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MONTHLY REVIEW TW E I FTH F EDERAL R E SE R V E DISTRICT Fe d e r a l R e se r v e B a n k NOVEMBER 1954 of S a n Fr a n c is c o TRENDS IN CONSTRUCTION ACTIVITY construction activity in the United States has risen to a new high level in the first ten months of this year. Expanded outlays on construction in the private and state and local government sectors have been a major prop to over-all levels of economic activity throughout the year thus far. Total new construction expenditures for the first ten months were at an annual rate of nearly $37 billion, a gain of about $1.7 billion or 4 percent from the 1953 rate. While the expansion in building activity was broadly based, some marked shifts have occurred in the relative importance of some types of construction. Most noticeable has been the substantial expansion in the private sector of the economy with only a slight rise in public outlays. Within the sphere of public building, however, the rela tive stability of construction expenditures is accounted for by an offsetting movement, with sharply increased state and local government spending outweighing the large decline in Federal Government outlays for construction purposes. The sharp expansion in private residential building, accounting for more than half of the dollar gain in total construction outlays, reflects to a high degree the in creased availability of mortgage funds and a liberalization of the terms of mortgages. Easing of the money markets since mid-1953 accompanied by a decline in the demand for credit by business led to a substantial increase in the amount of funds available for investment in residential mortgages. The turnabout in the availability of mortgage money was a major factor in the second quarter pickup in housing starts. Additional impetus was imparted to the market for new housing in midsummer when Congress liberalized the terms of mortgages insured by the Federal Government. Down payments were reduced and maxi mum maturities were extended on mortgages insured by the F H A for new dwellings, and the new law afforded similar although slightly less liberal terms to buyers of existing houses. This liberalization of mortgage terms has had a marked expansive effect upon the new housing market, judging from the very substantial rise in activity at F H A offices throughout the nation. Basic housing de mand factors, such as a rising population and increased number and size of families, migration from city to suburb N e w and from one region to another, and relatively favorable consumer income expectations, though not as strong as in some earlier years, still seem to be sufficiently high to generate a substantial demand for housing in an environ ment of easy credit. Private nonresidential construction, while accounting for a smaller dollar gain, has risen more percentagewise than has residential building in the first ten months of the year. During this period total nonresidential construction expenditures increased 10 percent over the same period in 1953 despite declines in three major types of construc tion— industrial, farm, and public utilities. Unusually sharp advances ranging from 21 to 35 percent in private outlays for commercial, educational, social, and recrea tional facilities have been large enough to outweigh by a considerable margin declines in other sectors. It should be recalled that construction of these types of structures was restricted in varying degree by Federal stabilization measures for a period of approximately two years during the Korean war. The attempt to make up for the backlog accumulated during the period of restriction is at least partly responsible for the current exceptionally high levels of activity in this field. Public construction activity is dominated by the grow ing needs associated with a rapidly rising school popula tion and a continued expansion in population generally. Needed enlargement of educational, highway, sewer, water, and other community facilities has been instru mental in raising the rate of state and local government expenditures in 1954 by nearly $1 billion per year. This is a gain of 13 percent over the already high rate of expenditures attained during 1953. Federal expenditures on new construction, meanwhile, have declined sharply, off 20 percent in the first three quarters of this year from the same period in 1953. Nearly all the decline in Federal expenditures is accounted for by a reduction of more than one-third in outlays for military facilities, a cut of 14 perAlso in This Issue Pre- and Postwar Stability in District Per Capita Income Payments . . . 147 146 FEDERAL RESERVE B A N K OF SA N FRANCISCO cent in expenditures for conservation and development, and a drop in industrial plant construction of some 10 percent. District construction appears less active On the basis of available data, which are not compre hensive, the construction situation in the Twelfth District appears to be somewhat less favorable than in the nation. Owing to the lack of expenditure data for the District, it is not possible to compare expenditures on new construc tion in the District with those in the nation. However, information that is available on District building permits issued and construction contracts awarded indicates a smaller rise in over-all activity here than elsewhere in the nation. The available data also indicate that most of the District weakness relative to that of the nation occurred in the first half of the year. Since midyear, District gains have tended to equal or exceed the rise nationally. Construction employment declines Employment in contract construction in the District has shown a considerable degree of weakness throughout the first