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MONTHLY REVIEW TWELFTH FEDERAL RESERVE DISTRICT Fe d e r a l R e s e r v e B a n k September 1951 S a n Fr a n c i s c o of THE CRISIS IN THE ALUMINUM INDUSTRY T is c o n s e q u e n c e o f th e la s t w a r . T h e fo r tu n a te c ir c u m s ta n c e a g a in fa c in g a c r is is . T h i s c r is is g r o w s o u t o f th e a l h e th a t t w o h u g e p o w e r p la n ts b e c a m e a v a ila b le a t B o n n e v ille m ost a lu m in u m c o m p le te in d u s tr y of dependence th e of P a c ific th e lo c a l N o rth w e st in d u s tr y h y d r o e le c tr ic p o w e r , v e r y la r g e ly u n s u p p o r te d b y ia r y s t a n d -b y s te a m upon a n d G r a n d C o u le e o n th e C o lu m b ia R iv e r , a t a tim e w h e n a u x il n a tio n a l d e fe n s e n e e d s fo r a lu m in u m se e m e d a lm o s t lim it c a p a c ity . P e r io d ic a lly th e a lu m in u m p r o d u c e r s, to g e th e r w ith o th e r la r g e in d u s tr ia l u s e r s of le s s , le d th e d e fe n s e a u th o r itie s to f o llo w A lu m in u m th e le a d o f th e C o m p a n y o f A m e r i c a in lo c a t in g th e g r e a te r e le c tr ic p o w e r in th e a r e a , h a v e b e e n s u b je c t e d to p r o d u c p a r t o f th e n e w w a r tim e a lu m in u m t io n c u tb a c k s b e c a u s e o f p o w e r s h o r ta g e s r e s u lt in g fr o m area. lo w p o w e r ; c h e a p p o w e r is , in d e e d , a sine q u a n o n o f a lu m i strea m flo w or b e c a u se o f n o r m a l se a so n a l r e q u ir e A lu m in u m m e n ts o f d o m e s tic a n d o th e r c o n s u m e r s d u r in g th e w in te r num m o n t h s . S u c h a s itu a tio n o c c u r r e d la s t m o n t h w h e n r a p id n o t a v a ila b le l y d i m i n i s h i n g s t r e a m f lo w in th e C o lu m b i a R i v e r le d th e pow er B o n n e v ille m a t e ly t w o m ills cut o ff Pow er 2 4 5 ,0 0 0 A d m in is tr a tio n k ilo w a tts of on S e p te m b e r in te r r u p tib le pow er 17 to fr o m s m e lte r s p r o d u c tio n , a n d by th e The p la n t c a p a c it y in th a t heavy a lte r n a tiv e e ls e w h e r e . ch arged are u sers of e le c tr ic sou rces o f p o w e r w ere lo w ra te fo r B o n n e v ille h y d r o e le c tr ic a u th o r itie s p e r k ilo w a tt h o u r ) has been c ip a l fa c t o r in s u s t a in in g th e a lu m in u m (a p p r o x i th e p r in s m e ltin g in d u s tr y la r g e in d u s t r ia l u s e r s in its m a r k e t in g a r e a . T h i s c u r ta il in t h e P a c i f i c N o r t h w e s t . T h i s is in s p i t e o f t h e f a c t t h a t m e n t o f p o w e r s u p p ly fo r c e d th e im m e d ia te c lo s in g d o w n m o s t o f th e r a w m a te r ia l fo r th e lo c a l s m e lte r s m u s t m a k e o f a lu m in u m p o t-lin e s b y tw o o f th e th r e e p r im a r y a lu m i a 2 ,0 0 0 - m i l e j o u r n e y b y r a il o v e r la n d a n d th e g r e a t b u lk n u m p r o d u c e r s in th e P a c ific N o r t h w e s t a n d a s u b s ta n tia l o f th e o u tp u t m u s t b e s h ip p e d a n e q u a l o r g r e a te r d is ta n c e r e d u c tio n in o p e r a tio n s b y th e th ir d . T h e fiv e a lu m in u m to r e a c h its m a r k e t s — a m a r k e d c o m p e t it iv e d is a d v a n t a g e s m e lt in g p la n ts o p e ra te d b y th ese p ro d u c e rs as e le c tr ic a n d c u sto m e rs. depend upon in th e a r e a in te r r u p tib le pow er fo r a p p r o x i com p ared w ith p la n ts lo c a te d c lo s e r to raw m a te r ia l m a t e ly 2 0 p e r c e n t o f t h e ir t o ta l r e q u ir e m e n t s .1 The chronic B e c a u s e o f th e e x tr e m e ly lo w p e n d in g s e a s o n a l p e a k r e q u ir e m e n ts f o r g e n e r a l in d u s tr ia l and h o u s e h o ld u se d u r in g th e power shortage in the Pacific Northwest w a t e r le v e l a n d th e im fa ll and w in te r m o n th s, The P a c ific N o r t h w e s t p r o b a b ly c o n ta in s a la r g e r p o te n tia l of u n d e v e lo p e d h y d r o e le c tr ic en ergy th a n any fu r t h e r r e d u c tio n s fo r la r g e in d u s tr ia l u s e r s , a s w e ll a s fo r e q u a l a r e a a n y w h e r e in th e w o r ld . I n o th e r c o n s u m e r s , s e e m a lm o s t in e v ita b le . S u c h r e d u c tio n s a d d itio n s to its g e n e r a t in g c a p a c ity d u r in g th e p a s t d e c w o u ld a d e , th e e x p a n s io n p r o b a b ly e x te n d to fir m as w e ll as in te r r u p tib le p o w e r , a n d c a n n o t b e o f f s e t to a n y s ig n ific a n t e x t e n t b y g ro w th r e c o u r se to sam e s te a m -g e n e r a te d lim ite d s te a m pow er b ecau se c a p a c ity e x is t in g in th e P a c ific o f th e v e r y N o rth w e st o f p o p u la tio n in th e area have tim e th e c r itic a l m ore s p ite o f v e r y la r g e a n d g e n e r a l in d u s tr ia l th a n im p o r ta n c e of kept pace. A t th e a lu m in u m to th e n a tio n a l d e fe n s e h a s r e q u ir e d th e s a le o f la r g e b lo c k s o f a n d th e la c k o f t r a n s m is s io n fa c ilitie s w h ic h w o u ld p e r m it B o n n e v ille la