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Qewleur Monthly FEDERAL RESERVE B A N K OF S A N SEPTEMBER FR A N C ISC O 1944 Review of Business Conditions— Twelfth District r o d u c tio n and trade have been maintained at high wartime levels during recent months, and overall in P dustrial employment has continued a slow decline which first became evident in mid-1943. Bank deposits have shown a further increase. Production and Employment With the exception of food processing, which be comes seasonally active in August and September, little change in the volume of Twelfth District industrial pro duction has occurred in recent weeks. Although there has been some slight further falling off in aircraft production and ship deliveries, reports indicate that war production in this District is generally close to schedule. The manu facture of heavy guns and ammunition, combat and motor vehicles, and some other munitions which are reported behind schedule because of manpower shortages is unim portant or nonexistent in the Twelfth District. In the light metals field, increasing ingot surpluses have prompt ed drastic production cuts in recent months, and current output is a small fraction of plant capacity, particularly in government-owned plants. One of the District’s seven aluminum plants and one of its four magnesium plants have been shut down, and closing of the large Basic Mag nesium plant in Nevada is expected before the end of the year. The comparatively few workers released by cut backs in aluminum and magnesium have readily been ab sorbed in other activities. Among the major basic industries, petroleum has dis played some further production gains in recent months, largely reflecting the completion of small new wells in de veloped reserves. For September, the Petroleum Admin istration for W ar authorized certain production in excess of the maximum efficient rate. Lumber and nonferrous metals output (other than of light metals) have fallen off substantially, however, and production in recent months has been lower than in 1943. Shortages of mine and mill labor have resulted in a particularly sharp drop in copper production which, in July and August, totaled little more than 100,000 tons, compared with 133,000 tons during the same months in 1943. While total employment, excepting seasonal agricul tural and food processing workers, has not receded a great deal, wrorkers continue to leave the durable goods indus ★ tries, principally aircraft and shipbuilding, to enter other work, retire from the labor force, or leave the District. At the end of August, for example, total net employment in the Pacific Coast plants of seven major aircraft firms wras 225,300, compared with 269,000 six months earlier, and a peak of 307,400 attained in June 1943. Shipbuild ing employment has receded similarly. Wage-earner data for California show that since the first of the year the average rate of decline in durable goods employment has been about the same for men and women. Industrial pay rolls have reflected these declines to a moderate degree, but the effect of this curtailment in total consumer income has not been reflected in figures of consumer commodity purchases, as measured by department store sales. Department Store Trade Third quarter department store sales averaged 219 per cent of the 1935-39 average, after allowance for seasonal variation, compared with 209 percent in the second quar ter, and 195 percent in the third quarter of 1943. Department store inventories have been increasing sea sonally since the first of the year, but at a slower rate than in 1942 or 1943, and on August 31 were 4 percent lower than a year earlier. Orders placed by stores with their suppliers during the first eight months of 1944 were 6 percent lower than in the corresponding 1943 period. Orders outstanding on August 31 were moderately lower than the peak attained in July 1943 but roughly five times higher than prewar levels. Income Payments in the Twelfth District Income payments to individuals in the Twelfth Dis trict exceeded 18 billion dollars in 1943, according to recent estimates of the United States Department of Com merce, compared with 14 billion in 1942 and 8 billion in 1940. Because of the outstanding importance of wTar pro duction in this District, the indicated rate of increase over the four-year period was greater than that for the United States as a wThole, and the District’s share of the United States total increased from 10.8 percent in 1940 to 13.2 percent in 1943. In the case of salaries and wages, the most important single component, the District share increased from 10.5 percent to 13.5 percent. Vict&uf' ★ ßpuf Wan ßtuixii ★ 40 FEDERAL RESERVE BANK OF SAN FRANCISCO More than doubling of total income payments to indi viduals from 1940 to 1943 was accompanied by an 87 per cent increase in per capita payments from $711 to $1,333. I n c o m e P a y m e n t s to I n d i v id u a l s — T w e l f t h D is t r ic t ( in m illio n s ) Twelfth D istrict................. 