits and collection items. Government securities include direct and guaranteed issues. W e d n e s d a y figures, latest shown are for December 31, 1946. Value of department store sales in January and the early part of February was main tained close to the level prevailing since last June, after allowance is made for the usual seasonal changes. Sales during the first seven weeks of this year were 17 percent larger than the same period last year. Sales at other retail stores were at a relatively higher level compared with last year, reflecting mainly advanced prices for foods and increased supplies of such durable goods as automobiles and hardware. Unit sales of numerous nondurable goods apparently have declined somewhat from earlier advanced levels. Freight carloadings increased somewhat further in January, reflecting chiefly increased shipments of coal, iron, steel, and lumber. Shipments of most manufactured products and agricultural commodities showed little change. Shortages of cars continued to limit the movement of some classes of freight. C o m m o d i t y P r ic e s MEMBER BANK R ES ER V ES AND R E L A T ED ITEMS Prices of farm products and foods, which declined from the middle of December to the latter part of January, have risen since that time, reflecting partly severe weather conditions and increased Federal export allocations for grains. Wholesale prices of most industrial products have shown little change but building material prices have increased further. B a n k C r e d it Wednesday figures, latest shown are for February 19, 1947. Income tax collections greatly increased Treasury deposits at the Reserve Banks in January and the first half of February and placed member banks under moderate Reserve pressure. A post-holiday return flow of currency of about 900 million dollars and an increase in monetary gold stock supplied some Reserve funds to member banks and there was a decline in required reserves. To maintain their Reserve positions, however, banks sold short-term Government securities to the Reserve Banks. Bank deposits were also reduced by tax collections, notwithstanding the return flow of currency. A t member banks in leading cities demand deposits adjusted declined by 1.3 billion dollars in the four weeks ending February 19. Commercial and industrial loans continued to expand during January and early February; the rate of increase was more moderate than during last summer and fall. Government security holdings declined fur ther, reflecting Treasury debt retirement and bank sales of bills and certificates.
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