r g e p r o x im a t e ly 2 0 p e r c e n t o f th e e n tir e e le c tr ic p o w e r o u tp u t d r a fts upon o u ts id e sou rces, su ch as C a lifo r n ia , pow er to th a t in d u s tr y — a m o u n tin g to w h ic h c u r r e n tly e n jo y s a c o m fo r t a b le s u r p lu s o v e r im m e d ia te r e q u ir e m e n ts . T h e P a c ific N o r t h w e s t c o n ta in s o n e o f th e la r g e s t c o n c e n tr a tio n s o f a lu m in u m s m e lt in g fa c ilitie s in th e w o r ld , a n d in r e c e n t y e a r s h a s p r o d u c e d f r o m 4 0 to 5 0 p e r c e n t o f th e to ta l p r im a r y a lu m in u m o u tp u t o f th e U n ite d S ta tes. T h i s h e a v y c o n c e n t r a t i o n o f s m e l t i n g c a p a c i t y is a d i r e c t 1 These producers are Aluminum Company of America (A lc o a ), with a smelter at Vancouver, W ash in gton ; Kaiser Aluminum and Chemical Cor poration, operating smelters at M ead, near Spokane, and Tacoma, W ash ington ; and Reynolds M etals Company, operating smelters at Longview, W ashington and Troutdale, near Portland, Oregon. Also in This Issue Defense Activity, Employment, and the Structure of Twelfth District Industry Earnings and Expenses of Twelfth District Member Banks, First Half— 1950 Income in the Twelfth District, 1950 ap 66 September 1951 FEDERAL RESERVE B A N K OF S A N FR A N C ISCO o f th e r e g io n . H e n c e a c o n d itio n o f m o r e o r le s s c h r o n ic is d e m a n d e d b y a t o m i c e n e r g y p l a n t s , b y e l e c t r o - c h e m i c a l p o w e r s h o r ta g e h a s d e v e lo p e d th e r e , o n e e ffe c t o f w h ic h in d u s tr ie s p r o d u c in g c r itic a l r a w has been m a n u fa c t u r e , b y m ilit a r y in s ta lla tio n s , b y e x p a n d in g a ir to n e c e ssita te ra th e r s e v e r e r e s tr ic tio n s o n th e s a le o f p o w e r t o n e w lim it s o m e c r a ft p r o d u c tio n , a n d b y a h o s t o f o th e r u se s. L a r g e d r a fts ty p e s o f h o u s e h o ld u s e . C o n s e q u e n tly th e r e h a s b e e n s o m e w e r e m a d e d u r in g th e p a st s u m m e r o n th e w a te r s to r a g e te n d e n c y to a n d p o te n tia l p o w e r p r o d u c tio n o f th e G r a n d C o u le e D a m g io n a l reta rd econom y in d u s tr ie s , a n d th e b a la n c e d and e v e n to m a te r ia l fo r m u n itio n s d e v e lo p m e n t o f th e r e c o n s id e r a b le o p p o s itio n has been m a n ife s te d to fu r th e r c o n c e n tr a tio n o f th e a lu m in u m in d u s tr y in th e P a c ific N o r t h w e s t .1 T h i s c o n d itio n o f p o w e r s h o r ta g e h a s b e e n a g g r a v a te d , b y p u m p in g la r g e q u a n titie s o f w a t e r in to th e n e w ly c o n s tr u c te d r e s e r v o ir s a n d c a n a ls o f th e C o lu m b ia B a s in ir r i g a tio n p r o je c t. r e g io n (K a is e r A lu m in u m A t le a s t o n e a lu m in u m producer in th e & C h e m ic a l C o r p o r a tio n ) w a s o f c o u r s e , b y th e a lm o s t c o m p le te fa ilu r e to e x p a n d s te a m e n c o u r a g e d b y th e d e fe n s e a u th o r itie s to e x p a n d s m e ltin g g e n e r a tin g c a p a c ity in th e a r e a d u r in g th e p a s t 2 0 y e a r s . c a p a c ity W e ll a d d itio n a l under u tility 10 pow er p ercen t c a p a c ity of in sta te s c o n s is ts o f s te a m th e th e e n tir e th re e e x is tin g P a c ific e le c tr ic N o rth w e st p la n t fa c ilitie s , a s c o m p a r e d w ith d u r in g th e p o t-lin e p ast yea r by (r e m o v e d fro m th e in s ta lla tio n a of an w a r -c o n s tr u c te d p la n t a t R iv e r b a n k , n e a r M o d e s t o , C a li f o r n ia ), f o r w h ic h a d d itio n a l p o w e r w a s (R e y n o ld s fu e l-b a s e d p la n ts o f c lo s e to 7 5 p e r c e n t. L o n g r a n g e p la n s e x p a n d in g c a p a c ity b y r e c o n s tr u c tin g a n d e n la r g in g o n e fo r d e v e lo p m e n t o f th e p o w e r p o te n tia l o f th e C o lu m b ia o f its e x i s t i n g p o t -lin e s , w h ic h a g a in w o u ld r e q u ir e m o r e R iv e r p o w e r to o p e ra te . and its re m e d y fo r tio n a l tr ib u ta r ie s th is u p stre a m m ore even w ill u n b a la n c e d r e s e r v o ir s stre a m flo w , e v e n tu a lly c o n d itio n w h ic h b o th by w ill p r o v id e som e c r e a tin g a d d i ten d s e a s o n a lly to and p ro m o te c y c lic a lly . P la n s M e ta ls e a r m a r k e d — if a v a ila b le . A n o t h e r a b o u t 5 0 p e r c e n t in C a lifo r n ia a n d a n a tio n a l a v e r a g e f o r Com pany) has o f th e n a tio n a l d e fe n s e announced p la n s a u th o r itie s w h ic h fo r have b e e n u n d e r c o n s id e r a tio n d u r in g th e p a s t y e a r c a lle d fo r th e lo c a tio n o f tw o a d d itio n a l a lu m in u m s m e lte r s in th e E v e n a t b e s t, h o w e v e r , th is w ill b e o n ly a p a r tia l r e m e d y N o r t h w e s t e r n a r e a . T h e la r g e r o f th e s e p la n ts , c o n s is tin g a n d it o b v io u s l y s e r v e s n o p u r p o s e in m e e t i n g t h e p r e s e n t o f th r e e p o t-lin e s d e s ig n e d