The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
MontUhj, FEDERAL RESERVE R&tpLeur BANK J UL Y OF SAN FRANCISCO 1943 Review of Business Conditions— Twelfth District slackening in the general rate o f increase in T w elfth District industrial activity has becom e evi dent in recent months. This tendency was to be expected as plant facilities constructed or converted under the war program approached full utilization and as available labor supplies became increasingly absorbed. D uring 1942, the year o f m ost rapid expansion in war p rodu c tion, total m anufacturing em ploym ent in the T w elfth District increased by 458,000 workers, an average o f 38,000 per month. Prelim inary data indicate that in the first five months o f 1943 about 80,000 additional workers were added to the payrolls o f m anufacturing concerns, an average increase o f 16,000 per month. Because o f further lengthening o f the average w ork-w eek and o f higher average hourly earnings, the latter being m ore a reflection o f the upgrading o f workers and increased hours at overtim e pay than o f increases in basic wage rates, slackening in the rate o f gain in aggregate manu facturing payrolls has been less marked. Despite this con tinuous large increase in consum er incomes, retail trade, as measured by department store sales, has shown little change from m onth to m onth during the first half o f 1943 except fo r the abrupt and tem porary increase in February. larger totals, proportionately, fo r the lumber and food groups, and slightly smaller totals fo r the other groups. Because the length o f the w ork-w eek varies am ong in dustries, and because som e industries are m ore highly mechanized, or utilize their labor forces m ore efficiently than others, m an-hour data do not measure the relative volum e o f output in different industries with exactness. T h e data do provide, how ever, an approxim ate measure o f the extent o f, and changes in, activity in the several industries. Dominance of the Aircraft and Shipbuilding Industries Increased labor productivity has been limited by high labor turnover. A s job s became increasingly plentiful after m id-1940, workers tended m ore and m ore to shift from plant to plant seeking higher rates o f pay and better living, w orking and com m uting conditions. V a ri ous steps have been taken to rem ove som e o f the con d i tions occasioning excessive labor turnover and also to restrict directly the facility with which workers might transfer from jo b to job . A s early as A pril 1941, wage stabilization agreements designed to make u niform the wage rates fo r given occupations am ong the various yards and am ong individual w orkers in the same yard were negotiated between labor unions and shipyard oper ators. In the aircraft industry, a similar result was at tained under a ruling o f the W a r L abor Board on F eb ruary 4, 1943. W a g e adjustm ents have been made in other industries such as lumber and non-ferrou s metals mining, and widespread efforts have been made to p ro vide better housing and com m uting facilities. It is now necessary fo r a w orker in an essential industry to obtain a certificate o f availability from the W a r M anpow er Com m ission b efore he m ay obtain other employment. S o m e T h e aircraft and shipbuilding industries have com e to exert a dominant influence in the T w e lfth D istrict indus trial pattern. T heir im portance in C alifornia is indicated in the chart on the next page o f m an-hours w orked by wage-earners in broad industry classifications during recent years. T h e vast expansion in m an-hours worked in all C alifornia m anufacturing establishments since 1939 has occurred almost entirely in durable good s in dustries and, within this broad classification, in the trans portation equipment field, chiefly the aircraft and ship building industries. F o r m ore than a year, man-hours w orked in these tw o industries have been greater than in all others com bined. T h e chart also indicates the grad ual tapering o ff in the rate o f increase during recent months, to which reference was made earlier. Data similar to those fo r C alifornia are not available fo r other T w elfth District states, but it is believed that the chart is reasonably indicative o f the situation fo r the district as a whole. M an-hour figures fo r all seven west ern states com bined would show, fo r 1943, somewhat ★ 'U ic to s u f, ★ B uy W Labor Productivity W ith the program o f expansion o f District aircraft plants and shipyards largely com pleted early in 1943, further increases in the already substantial output o f planes and ships hinge largely on whether scheduled in creases in w orking forces