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FEDERAL RES ERVE B A N K OF S A N F R A N C I S C O
J U N E -J U L Y
1946
Unemployment and Labor Shortages
m ong
the anomalies characterizing the transition from
■a wartime organization of the economy to a more
A
nearly normal condition, none is more striking than the
continuance of labor shortages in many industries and
localities of the District at a time when there is consider
able unemployment. Reports of labor shortages, which
are not inconsistent with the record levels of peacetime
employment being experienced, come from many quar
ters. Yet, in the three Pacific Coast states the ratio of
unemployment to the non-agricultural labor force has
for several months been not far below that of 1940, be
fore the boom associated with the national defense pro
gram. This paradox of simultaneous labor shortages and
substantial unemployment has occasioned no little con
fusion and misunderstanding and has given rise to com
plaints in some quarters that excessively liberal policies
with respect to unemployment compensation and vet
erans’ allowances are hindering the return to work of
many thousands of work people for whose services in
dustry is said to be clamoring.
The extent of unemployment
Since the end of the war ..unemployment has fluctuated
in the District in much the same way as nationally, al
though apparently on a relatively higher scale. Starting
from a low point in August 1945, total continued claims
filed for unemployment benefits and veterans’ allowances,
i.e., claims certifying to the completion of a week of un
employment, reached a maximum of around 485,000 in
the District in the first week of March and declined to
about 335,000 by the middle of June.1 The reduction was
much more rapid in claims filed by persons who were
previously in insured employments than among the vet
erans. Civilian claims declined from about 350,000 in
March to about 215,000 in June, while veterans’ claims
continued to increase for a time above the March level
and have shown only a slight reduction.
Among non-veterans the rate of unemployment during
the first half of 1946 appears to have been appreciably
higher in the Twelfth District than in the nation as a
whole. The ratio of continued claims in March 1946 to
1N o exact statistics are available on the total number of unemployed. Total
unemployment in the three Pacific Coast states, including individuals not
covered by the unemployment compensation systems as well as those who
had been in insured employment and veterans, was estimated by the
United States Employment Service at just over 600,000 in M ay of this
year, compared with 725,000 at the March peak, less than 100,000 at the
wartime low, and 600,000 in April 1940. Continued claims in the three Coast
states have been more than 90 percent of those in the entire District in
recent months.
average covered employment in 1945 was about 11.6 per
cent for the states of the Twelfth District; the correspond
ing ratio for the United States as a whole was 6.8 percent.
This difference has narrowed, however; the ratios of
June claims to 1945 covered employment were 7.1 per
cent in the District and 5.1 percent in the United States.
Equating supply and demand in the labor market
The reasons for the high rate of unemployment in this
region are to be found primarily in a war-expanded
population and in a lack of industrial diversification as
compared with the United States as a whole. To a far
greater degree than is true of the country generally, war
industry in the Twelfth District took the form of com
pletely new plants, largely financed by Government funds
and largely staffed by labor recruited from outside the
District. W ar workers laid off in many other regions
could more quickly return to their normal habitations,
employments, and occupations, while in the aircraft and
shipbuilding centers of the Pacific Coast large numbers
of unemployed war workers having specialized skills no
longer in demand have found themselves faced with a
lack of comparable job opportunities in the locality and
with the uncertainty of finding employment at the end of
a long and costly journey elsewhere.
The explanation of persistent shortages of labor in par
ticular industries, occupations, or localities in the face of
continuing unemployment is to be found, of course, in
the fact that labor is not a homogeneous or completely
fluid commodity but is a composite of many kinds of in
dustrial skills and aptitudes. Male, female, white, non
white, old, young, experienced, inexperienced— all are
found in varying combinations. The demand for labor is
also not a demand for labor in general but is a demand
for particular kinds of labor and for definitely specialized
training and abilities.
Even before the end of the war the character of the
demand for labor in this District had shifted from a
willingness to hire labor of almost any kind, even un
trained women and young persons, to an insistence upon
workers having some degree of industrial competence.
With the reconversion of industry and the transition to a
peacetime basis of operations, employers have become
even more selective in their hiring practices and are in
creasingly specifying definite occupational skills and ex
perience as a basis for employment.
24
FEDERAL RESERVE BANK OF SAN FRANCISCO
Large numbers of employees in Twelfth District war
industries had acquired limited specialized skills while
engaged in war production, but the demand for most of
these particular skills largely disappeared with the end of
the war. An abnormal proportion of war industry work
ers were in the higher age groups; postwar job specifica
tions, on the contrary, offer much less encouragement to
those above 35 years, especially in unskilled occupations.
In the last years of the war the staffs of Pacific Coast
shipyards and aircraft plants were also heavily weighted
with women and non-whites, groups which now have
substantially fewer employment opportunities than they
did during the war.
Unemployment exists also because of the geographic
immobility of labor. The notion that labor possesses a
high degree of mobility and flows readily from place to
place in response to new job opportunities must be modi
fied in the light of such considerations as housing, local
transportation, schools, and other community services.
The inadequacy of such facilities in particular areas of the
District is still an effective obstacle to the rapid adjust
ment of supply and demand in the labor market. There is
little likelihood, for example, that surplus labor in San
Diego will seek jobs in the Los Angeles area so long as
the existing housing shortage in the latter community
persists.