to p r o d u c e 8 5 ,0 0 0 to n s o f p ig em ergen cy. a lu m in u m s t a n d -b y The c r y in g need o f th e r e g io n is f o r m ore c a p a c ity to “ fir m -u p ” th e flu c tu a tin g o u tp u t o f th e h y d r o e le c tr ic s y s te m . R iv e r , w o u ld T h e r a p id g r o w t h in r e c e n t y e a r s o f lo c a l p u b lic u tility a near be d u r in g p r o x im a te ly s e c u r in g a w e ll b a la n c e d e x p a n s io n of to and be in lo c a te d on C e n tra l o p era ted by th e C o lu m b ia W a s h in g to n , th e A lu m in u m and C om p a n y o f A m e r ic a . I t w a s p la n n e d to c o m e in to o p e r a t io n th e of w as W e n a tc h e e , ow ned d is t r ic t s in t h e P a c ific N o r t h w e s t h a s fu r t h e r c o m p lic a t e d p r o b le m year, th e second h a lf 1 7 0 ,0 0 0 of 1952, k ilo w a tts and of w o u ld e le c tr ic r e q u ir e pow er. ap The p o w e r fa c ilitie s . T h e s e p u b lic u tility d is tr ic ts a r e e m p o w o th e r p la n t, to b e lo c a te d n e a r K a lis p e ll in W e s t e r n M o n e r e d b y la w to ta k e o v e r a n d o p e r a te th e lo c a l p r o p e r tie s ta n a a n d o f e x is tin g (H a rv e y berm ent has u tility s y s te m s . T h i s h a s le d to th e d is m e m o f s o m e im p o r t a n t p r iv a te e le c tr ic u tilitie s a n d d isc o u ra g e d th e s u p p ly of new in v e stm e n t c a p ita l, to be o p e ra te d M a c h in e b y a n e w c o m e r in th e C o m p a n y ), w as to in d u s tr y produce 5 4 ,0 0 0 to n s o f a lu m in u m a y e a r a n d w o u ld r e q u ir e a b o u t 1 1 0 ,0 0 0 k ilo w a tts o f p o w e r . T h i s p la n t w a s to b e b a s e d o n p o w e r th u s m a k in g th e in te g r a te d d e v e lo p m e n t o f p o w e r fa c ili fro m tie s th e tio n b y th e B u r e a u o f R e c la m a tio n o n th e F la th e a d R iv e r , th e fr o m m ore w h o le d iffic u lt r e g io n has in th e te n d e d area. to A s r e ly a con sequ en ce, in c r e a s in g ly upon th e H u n g r y H o r s e D a m , c u r r e n tly u n d e r c o n s tr u c w h ic h p o w e r is e x p e c t e d t o b e a v a ila b le in 1 9 5 2 - 5 3 . F e d e r a l p o w e r s y s te m , w h o s e p la n s fo r n e w c o n s tr u c tio n P a r t o f th e e q u ip m e n t o f th e K a lis p e ll p la n t w a s a ls o to b e depend o b ta in e d f r o m th e h ig h c o s t R iv e r b a n k p la n t in C a lifo r n ia , upon C o n g r e s s io n a l d e c is io n . H ence c o n s id e r a b le t im e la g s fr e q u e n t ly o c c u r b e t w e e n th e o r ig in a l p la n w h ic h n in g cu rren t and ow ned th e fin a l fr u it io n o f a d d itio n s p o w e r sy ste m . W h e n su ch to th e fe d e r a lly a d d itio n s o c c u r , th e y has been co n v e rte d to d e v e lo p m e n ts , p rop osed new th e p la n ts n o w o th e r u se s. e a r ly In th e lig h t o f c o n s tr u c tio n of th ese s e e m s s o m e w h a t d o u b tfu l. a r e lik e ly t o b e in v e r y la r g e u n it s , b u t in t h e m e a n t im e th e re m a y b e lo n g “ d r y s p e lls ” d u r in g w h ic h th e p o w e r s u p p lie s o f th e r e g io n fa ll f a r b e h in d its c u r r e n t n e e d s . S u c h a p e r io d a p p e a r s to b e a p p r o a c h in g its c li m a x a t th e p re sen t m o m e n t. been w a n tin g For m any m o n th s th a t th e p e r s is te n t p o w e r s ig n s have sh o rta g e to a c r u c ia l te s t d u r in g o f th e B o n n e v ille pow er not in u m in d u s tr y . T h is w a s a n o tific a tio n o n fr o m th e O ffic e o f D e fe n s e an M o b iliz a tio n S e p te m b e r 2 2 th a t b eca u se o f th e lo c a l p o w e r s h o r t a g e it m i g h t b e n e c e s s a r y t o r e m o v e s o m e o f th e a lu m in u m c a p a c ity o f th a t a r e a to o th e r p a r ts o f th e c o u n tr y . E a c h o f th e th r e e p r o d u c e r s h a v in g s m e lt y e a r h a v e p u t in c r e a s in g p r e s s u r e o n p o w e r s u p p lie s fr o m in g p la n ts in th e N o r t h w e s t w a s a s k e d to s u p p ly a n e s t i e v e r y d ir e c tio n , in a d d it io n to th e n e c e s s ity o f p r o v id in g m a te o f th e p r o b a b le c o s t a n d le n g th o f tim e r e q u ir e d to f o r g r o w i n g c iv ilia n r e q u ir e m e n t s . M o r e a n d m o r e p o w e r r e m o v e tw o o r m o r e p o t-lin e s “ to th e O h io o r o th e r a r e a s 1Official statements of the Bonneville Power Administration indicate con siderable sympathy with this position. See United States Department of the Interior, Bonneville Power Administration, “ Advance Program of Transmission System Development, 1950-56,” January 1950, pp. 10-13. e c o n o m ic a lly b y p u r c h a s e o r c o n s t r u c t io n .” d e fe n s e econom y seaso n . c u tb a c k th e p a st o f th e cu rrent a w eek The in s is te n t n e e d s th e W ith in o th e r b o m b s h e ll w a s d r o p p e d o n th e N o r t h w e s t e r n a lu m o f th e p a s t s e v e r a l y e a r s in th e P a c ific N o r t h w e s t w o u ld b e s u b je c te d Threat to remove part of Northwestern alum inum capacity d u r in g w h ere n o