1940 1941 1942 1943 $8,165 $10,370 $14,114 $18,277 A r iz o n a .................................. California ............................. Idaho .................................... Nevada .................................. Oregon .................................. Utah ....................................... W a s h in g t o n ........................ 237 5,606 232 92 633 265 1,100 287 7,044 278 107 824 329 1,501 426 9,260 403 194 1,164 505 2,162 565 12,097 475 202 1,517 639 2,782 Salaries and w ages............ Proprietors’ income.......... Property in c o m e ............... Other in c o m e ...................... 5,037 1,344 1,211 573 6,477 1,830 1,523 540 9,665 2,401 1,571 477 13,009 2,958 1,708 602 Source: U . S. Department of Commerce. The 1943 per capita figure is higher than that for any other region, and compares with a United States average of $1,031. Further Increase in Bank Deposits Contract cancellations and outmigration occurring in recent months have had no appreciable effect upon the Twelfth District money supply. Currency in circulation and demand and time deposits have continued to increase. After reaching a peak in mid-June of 6.4 billion dollars, adjusted demand deposits of District member banks de clined somewhat because of the Fifth War Loan Drive, but Treasury disbursements of those funds and other funds shifted to the Twelfth District raised demand de posits by mid-September above the previous record level. On September 20, adjusted demand deposits ap proximated 6.6 billion dollars, up 3 percent over the pre September 1944 drive peak in June and 27 percent over a year ago. (In mid-September District banks held about a billion dollars on war loan account, compared with 1.5 billion at the end of the fifth drive and 0.5 billion before the drive opened.) Time deposits of District banks have continued their steady increase which has been evident over the past 18 months or more. They have been much less affected than demand deposits by the loan drives. Their rise was checked during the fourth and fifth drives, but no decline occurred in either instance. By mid-September, time de posits of District member banks are estimated to have amounted to about 3.8 billion dollars, an increase of 7 percent during the previous quarter and 27 percent over a year earlier. Production and Employment— Index numbers, 1935-39 daily average^ 100 With seasonal Without seasonal (--------adjustment-------- /---------------adjustment-------- ,------- 1944------- ^ 1943 ,------- 1944--------x 1943 Industrial production1 Aug. July JuneAug. Aug. July 131 127 152 r l3 7 Lumber .................................... 127 r l2 7 Refined oils2 ........................ — — — — 220 214 Cement2 .................................... I l l 124 119 135 124 136 W heat flour2 ...................., . 1 3 7 151 153 121 137 133 Petroleum2 ....... ..................... — — — — 130 129 Electric power2 ................... 415 407 418 389 455 454 Factory employment and payrolls3 Employment Twelfth D i s t r i c t ...................... 281 California ...................... 327 332 222 Pacific N o r t h w e s t............... O r e g o n ................................ 195 W a s h in g t o n ...................... 238 In te rm o u n ta in ...................... 120 Payrolls California ...................... 679 r682 June Aug. 149 152 225 198 135 151 134 121 128 118 448 426 284 334 224 193 243 121 312 371 234 212 247 161 .. 328 .. .. .. .. 282 332 223 196 239 123 283 334 223 194 240 124 314 372 239 218 251 161 691 726 682 r681 694 730 1 Daily average. 2 1923-25 average = 100. 3 Excludes fish, fruit, and vegetable canning, r Revised. M A P OF UNITED STATES Showing, by geographic divisions, numbers (in thousands) and origins of persons residing in each of five Pacific Coast Congested Production BLOCKED FIGURES at extreme left of map: Figure in upper portion of block for eoch congested area indicates number (in thousands) of 1944 residents who lived outside the Pacific division in 1940. Figure in lower portion indicates number who in 1940 lived in the Pacific division, but outside the congested area to which the block refers. SPLIT ARROW extending from each geographic division shows total 1944 residents (in thousands) of the five Pacific Coast congested areas who in 1940 resided in that geographic division. The five parts of each arrow point towards Hie five destinations of these migrants and show the number going to each congested area. Areas in early 1944, who