The occupations in which local labor shortages in the
District are reported to be most acute fall into two major
classifications. First, there is the group of skilled trades
in which relatively few persons were being trained either
before the war or during the war, such as machine tool
operators, building and construction mechanics, and a
wide range of engineering and specialized industrial occu
pations, as well as the more skilled clerical employments
such as stenographers, bookkeepers, salespeople, and the
like. The other principal category of occupations for
which it is difficult to recruit labor includes such rela
tively undesirable jobs as those in laundries, foundries,
domestic service, logging, agriculture, railroad track
maintenance, and the lower grades of clerical and sales
w ork; in a word, the group of jobs where either the work
itself is heavy or unpleasant or is characterized by less
desirable working conditions, or where the wages offered
are relatively low.
Administration of unemployment benefits
To what extent liberal policies followed in the admin
istration of unemployment compensation and veterans’
allowances have increased the difficulties of employers in
obtaining labor is not clear. One of the important influ
ences affecting the flow of labor under present conditions
is the efficiency with which the criterion of suitable work
is applied in the administration of unemployment benefits.
T o be eligible for benefit an unemployed person may not
refuse an offer of suitable work made through the public
employment office administering the compensation sys
tem. This is necessary both as a test of the genuineness of
the claimant’s efforts to obtain work and as a means of
securing the most effective distribution of the available
June-July 1946
labor supply among the various employers who can utilize
it. Difficult problems frequently arise in the practical ap
plication of this requirement and, while minimum stand
ards for the determination of suitability are prescribed by
all the state laws, much must be left to the judgment of
the administrative officers in interpreting the circum
stances of each particular case.
W hat is " suitable work”
In determining whether work is suitable or not, the
following are some of the factors of special importance
in the transition from war to peace : the relation of the
job’s wages and hours to those prevailing in the locality
for similar work ; the claimant’s prior training, experi
ence, and earnings ; the length of time he has been unem
ployed; the prospects of getting local work in his cus
tomary occupation ; and the time and inconvenience in
volved in going to and from work. Probably the most
crucial of these in securing the prompt adjustment of
the individual to the changing conditions of the labor
market are the duration of his unemployment and his
prospects of obtaining a job in his customary line of work.
The longer the claimant has been out of work and the
more unlikely the prospect of his finding a job in his cus
tomary occupation, the greater becomes the economic
pressure to accept an offer of work in some other line.
These conditions also make it easier for the unemploy
ment compensation officers to determine that work out
side the claimant’s customary occupation may, in fact,
become suitable for him. If such a job is refused he will
then be denied eligibility for continued receipt of benefit
payments.
Some states allow claimants a definite period of time
in which to find work in their own occupations before
becoming ineligible for benefit through refusal to accept
work in other occupations or in their own occupations at
substantially lower rates than they had formerly earned.
Other states, including California, secure somewhat the
same results by allowing a reasonable time for adjust
ment according to the circumstances of the individual
case. Some delay is probably desirable in any event as it
permits a more efficient matching up of job opportunities
Production and Employment—
Index numbers, 1935-39
average— 100
W ith seasonal
,-------- adjustment --------\
1945
/---------1946
May Apr. M ar. May
Industrial production1
113
107
108
105
Lumber2 ........................
—
—
—
—
Refined oils2 .................
120
160
, 120
148
173
. 140
153
143
W heat flour2 ..............
—
—
—
Petroleum2 ...................
Electric power2 ................... 397 403 421 429
—
Factory employment and payrolls3 4
Employment
Twelfth District
170
California ............ . . . . 171
Pacific Northwest
Oregon ............
W ashington . .
Intermountain . .
Payrolls
323
321
California .................
Without seasonal
adjustment"¡945
-1946M ay Apr. M ar. M ay
94
125
110
130
222 210 210 265
149
126
126
168
123
135
140
152
129
131
131
143
397
392 437
404
160
275
171
170
159
275
294
576
324
321
293
573
1 Daily average.
2 1923-25 average = 100.
3 Excludes fish, fruit, and vegetable canning.
4 Indexes in process of revision.
June-July 1946
M ONTHLY REVIEW
and job applicants. Even under present conditions the
turnover among claimants to unemployment compensa
tion is fairly rapid. The United States Employment Serv
ice estimated that at the peak of unemployment last
March the average period for which unemployed civilians
were drawing benefits in the three Pacific Coast states
was only about ten weeks; veterans at the same time were
drawing allowances for an average of about five weeks.
Unemployment benefits vs. wages
In judging the effect of unemployment benefits upon
the free flow of labor in response to job opportunities, it
is necessary to discriminate between the various groups
of work people and the various types of jobs. There is
little or no direct evidence, for example, that the avail
ability of unemployment benefits has slowed down to any
marked degree the acceptance of job offerings by compe
tent workers in the skilled trades. The spread between
full earnings at going rates of pay for skilled work and
the maximum weekly amount offered as unemployment
benefit is so large that the average skilled craftsman has
little difficulty in making a choice. The person to whom
only an unskilled worker’s job is open may not have as
clear a choice between unemployment benefit without
working and full time employment at low rates of pay.
This is particularly true where the work offered differs
widely from the claimant’s previous occupation or the
wages offered are substantially lower. Under present con
ditions there is also the special problem presented by those
persons not normally in the labor force who accumulated
wage credits in war industries and who have been draw
ing unemployment benefits with little or no intention of
going back to work at jobs differing materially in pay or
working conditions from their former war jobs. This
group would not be actively seeking work even in the
absence of an unemployment compensation system.