nine months of the year. Seasonally adjusted average monthly employment during the January-September period this year was almost 8 percent below the comparable months of 1953. In the nation, however, monthly employment during this same nine-month inter val averaged slightly higher than in the corresponding period of last year, although employment in September and October was significantly below the same months of 1953. It appears somewhat paradoxical to find the em ployment level virtually unchanged at the same time that expenditures on construction are at a record rate, at least in the nation where outlays were 4 percent ahead of 1953 in the first nine months of the year. There is no ready explanation for this seeming paradox. No consistent rela tionship is discernible in the past record of expenditures and employment. Such factors as changes in productivity, changes in the composition of the types of construction in different periods, shifts in the proportion of work done by contractors and by the owners’ own force, shifts in the proportion of expenditures on contract construction labor as distinct from building materials and equipment, meth ods of data estimation and computation, and other less obvious elements account for this apparently paradoxical situation. That there has been a shift in the composition of con struction is quite apparent in the nation as well as in the Twelfth District. Nationally, Federal military construc tion expenditures in the first ten months of this year were down nearly one-third from 1953 levels and in the Twelfth District military contract awards and force account work started on military projects were off by approximately the same percentage. Industrial building has dropped sharply while commercial and other nonresidential structures have assumed greater importance in over-all construction activities. The varying requirements of the different types of construction may well account for a major portion of N o v e m b e r 1954 the weakness in construction employment relative to ex penditures. The explanation as to why the District has fared less well than the nation in this regard probably lies in the fact that residential construction was relatively less active in the District than in the country as a whole in the first half of this year. This affected the volume of work started and hence the total volume of construction in process, which in turn diminished the District demand for labor. Variation in construction activity marked as between District states While over-all District construction employment de clined nearly 8 percent in the first nine months of the year, there were fairly substantial differences in behavior be tween the various states. In two states, Washington and Nevada, employment averaged slightly higher in the January-September period this year than last and in the other five states the declines in employment ranged from 3.1 percent in Arizona to 12.5 percent in Idaho. A variety of factors accounts for these differences in construction activity. In Washington the high level of over-all construction activity reflects the continued heavy volume of work at the atomic installations at Hanford and expanded employ ment at the large Federal reclamation and hydroelectric power projects. Building permit volume, moreover, has shown a stronger upward tendency in Washington than for other District states during the year thus far. Nevada’s relatively rapid population gains and expansion of tourist and Federal Government facilities throughout most of the current year are the factors largely responsible for its gain in construction activity. Among those District states in which construction em ployment has fallen off, Idaho and California show the largest relative declines for the first nine months of the current year from the same period last year. In both states, the completion of major Federal defense construc tion projects has had a major impact upon the total num ber of workers employed. In addition, despite very sub stantial gains in recent months, the weakness early in the year in the volume of housing starts has been a factor holding the level of construction employment below com parable 1953 periods. In contrast to the nation, California has had a decline in commercial and utility construction. Roughly similar circumstances have accounted for re duced construction activity in Utah and Oregon, although residential construction in Utah did not share in the weak ness in the early months of the year. Measured by the value of building permits issued, nonresidential construc tion activity generally has been relatively weak in Utah during the first ten months of this year. In Arizona, strike interruptions in June and a fairly sharp cutback in roadbuilding and residential activity in September reduced employment for these months below the same months of 1953. June and September, therefore, were exceptions to a generally strong situation during the other months of the year. N ov em b e r 1954 M O N T H L Y REVIEW 147 PRE- AND POSTWAR STABILITY IN DISTRICT PER CAPITA INCOME PAYMENTS A n article on income payments in the Twelfth District • published in the last issue of the Review showed that a wide dispersion of changes in incomes among the Dis trict states during 1953 largely reflected differences in the year’s developments in major industries of each state. This suggests that differences in the range of year-toyear fluctuations in income payments between the Dis trict and the nation and among the District states may be significantly associated with regional differences in eco nomic specialization. If, in addition to annual data, monthly or even quarterly income data for the several District states were available, it would be