and the attainment o f increased w orker productivity are realized. Output per w orker has increased considerably in these tw o new and m ajor war industries over the past year or m ore. T he period o f speedy organization and sudden grow th is com ing to a close and increased effort is being directed towards realizing m ore com plete and efficient utilization o f em ployed labor. g a. ß o + td li a n d S to n tp A . ★ 46 FEDERAL RESERVE BAN K OF SAN FRANCISCO These and other measures appear to have had an effect recently in curbing further increases in labor turnover. July 1943 Production in O ld e r Established Industries While the smaller expansion of industrial activity dur ing recent months is largely accounted for by the major war industries, the older established industries of the District have shown little if any gain since last winter, seasonal influences considered. Lumber production in creased only slightly more than seasonally in the first six months of the year, and output has been consistently lower than in the like months of 1942. A shortage of labor, particularly in logging operations, has been largely responsible for the decline of lumber production, al though the necessity for replacing skilled with compara tively untrained workers has resulted in some decline in worker productivity. Petroleum producing and refining, although above the levels of a year earlier, have changed little since the first of the year. On the other hand, metals production has increased, a reflection chiefly of the com pletion of additional magnesium and pig iron plant capac ity during recent months. District A re a s of A c u t e Labor Shortage The tapering off in the rate of expansion of Twelfth District factory employment since the first of the year partly reflects an approach to full employment of work ers in the labor force in the principal war production centers and the lack of housing and other facilities to accommodate additional workers and their families, who might otherwise move to those centers. By mid-June all major centers of war industry in the seven western states except Los Angeles had been declared areas of acute labor shortages by the War Manpower Commission. To the San Francisco Bay, Salt Lake City, Ogden, PortlandVancouver, San Diego and Puget Sound (SeattleTacoma) areas, already so classified, the War Manpower Commission added the Stockton area in June. Such areas are designated as localities “in which current labor re quirements cannot be met, except through the release of workers now employed in production for which facilities exist elsewhere” and “where labor requirements have been or are being met only through substantial in-migra tion or where large scale special recruitment programs have been or are immediately necessary to draw upon reserves of women and other individuals not customarily in the labor market.” In these areas a mandatory 48-hour minimum work week prevails. In mid-July a mandatory 48-hour minimum work week was ordered for all establishments with eight or more employees in the region comprising the five south ern California counties of Los Angeles, Orange, River side, San Bernardino and Ventura. By this action the labor situation may be sufficiently relieved to avoid the necessity of classifying the area as one of acute labor shortage. Fruit and vegetable canning and preserving has fol lowed the customary seasonal pattern, but the packs of most major items canned thus far this season are smaller than a year earlier. Estimates of the spinach, asparagus and cherry packs all indicate a lower output than in 1942, and the apricot pack is the smallest in more than a decade. Smaller farm output, particularly of apricots, and short ages of labor have been factors in the curtailed output. On June 28, the War Food Administration announced a program to prevent undue diversion of Pacific Coast peaches and pears into fresh markets in order to be more certain that essential needs for processed fruits will be met. Price ceilings have been established on both raw and processed peaches and pears by the Office of Price Ad ministration. M IL L IO N S OF M AN H O U R S P E R W E E K M IL L IO N S OF M A N H O U R S P E R W E E K 1 NONDURABLE GOOOS INDUSTRIES DURABLE GGCOS INDeSTBIES ALL MANUFACTURING INDUSTRIES r J/ jfl ■ j f j B k AND OTHER TRANSPORTATIOf> EQUIPMENT SHIPS, AIRCRAFT -^ -« w iu w B e R , TIM*er, : : - AND PRODUC i i \ y~ , , , V ^ ' ITv TOOD AND KINDI*eo products m fP fV s METALS ANOi PRODUCTS / / / / ^ > } /Vapharll, textile ih4ERY m ^^^^OTHER NONCMJRv ^ s ^ s s s ^ m H O U R S W O R K E D IN C A L I F O R N I A M A N U F A C T U R IN G PLAN TS T otal hours w ork ed , including part time and overtim e, by