In any event, the most that benefit payments can do is
to give the unemployed person more time to weigh the
relative advantages of alternative job opportunities and
relieve him of the necessity of having to take the first job
offered, regardless of its suitability or intrinsic attractive
ness. One of the objectives of unemployment compensa
tion systems is to promote the smooth flow of labor to
those employers who can best utilize it and thus give
every individual a chance to find that place in the indus
trial scheme where he can produce to the best advantage.
Orderly marketing is a concept applicable to the labor
market as well as to commodity markets.
Unemployment among veterans
Veterans represent currently somewhat over one-third
of the total number of compensation claimants in the
states of the Twelfth District. Their proportion has stead
ily increased since the heavy impact of civilian lay-offs
last September. It is difficult to determine whether un
employment among veterans is more serious in this region
than in the nation as a whole. During the second quarter
of 1946 the volume of insured unemployment represented
by veterans throughout the nation was more than half the
25
total as compared with a ratio of about one-third in the
District, but over-all unemployment rates are somewhat
higher in the District than in the country at large.
Many of the younger veterans have had little or no
work experience or definite occupational interests, and
are consequently more difficult to place in jobs. Non
white veterans present an unusually difficult placement
problem in this area. In general, it is probable that the
availability of veterans’ allowances has increased the
tendency among newly-discharged ex-service men to shop
around for jobs rather than accept the first employment
offered, or even to delay actively reentering the labor
market. Refusal of an offer of suitable work is, of course,
ground for disqualification for benefit in the case of vet
erans as in the case of other claimants.
The labor market in transition
The conditions existing in the labor market of the Dis
trict in mid-1946 are a legacy from the war. They had
their roots in the recruitment of several hundred thou
sand war workers from outside the District and in the
employment, especially in aircraft and shipbuilding
plants, of large numbers of persons, mostly women, who
had no previous industrial experience and who now have
little or no attachment to the labor market. Some of these,
no doubt, have taken every advantage possible of the un
employment compensation system; they draw benefits as
long as the law allows and then drop out of the labor
market. A bona fide offer of a suitable job, since penalty
of disqualification would follow refusal, would probably
result in the prompt retirement of such persons from the
labor force. This situation may be expected to disappear
before long, and will probably not recur under normal
peacetime conditions. Indeed, many of the war workers
displaced from their jobs by the sudden ending of the war
and the cutbacks of military procurement, if still unem
ployed, have probably already exhausted their benefit
periods and are no longer eligible claimants.
Making all due allowance for possible abuse of the
benefit system, whether by former war workers or by exservice men, the fact remains that large numbers of work
people have successfully made the transition to peacetime
jobs. There has been a steady flow of labor both into and
out of the District.1 Marked occupational and geographic
shifts have occurred in job opportunities in the District,
as a result of the changeover from war to peace. These
shifts have involved more or less downgrading of workers
and reclassification of jobs. Both unemployment and
labor shortages have been created by these cross-currents
in labor supply and demand, not by the administration of
unemployment benefits alone. In some instances, benefits
may have aggravated labor shortages, but it is doubtful
that they have seriously intensified labor shortages gener
ally.
1 Information on net migration into or out of the Twelfth District is not
available. I t is worthy of note, however, that during the first quarter of
1946, for every initial claim for unemployment compensation filed in the
three Pacific Coast states for which other states were liable, three such
claims were filed in other states for which the Pacific Coast states were
liable.
26
FEDERAL RESERVE BANK OF SAN FRANCISCO
June-July 1946
Department Store Sales and Stocks
Summary of Interviews with Department Store Executives
y
V -E Day, the annual rate of Twelfth District de
B partment store sales was two and a half times what it
had been in the summer of 1939, just before the outbreak
of war in Europe. Sales in the second and third quarters
of 1945 fell off somewhat. The uptrend was quickly re
sumed, however, and by mid-1946 sales were more than
three times the prewar annual rate.
Underlying causes of the wave of consumer buying dur
ing the spring and early summer of 1946 are to be sought
primarily in the general prosperity of the Twelfth Dis
trict and in the need of the public for goods not available
during the war. This was the consensus among a number
of leading department store executives who were inter
viewed in late May and early June. Since that time, price
controls, after lapsing for several weeks, have been re
instated on a modified basis. These circumstances should
be noted in interpreting the conclusions that follow.
The factors most stressed as being responsible for the
high levels of sales were increased local population and
expanded employment, high wages and large amounts of
money in the hands of the public, the requirements of
returning ex-service men, replacement needs in home
furnishings and accumulated shortages of goods which
until recently have been unavailable, a taste for better
grades of merchandise, higher prices, and in a few in
stances buying in anticipation of further price increases.
The average increase in department store prices be
tween 1940 and mid-1946 was variously estimated by the
store executives at from 20 to 60 percent, with a fairly
definite concentration around 40 percent. These estimates
are roughly comparable with the reports of the United
States Bureau of Labor Statistics of advances in retail
prices of clothing and house furnishings in four Pacific
Coast cities during the period from 1940 through May
1946. In addition, a number of store executives empha
sized that, partly from unavailability of lower cost items
and partly from consumer preference, sales have shifted
strongly toward the higher-priced lines.
The buying wave was expected to persist at least
through 1946, and the probability of a buyers’ strike in
the near future was generally discounted. Some of the
store executives, however, regarded a buyers’ strike af
fecting luxury and semi-luxury items, if not all consumer
goods, as a definite possibility if prices continued to rise.