possible to make many more useful comparisons between income stability in the District and the nation. For example, minor business fluctuations may be transmitted inter regional^ because of the flow of trade between regions, but their effects in any one area such as the Twelfth Dis trict may not be traceable through annual income sta tistics. Also, the timing of leads or lags between changes in District and national income is probably concealed in yearly data. However, even the use of annual statistics of income payments— one of the most comprehensive and intelli gible indicators of regional economic activity available— serves to reveal some differences or even lack of differ ences between the nation and District and among the seven western states. Also, since income is one of the primary determinants of consumer expenditures on goods and services, a review of pre- and postwar movements in state relative to national income payments may sug gest differences in trends and year-to-year fluctuations between the District and national retail sales. Differences in the rate of change of total income pay ments between the Twelfth District and the country as a whole have been associated with variations in popula tion growth to a large degree. Thus, a comparison of trends and annual fluctuations in total income payments between this region and the nation will reflect popula tion variations between these areas as well as differences in other economic forces. In order to compare regional movements in income exclusive of differential rates of population growth, it is preferable to examine changes in per capita rather than total income payments. Long-term changes in per capita incomes reflect not only business developments but also changes in public policy (e. g., social security laws and farm price support programs) and changes in the proportion of the population partici pating in the labor force (due, in part, to changes in the age distribution of the population) as well as many other economic factors. However, the primary emphasis in this article will be in associating state differences in annual per capita income fluctuations with regional differences in economic specialization. A fair degree of stability in the ratio of District to na tional per capita income payments over the pre- and post war years suggests that cyclical movements in per capita income payments in this region generally paralleled those in the country as a whole. This broad geographic aggre gate, however, conceals a good deal of intra-District de velopment. The District states, considered individually, exhibited marked differences in their per capita income fluctuations over the past twenty-five years. Department of Commerce income and census data further suggest that these differential fluctuations in per capita income payments are largely associated with state differences in ( 1 ) economic specialization and year-to-year eco nomic developments and ( 2 ) the proportion of total state income payments arising from property income as op posed to wages, salaries, and proprietors’ income. District per capita income changes not significantly insulated from national movements Charts 1 and 2 show District and state per capita in come payments expressed as a percent of the national figure in order to enhance comparison of regional and national per capita income movements. Thus, a rise in the plotted ratio of state to national per capita income payments indicates greater strength (that is, a smaller relative decline or a larger percentage rise) in the state than in the nation; a horizontal movement in the ratio indicates equal percentage changes in the state and in the nation; and a decline in the ratio indicates less strength (that is, a larger relative decline or a smaller percentage rise) in the state than in the nation. The an nual ratios of state to national per capita income pay ments are affected by a variety of forces. Some of these forces cause the ratios to have a rising or declining trend over a period of several years. In an attempt to remove some of the longer run movements, trend lines were fitted to the annual ratios of state to national per capita incomes for two separate periods— the twelve prewar years and the eight postwar years. Twelfth District per capita income payments, partic ularly after adjustment for trend, have departed from national changes to only a minor extent during the preand postwar years. Thus, insofar as annual per capita incomes are concerned, the District as a whole has not varied greatly from national economic fluctuations since 1929. Chart 1 indicates that even in the Great Depres sion of the early thirties Twelfth District per capita in comes did not depart to any great extent from changes in national per capita incomes. Small deviations from this fairly stable 1929-37 pattern occurred during a year of downturn (1930) when District per capita incomes de clined less than the national average and during a year of upturn (1936) when District per capita incomes rose more than in the nation. Since 1946, the average annual rate of growth in Dis trict per capita incomes has not kept pace with that na tionally. This is in contrast to the twelve prewar years when the District percentage rise was larger than the percent increase in the country as a whole. Adjustment 148 N o v e m b e r 1954 FEDERAL RESERVE B A N K OF SA N FRAN CISCO C hart 1 RATIO OF STATE TO NATIONAL PER CAPITA INCOME PAYM ENTS-TW ELFTH DISTRICT, CALIFORNIA, OREGON. AND WASHINGTON-1929-40 and 1946-53 (Adjusted and unadjusted for trend) 150 140 C A L IF O R N IA ------- - C A L IF O R N IA TW ELFTH D IS fR IC T J __ L_ 1929 1930 1932 . 