n -in te r r u p tib le M o b iliz e r a ls o r a is e d th e pow er c o u ld q u e s tio n be m ad e w h e th e r a v a ila b le T h e D e fe n se a m ore eco- September 1951 N e e d le s s n o m ic a l s o lu tio n o f th e p o w e r p r o b le m fa c in g th e N o r t h w estern a lu m in u m produ cers c o u ld be had by b u ild in g I t is t o o e a r ly to fo r e c a s t th e p r o b a b le o u t c o m e o f th is r a d ic a l p r o p o s a l— w h e t h e r , in tio n o f th e c a p a c ity n o w fa c t, a c o n s id e r a b le fr a c in s ta lle d in th e N o r t h w e s t m a y b e r e m o v e d e ls e w h e r e , e ith e r te m p o r a r ily o r p e r m a n e n tly , o r w h e th e r th e p r o b le m o f s u s ta in in g th e m a x im u m s ib le o u tp u t o f a lu m in u m p o s fo r n a tio n a l d e fe n s e c a n b e m e t b y in s t a llin g s t e a m p la n ts in th e N o r t h w e s t to ta k e u p th e w h ic h , to sa y , th e p r o p o sa l to N o rth w e ste rn s m e ltin g c a p a c ity c o u n try a ro u se d a sto rm s t a n d -b y p o w e r p la n ts . lo a d 67 M O N T H L Y R E V IE W te m p o r a r ily at le a st, th e hydro p la n ts are o th e r som e o f th e p a rts of th e o f p r o te s t, e s p e c ia lly in v ie w of th e e ffo r t s o f th e d e fe n s e a u th o r itie s o v e r th e p a s t y e a r to lo c a t e a d d it io n a l a lu m i n u m p la n ts in th e a r e a . I t w a s a n nounced th a t th e on S e p te m b e r N o rth w e ste rn 26 p o t-lin e s w o u ld be p ro p o sa l to dropped. It rem ove has been s u g g e s t e d in s e v e r a l q u a r te r s th a t th e b a s ic p u r p o s e b a c k o f th e D e fe n s e M o b i l i z e d th r e a te n p r o p o s a l w a s n o t p r im a r ily to th e a c tu a l r e m o v a l o f a lu m in u m th e N o r th w e s t, b u t ra th e r to h a s te n in g u n a b le to c a r r y . rem ove to th e pow er c a p a c ity fr o m s tim u la te u n ifie d p la n s fo r d e v e lo p m e n t o f th e r e g io n , w h ic h h a s la g g e d d a n g e r o u s ly b e h in d th e n e e d s o f n a tio n a l d e N u m e r o u s fa c t o r s e n te r in to th e p r o b le m . N o t th e le a s t fe n s e a n d lo c a l in d u s t r y . im p o r t a n t is t h e t im e e le m e n t . E q u a l l y im p o r t a n t , b u t u n c e r ta in , a r e th e h a z a r d s o f w e a th e r . T h e m e n t in th e N o r t h w e s t e r n p o w e r s u p p ly m a y p r o v e to b e o n ly t e m p o r a r y , lik e th a t in N o r t h e r n C a lif o r n ia e a r ly in 1 9 4 8 . H e a v y r a in s in t h e C o lu m b i a B a s i n la te in S e p t e m b e r h a d , in fa c t , a lle v ia t e d th e p o w e r s h o r t a g e s u ffic ie n tly to p e r m it r e s u m p tio n o f fu ll a lu m in u m p r o d u c tio n and p o s tp o n e d th e n e c e s s ity o f a g e n e r a l “ b r o w n o u t” o f n o n e s s e n tia l p o w e r u s e f o r a t le a s t t w o w e e k s . H o w lo n g th is r e li e f w i ll l a s t is , o f c o u r s e , u n p r e d ic t a b l e . I t is q u it e p o s s ib le th a t c o n tin u e d h e a v y r a in fa ll c o u ld tu r n th e c o n d i tio n o f p o w e r s h o r ta g e in to o n e o f p le n ty . T o b a se n a tio n a l d e fe n s e p la n n in g , s o fa r a s a lu m in u m s u p p lie s a r e c o n c e r n e d , u p o n so u n c e r ta in a p r o s p e c t m ig h t, h o w e v e r , b e to c o u r t d is a s t e r . A t th e o p p o s it e e x t r e m e it m i g h t b e a m a tte r o f tw o o r th re e y e a r s b e fo r e n o r m a l w a te r c o n d i t io n s a r e r e s t o r e d in th e C o lu m b ia R iv e r w a t e r s h e d , a n d in th e m e a n tim e pow er s u p p lie s T h is d r a s tic c u r ta il w o u ld be sh ort fo r e p is o d e illu s tr a te s th e c r u c ia l in p la n n in g r e g io n a l m in im u m p la n ts o f ste a m c a p a c it y is n e c e s s a r y t o im p o r ta n c e pow er s u p p lie s . A t le a s t a s ta b iliz e th e p o w e r s u p p ly o f a r e g io n s o h ig h ly d e p e n d e n t u p o n w a te r p o w e r a s th e P a c ific N o r t h w e s t . T h i s h a s a ls o b e e n th e e x p e r ie n c e , fo r e x a m p le , o f th e T e n n e s s e e V a lle y A u t h o r ity , w h ic h c u r r e n tly has a num ber of very p la n ts u n d e r c o n s t r u c t io n in o r d e r to fir m of its h ydro fa c ilitie s . L a r g e ly becau se la r g e stea m u p th e o u tp u t of th e c o m p le x s tr u c t u r e o f th e p o w e r s e t -u p in th e N o r t h w e s t , c o m p o s e d o f F e d e r a l m u lt i-p u r p o s e p r o je c ts , la r g e m u n ic ip a l s y s t e m s , p r iv a te ly o w n e d u tilitie s , a n d p u b lic u tility d is tr ic ts , th is v it a l fe a t u r e in t h e w h o le r e g io n a l p o w e r s u p p ly h a s b e e n n e g le c te d , w it h th e u n fo r t u n a te r e s u lt s w e a r e n o w w itn e s s in g . N o o n e h a s b e e n w illin g to u n d e r ta k e th e c o n str u c tio n w o u ld everyone. w h o le o f a s o u n d b a la n c e b e tw e e n fu e l-d r iv e n p la n ts a n d h y d r o of la r g e ste a m su ffic e — w h ic h p la n ts — a n d w o u ld o