Customers generally were regarded as becoming some
what more discriminating in their purchasing in terms of
both price and quality, with the major emphasis on qual
ity. Better grades of merchandise were moving quite rap
idly despite higher prices, although sales resistance to in
ferior quality goods and substitute merchandise was
growing.
The inventory position of most stores had been gaining
strength during the first five months of 1946 but stocks
were still unbalanced and in many instances were low in
relation to sales volume at the end of May. Consider
able variation wTas reported wdth respect to inventories
and receipts of merchandise against outstanding orders,
both among individual stores and among departments.
In general, receipts have been improving, inventories in
creasing and the supply position easing. While some store
officials felt that inventories were keeping fairly close
pace with expanding sales, others noted that their stocks
still were far below what they should be in relation to
sales volume. The situation with respect to men’s clothing
has been especially bad, and difficulty was reported in
securing textiles, furniture and tableware. Supplies of
hard goods, such as iceboxes and refrigerators and other
appliances, though growing, remained grossly inadequate.
Buying policies were more liberal than before the war.
While not much deliberate over-ordering based on the
assumption of only partial delivery was admitted, a ten
dency to refrain from cancellation of overdue orders ex
cept for seasonal merchandise was reported. Although a
few stores placed their orders with the understanding that
cancellation would occur automatically should delivery
not be made within a specified time, the more common
practice was to let overdue orders stand. As a conse
quence, if the supply situation should relax suddenly, a
number of the less conservative stores might find them
selves in a difficult position. This contingency, however,
was regarded as highly unlikely.
Distribution and TradeWith seasonal
— adjustment------- \
-1946---------x 1945
M ay Apr. Mar. M ay
Department store sales (value)
291
297 234
Twelfth District ................. 305
Southern California . . . . 315 318 307 249
266
217
261
Northern California .......... 281
275 284 214
Portland .................................. 293
312 340 282
W estern W ashington . . . . 355
Eastern W ashington and
247 293 200
Northern I d a h o ...............282
Southern Idaho and U ta h . 278 286 303 203
320 336 r255
Phoenix .................................... 371
Index numbers, 1935-39
daily average=100
Department store stocks
(value)1 ..................................... 217
Carloadings (num ber)2
108
Total ................................
Merchandise and m isc.. 128
83
O t h e r .....................................
284
291
260
275
327
287
309
258
269
321
258
276
233
251
286
219
230
201
201
259
272
286
383
253
280
357
227 193
253 209
330 r263
215
190
169
225
212
177
191
106
129
79
104
123
80
121
129
92
108
120
93
103
121
80
96
114
74
121
121
103
1 A t retail, end of m onth ; 1935-39 average =
2 1923-25 daily average = 100.
r Revised.
Without seasonal
------- adjustment--------1946---------* 1945
M ay Apr. M ar. M ay
100.
Banking and Credit—
Averages of Wednesday figures
1<1,4C
(millions of dollars)
Condition items of weekly reporting
member banks
Total loans ................................................
Com ’l., ind., & agric. loans..........
Loans to finance transactions in :
U . S. Government securities. . .
Other securities .............................
Real estate loans ...............................
A ll other loans ....................................
Total in vestm en ts....................................
U . S. Government securities..........
A ll other securities ...........................
May
1,343
662
164
64
304
149
5,977
5,531
446
3,459
2,094
United States Government deposits. . . 1,252
Coin and currency in circulation
—
Total (changes o n l y ) ..................................
Fed. Res. N otes of F . R . B. of S . F . . . 2,993
M ember bank reserves .................................. 1,968
Apr.
+
+
-Change from------- \
1Û4C
ly^ro
M ar.
M ay
22
26
+
+
37
32
+371
+182
- 15
b 3
5
3
-1 7 2
-1 7 5
-f
3
-1 9 3
+ 12
-1 7 6
—
16
+130
+ 20
+
27
32
29
+
5
T
8
+
8
— 248
— 253
+
5
+ 65
+ 14
— 282
—
—
+
74
81
16
t
13
+ 41
+943
+877
+ 66
+253
+284
+699
+ 158
+ 126
+210
June-July 1946
27
M ONTHLY REVIEW
Index of Department Store Stocks— Twelfth District
m o n th ly
index of the value of department store
stocks in the Twelfth District from 1919 to date has
A
been constructed recently by the Federal Reserve Bank
of San Francisco. It is shown, together with the department store sales index, in the accompanying chart.
The index of Twelfth District department store stocks
increased by about 50 percent in the year preceding the
1920 peak, compared with an increase of less than 20
percent from the end of the Japanese war to date. The
index rose considerably in the first half of 1946, how
ever, and reached a new high of 217 percent of the 193539 average in May and June. With increased supplies of
consumer goods reaching the retail level, rising prices,
unbalanced inventories, and a generally low ratio of de
partment store stocks to sales, further increases in the
stocks index are likely. (The ratio of stocks to sales will
be discussed in a subsequent issue of the R e v i e w . )
The present level of the index is only slightly higher
than that attained at the wartime peak in mid-1942. The
sharp increase in stocks that took place in 1941 and the
first half of 1942 came to an abrupt halt, however, and
inventories declined rapidly to their wartime low in the
first part of 1943. Rapidly expanding sales accompanied
by restrictions on civilian production and inventories
contributed to this reaction. Despite wartime drains upon
inventories, since mid-1941 the stocks index has contin
ued well above the previous 1929 and 1921 peaks.