factory w age-earn ers. N o t adjusted fo r seasonal variation. W e e k ly figures by m onths, January 1940 to June 1943. S ource: C aliforn ia D iv ision o f L a bor Statistics and Law E n forcem ent. July 1943 47 M O N T H L Y REVIEW C o s t of Living Living costs continued to increase through May 1943. In the major Pacific Coast cities the cost of living of wage-earners and lower salaried workers, as measured by the indexes released by the United States Bureau of Labor Statistics, had increased 22 percent between De cember 1940 and December 1942. With further advances in retail prices after the first of the year, particularly of foods and clothing, the increase over December 1940 had risen to 25 percent by May. In that month the index for San Francisco had risen to 128.1 percent of the 1935-39 average from 124.0 in December 1942, for Los Angeles to 125.7 from 123.9 five months earlier, and for Seattle to 129.5 from 125.1. 326 million dollars during the year, the decrease during the last half amounting to 215 million dollars. On June 30, 1943, investments in Government securities com prised 67 percent of all earning assets of member banks, compared with 43 percent a year earlier. E a r n in g A ssets T of w e lfth D is t r ic t M em ber B a n k s (in millions of dollars) Item L o a n s .................................. U n ite d S tate s G overn m en t Secu rities ....................... O th e r S e c u r it ie s .................. June 30, 1942 2,281 D e c. 31, 1942 2,170 June 30, 1943 1,955 2,122 503 3,630 538 5,014 548 4,906 6,338 7,517 Expansion in Deposits In the fiscal year ended June 30, the interest bearing debt of the United States Government almost doubled. Direct and guaranteed obligations rose to 140 billion dol lars from 76.5 billions a year earlier. A small amount of the increased securities was absorbed by Government agencies and trust funds, and of the more than 60 billion dollars remaining, almost one-half was taken by com mercial banks and the Federal Reserve banks. Both the increase in the public debt and the proportion absorbed by the banking system were smaller in the second half of the 1943 fiscal year than in the preceding six months, but considerably increased tax revenues and borrowing from non-bank sources must be achieved in order to retard the rapid expansion of the country’s money sup ply and to aid in checking inflationary pressures. United States Treasury expenditures of funds bor rowed from District banks together with the expendi ture of large sums transferred by the Treasury to this area from other parts of the country were the major factors contributing to a marked further increase in de posits of Twelfth District member banks in the six months ending June 30. Demand deposits of individuals, partnerships, and corporations amounted to 4,951 mil lion dollars on that date, an increase of 614 million dol lars since December 31, 1942 and of 1,934 million over a year earlier. Coin and currency in circulation, the other component of the money supply, has also increased stead ily during recent months. In the six months ending June 30, net payments of coin and currency into circulation in this District amounted to 297 million dollars and in the 12 months ending on that date the increase was 719 million dollars. Investments a nd Loans of Twelfth District M e m b e r Banks N e t Treasury Expenditures Holdings of United States Government securities by Twelfth District member banks increased sharply in the fiscal year ending on June 30. Investments in these obliga tions rose to 5,014 million dollars, an increase of 2,892 million during the 12-month period. O f this increase, slightly less than half (1,384 million) was added to the banks’ portfolios in the six months ending on June 30. Loans of member banks, on the other hand, declined Net Treasury expenditures in the Twelfth District, i.e. the expenditure of funds transferred to this area from other parts of the country, totaled 4,116 million dollars during the fiscal year just closed. O f this total, 2,492 mil lion 'was accounted for in the second half of the year. The expenditure of these funds added directly both to deposits and reserve balances of District member banks. Both deposits and bank reserves were drawn upon dur ing the period to meet large net payments to the rest of the United States arising from commercial and financial transactions and to meet increased local demands from the public for currency and coin. The net outflow of Government Finance and Bank Credit Production and Employment— In d ex num bers, 1923-25 average=100 W ith Seasonal W ith ou t Seasonal t---------A d justm ent t-------- A d justm ent ,----------19431942 M ay A p r. M ar. M a y In d u stria l P r o d u ctio n 1 L u m b e r 2 ........................... . .p l3 4 p l2 8 131 134 — — — — R efin ed O i l s ................... C em ent ............................. . . 