n ly n o r m a lly be la r g e p la n ts o p e ra te d o n ly p a r t o f th e tim e a n d w h ic h w o u ld b e r e la tiv e ly c o s tly to T o b e o n th e s a fe s id e , th e r e fo r e , s o m e p o s itiv e a c tio n is in d ic a te d lo o k in g t o m a x im u m fe a s ib le p r o d u c tio n of a lu m in u m o v e r a p e r io d o f y e a r s . T h i s r e q u ir e s a w e ig h in g o f a lte r n a tiv e s b e tw e e n m e a s u r e s s e e k in g to m a in ta in o r in c r e a s e o u tp u t in th e N o r t h w e s t , o n th e o n e h a n d , a n d on th e o th e r, e m p h a s iz in g The fir st in v o lv e s th e la r g e r r e la tiv e p r o d u c tio n tim e s t a n d -b y fa c ilitie s in th e N o r t h w e s t e ls e w h e r e . r e q u ir e d to ra th e r th a n s u p p la n t h ydro p la n ts s o u r c e o f p o w e r s u p p ly fo r a lu m in u m as th e r e g io n la c k in g lo c a l s u p p lie s o f o il, n a tu r a l is tr a tio n ste a m th e has c o a l. T h e p e r s is t e n t ly c a p a c ity in th e F ederal p ow er B o n n e v ille argu ed th e P o w e r A d m in case N o rth w e st as an fo r s t a n d -b y in te g r a l p a r t o f sy ste m , b u t C o n g re ss has so fa r re g a r d e d su c h p r o p o s a ls w ith a h o s tile e y e . b u ild (a n d to so m e e x te n t th e c o s t o f o p e r a tin g s u c h f a c ilit ie s ) , w h ic h w o u ld s u p p le m ent o p e r a te in a g a s , o r g o o d ste a m O utlook for pow er supplies a n d aluminum production in other areas m a jo r s m e ltin g . T h e s e c W h a te v e r rem ove th e som e im m e d ia te of th e o u tc o m e N o rth w e ste rn o f th e p ro p o sa l to p o t-lin e s to o th e r o n d in v o lv e s th e p r o s p e c t o f r e m o v in g s o m e o f th e N o r t h a r e a s , w h ic h h a s a p p a r e n t ly b e e n d r o p p e d f o r th e m o m e n t, w e s te r n p o t-lin e s to o th e r p a r ts o f th e c o u n tr y w h e r e th e th e s u g g e s tio n m ig h t w e ll b e e x a m in e d on its m e r it s a s n e c e s s a r y p o w e r fa c ilitie s c a n b e fo u n d o r m a d e a v a ila b le in d ic a tin g th e p o s s ib le w is d o m o f a d e c e n tr a liz a tio n a n d w ith r e a s o n a b le p r o m p tn e s s ; o r e v e n th e c o n s tr u c tio n o f r e o r ie n ta tio n of th e in d u str y . T e m p o r a r ily , at le a st, e n tir e ly n e w s m e lt e r s lo c a te d c lo s e r to r a w m a te r ia l s u p such p lie s and e q u ip p e d w ith s e lf-c o n t a in e d pow er r e lo c a tio n o f e x is tin g c a p a c ity does not appear to p la n ts p r o m is e m u c h r e lie f f r o m th e t h r e a te n e d c u t -b a c k in a lu w h ic h w o u ld b e in d e p e n d e n t o f th e v a g a r ie s o f w a te r s u p m in u m p ly , e v e n th o u g h th e u n it p r o d u c tio n p r o d u c tio n fo r th e reason th a t a d e q u a te pow er c o s t o f a lu m in u m s u p p lie s a r e n o t im m e d ia t e ly a v a ila b le e ls e w h e r e . A l u m i m e ta l m ig h t be som ew h at h ig h e r . It m ig h t a ls o prove p o s s ib le — w ith a r a p id a n d s u b s ta n tia l in c r e a s e in C o lu m b ia R i v e r w a t e r f lo w — to o b t a in s o m e w h e r e n e a r c a p a c ity p r o d u c tio n o f a lu m in u m in th e N o r t h w e s t , in th e in te r e s t num s m e lt in g r e q u ir e s h u g e q u a n titie s o f e le c tr ic e n e r g y an d v e ry fe w any a r e a s in th e U n i t e d s u b s ta n tia l s u r p lu s of pow er S ta te s c u r r e n tly h a v e ow n lo c a l r e q u ir e m e n t s ; th e m a r g in is m o r e lik e ly to n a r r o w over th e ir th a n o f n a tio n a l d e fe n s e , a t th e e x p e n s e o f a g e n e r a l c u r ta il to w id e n d u r in g th e n e x t tw e lv e m o n th s a s th e n a tio n a l m e n t o r “ b r o w n o u t ” fo r n o n -e s s e n tia l u se s o f p o w e r . d e fe n s e p r o d u c tio n p r o g r a m is s t e p p e d u p t o its p r o b a b le September 1951 FEDERAL RESERVE B A N K OF S A N FRA N C ISCO 68 p e a k . O v e r t h e lo n g e r t e r m , h o w e v e r , it m a y w e ll b e th a t, o t h e r t w o la r g e p r o d u c e r s in e x p a n d in g th e ir c a p a c it y to o n b a la n c e , a c o n s id e r a b ly la r g e r fr a c t io n th a n a t p r e s e n t m e e t th e o f th e n a t io n ’s a lu m in u m o u tp u t c o u ld b e p r o d u c e d to a d n o ld s is b u ild i n g a p la n t t o u t iliz e n a t u r a l g a s in T e x a s , v a n ta g e in a r e a s o th e r th a n th e P a c ific N o r t h w e s t . and S o m e o f th e e le m e n ts e n te r in g in to th is p r o b le m a lr e a d y s im ila r p la n t near N ew th e d e v e lo p m e n t o f th e r e g io n a l e c o n o m y , th e b a sic in d u s is t h e tr ia l c o m p a r is o n u tiliz a tio n th e b e tw e e n N o rth w e st, w h ere q u e s tio n s a O r le a n s . A n o t h e r r e c e n t te c h n ic a l d e v e lo p m e n t w h ic h m a y p r o v e one fr o m c o n s tr u c tin g r e q u ir e m e n ts ; R e y o f m a j o r im p o r t a n c e in th e lo c a t io n o f a lu m in u m s m e lt e r s is A s id e is d e fe n s e of broad in