Estimates of the total retail value of department store
stocks at the end of each month were computed as follows.
It was assumed that stocks-sales relationships for stores
reporting both items (a smaller number than report sales)
were representative of those for all stores. The monthly
ratios of aggregate stocks to sales of all stores reporting
both items were multiplied by monthly estimates of total
sales, derived from the Twelfth District’s department
store sales index, to obtain monthly estimates of the total
value of department store stocks. Total stock values were
converted to index numbers on a 1935-39 base by divid
ing them by monthly average stocks in the base period.
Since the sales index has been adjusted to the levels in
dicated by the various censuses of retail trade, this pro
cedure incorporates the same trend adjustment in the
stocks index.
Seasonally adjusted indexes were computed by divid
ing the unadjusted index by the appropriate seasonal ad
justment factor. Since seasonal influences were not con
stant over the period covered by the index, the adjust
ment factors were changed from time to time. In 1945, the
seasonal adjustment factors used were:
J a n u a ry ................... 87.9
F e b ru a ry .................37.9
M a r c h ......................92.9
April ........................ 98.8
M ay . . .
June . . .
July . . .
August
.103.8
. 101.8
. 105.8
.109.8
September
October . . .
November .
December .
112.8
110.8
.105.8
. 81.9
.
.
N o te : Tabulations of the Twelfth District department store stocks index
from January 1919 to date, by months, are available upon request.
D E P A R T M E N T S T O R E S A L E S A N D S T O C K S -T w e lfth District
Indexes o f value of sales and stocks, adjusted for seasonal variation. 1935-39 average— 100.
M O H T H LY
28
June-July 1946
FEDERAL RESERVE BANK OF SAN FRANCISCO
Retail Credit Survey, 1945— Twelfth District
some tendencies toward change became
was more than 10 percent of the business reported in the
little in their behavior as compared with 1942-44. The
primary factors affecting retail credit, that is, high con
sumer incomes, shortages of many goods, and rising
prices, persisted to a considerable extent through 1945.
trade group in the District than at the end of 1944. Dur
ing 1945, furniture stores followed their usual practice of
keeping most of their instalment paper, and automobile
dealers, despite large holdings of cash and Government
bonds, characteristically sold an important part of theirs.
For the country as a whole, consumer credit arising out
of retail instalment sales increased by about 8 percent in
1945, but at the end of the year was only one-quarter of
the 1941 peak.
lth o u g h
•
mildly evident in 1945, retail credit and relatedform of instalment sales. The amount of instalment ac
A
items in the Twelfth Federal Reserve District changed counts receivable at the end of 1945 was lower in each
Cash sales
Increased total sales in 1945 were accompanied by the
highest proportion of cash sales in any recent year. The
importance of cash sales, nevertheless, varied widely
among the different kinds of business.1 Customers of
men’s clothing stores paid cash for over 70 percent of
their purchases. At the other extreme, less than 30 percent
of the furniture store sales were for cash. Automobile
dealers and hardware stores reported that cash sales
made up more than a third but less than half of their total
sales.
Charge sales
Regular charge account sales, with few exceptions, ex
panded in 1945 at about the same rate as total sales. Half
or more of the purchases at hardware stores were charged,
and from one-third to one-half at women’s apparel stores,
department stores, and automobile dealers. Jewelry
stores had the smallest ratio, a little over one-fifth, of
charge account sales to total sales. Charge accounts re
ceivable moved in the same direction as charge account
sales, but tended to go up or down more sharply than
sales. Furniture and hardware stores are exceptions;
their charge accounts receivable went up less than their
charge account sales.
Instalment sales
Instalment sales failed to increase with total sales in
1945, due largely to continued unavailability of durable
goods. Consequently, the already low ratio of instalment
sales to total sales declined still further. In only three out
of nine retail lines, automobiles, furniture, and jewelry,
1 Since stores selling- only for cash were not included in the survey, the
proportion of cash to total sales in individual lines is understated.
Current assets and liabilities
Total accounts receivable, including both regular
charge and instalment accounts, after falling sharply in
1942 and 1943, went up during 1945 in most retail lines
in the District. Men’s clothing and furniture stores were
exceptions. Only among automobile dealers, department
stores, and women’s apparel stores, moreover, did receiv
ables increase faster than sales.
Inventories either declined or increased less than sales
in 1945 in nearly all groups. With textile output falling
far short of demobilized veterans’ and other civilians’
needs, stocks in men’s clothing stores, already heavily
depleted, were reduced by one-third.
During the war years current assets gained relative to
current liabilities because of involuntary liquidation of
inventories and accounts receivable on the part of most
retailers. As a consequence, retailers’ current ratios were
said to have become stronger. In 1945 a slight reversal of
this trend took place, with the ratio of current assets to
current liabilities declining in six of the nine lines of trade
covered by the survey, but remaining relatively high,
nevertheless.
The foregoing conclusions are based on reports from
approximately one thousand credit-granting retail stores
in the Twelfth District that participated in the fourth
annual retail credit survey. The lines of business in which
the stores were engaged are listed in the accompanying
table.
C h a n g e s i n R e t a i l C r e d i t a n d R e l a t e d I t e m s , 1944-45
Reporting credit-granting stores in Twelfth District
Kind of store
A u to m o b ile ...............................
Au to tire and accessory.. . .
Department .............................
Furniture ................................. . .
Hardware .................................
Household appliance2 ...........