162 159 168 176 152 143 114 W h e a t F l o u r ................... , , 133 — — — — P e t r o l e u m ........................ 383 391 290 E le c tr ic P o w e r ............... . .p 3 8 9 F a c t o r y E m p lo y m e n t and P a y ro lls 3 E m p loy m en t P a cific C o a s t .............. , 337 339 C a liforn ia ............... , 403 403 277 284 O re g o n ................... W a s h in g to n .......... 236 240 P a y rolls 612 615 P a cific C o a s t .............. 702 C a liforn ia ............... . 704 524 495 O re g o n ................... W a s h in g to n .......... 479 477 A M ar. 116 186 169 140 118 364 1942^ M ay 153 168 184 100 95 295 347 408 297 251 247 288 219 180 342 405 288 245 339 399 289 247 338 398 285 248 251 289 227 187 615 686 554 497 374 432 340 270 629 714 529 503 622 703 534 496 607 677 532 497 384 438 364 283 1 D a ily average. 2 C on verted to 1935-39 base. 3 E x clu d e s fish, fru it, and v egetable can n in g , p P relim in ary. » -1 9 4 3 M a y A p r. p l5 4 p l3 3 188 196 170 167 117 134 117 117 p396 396 Distribution and TradeW ith Seasonal /-------- A d justm ent-------- ^ ,----------1943----------N 1942 R etail T r a d e M a y A p r . M ar. M ay D epartm en t Store' Sales (v a lu e ) T w e lfth D is t r ic t ............ p l 8 7 190 196 147 S ou th ern C a lif o r n ia .. . p l 9 2 191 183 1 48 N o rth e rn C a lif o r n ia .. . p i 6 6 1 70 174 1 3 4 P o rtla n d ...........................p l 9 4 205 218 153 W e s te rn W a s h i n g t o n .. p 2 2 4 223 260 181 E a stern W a s h in g to n and N o rth e rn I d a h o . p l 6 7 1 70 203 121 P h o e n ix ...........................p 2 0 4 210 1 96 153 In dex num bers, 1935-39 daily average=100 W ith out Seasonal A djustm ent 1942 f-------- -1943M ay A p r. M ar. M a y p l8 0 p l8 2 p l6 0 p l8 8 p218 188 187 167 2 01 2 31 171 165 153 195 2 21 1 42 140 1 30 148 1 77 p l6 9 p209 176 220 160 195 1 22 157 p ll7 p l2 0 p ll4 100 105 94 97 103 89 110 1 10 110 C a rloadin g s ( n u m b e r )1 T o t a l ...........................................p l l 6 M e r ch a n d is e an d M is c . .p l 2 7 O t h e r ......................................p l O l 1 1923-1925 daily average = 100. p Preliminary. 1 03 112 93 1 04 111 95 109 117 98 48 July 1943 FEDERAL RESERVE BAN K OF SAN FRANCISCO funds (other than for the account of the Treasury) from the Twelfth District to meet an unfavorable balance of payments because of interdistrict transactions in goods, services, and securities, amounted to 3,169 million dol lars during the year ending June 30, and to 2,107 milF actors A f f e c t in g R T w e lfth eserve B D is t r ic t M em ber B a n k a la n c e s (in millions of dollars) July 1,1942 to June 30, 1943 Jan. 1,1943 to June 30, 1943 U n ited States T re a su ry O p e r a t io n s ........................ T h e’ am ou n t b y w h ich F ed era l G o ve rn m e n t d is bursem en ts in the d istrict e x ce e d e d c o lle ctio n s. 4,116 2,492 R e se rv e B a n k C r e d it ........................................................ T h e a m ou n t o f in crea se in cre d it exten ded d i r e c tly in the T w e lft h D is trict. 99 — 5 4,215 2,487 In te r d is tr ict P a y m e n ts and T ra n sfe rs o f F u n d s T h e net a m o u n t paid_ to o th er d istricts in settlem ent o f co m m e r c ia l and financial tran s a ction s (e x c lu s iv e o f T re a s u ry o p e r a tio n s ). 3,169 2,107 D em a n d fo r C u r r e n c y ..................................................... T h e a m ou n t b y w h ich h old in g s o f cash b y ba n k s and the' p u b lic increased. 719 297 O th er F ed era l R eserv e A c c o u n t s ............................... T h e a m ou n t o f the increase in n on m em ber ban k a cco u n ts and o th e r m iscella n eou s a c cou n ts at th e R e se rv e ban k. 13 2 3,901 2,406 314 81 F a cto r s W h ic h In cre a s e d R e se rv e s T o t a l o f fa c to r s in crea sin g m em ber ban k r e s e r v e s ............................................................... F a cto r s W h ic h R e d u c e d R eserves T o t a l o f fa cto rs de cre a sin g m em ber ban k r e s e r v e s ............................................................... M em b er ban k reserve balance's at the F ed era l R e serve B a n k o f San F r a n cis c o in c re a s e d ............ lions during the six months ending on that date. The accompanying table summarizes the factors affecting re serve balances of member banks during the fiscal year just closed. Excess Reserves of M e m b e r Banks As shown in the accompanying table, reserve balances of District member banks increased 314 million dollars in the fiscal year ending June 30, most of the increase occurring in the first half. Despite this increase in re serves and the removal, effective April 13, of the require ment that member banks maintain reserves against War Loan Deposits, excess reserves of member banks de clined. In the last half of June they averaged 176 million dollars compared with an average of 251 millions six months earlier and 282 millions in the last half of June 1942. Use of Treasury Bills fo Adjust Reserve Positions The decline in excess reserves reflects the increase in deposits subject to reserve. As the figures of increased investments in Government securities shown earlier in this discussion indicate, District banks have not been deterred from substantial participation in new Treasury issues by the decline in excess funds. One development of the past year has been a considerable increase in aggre gate investments in Treasury bills by District banks, with an increasing number of banks participating in the weekly issues of these securities. To encourage wider participation in the purchase of bills, particularly by smaller institutions, the Treasury recently announced that subscriptions of $100,000 or less may be made at a fixed price of 99.905, representing a discount of slightly more than .37 percent, and will be filled before allotment on other subscriptions. Any holder of Treasury bills currently may sell all or any portion of his holdings to the Federal Reserve banks at a fixed discount of of one percent. These sales may be made under an agreement whereby the Federal Re serve bank purchasing the bills agrees to resell bills of like amount and maturity to the seller at the same rate of discount and prior to maturity of the issue. This privi lege provides banks with a means readily to meet tempo rary demands upon their reserves and at the same time to maintain a fully invested position. Extensive use has been made of this privilege at the Federal Reserve Bank of San Francisco during recent months. On July 13, Treasury bills held by this Bank under option to repur chase by sellers amounted to $157,220,000. Banking and Credit— -Change From,-------- 1943------- ^ 1942 May April June Averages of Wednesday figures (millions of dollars) C o n d itio n Ite m s o f W e e k ly R e p o rtin g M e m b e r B a n ks T o ta l l o a n s ................................................ C o m m ’ l, ind. & agric. lo a n s .......... L o a n s to finance securities tran saction s .................................... R e a l estate lo a n s .................................. A ll oth er lo a n s .................................... T o ta l in v e s tm e n ts .................................... G o v ’ t securities .................................. A ll other se cu ritie s............................. A d ju ste d de'mand d e p o s its ................. T im e d e p o s it s ............................. .............. U n ite d States G o ve rn m e n t d e p o s it s . C oin and C u rre n cy in C ircu la tio n T o t a l (ch a n g e s o n l y ) ............................. F e d . R es. n otes o f F . R . B . o f S. F . M e m b e r B a n k R e s e r v e s ............................. 931 438 — — 35 2 — + 15 9 — — 174 68 44 338 I ll 3,199 2,895 304 2,378 1,189 470 — 26 — 4 — 3 + 84 + 88 — 4 + 133 + 19 — 90 — 12 — 6 — 6 +413 +408 + 5 + 111 + 31 +269 1 + 43 — 64 + 1,608 + 1,598 10 + 783 + 85 + 37 — — 1,501 + + 67 69 + 113 +115 1,297 + 54 — + + + 6 720 659 237 Supplement July 1943 M O N T H L Y REVIEW S u m m a r y o f N a tio n a l B u s in e s s C o n d it io n s R eleased June 23, 1943— Board o f G o v e rn o rs o f the Federal R eserve System activity and retail trade were maintained in large volume during May and the early part of June. Retail prices, particularly foods, increased further in May. I n d u s tr ia l P r oduction IN D U S T R IA L P R O D U C T IO N F ederal R eserve m onthly index o f physical volum e o f p roduction, adjusted fo r seasonal variation, 1935-39 average= 1 0 0 for total. G ro u p s are e x pressed in terms o f points in the total index. M on th ly figures, latest show n are fo r M ay. Total volume of industrial production, as measured by the Board’s seasonally adjusted index, remained in May at the level reached in April. Activity in munitions industries continued to rise, while production of some industrial materials and foods declined slightly. Aircraft factories established a new record in producing 7,000 planes in May. In most nondurable goods industries there were small increases or little change in activity. Meat