1 „ ,1__ 1__ 1--- 1__L. 1934 1936 1938 1940 1946 Source: United States Department of Commerce, 1948 S u rvey 1950 1952 1953 o f C u rr en t B u sin e s s, August 1954. for the downward trend in the ratio of District to na tional per capita incomes since 1946 somewhat reduces fluctuations in the ratio during the postwar years. For example, a drop in the ratio of District to national per capita incomes during the 1948-49 recession is tempered when adjusted for the postwar downward trend. States deriving a large proportion of their incomes from agriculture experience largest per capita income fluctuations in the District The Intermountain District states have generally ex perienced marked fluctuations in per capita incomes rela tive to changes in the national average during both the pre- and postwar periods. Whether an attempt is made to adjust for a prewar trend or not, per capita income payments in Arizona, Idaho, Nevada, and Utah show the greatest volatility in the District. Per capita income payments in Arizona, Idaho and, to a lesser degree, Utah declined sharply relative to the nation during the Great Depression but showed more moderate decreases than national per capita incomes during the 1937-39 cycle. Since 1946, each of these three states has continued to experience significant annual fluctuations (either ad justed or unadjusted for trend) in per capita incomes compared with changes in the nation as a whole. Prewar changes in the ratio of state to national per capita income in Arizona, Idaho, and Utah were in part due to a twelve-year upward trend in each of these re gions. Among all seven District states, Arizona has shown the highest average annual rate of growth in its per capita income during both the pre- and postwar years. Idaho, on the other hand, has suffered the sharpest down trend in per capita income in the District since 1946. Completely acceptable data do not exist for measuring differences in industrial structure. However, compari sons of percentage distribution of total gainfully em ployed by major industry group are generally sufficient for suggesting differences in enonomic specialization be tween areas. Reviewing population census data for 1929, 1939, and 1949— the only complete regional statistics available for this purpose— along with per capita income fluctuations since 1929 may suggest possible relation ships between state differences in economic specializa tion and annual changes in per capita income payments. Chart 2 indicates that the Intermountain states have gen erally exhibited the widest swings in per capita incomes in the District. The table on page 150 shows that they have also had large proportions of their gainfully em ployed labor force engaged in extractive industries— par ticularly agriculture. C hart 2 RATIO OF STATE TO NATIONAL PER CAPITA INCOME PAYMENTS—ARIZONA, NEVADA, IDAHO, AND UTAH—1929-40 and 1946-53 (Adjusted and unadjusted for trend) ARIZONA NEVADA IDAHO UTAH 60 v J ___ I _ J____1 1929 1930 1932 Source: United States Department of Commerce, Survey of Current Business, August 1954. J ___ I___ I___ I___ I___ L_ 1934 1936 1938 194 0 ~ 1946 1950 1952 1953 N o v e m b e r 1954 149 M O N T H L Y REVIEW There also appeared to be an ordering among these Intermountain states during the prewar years ; the state with the largest proportion of its gainfully employed labor force working in agriculture (Idaho) experienced the widest swings in its per capita income payments. The pattern— though less marked— has been much the same over the postwar years. In 1949, each of the Intermoun tain states had a larger proportion of its labor force gain fully employed in agriculture and other extractive in dustries than any of the three Pacific Coast states and also experienced larger fluctuations in per capita incomes than did the Pacific Coast states during the postwar years. Further evidence is suggested by Chart 3 showing in dexes, based upon national data, of average per capita net incomes of individuals living on farms,1 those not liv ing on farms, and of the total population. The chart clearly demonstrates greater volatility in per capita incomes among individuals living on farms compared with indi viduals not living on farms. Though regional differences in prices, products, and general market conditions are lost in using national averages, the graph suggests pos sible similar differential movements between agricultural and nonagricultural per capita incomes in the Twelfth District economy. Thus, states in the District in which large proportions of the population derived incomes from farm activity can also generally be expected to have experienced larger fluctuations in per capita incomes over the pre- and postwar years than those District states having a smaller proportion of their labor force engaged in agriculture.2 The wide swings in Nevada per capita income pay ments seem to have been out of tune with the other In termountain states, the Pacific Coast states, and the coun try as a whole during pre- and postwar periods. The difference in fluctuations of per capita income payments in Nevada compared with other areas is probably ex plained by the importance of tourist trade in that state’s economy. Over the two decades, 1929-49, Nevada has had a much larger proportion of its labor force employed in trade and service activities— largely reflecting the im portance of tourist trade— than either Arizona, Idaho, or Utah. Postponability of tourist travel with resultant fluctuations in tourist trade and service industries prob ably accounts for some of the continued annual swings in per capita income payments in Nevada. C h art 3 I N D E X E S O F A V E R A G E PER C A P I T A N E T I N C O M E O F F A R M “P O P U L A T IO N F R O M F A R M I N G , N O N F A R M P O P U L A T IO N , A N D T O T A L P O P U L A T IO N -1 9 2 9 -4 0 A N D 1946-53 ^Figures not available. Source: United States Department of Agriculture, Agricultural Service, F a r m I n c o m e S i t u a t i o n . Marketing nual per capita income payments (Chart 1 ) were more closely associated with changes in national per capita income than those of any of the other six District states. During the Great Depression, per capita income pay ments in California declined somewhat more moderately but recovered more slowly than in the country as a whole. During the 1937-39 cycle, California per capita incomes bore a fairly constant relation to the national figure and, except for a dip in 1948 due in part to a differential rate of population growth, stood at a fairly stable percent of national per capita incomes during the postwar years. A faster annual rate of growth in national relative to California per capita income payments since 1929 has resulted in a downward trend in the ratio of California to national per capita incomes. Population census data indicate that this downward trend is, in part, explained by a decline in the proportion of California population participating in the state’s labor force from 1929 to 1949 compared with a generally rising labor participation ratio in the country as a whole.1 The three Pacific Coast states have generally experi enced smaller fluctuations in their per capita income pay ments than the Intermountain states during the pre- and postwar years. On the whole, changes in California an- Annual fluctuations in per capita income payments in Oregon and Washington generally followed changes in national per capita income payments during the prewar and, particularly, the postwar years ( Chart 1). Prewar fluctuations in the ratios of state to national per capita income payments are largely dampened after adjusting for the 1929-40 average annual rate of growth (trend). During the Great Depression, Oregon and Washington experienced declines in their per capita incomes which were neither as moderate as in California nor as large as in the Intermountain states. During the 1937-39 cycle both states suffered slightly less severe declines in per capita income payments than the country as a whole. 1 Includes only income derived from farming. 2 Data are not available for average per capita net income of individuals not living on farms from 1929 through 1933. However, the close parallel move ments between average per capita incomes for total population and nonfarm population over the charted fifteen years plus the predominance of nonfarm population in the country strongly suggest a similar parallel movement between the two series during the early thirties. 1 Available data suggest that annual differences in movements of the population in and out of the labor force between the District states and the nation have probably had only a small or negligible effect upon year-to-year fluctuations in the ratios of state to national per capita income payments. However, even these mild differential annual movements have apparently contributed to preand postwar declining trends in the ratio of California to national per capita income payments. Pacific Coast states show varied but more moderate per capita income changes than Intermountain states 150 N o v e m b e r 1954 FEDERAL RESERVE B A N K OF SA N FRANCISCO Since 1946, changes in per capita incomes in both Oregon and Washington were even more similar to movements in national per capita incomes. Changes in Oregon per capita incomes from 1946 to 1950 and in Washington per capita incomes since 1951 both illustrate a fairly con stant relation to movements in the national figure over the postwar years. The somewhat larger fluctuations during the prewar years of per capita income payments in Oregon and Washington compared to California probably reflect a greater concentration of generally more volatile indus tries in the two Pacific Northwest states in contrast to the location of generally less volatile industries in Cali fornia. Even when considered in the aggregate, manu facturing and construction activities are, on the whole, more volatile than either trade or service activities. In 1929 and 1939, California had a larger percent of its gainfully employed labor force engaged in trade and service industries, particularly the latter, than either Washington or Oregon. On the other hand, both Oregon and Washington during these same census years had larger proportions of their gainfully employed workers concentrated in manufacturing industries than California. A further breakdown of total manufacturing activity, based upon the 1949 census, indicates differences in re gional specialization in durable goods industries which might also have contributed to differences in per capita income fluctuations between California and the Pacific Northwest during the postwar years. Washington and especially Oregon had a somewhat higher concentra tion of durable goods industries (generally more volatile than nondurable goods industries) than California. In California the largest proportion of durable goods em ployment is centered in transportation equipment— pri marily aircraft— with the Federal Government as the principal customer. Major fluctuations in this industry are largely the result of changing national defense policy and may, therefore, bear little relation to changes in gen eral business activity. In contrast, the largest proportion of durable goods manufacturing employment in Wash ington and, particularly, Oregon is concentrated in the production of lumber and lumber derivative goods— an industry in which major fluctuations are the result of numerous changes in both the private and governmental sectors of the economy. Property income as a possible source of District stability In addition to differences in industrial specialization, differences in state percentage distribution of income payments by type during the pre- and postwar periods P e r c e n t a g e D is t r ib u t io n of G a i n f u l l y E m p l o y e d W o r k ers b y M a jo r I n d u s t r y G r o u p T w e l f t h D is t r ic t a n d U n it e d S t a t e s — 1930, 1940, a n d 1 950 Industry group Total all industries ........................... Extractive industries ...................... Agriculture, forestry, fishing . M ining ................................................ Manufacturing and construction M a n u fa ctu rin g .................................. Construction .................................... Trade and services ........................... Trade ................................................... Services .............................................. Finance, insurance, real estate . . Transportation, communications, other public utilities ............... Industries not rep re se n te d ............ -U nited States— 195o' 1940 100.0 100.0 14.2 20.9 18.9 12.5 2.0 1.7 28.1 32.0 23.5 25.9 4.6 6.1 52.4 49.2 16.8 18.8 22.4 22.2 3.4 3.3 19301 100.0 20.9 18.3 2.6 23.9 17.1 6.8 55.1 16.3 24.0 4.1 6.9 1.6 7.8 1.5 7.6 3.1 19301 100.0 25.8 25.2 0.6 24.3 18.0 6.3 46.9 15.0 21.3 2.8 1940 100.0 19.7 18.9 0.8 26.3 20.9 5.4 52.3 19.0 22.3 3.0 1950 100.0 13.0 12.7 0.3 30.1 22.7 7.4 55.5 20.5 23.0 3.4 19301 100.0 22.1 21.1 1.0 26.5 19.9 6.6 47.9 15.3 21.1 3.1 7.8 3.0 8.0 1.7 8.6 1.4 8.4 3.4 1950 100.0 29.8 27.2 2.6 16.7 9.2 7.5 51.8 19.2 21.3 2.3 19301 100.0 35.3 21.2 14.1 14.0 8.0 6.0 47.6 11.1 21.7 1.7 9.0 1.5 13.1 3.2 19301 100.0 24.4 22.0 2.4 29.7 23.5 6.2 43.1 13.4 20.1 2.9 6.7 2.7 Total all industries ......................... Extractive industries ............ Agriculture, forestry, fishing M ining .............................................. Manufacturing and construction . Manufacturing ............................. Construction .................................. Trade and services ........................ Trade ................................................ Services ........................................... Finance, insurance, real estate . . Transportation, communications, other public utilities ............ Industries not re p resen ted .......... 19301 100.0 48.1 44.1 4.0 13.5 9.5 4.0 35.4 11.4 16.5 1.5 6.0 3.0 T J.1_ i uano--------1940 100.0 41.2 37.0 4.2 12.5 7.9 4.6 44.7 16.4 19.8 1.7 6.8 1.7 1 Adjusted to the 1940 and 1950 census definitions. Source: United States Department of Commerce, Bureau of the Census, C en su s t 19301 100.0 16.1 13.9 2.2 24.7 17.4 7.3 56.1 17.5 26.2 5.0 8.0 1.4 8.2 1.2 7.4 3.1 1940 100.0 15.8 14.9 0.9 28.3 22.0 6.3 54.2 19.6 22.3 3.6 1950 100.0 10.6 10.1 0.5 29.4 21.2 8.2 58.6 20.7 24.9 3.8 19301 100.0 34.5 23.9 10.6 17.6 11.5 6.1 44.9 13.5 22.5 2.0 8.7 1.5 9.2 1.5 6.9 2.9 7.9 1.5 8.9 1.6 1940 100.0 30.8 15.6 15.2 12.0 4.5 7.5 55.1 16.5 24.4 1.7 1950 100.0 15.9 10.7 5.2 13.7 5.1 8.6 68.6 19.9 34.6 2.5 19301 100.0 31.8 24.4 7.4 19.0 13.5 5.5 45.4 14.4 19.6 2.4 Utah 1940 100.0 26.3 19.5 6.8 16.5 11.0 5.5 55.6 19.5 22.6 3.0 1950 100.0 17.9 12.6 5.3 19.6 12.2 7.4 61.2 20.4 28.0 3.2 12.5 2.1 11.6 1.7 9.0 3.7 10.5 1.6 9.6 1.3 U- XT___ o f P o p u la tio n . — California— ------------v 1950 1940 100.0 100.0 8.4 12.9 7.6 11.0 0.8 1.9 27.3 23.0 19.6 16.8 7.7 6.2 63.2 62.6 22.4 22.3 27.5 28.0 4.6 4.8 8.5 1.3 8.2 1.5 w r\ Total all industries ........................ Extractive industries ...................... Agriculture, forestry, fishing . M ining .................................... Manufacturing and construction . Manufacturing ................................ Construction #.................................. Trade and services ........................ Trade ................................................ Services ........................................... Finance, insurance, real estate . . Transportation, communications, other public utilities ............ Industries not rep resen ted .......... -Twelfth District---------- ^ 1950 1940 100.0 100.0 16.5 10.7 9.6 14.2 2.3 1.1 26.6 23.0 18.9 17.0 6.0 7.7 61.3 59.0 21.0 21.7 26.9 25.7 4.2 4.1 K— I ......Arizona— 1940 100.0 30.3 21.7 8.6 14.4 8.4 6.0 53.9 18.5 25.5 2.0 1950 100.0 19.3 14.9 4.4 17.4 8.8 8.6 61.6 21.9 27.8 3.0 N o v e m b e r 1954 M O N T H L Y REVIEW suggest a second major factor probably contributing to state and national differences in per capita income fluc tuations. Income from property— particularly personal interest income, the largest single source of property in come— is generally more stable than wages and salaries, or proprietors’ incomes during periods of fluctuating business activity. Thus states with large proportions of income arising from property may be expected to exhibit a higher degree of stability during periods of changing economic conditions than states in which personal inter est and rental incomes are a significantly smaller fraction of their total income payments. Among District states, California has generally shown the mildest fluctuations in per capita income payments during the pre- and postwar years. At the same time, California has derived a larger proportion of its total in come from property than any of the other six western states. In 1929, California obtained slightly less than 23 percent of its total income from property compared with slightly less than 19 percent in the country as a whole. Nationally, property income declined at a slower rate from 1929 to 1932 than the sum of the remaining types of personal income. This suggests that the differential importance of property incomes between California and the nation may be a significant factor in explaining the apparent slower rate of decline in California per capita income during