Jewelry ......................................
M e n ’s c lo th in g ......................
W om en ’s apparel ..................
Total sales----- ■\
Number
of stores Percent
reporting change
this item1 1944-45
194
263
130
185
h l6
81
103
61
104
-1 8
65
-1 7
-2 0
-1 3
- 9
- 6
- 5
- 4
Ratios of cash and credit sales
to total sales, 1945 and 1944
--------- ( i n percent) c
Charge
Instal(— Cash— \t— acc’ t— \ t-----ment— \
1945 1944 1945 1944 1945 1944
N
45
65
64
29
42
43
43
63
64
27
58
55
70
52
71
53
41
36
34
31
33
32
56
50
21
27
43
34
33
33
32
55
57
21
28
43
21
4
3
39
2
7
21
2
4
Total
accounts
receivable
(year end)
percent
change
1944-45
23
4
3
41
4
7
24
+28
+ 12
+15
— 1
+ 8
— 35
+ 2
2
5
Ratios of charge and
instalment accounts
receivable to total
accounts receivable
(year end), 1945 and 1944
--------- -{in percent)— --------t—Charge—nt— Instalm't
1945 1944 1945 1944
f
70
22
93
88
Inventories
(year end)
percent
change
1944-45
Ratio of
current assets
to current
liabilities
e— (year e n d )-
1945
1944
1
5
3 .8
3 .6
3 .4
4 .4
4 .4
3 .2
6.5
8.1
+ 13
3 .4
—
4
6
30
7
+
9
10
12
38
61
62
+
+
12
16
26
62
+29
+ 13
5.8
— 19
10
— 33
4 .5
3 .4
5 .3
3 .6
+ 17
90
86
35
59
11
10
6.0
41
89
84
74
38
90
14
—
2.5
2.1
78
94
90
39
88
65
3
3 .6
Ordinarily a smaller number of stores reported the detailed information in other parts of the table.
2 Reporting household appliance stores appear to be unrepresentative. National sales of household appliance stores were 50 percent higher in 1945 than
1944, and household appliance sales of Twelfth District department stores were up 90 percent.
Note : More detailed tabulations based upon the 1945 Retail Credit Survey are available upon request.
M ONTHLY REVIEW
June-July 1946
29
Bank Operations and Banking Structure, 1945 -Twelfth District
Member Bank Operations
operations in 1945 continued to reflect wartime
developments, as is indicated by the accompanying
tabulation of member bank operating ratios. (Aggregate
dollar earnings and expenses of Twelfth District mem
ber banks for 1940-45 are contained in the previous issue
of this R e v i e w . ) The average return on capital continued
to increase to a new high, largely as a result of the further
expansion in Government security holdings. Earnings on
securities, which in 1944 succeeded earnings on loans as
the most important component of total earnings, rose
further. Earnings on loans continued to decline relative
to total earnings, although in absolute or dollar amount,
earnings on loans increased in 1945 over the preceding
vear for the first time since 1941.
a n k
B
S e le c te d O p e r a tin g R a t io s o f M e m b e r B a n k s
ily in the past five years to a record low in 1945 of 5.7
percent. Since the increase in assets, corresponding with
the increase in deposit liabilities, occurred largely in Gov
ernment security holdings, the average ratio of capital
accounts to assets other than Governments and cash has
moved in an opposite direction and attained a new high
in 1945 of 32.5 percent.
Changes in Banks and Branches
One more bank was discontinued than was newly es
tablished in the Twelfth District in 1945. Total banking
offices, including branches and facilities at military posts,
increased, however, from 1,691 to 1,714. At the end of
the year, only 4 percent of all banks but almost 30 percent
of all branches and additional banking offices in the
United States were in this District.
1940-45 — T w e l f t h D i s t r i c t
1940
194!
1942
1943
1944
1945
Net profits after taxes as percentage of
Total capital accounts........................
Total assets ...........................................
8.3
0.9
9.1
1.0
7.4
0.7
9.7
0.6
11.8
0.6
12.3
0.5
Percentages of total earnings
Interest and dividends on securities
Interest and discount on loans. . . .
Service charges on deposit accounts
21.5
62.7
5.6
19.8
64.1
5.8
23.7
58.8
6.2
34.4
42.9 46.8
46.41 38.61 36.41
7.5
7.2
6.1
31.9
15.7
34.3
15.3
34.6
13.1
32.1
12.8
30.5
13.8
2
18.3
28.2
32.8
34.1
13.7
11.8
12.5
—
10.0
—
7.0
6.4
5.7
5.3
4.9
4.7
—
—
23.9
28.3
32.0
32.5
Salaries and wages .............................
Interest on time deposits...................
31.6
16.6
Net current earnings ...........................
Capital accounts as percentage of
Total deposits .......................................
Total a s s e t s ..............................................
Total assets less cash and United
States Government securities. . .
2
6.5
Interest and dividends on securities
as percentage of total securities. . .
3.1
Interest on time deposits as percentage
of total time deposits...........................
1.7
6.4
6.0
5.91
5.71
5.41
3.0
2.3
1.6
1.4
1.33
1.6
1.5
1.1
1.0
0.9
1 Includes service charges and other fees on loans.
2 Figures comparable with those for 1942-45 not available.
3 Interest on United States Government securities only. The rate of return on
other securities, which supplied an average of 5.2 percent of total earnings,
averaged 3.1 percent.