su g g e ste d . K a is e r o f n a tio n a l p u b lic p o lic y , s u c h a s p r e s e r v in g a r e a s o n a b le b a la n c e in co sts been have needs m ore fa v o r a b le th e h u g e pow er F e d e r a l m u lti has d is c o v e r y lo n g o f a p r o c e s s w h ic h o f lig n ite a s a been u sed in p e r m it s t h e e ffic ie n t fu e l. L ig n it e G erm any and or “ brow n c o a l” o th e r a rea s w here p u r p o s e d a m s a n d p o w e r p r o je c t s p e r m it r e m a r k a b ly lo w c o a l is e x p e n s iv e , b u t its p o s s ib ilit ie s a p p e a r t o h a v e b e e n r a te s to la r g e in d u s tr ia l u s e r s , a n d fr e ig h t c o s t d if f e r e n n e g le c t e d t ia ls o n a b u n d a n t. raw m a te r ia l in b o u n d a n d b o u n d , w h ic h are s a id to fin is h e d p r o d u c t o u t “ p e n a liz e ” th e in th is T h is N o rth w e ste rn U n ite d S ta te s p la n ts in c o m p a r is o n w it h c o m p e t in g p la n ts m o r e f a v o r v o lu m e as a b ly lo c a te d in th is r e s p e c t. I t m a y a ls o b e p o in te d o u t th a t tir e ly m o s t o f th e N o r t h w e s t e r n a lu m in u m p la n ts w e r e a c q u ir e d its e lf fr o m te n d e n c y th e G overn m ent by th e ir presen t ow n ers at very in is c o u n try n e g le c t lig n ite com p ared areas not to due b e tte r in part w ith c o a l— a r e fro m sp o n ta n eo u s or are th e are c o m b u s tio n , in en L ig n ite becau se and th a t a lm o s t cen ters. sto re d m ore fa c t im m e n s e lo c a te d in d u s tr ia l tra n sp o rte d fu e ls to d e p o s its — w h ic h d is ta n t e a s ily w h ere is its of its h e a tin g s u b s ta n tia l c o s t d is c o u n ts . T h e b a la n c in g o f th e s e fa c to r s v a lu e p r o b a b ly g iv e s a n e d g e to th e n e w e r p la n ts lo c a te d in th e H e n c e th e d e liv e r e d c o s t p e r h e a t u n it d e r iv e d f r o m N o r t h w e s t , a ll o f w h ic h h a v e b e e n n ite c o m p a r e s u n fa v o r a b ly w ith th a t o f c o a l a t p o in ts o f b u ilt w ith in th e p a st is lo w d e c a d e , t h o u g h th is a d v a n t a g e m a y b e o f f s e t to s o m e d e u tiliz a tio n gree n a tu ra l g a s . by th e ir g re a te r lia b ility to pow er c u r ta ilm e n t, as c o m p a r e d w it h r e c e n tly c o n s t r u c t e d p la n ts in o th e r a r e a s w h ic h p r o d u c e th e ir o w n p o w e r f r o m A s fa r b a c k as th re e y e a rs a g o p rodu cer (A lc o a ) th e M any or in c o m p a r is o n w ith such in d u s tr ia l r a w an w ith e a s ily le a d in g A m e r ic a n th r o u g h d e c id e d th a t fu r t h e r e x p a n s io n in th e lig n it e o f co a l ta r tio n fo r g a s a re a o f th e T e x a s G u lf C o a st. C o n s tr u c tio n w a s b e g u n num s m e ltin g . T h e A lu m i n u m in r e c e n tly b e g u n ty p e of n a tu ra l 5 7 ,0 0 0 to n p la n t b a s e d s p a r k -fir e d gas as fu e l in te r n a l and on an c o m b u s tio n p r o d u c in g d ir e c t o b v ia tin g th e n e e d f o r a re c tifie r s y s te m n a tin g c u r r e n t in to u s a b le f o r m e n tir e ly e n g in e cu rren t, new c o a l. lig fu e l as p r o d u c tio n of pow er a p p e a r s p o s s ib le b y -p r o d u c ts e c o n o m ic a lly a t p o in ts c lo s e th e of m a t e r ia ls c a n r e a d ily b e b r o u g h t to th e fu e l s u p p ly , h o w e v e r , a n d it n o w c o n s e r v a tio n grad es tr a n s p o r ta b le fu e l so u rce s. N o r t h w e s t w a s le s s a t t r a c t iv e t h a n lo c a t io n in th e n a tu r a l 1948 on a m ost to to to u tiliz e its g e o lo g ic be u sed in lo c a a lu m i C o m p a n y o f A m e r ic a h a s th e c o n s tr u c tio n of an $80 m illio n p la n t u s in g in S o u t h e a s t e r n T e x a s n e a r th e s ite o f a la r g e d e p o s it o f th u s e a s ily m in e d lig n it e w h ic h it is p la n n e d t o u s e a s fu e l. T h e to c o n v e r t a lte r r e la tiv e e c o n o m y o f lig n ite in th e g e n e r a tio n o f p o w e r a s fo r th e e le c tr o ly tic s m e lt c o m p a r e d w ith n a tu r a l g a s o r h y d r o p o w e r r e m a in s to b e in g p r o c e s s . T h i s le a d h a s b e e n fo llo w e d by e a c h o f th e d e t e r m in e d , b u t it is s ig n i f ic a n t t h a t t h e l e a d i n g a l u m i n u m R E G U LA T IO N X C H A N G E S On September 1, the Board of Governors of the Federal Reserve System and the Housing and Home Finance Administrator issued a statement to the press concerning changes in real estate credit controls, including Regulation X of the Board of Governors. Selected portions of that press statement appear below. Copies of Regulation X, as amended, may be obtained from this bank. “ The Board of Governors of the Federal Reserve System and the Housing and Home Finance Agency today announced the re vision of Regulation X and related restrictions on housing credit affecting 1- to 4-family housing to bring the regulation into con formity with the provisions of the new Defense Housing and Com munity Facilities and Services Act of 1951. “ The act provides that with respect to veterans’ home loans guaranteed under the GI bill of rights, where the sales price does not exceed $7,000, the down payment shall not exceed 4% ; where the sales price does not exceed $10,000, the down payment shall not exceed 6% ; and where the sales price does not exceed $12,000, the down payment shall not exceed 8%. “ With respect to other home loans (conventional and FH Ainsured), the act provides that no more than 10% down payment shall be required where the transaction price does not exceed $7,000; no more than 15% where the transaction price does not exceed $10,000; and no more than 20% where the transaction price does not exceed $12,000. “The act also provides that credit restrictions shall not require the term or maturity of any loan on housing up to $12,000 to be less than 25 years. Under the previous regulations the maximum maturity was 20 years for housing priced at more than $7,000, except for hardship cases under GI loans. “ Similar terms—both as to down payment and maturity—also apply to farm housing loans made by the Farmers Home Admin istration. “ The new schedule of maximum loans and minimum down pay ments follows the requirements of the act up to $12,000 and then, as rapidly as practical, returns to the schedule of down payments required under the credit controls instituted last October. Except for fractional changes made in the interest of simplifying calcula tions, the level of the previous regulations is reached at $15,000 and from that point on the mortgage limits are substantially the same as before. “The new act also provides for the suspension of credit restric tions in critical defense housing areas for housing programmed for defense workers and military personnel and selling for not more than $12,000 or renting for not more than $85 a month. Regu lation X and related restrictions have been amended accordingly, to bring the provisions with respect to defense areas into con formity with the new law. At the same time, it was announced that credit terms are also suspended for defense housing programmed in areas previously designated as critical defense areas. “Regulation X has been further amended to provide for the exemption from the regulation of certain essential nonresidential defense construction.” 69 M O N T H L Y REVIEW September 1951 p r o d u c e r s h o u l d h a v e r is k e d a la r g e in v e s t m e n t t o p u t it in n o r m a l tim e s w o u ld b e r e la tiv e ly m o r e a b u n d a n t. T h i s to th e te st. w o u ld p e r m it th e m o r e r a p id d e v e lo p m e n t o f d iv e r s ifie d T h e s e d e v e lo p m e n ts o f th e p a s t fe w y e a r s in th e u t iliz a tio n of cheap fu e ls , fir st n a tu ra l p r o m is e to fr e e th e a lu m in u m e a r lie r dependence on gas and now lig n ite , s m e ltin g in d u s tr y fr o m h y d r o e le c tr ic pow er w h ic h its has h i t h e r t o tie d it t o lo c a t i o n s o f f e r i n g a l m o s t n o o t h e r a d v a n t a g e s , o r h a s e v e n h a n d ic a p p e d it w it h t r a n s p o r t a t io n d is a d v a n ta g e s . T h e p r e se n t tr e n d a lu m in u m s m e lte r s m a y in th e lo c a tio n of new w e ll p r o v e p e r m a n e n t a n d le a d to a w id e r d is p e r s a l o f th e in d u s tr y a n d to g r e a te r c o n I f th e e a r lie r tr e n d to a d d itio n a l c o n c e n tr a tio n o f a lu m i s m e ltin g c a p a c ity w e ll as th e e n jo y m e n t by s tr ic te d u se of pow er. e le c tr ic h o u s e h o ld The u sers of le s s in th e P a c ific N o rth w e st is re re in d u s t r ia liz a t io n of th e r e g io n , w h ic h r e c e iv e d a t r e m e n d o u s im p e tu s d u r in g th e w a r , h a s b e e n g r e a tly h am p ered sin c e th a t tim e by th e b a s ic la c k o f p o w e r a v a ila b le to a ll c o m e r s a n d m a n y in d u s tr ie s s e e k in g to lo c a te in th e a r e a h a v e had to be t u r n e d a w a y . T h i s is a p a r a d o x ic a l s it u a t io n f o r a r e g io n h a v in g su ch en orm ou s la t e n t pow er resou rces and lo w e s t r a te s f o r in d u s tr ia l p o w e r in th e n a tio n . A t in u it y in its o p e r a t io n s . num in d u s tr ie s o f f e r in g g r e a te r e m p lo y m e n t o p p o r tu n itie s a s th e broader b a se fo r e c o n o m ic d e v e lo p m e n t w o u ld p r o b a b ly m e a n fa r m o r e to th e r e g io n a l e c o n o m y in th e lo n g r u n t h a n c o n v e r s e d a n d th e r e s u lt in g b u r d e n o n th e flu c tu a tin g p o w e r t in u e d m o r t g a g in g o f a d is p r o p o r t io n a t e s h a r e o f its p o w e r s u p p lie s o f t h e a r e a is r e lie v e d , t h e c o n s e q u e n t e a s in g o f r e s o u r c e s to a s in g le i n d u s t r y .1 th e s itu a tio n w o u ld be o f m a te r ia l b e n e fit to r e g io n a l e c o n o m y . T h e p e r io d ic pow er th e w h o le s h o r ta g e s w o u ld te n d to b e c o m e le s s a c u te a n d th e a v a ila b le p o w e r s u p p ly 1 For a more detailed discussion of the power and fuel situation in the Pa cific Northwest, the reader i s referred to the Supplement to the M o n t h l y R e v i e w for Novem ber, 1950, “ W estern Power and