lived elsewhere in 1940 Figures do not necessarily add to totals because of rounding September 1944 41 MONTHLY REVIEW Migration to the Twelfth District, 1940-43 the outmigration of Twelfth District war work ers is likely to continue for some time to come, it is of interest to note something of the characteristics of persons entering this area during the war period. Most of the persons entering were workers and their families at tracted by employment opportunities in shipbuilding, air craft fabricating, military, and related activities, prin cipally in or near the five principal production centers of the Pacific Coast states. In those states the ratio of con tracts for w7ar supplies and facilities to prewar population has been unusually high, amounting in mid-1944 to $2,650, compared with $2,270 in the next highest geo graphical division, and $1,440 in the United States as a wrhole. The migration of workers taking place during the past four years to states having a high ratio of wrar ex penditures to prewar population has tended to reduce these differences only slightly. At the recent population peak attained in the Pacific Coast states the value of w^ar contracts awarded in that area as a whole was still higher, with regard to the current population, than in any other geographical division. S in c e Migration to the Twelfth District From April 1,1940 to November 1,1943, during which period migration to the West was most active, a net gain in the Twelfth District civilian population of 1,347,000 occurred. This impressive increase took place despite a C iv il ia n A r iz o n a ............... California .......... Idaho ................. Nevada ............... O r e g o n ............... Utah ................... W ashington . . . Twelfth District P o p u l a t io n — T w e l f t h D is t r ic t (in thousands) -------Increase or decrease----------------\ f" Net gain ( + ) or loss (— ) through civilian N et loss to Natural April 1 Nov. 1 migration increase Total armed forces 1940 1943 + 77 + 32 — 37 569 498 + 71 + 1,369 + 224 — 574 7,877 + 1,019 6,858 — 45 + 28 — 35 473 — 52 525 + 27 — 11 131 + 20 110 + 4 + 138 + 33 + 83 — 88 1,088 1,172 + 39 + 32 584 + 33 — 38 550 + 58 + 245 1,904 — 131 + 171 1,732 + 419 + 1.843 — 915 11,362 12,709 + 1,347 Source: U . S. Bureau of the Census. N o te : Figures do not necessarily add to totals because of rounding. net loss to the armed services of 915,000 civilians, owing principally to a net inflow' of 1,843,000 migrants. Also contributing to the upturn was a natural increase, or ex cess of births over deaths, totaling 419,000. Figures in the accompanying table indicate the magni tude of net, rather than total, migration. The total num ber of civilians entering and leaving Twelfth District states during the period under review was very much larger than the net figures shown and, in addition, there was a substantial movement from one place to another within individual states on which no data are available. Congested Production Areas Before the war, as well as at the present time, more than half of the Twelfth District population, and more than 60 percent of the Pacific Coast population resided in the San Diego, Los Angeles, San Francisco Bay, Portland-Van couver, and Puget Sound areas. Since the greater part of the District facilities for war production are in those areas, it was natural that most of the inmigrants headed for and settled in the same areas. The resident popula tion (civilians plus military personnel living off post) in creased from 5,989,000 in 1940 to 7,266,000 in 1944, or R e s id e n t P o p u l a t io n — P a c if ic C oast C on gested P r o d u c t io n A r e a s (in thousands) Area San Francisco B a y . . . Portland-Vancouver . T o ta l........................ April 1 1940 289 ' 916 1,462 501 820 Spring 19441 416 3,357 1,841 661 992 Increase 127 441 379 159 172 5,989 7,266 1,277 Percent increase 44 15 26 32 21 21 1 Censuses taken during following periods: San Diego (San Diego County, California), latter part of M arch ; Los Angeles (L os Angeles and Orange Counties, California), A p ril; San Francisco (Alam eda, Contra Costa, Marin, San Francisco, San M ateo, and Solano Counties, California) early part of A p ril; Portland-Vancouver (Clackamas, Multnomah, and W a sh ington Counties, Oregon, and Clark County, W ashin gton), M a y ; Puget Sound (K in g , Kitsap, Pierce, and Snohomish Counties, W ashington), middle of June. Source: U . S. Bureau of the Census. N o te : Figures do not necessarily add to totals because of rounding. 