production, however, reached a record high level for May reflecting a sharp advance in hog slaughtering. Seasonally adjusted output of other manufactured foods continued to decline. Newsprint consumption showed little change, and publishers’ stocks declined further to a 50-day supply on May 31. Consumption for the first five months of 1943 was only 5 percent below the same period in 1941, whereas a reduction of 10 percent had been planned. The temporary stoppage of work in the coal mines at the beginning of May brought production of bituminous coal and anthracite down somewhat for the month. Iron ore shipments on the Great Lakes continued to lag in May behind the corresponding month of 1942. The value of contracts awarded for construction continued to decline in May, accord ing to reports of the F. W . Dodge Corporation. Total awards were about 65 percent smaller than in May a year ago. D is t r ib u t io n W H O L E S A L E P R IC E S Bureau o f L a b or Statistics indexes, 1926 average = 100. W e e k ly figures, latest show n are fo r w eek ending June 12. During May the value of sales at department stores decreased more than seasonally, and the Board’s adjusted index declined 5 percent. Sales, however, were about 15 percent above a year ago, and during the first five months of this year showed an increase of 13 percent over last year. In general, the greatest percentage increases in sales have occurred in the western and southern sections of the country where increases in income payments have been sharper than elsewhere. Freight-car loadings advanced seasonally in May but declined sharply in the first week in June, as coal shipments dropped 75 percent from their previous level, and then recovered in the second week of June as coal production was resumed. C o m m o d it y P rices Prices of farm products, particularly fruits and vegetables, advanced during May and the early part of June, while wholesale prices of most other commodities showed little change. Retail food prices showed further advances from the middle of April to the middle of May. On June 10 maximum prices for butter were reduced by 10 percent and on the 21st of the month retail prices of meats were similarly reduced, with federal subsidy payments being made to processors. A gric u l tu r e Y I E L D S O N U .S . G O V E R N M E N T S E C U R I T I E S A v era ges o f daily yield s on notes and bond s and average discount on bills offered. Bills are taxexem pt prior to M arch 1941, taxable thereafter. W e e k ly figures, latest show n are fo r w eek ending June 19. Prospects for major crops, according to the Department of Agriculture, declined during May while output of livestock products continued in large volume, as compared with earlier years. Indications are that acreage of crops may not be much below last year but that yields per acre will be reduced from the unusually high level of last season. B a n k C redit Excess reserves at all member banks declined from 2 billion dollars in early May to 1.5 billion in the latter part of the month and remained at that general level through the first half of June. As the Treasury expended funds out of W ar Loan accounts which require no reserves, the volume of deposits subject to reserve requirements increased and the level of required reserves rose by 600 million dollars in the four weeks ending June 16, while continued growth of money in circulation resulted in a drain on bank reserves of 400 million dollars. These reserve needs were met in part by Treasury expen ditures from balances at the reserve banks and in part by Federal Reserve purchases of Treasury bills. Reserve banks continued to reduce their holdings of Treasury bonds and notes in response to a market demand for these issues. During the four weeks ending June 16, Treasury bill holdings at member banks in 101 leading cities fluctuated widely, reflecting primarily sales and repurchases on option D em and deposits (a d ju sted ) exclu de U . S. G o v ernm ent and interbank deposits and co llection item s. G overn m en t securities includ e d irect and guaranteed issues. W edn esda y figures, latest show n are for June 16. account by New York City banks in adjusting their reserve positions. Holdings of bonds and notes declined somewhat while certificate holdings increased. Loans to brokers and dealers in securities declined sharply during the period, as repayments were made on funds advanced for purchasing or carrying government securities during the April W ar Loan Drive. Commercial loans continued to decline. Government security prices advanced during May following the close of the Second War Loan Drive, but in the early part of June there were small declines.
@FedFRASER