that four-year period compared with the decrease in the country as a whole. However, since 1929, the proportion of California income derived from prop erty has declined at a faster rate than in the country as a whole so that by 1953 the California fraction was less than 1 percentage point above the national ratio. Conclusions In summary, the data indicate that fluctuations in per capita income payments in the Twelfth District have, in general, paralleled changes in the country as a whole dur ing the pre- and postwar years. Thus, insofar as annual per capita income payments are an indicator of regional purchasing power, this District— considered as a whole — has generally not been greatly insulated from major economic cycles in the nation since 1929. However, the seven District states reviewed separately show varied fluc tuations in their per capita incomes which appear to have been associated with differences in industrial structure and, in the case of California, with the fraction of prop erty income as a major type of total income payments. The District Intermountain states, with large propor tions of their gainfully employed labor forces engaged in agricultural activity, have generally experienced larger per capita income fluctuations than the Pacific Coast states. Among the Pacific Coast states, California has had milder year-to-year changes in per capita incomes than either Oregon or Washington, which may reflect both the larger concentration of less volatile trade and service industries and the larger percentage of total income de rived from property in that state. Further analysis, es pecially of the postwar period, using a more detailed re 151 gional breakdown of durable goods manufacturing among the three Pacific Coast states would probably suggest further differences contributing to the differential fluc tuations in per capita income payments. Similarly, a more detailed regional comparison of gov ernment (Federal, state, and local) employment suggests another probable factor contributing to differences in fluctuations in per capita income payments between the District and nation and among the seven District states. Government employees are counted among other major industry groups in the census data and cannot readily be identified as a separate category. For example, govern ment workers engaged in medical services, transporta tion, and other activities commonly carried on by private enterprises are classified in the appropriate industrial category. In general, the bulk of government employ ment is included under services— public administration and education— in the census reports. However, esti mates published by the United States Department of Labor indicate sizable differences during 1953 in the pro portion of nonagricultural workers employed in govern mental activity in the nation (13.6 percent) compared with the District (17.5 percent). Still another important factor probably contributing to similar per capita income movements between the Dis trict and the nation is the effect of public policy. Where large subregions like the Twelfth District are involved, public policy directed at stabilizing incomes may well re sult in a greater uniformity between regional and na tional fluctuations in annual per capita income payments. Thus differential cyclical movements in per capita in come payments between the District and the nation re sulting from differences in industrial structure may be reduced by public policy. Finally, several precautions should be pointed out in interpreting both the pre- and postwar trends and the annual fluctuations shown in the charts. The trend lines shown in the charts measure twelve-year prewar and eight-year postwar average annual rates of growth in the plotted ratios of state to national per capita income payments. These trend lines cannot be sensibly extra polated. For example, the possible location in the future of a high wage industry or industries in the smaller pop ulated and less developed Intermountain states could well result in a sizable jump in the trend of the ratio of state to national per capita income payments. Somewhat similar precautions should be taken in com paring annual income fluctuations among the District states. Not only is there a paucity of annual observations (12 prewar plus 8 postwar years) but allowance must also be made for differences in the size of per capita in comes when employing ratios. For example, an absolute difference of 5 percentage points in the ratio of state to national per capita income payments would appear as a larger relative deviation in a state with generally lower per capita income (for example, Idaho) than a state with generally higher per capita income (for example, California). 152 FEDERAL RESERVE B A N K OF SA N FRANCISCO N o v e m b e r 1954 BUSINESS INDEXES—TWELFTH DISTRICT1 (1947-49 average=100) ■ear and month 1929 1931 1933 1935 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1953 September October November December 1934 January February March April M ay June July August September Total Waterborne Industrial production (physical volume)2 Car nonagri Total Retail Dep’t foreign |>y*f 9 «a g loadings store cultural mT rood trade*» 8 Petroleum3 Wheat Electric employ employ (num sales prices S , 6 Copper* flour8 power Refined Cement ber)2 Lead* ment4 (value)2 ment Lumber Crude Exports Imports 80 42 34 45 61 48 60 65 77 77 74 74 61 80 94 102 104 116 115 111 119 87 57 52 62 71 75 67 67 69 74 85 93 97 94 100 101 99 98 106 107 109 78 55 50 56 65 64 63 63 68 71 83 93 98 91 98 100 103 103 112 116 123 54 36 27 33 56 45 56 61 81 96 79 63 65 81 96 104 100 112 128 124 130 165 100 72 86 114 92 93 108 109 114 100 90 78 70 94 105 101 109 89 86 74 105 49 17 37 88 58 80 94 107 123 