N o te: Ratios are arithmetic averages of ratios of individual banks, not ratios
based on aggregate dollar totals. The operations of each bank regardless of
size have equal weight in the determination of the averages. More complete
tabulations of Twelfth District member bank operating ratios for 1945,
including separate tabulations for banks classified by state, by state or
larger area and size, by proportion of time to total deposits, and by pro
portion of loans to total assets, are available upon request.
The rate of return on loans continued the decline evi
dent throughout the war period. Little change occurred
in the rate of return on securities in 1945, but the con
trast between 1945 and 1940 rates is marked. Through
out the period, however, the unprecedented expansion in
security holdings more than offset the decline in the yield
of earning assets, and total dollar earnings increased sub
stantially.
Total expenses rose further in 1945, but continued their
decline relative to total earnings. Only two out of every
three dollars realized in current earnings went for cur
rent expenses in 1945, compared with four out of five in
1942.
Although capital accounts of member banks have been
increased, in large part through the retention of profits,
the ratio of capital accounts to deposits has declined stead-
B a n k s— T w e lfth
D is tr ic t
D e c e m b e r 31, 1945 a n d 1944
Banks operating
/-------------branches---------------x
N on/ " Member—N ✓'-member—>
1945
1944
1945
1944
2
. .
2
1
1
California ............ . 17
16
15
16
6
6
1
1
3
3
1
1
.. 2
2
4
4
2
Utah ...................... . .
2
3
3
W ashington
8
8
4
4
Twelfth District
Interest and discount on loans as
percentage of total loans.................
N um ber o f B ra n ch
..
40
39
29
30
Number of branches1
f----------operated by---------- N
N onMember
member
<-— banks—
/— banks—■
n
1945
1944
1945
1944
24
23
4
4
807
794
37
41
38
38
2
2
14
13
1
1
68
65
4
4
9
9
4
4
98
87
8
8
1,058
1,029
60
64
* N o t including 72 facilities at military posts at the end of 1945 and 73 at the
end of 1944.
Assets of Twelfth District banks totaled over 1 9 bil
lion dollars at the end of 1 9 4 5 , compared with 1 6 billion
a year earlier and 6 billion on December 3 1 , 1 9 4 0 . Mem
ber banks numbered little more than half of all banks,
but held over nine-tenths of all bank assets. Branch banks
held over four-fifths of total bank assets in the District,
having had some three-fourths or more of the total in
every state except Utah.
T o ta l A sse ts o f B ra n c h
B a n k s— T w e lfth
D is tr ic t
D e c e m b e r 31, 1945 a n d 1944.
(thousands of dollars )
Arizona ....................
California ..............
Idaho ........................
Nevada ...................
Oregon ...................
Utah ........................
W ashington ..........
Member
/---------branch banks---------\
1945
1944
279,379
212,768
11,017,172
9,044,755
301,747
245,964
137,721
105,800
1,203,294
953,373
151,413
129,418
1,675,002
1,434,373
Twelfth
14,765,328
D istrict..
12,216,451
Branch
bank as
percent of
Nonmember
all bank
,— branch banks —N assets
1945
1944
1945
15,665
13,373
92.9
714,230 645,954
84 1
17,972
14 466
74 2
8,068
5,393
88 8
22,910
17,257
82 5
13,042
10,347
28 1
180,105
149,454
76.1
971,992
856,244
81.2
In 1 9 4 4 and 1 9 4 5 , most of the new District banks were
established in the Pacific Northwest. Eleven banks, five
in Oregon, three in Washington, and three in California
came into existence last year. Five of the newly estab
lished banks became members of the Federal Reserve
System, as did four banks that had been nonmembers at
the beginning of 1945. Most of the twelve banks ceasing
30
FEDERAL RESERVE BANK OF SAN FRANCISCO
operations as independent units in 1945 also were lo
cated in the Pacific Northwest, seven in Washington and
three in Oregon. All twelve, seven of which had been
member banks, were absorbed by branch banks.
Twenty-eight branch offices were established, all by
June-July 1946
member banks, in the District last year. Eleven of these
new branches replaced unit banks. Only three branches,
all of one member bank, were discontinued. One bank
with four branches was among those admitted to mem
bership in the Reserve System.
N um ber and T o ta l A ss e ts o f A l l B a n k s— T w e lft h
D is tr ic t
D e c e m b e r 31, 1945 a n d 1944
(assets in thousands of dollars)
A rizona........................ ..
California1 ........................
Idaho .................................. ,
N e v a d a ................................
O r e g o n ...............................
U t a h ....................................
W a s h in g to n ...................... ,
Twelfth D is t r i c t ............
..
.