21 percent, according to a special census undertaken last spring. This huge influx gave rise to many housing, trans portation, and other community problems which, in turn, had much to do with the decision of a considerable num ber of persons to return to their home states while em ployers were still attempting to build up adequate work ing forces. Source and Characteristics of Inmigrants in Pacific Coast Congested Areas Of the 7,266,000 persons resident in the five Pacific Coast congested production areas during the spring of 1944, 1,415,000 lived outside the Pacific Coast states, and 539,000 lived elsewhere in the Pacific Coast states, in 1940. As shown in the accompanying map, approximately two-thirds of those entering the five areas from outside the three Pacific Coast states originated in states wrest of the Mississippi, largely plains states in the West Central divisions. Most of the remainder originated in the north ern states east of the Mississippi. It should be stressed that the numbers of persons indicated on the chart repreBanking and Credit— Averages of Wednesday figures (millions of dollars) - Change from «--------------- 1944Aug. July Condition items of weekly reporting member banks Total l o a n s ................................................... Com ’L, ind., & agric. loans............ Loans to finance transactions in : U . S. Government securities. . . Other s ecu rities............................... Real estate lo a n s .................................. All other loans .................................... Total investments .................................... U . S. Government securities.......... All other secu rities...................... Adjusted demand deposits ................. Time d e p o s its .............................................. United States Government deposits. 967 472 51 3 61 47 295 92 4.555 4,216 339 2,781 1,512 1,035 -4 7 + — 1 — 8 + 61 +■ 68 ■— 7 + 102 + 33 — 109 2 6 -441 L435 b 5 9 + 47 +478 Coin and currency in circulation Total (changes only) ............................. Fed. Res. Notes of F . R. B . of S. F .. 2,408 + 92 _i_ 92 + 167 4-166 Member bank reserves.................................. 1,510 + _ 43 1943 Aug. June + + - 9 5 + + } + 5 — 53 23 70 33 8 + 1,167 + 1,128 + 39 +* 318 + + 270 599 + + 792 790 + 185 42 FEDERAL RESERVE BANK OF SAN FRANCISCO sent, not the total numbers of inmigrants originating in a given geographical division or settling in a given con gested area, but the 1940 origins and 1944 locations of inmigrants actually resident in the five Pacific Coast pop ulation centers as of the spring of 1944. About a sixth of the inmigrants from outside the Pacific Coast states lived on farms in 1940. This proportion was far from uniform as among the several geographical divi sions, ranging from 2 percent for the New England divi sion to 25 percent for the West South Central division, comprising the states of Texas, Oklahoma, Arkansas, and Louisiana. Because relatively few persons over 45 years of age migrated to the West, the effect of Selective Service with drawals upon the average age of the population residing in the five congested areas has been offset to some extent, and the present average age of persons in the labor force is lower than it would be if inmigration had not occurred. Thirty-two percent of the male inmigrants and 43 per cent of the female inmigrants were from 20 to 34 years old when the census was taken this year. These compare with 14 percent and 22 percent, respectively, of non migrants in the same age group. The lowering of the aver age age in the total resident population through the inmigration of relatively few persons over 45, particularly elderly people, was almost entirely offset by a relatively small (with regard to the existing population) propor tion of children under 15 who entered the five areas. September 1944 Owing primarily to the large numbers of younger adults in the inmigrant group, a larger than normal pro portion of that group is in the labor force. This is particu larly true of women entering the five areas, many of whom migrate west to live near husbands in the armed forces stationed or based at Pacific Coast points. Migration data by race are not available. From 1940 to 1944, however, the Negro population of the five con gested areas increased from 107,000, or less than 2 per cent of the resident population, to 228,000, or 3 percent. During the same period the numbers of other races other than white are estimated to have declined from 127,000 to 64,000, principally because of the Japanese exclusion. Outmigration in 1944 Increasing talk about the resumption of civilian pro duction, and recurrent waves of optimism with regard to the ending of the European war have induced many workers to leave their war work in the Pacific Coast pop ulation centers for more permanent work elsewhere, in many cases their home states. The return flow of inmi grants has been increasing in recent months. While no exact