125 112 90 71 106 101 93 115 115 112 111 90 86 75 87 84 81 91 87 87 88 98 101 112 108 113 98 88 86 95 96 96 29 29 26 30 38 36 40 43 49 60 76 82 78 78 90 101 108 119 136 144 161 113 114 115 114 109 109 110 109 126 125 121 125 133 137 128 120 73 69 69 67 111 112 112 104 101 99 98 96 122 122 119 120 124 103 80r 89 r 109 109 108 107 107 107 106 104 105 121 120 118 119 123 119 118 115 121 114 117 116 134 143 140 143 137 60 79 76 71 67 69 63 72 r 67 V 107 102 99 98 103 105 91 75r 97 p 99 97 98 96 96 96 92 101 104 112 30 25 18 24 30 28 31 33 40 49 59 65 72 91 99 104 98 105 109 114 116 64 50 42 48 50 48 47 47 52 63 69 68 70 80 96 103 100 100 113 115 113 190 138 110 135 170 164 163 132 124 80 72 109 119 87 95 101 'ÌÓÓ 101 96 95 99 102 99 103 111 118 122 "4 7 60 51 55 63 83 121 164 158 122 97 100 102 97 105 122 132 139 102 68 52 66 81 72 77 82 95 102 99 105 100 101 106 100 94 97 100 101 100 ’ *89 129 86 85 91 186 171 140 * ’ 57 81 98 121 137 157 200 308 166 163 157 158 122 122 121 121 140 141 137 138 98 95 97 102 110 111 112 109 114 114 113 113 129 133 139 141 368 316 287 256 163 160 171 168 174 183 179 174 121 121 120 120 120 120 119 119 120 138 137 136 136 136 137 131 130 136 93 90 94 99 97 96 88 90 97 109 107 111 111 114 114 115 115 110 114 114 113 113 114 114 113 113 113 108 156 156 157 158 141 114 210 271 233 232 271 237 331 282 BANKING AND CREDIT STATISTICS—TWELFTH DISTRICT (amounts in millions of dollars) Year and month Bank Member bank reserves and related items10 rates on Reserve Coin and Demand Total short-term U .S . Loans Commercial Treasury currency in business 7^:». bank time deposits Gov’t and opérations12 operations12 circulation11 Reserves loans0 credit11 discounts securities adjusted8 deposits Condition items of all member banks7 2,239 1,898 1,486 1,537 1,871 1,869 1,967 2,130 2,451 2,170 2,106 2,254 2,663 4,068 5,358 6,032 5,925 7,093 7,866 8,839 9,220 495 5-47 720 1,275 1,270 1,323 1,450. 1,482 1,738 3,630 6,235 8,263 10,450 8,426 7,247 6,366 7,016 6,415 6,463 6,619 6,639 1,234 984 951 1,389 1,740 1,781 1,983 2,390 2,893 4,356 5,998 6,950 8,203 8,821 8,922 8,655 8,536 9,254 9,937 10,520 10,515 1,790 1,727 1,609 2,064 2,187 2,221 2,267 2,360 2,425 2,609 3,226 4,144 5,211 5,797 6,006 6,087 6,255 6,302 6,777 7,502 7,997 1953 October November December 9,255 9,248 9,220 6,556 6,693 6,639 10,248 10,255 10,515 7,854 7,815 7,997 1954 January February M arch April M ay June July August September October 9,198 9,176 9,106 9,045 9,001 9,049 8,989 8,977 9,054 9,048 6,844 6,667 6,500 6,903 6,991 6,981 7,190 7,574 7,610 8,014 10,540 10,138 9,922 10,190 10,045 10,087 10,310 10,257 10,463 10,749 7,995 8,071 8,175 8,234 8,306 8,428 8,444 8,501 8,555 8,651 1929 1931 1933 1935 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 — + — + — + + + + + + 3.20 3.35 3.66 3.95 4.14 + + + + + — 4.19 + + + 4.12 + + 4.14 + ‘ 4.Ó8' + + 34 21 2 2 1 3 2 2 4 107 214 98 76 9 302 17 13 39 21 7 14 0 154 110 163 90 240 192 148 596 - 1 ,9 8 0 - 3 ,7 5 1 —3,534 - 3 ,7 4 3 - 1 ,6 0 7 510 + 472 930 -1 ,1 4 1 - 1 ,5 8 2 - 1 ,9 1 2 - 3 ,0 7 3 + + + + + + + + +1 +2 +4 +4 +4 +1 + 19 137 50 - 391 149 432 + + + 394 330 438 1 98 125 5 9 21 29 18 16 9 + - 308 245 213 324 148 254 307 28 170 138 + + + + + + + 125 80 315 381 136 277 170 12 196 142 — + +1 +1 +2 +3 + + 23 154 150 219 157 276 245 420 ,000 ,826 ,486 ,483 ,682 ,329 698 482 378 ,198 ,983 ,265 ,158 — + — + + 4* + + + + + + — — — — + + + + + __ — — + + + + + — + Bank debits Index « 31 cities** (1 9 4 7 -4 9 = 1 0 0 )2 6 48 18 14 3 20 31 96 227 643 708 789 545 326 206 209 65 14 189 132 39 175 147 185 287 549 565 584 754 930 1,232 1,462 1,706 2,033 2,094 2,202 2,420 1,924 2,026 2,269 2,514 2,551 42 28 18 25 32 29 30 32 39 48 60 66 72 86 95 103 102 115 132 140 150 7 23 26 2,449 2,476 2,551 142 149 158 86 2 29 7 36 15 3 7 8 23 2,468 2,398 2,413 2,477 2,432 2,413 2,308 2,317 2,368 2,364 146 153 158 150 143 157 145 154 152 150 1 Adjusted for seasonal variation, except where indicated. Except for department store statistics, all indexes are based upon data from outside sources, as follows: lumber, various lumber trade associations; petroleum, cement, copper, and lead, U .S. Bureau of Mines; wheat flour, U .S. Bureau of the Census; electric power, Federal Power Commission; nonagricultural and manufacturing employment, U.S. Bureau of Labor Statistics and cooperating state agencies; retail food prices, U .S. Bureau of Labor Statistics; carloadings, various railroads and railroad associations; and foreign trade, U .S. Bureau of the Census. * Daily average. * N ot adjusted for seasonal variation. 4 Excludes fish, fruit, and vegetable canning. 1 Los Angeles, San Francisco, and Seattle indexes combined. • Commercial cargo only, in physical volume, for Los Angeles, San Francisco, San Diego, Oregon, and Washington customs districts; starting with July 1950, “ special category” exports are excluded because of security reasons. 7 Annual figures are as of end of year, monthly figures as of last Wednesday in month or, where applicable, as of call report date. • Demand deposits, excluding interbank and U.S. G ov’t deposits, less cash items in process of collection. M onthly data partly estimated. • Average rates on loans made in five major cities during the first 15 days of the month. 10 End of year and end of month figures. 11 Changes from end of previous month or year. 18 Minus sign indicates flow of funds out of the District in the case of commercial operations, and excess of receipts over disbursements in the case of Treasury operations. 11 Debits to total deposits except interbank prior to 1942. Debits to demand deposits except Federal Government and interbank deposits from 1942. p — Preliminary. r— Revised.
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