Member bank
as percent oí all
bank assets
1945
-M em ber banksN ut nber
f--------------A s sets-----------1944
1945 1944
1945
8
208
46
8
73
57
124
8
206
46
9
71
57
128
317,564
13,951,429
430,817
163,741
1,485,692
585,477
2,434,663
244,481
11,462,715
352,488
126,861
1,182,158
479,606
2,100,764
5
113
26
6
33
34
55
5
110
26
7
32
34
56
288,253
12,813,071
374,331
152,439
1,381,386
493,785
2,104,743
220,053
10,470,163
306,500
119,101
1,098,902
405,434
1,821,677
3
95
20
2
40
23
69
3
96
20
2
39
23
72
29,311
1,138,358
56,486
11,302
104,306
91,691
329,919
24,428
992,552
45,988
7,760
83,256
74,172
279,087
90.8
91.8
86.9
93.1
93.0
84.3
86.4
524
525
19,369,383
15,949,073
272
270
17,608,008
14,441,830
252
255
1,761,373
1,507,243
90.9
1 Includes Portland, Seattle, and Tacoma branches of the Bank of California N . A ., San Francisco.
- Nonmember banksNuimber f---------- Assets
1945 1944
1945
1944
- A l l banks—
Number t-------------- As; sets------------1945 1944
1944
1945
June-July 1946
FEDERAL RESERVE BANK OF SAN FRANCISCO
INDUSTRIAL PRODUCTION
National Summary of Business Conditions
Released June 28, 1946— Board of Governors of the Federal Reserve System
n d u s t r i a l output declined somewhat further in M ay but advanced considerably in
I the early part of June, reflecting chiefly the settlement of the coal strike. Department
store trade was maintained in record volume for this season of the year. Prices in both
wholesale and retail markets continued to advance.
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 is for May.
DEPARTMENT STORE SALES AND STOCKS
Federal Reserve indexes. Monthly figures, latest
shown are for May.
COST OF LIVING
E m ploym ent
V—
FÍVH
v /—
/
y
i
/CLOTHING
r
The Board’s seasonally adjusted index of industrial production was 160 percent of
the 1935-39 average in M ay as compared with 165 in April and 168 in March. Since the
resumption of bituminous coal mining and the settlement of various other wage dis
putes in the latter part of M ay, industrial production has expanded considerably and
indications are that the Board’s index in June will surpass the March level.
Output of iron and steel was especially affected by the coal shutdown and in M ay
steel ingot production averaged only 52 percent of capacity as compared with 78 percent
in the previous month. Steel production, however, rose rapidly in June, reaching a sched
uled rate of 87 percent of capacity during the current week. Activity in other durable
goods industries was generally maintained in M ay at about the April level.
Output of nondurable goods continued to show a slight decline in M ay, after
allowance for seasonal changes, largely due to further reductions in output of flour
and cereal products and of meats. Despite these declines production in recent months of
most nondurable goods, including many manufactured foods, cigarettes, textiles, shoes,
gasoline, chemicals, and rubber and paper products, has been considerably larger than
the volume produced for civilian use a year ago and also than the 1939-40 level of output.
Output of minerals rose 12 percent in M ay, reflecting largely the resumption of
bituminous coal production around the middle of the month. In the first two weeks of
June bituminous coal output increased sharply to a level close to the pre-strike rate.
Anthracite production was maintained at an exceptionally high level during most of
M ay, and after a work stoppage during the first week of June, was resumed in large
volume. Output of crude petroleum continued to advance in M ay and the early part of
June. Metals production showed much less than the usual seasonal rise in M ay, reflecting
chiefly wage disputes in iron ore mines which were largely settled by the end of the
month.
Value of construction contracts awarded, as reported by the F. W . Dodge Corpora
tion, continued to rise sharply in M ay, reflecting increases in awards for most types of
construction. Residential building awards were at a new record level, one-fourth higher
than in April. Awards for nonresidential construction advanced in M ay, after a drop in
April. Awards for manufacturing plant and public works permitted by Federal authori
ties showed sharp increases.
^
Nonagricultural employment showed a further substantial gain in M ay, reflecting
increases at factories and mines due to termination of work stoppages and a continued
large advance in construction employment. The number of persons unemployed remained
unchanged at the April level of 2.3 million.
.
C o m m o d it y
P r ic e s
>/^
............... 1
1939
1940
1941
1942
1943
1944
1945
1946
Bureau of Labor Statistics’ indexes. Midmonth
figures, latest shown are for M ay.
MEMBER BANKS IN LEADING CITIES
The general level of wholesale commodity prices continued to advance from the
middle of M ay to the third week of June. There were important increases in prices of
milk, bread, coal, cotton, leather, copper, and of a number of miscellaneous products.
From the middle of April to the middle of M ay, the consumer price index advanced
another one-half percent and since that time additional increases have occurred in
retail prices.
D is t r ib u t io n
Department store sales in M ay and the first half of June were maintained at the high
level reached earlier in the spring. Value of sales was about 35 percent larger than in
the corresponding period last year, reflecting largely a considerable expansion in the
volume of goods sold. Department store stocks continued to rise sharply in M ay and,
after allowing for seasonal changes, the value of stocks held on M ay 30 was one-fourth
larger than at the beginning of the year, although still comparatively low relative to
the value of sales.
Freight carloadings during M ay were slightly below the April rate as increased
shipments of coal and grain were more than offset by declines in loadings of most other
classes of revenue freight due chiefly to the railroad strike. During the first three weeks
of June carloadings increased sharply and in the week ending June 22 were as high as
in the same period a year ago.
Bank
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 June 19.
C r e d it
Deposits subject to reserve requirements increased further in M ay and the first three
weeks of June, reflecting primarily a shift of about 3.5 billion dollars from Treasury
war loan accounts to accounts held by businesses and individuals, and average required
reserves increased about 500 million dollars. Reserve balances increased considerably
less than required reserves and excess reserves declined.
A t member banks loans for purchasing and carrying Government securities were
further reduced in M ay and the first half of June. Real estate and commercial and in
dustrial loans continued to increase at banks outside N ew Y ork City. Bank holdings
of Treasury certificates and bonds declined largely as a result of Treasury debt retire
ment operations.
@FedFRASER