data are available, it is probable that outmigration from the five areas which approximated 14,000 persons per month in July is currently at a rate of something nearer 20,000 per month. This return flow aggravates the immediate problem of maintaining sufficient manpower in war production and essential civilian activities. California Employment and Payroll Statistics m p lo y m e n t and payroll figures are, in many ways, E the most useful of all indexes of the general level of economic activity, and of differences from time to time, from place to place, and from industry to industry in the level of economic activity. The number of people provided with a livelihood, in conjunction with the aggregate amount in their pay envelopes, provides a common unit in which different economic activities can be measured. It makes possible, for example, the addition and comparison of like figures for such widely divergent activities as saw mills, blast furnaces, retailing, and mining. Because the basic figures are taken from regular payroll records which have to be kept by business firms, employment and pay roll data can be made publicly available currently and with a minimum of burden to reporting firms. The employment and payroll statistics for California are currently among the best in the country. Manufactur ing statistics are available, in an unbroken series, back to 1935 and monthly comparisons have been published since 1924, when the California Division of Labor Statistics and Law Enforcement, in cooperation with the Federal Reserve Bank of San Francisco began to collect them. The Federal Reserve bank shortly thereafter withdrew in favor of the United States Bureau of Labor Statistics. The first report was based on returns from 462 manu facturing plants and 12 laundry, cleaning, and dyeing establishments employing 85,000 wage earners. The Sep tember 1944 report is based on returns from 8,675 estab lishments employing more than 950,000 wage earners. In the 20-year period, California's labor force increased from about one and a half million to over four million, and the employment and payroll statistics reflected cur rently the changes in economic activity which accom panied this growth. At the present time, data are avail able for the Los Angeles area and for the San Francisco Bay area, as well as for the State as a whole. Published reports present figures on average hours worked and average hourly earnings, indexes of employment and payrolls, and overall estimates of total employment and payrolls. Use of the Standard Industrial Classification breakdown for industry groups increases their value locally and facilitates direct comparisons with national figures, practically all of which follow the same classifica tion. Adjustments are made from time to time to bench mark figures from the various censuses and other au thoritative sources. The employment and payroll statistics have supplied up to date monthly measures of the economic impact of the war on California. They will be relied upon to furnish the most comprehensive and current measures of eco nomic activity during and after the return of peacetime pursuits. 42A September 1944 FEDERAL RESERVE BANK OF SAN FRANCISCO Summary of National Business Conditions INDUSTRIAL PRODUCTION Released September 26, 1944— Board of Governors of the Federal Reserve System n d u s t r ia l output and employment showed little change in August. Retail trade was I at a new high level for the month. There was a small further rise in retail commodity Pn c e s - Federal Reserve indexes. Groups are expressed in terms of points in the total index. Monthly fig ures, latest shown are for August. departm en t store sales and st o c k s I n d u s t r i a l P r o d u c t io n Output at factories and mines was 232 percent of the 1935-39 average in August as compared with 231 for July, according to the Board’s seasonally adjusted index of industrial production. Steel production was maintained, while output of nonferrous metals continued to decline. Overall, activity in the metal fabricating industries con tinued at the level of the preceding month. There were large increases in output of heavy trucks, tanks, and some other critical ordnance items in August; aircraft pro duction showed little change; while shipbuilding declined. Output increased in the shoe, woolen and worsted, and paper industries in August! following a drop in July which reflected chiefly the curtailment of operations around the fourth. Output of man ufactured foods, after allowance for seasonal changes, declined in August, largely re flecting decreases in output of meats, dairy products, and sugar products. Distilleries were shifted for the month of August from production of industrial alcohol for war purposes and output of about 50,000,000 proof gallons of beverage spirits was reported. Production of other nondurable goods was maintained at the level of the preceding month. Minerals output in August rose 2 percent from July, reflecting increases in coal and crude petroleum. Crude petroleum production was at a rate 11 percent above the same m o n t h la s t y e a r . D is t r ib u t io n Value of department store sales, according to the Board’s seasonally adjusted index, was larger in August and the first half of September than in the first half of 1944 and averaged 12 percent above the corresponding period of last year. In the third quarter the index at 90 percent above the 1935-39 average has been at the highest level on record. Carloadings of railroad freight were maintained in large volume in August. Dur ing the first three weeks in September loadings were slightly less than during the same period a year ago, owing to decreases in all classes of freight except merchan dise in less than carload lots and miscellaneous shipments. C o m m o d i t y P r ic e s Federal Reserve indexes. Monthly figures, latest shown are for August 1944. MEMBER BANKS IN LEADING CITIES Wholesale prices of farm products and foods showed small seasonal decreases from the middle of August to the middle of September. Maximum prices of such industrial goods as cotton fabrics, cement, and bricks were increased. Retail prices of food and other cost of living items increased slightly in August and the average of all items was 2 percent higher than a year ago, according to the Bureau of Labor Statistics index. A g r ic u l t u r e Crop prospects improved during August and the early part of September and har vests of most major crops are expected to be larger than last season. Marketings of livestock products, which were at a record level earlier this year and 15 percent higher than during the first six months of 1943, have declined in July and August to about the same level as that prevailing last year. Bank Demand deposits (adjusted) exclude U . S. G o v ernment and interbank deposits and collection items. Government securities include direct and guaranteed issues.Wednesday figures, latest shown are for September 13. MEMBER BANK RESERVES Breakdown between required and excess reserves partly estimated. Wednesday figures, latest shown are for September 20. C r e d it Bank deposits of businesses and individuals, as well as currency in circulation, have increased since the end of the Fifth W ar Loan Drive. This increase in the money hold ings of businesses and individuals is largely a reflection of the expenditures made by the Treasury from its war-loan accounts built up during the drive. Adjusted demand and time deposits at member banks in leading cities increased by nearly 4 billion dollars between the close of the drive and mid-September, or by over three-quarters of the amount of reduction in such funds during the drive. Deposits at non-reporting banks probably increased by nearly 2 billion dollars. Treasury war loan accounts at banks declined by nearly 8 billion dollars. In the same period loans and investments at weekly reporting member banks in 101 leading cities declined by 2.2 billion dollars. Loans to brokers and dealers for purchas ing and carrying Government securities declined to a level approximately equal to that of the pre-drive period. There was, however, a temporary increase in such borrowings in late August and early September presumably associated with market transactions stemming from the Treasury offer to exchange certificates maturing on September 1 and notes maturing on September 15 for new issues. Loans to others for purchasing and carrying securities declined steadily, but on September 13 were still well above the pre-drive level. Government security holdings showed a net decline of 800 million dollars over the period, reflecting mainly substantial bill sales by reporting banks partially offset by some increase in bond holdings. As the result of the increase in deposits of business and individuals, the average level of required reserves at all member banks rose by about a billion dollars between the close of the fifth drive and mid-September. In addition, a billion dollar increase in money in circulation and some further decrease in gold stock served to absorb reserve funds. Member bank needs for reserves due to these factors wrere met largely through an increase of 1.7 billion dollars in the Government security portfolio of the Federal Reserve banks and there was also a slight increase in Reserve bank discounts. Excess reserves declined from an average level of 1.4 billion at the close of the drive to some what less than a billion by early September.
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