Fuel Outlook.” See especially pages 1-9, 22, 37, 40-41, 47. DEFENSE ACTIVITY, EMPLOYMENT, AND THE STRUCTURE OF TWELFTH DISTRICT INDUSTRY A sh a rp in c r e a s e in to ta l e m p lo y m e n t h a s b e e n o n e o f th e o u ts ta n d in g fe a tu r e s o f th e im p a c t o f th e K o r e a n w a r o n th e T w e lft h n a tio n . Though D is t r ic t e c o n o m y , a s w e ll a s in D is tr ic t lin e s o f a c t iv it y f r o m e m p lo y m e n t June in c r e a se d 1 9 5 0 to J u n e in th e m ost 1 9 5 1 , m a n u fa c gree on fa c ilitie s and s k ills a lr e a d y in e x is te n c e in th is D is t r ic t th a n w a s t r u e in th e e a r ly 1 9 4 0 ’s. A t th a t t im e , th e c r e a tio n of a ir c r a ft and s h ip b u ild in g fa c ilitie s and th e d e v e lo p m e n t o f s u p p o r t in g in d u s t r ie s r e s u lte d in a n u n u s u a lly la r g e v o lu m e of d e fe n s e p la n t c o n s tr u c tio n . C u r tu r in g a n d g o v e r n m e n t e m p lo y m e n t g a in e d th e m o s t. Y e t r e n tly , h o w e v e r , d e fe n s e p la n t c o n s t r u c t io n , w h ile la r g e in d e s p ite th e g r e a te r e m p h a s is o n th e p r o d u c tio n o f m ilit a r y v o lu m e , is a n d c iv ilia n g o o d s to m e e t th e e x p a n d in g le v e l o f d e m a n d , c o n s tr u c tio n th e d is tr ib u tio n o f w o r k e r s a m o n g b r o a d s e g m e n ts o f n o n - le t in a g r ic u lt u r a l e m p lo y m e n t h a s r e m a in e d fa ir ly s ta b le . E m p lo y m e n t d a ta reveal in te r e s tin g c h a r a c te r is tic s of th e D is t r ic t e c o n o m y . T h e y p o in t u p th e e x is t e n c e o f a s u b s ta n tia l in d u s tr ia l b a s e , a s w e ll a s la r g e G o v e r n m e n t fa c il itie s . T h e y a ls o s h o w th a t m u c h g r e a t e r c h a n g e s t h a n a n y th is r e la tiv e ly m o d e ra te com p ared a c tiv ity o r th e v o lu m e D is tr ic t. r e s u lt e d f r o m The e x is tin g th e g r o w th to e ith e r to ta l o f d e fe n s e c o n tr a c ts in d u s tr ia l b a s e , d u r in g W o r l d W a r w h ic h I I a n d th e la r g e p o s tw a r e x p a n s io n , o f f e r s c o n s id e r a b le o p p o r t u n it y to th e G o v e r n m e n t fo r p r o c u r e m e n t o f a w id e v a r ie ty o f m ilit a r y g o o d s in t h is D is t r ic t . R o u g h ly h a lf o f th e D i s tr ic t’s d e fe n s e c o n tr a c ts h a v e b e e n fo r a ir fr a m e p r o d u c w e h a v e h a d s in c e th e K o r e a n o u tb r e a k w o u ld b e n e c e s t io n , a n d a v e r y s u b s ta n t ia l p r o p o r t io n o f th e e le c tr o n ic s s a r y to c a u s e a n y m a j o r a lt e r a t io n in th e s t r u c t u r e o f th e and econom y. r a d io g e a r fo r c o n tra cte d fo r h e re. Employment in District exp ands m ore than in the nation m o r e r a p id ly in th e t w e lv e m o n t h s f o llo w i n g K o r e a t h a n in t h e n a t io n a s a w h o le . M a n u f a c t u r i n g e m p lo y m e n t a n d program e m p lo y m e n t, o f m ilita r y b o th r e fle c tin g th e prep ared n ess, exp an d ed in c re a se d m o r e th a n h a lf a g a in a s m u c h a s c o m p a r a b le a c t iv it y in th e c o u n t r y a s a w h o le . T h e v e r y sh a rp In a ir fr a m e s has a ls o been su b a d d itio n , a la r g e v o lu m e o f c o n tr a c ts h a s b e e n le t to D is t r ic t fir m s f o r b o th n o n e le c tr ic a l N o n a g r ic u lt u r a l e m p lo y m e n t in th is D is t r i c t in c r e a s e d govern m en t th e se and e le c tr ic a l e q u ip m e n t, in c lu d in g som e ty p e s of m a c h in e t o o ls . M a n y D is t r i c t m a c h in e s h o p s , a n d e v e n s o m e to y m a n u fa c tu r e r s , h a v e o b ta in e d c o n tr a c ts fo r s m a ll p a r ts a n d s p e c ia liz e d e q u ip m e n t . T h e D is t r i c t f o o d a n d lu m b e r in d u s tr ie s , a n d e v e n th e D is t r ic t c lo t h in g in d u s t r y , h a v e fe lt th e im p a c t o f in c r e a s e d G o v e r n m e n t b u y in g . r ise in g o v e r n m e n t e m p lo y I t is s i g n i f ic a n t t o n o t e , h o w e v e r , t h a t t h e s h i p b u i l d i n g m e n t is d u e t o t h e e x i s t e n c e in t h e D i s t r i c t o f a l a r g e n u m in d u s t r y , w h ic h e x p a n d e d s o r a p id ly d u r in g W o r l d W a r b e r o f m a j o r m ilit a r y in s ta lla tio n s a n d a h ig h ly d e v e lo p e d I I , h a s s h o w n r e la t iv e ly little a c t iv it y , e x c e p t f o r o n e c o n n a v a l s h o r e e s ta b lis h m e n t. T h e a v a ila b ility o f a ir c r a ft f a tr a c t s ig n e d r e c e n tly b y a S a n F r a n c is c o B a y A r e a fir m . c ilitie s a n d a r a p id ly e x p a n d in g , w e ll d iv e r s ifie d m a c h in A lt h o u g h s h ip b u ild in g h a s b e e n b u t m o d e r a te ly a c tiv e o n ery a n a tio n a l b a s is , th e T w e lf t h in d u s tr y has a cc o u n te d fo r th e sh arper in c r e a s e in m a n u fa c tu r in g e m p lo y m e n t h e r e th a n in th e n a tio n . T h o u g h s im ila r in s o m e r e s p e c t s t o d e v e lo p m e n t s d u r in g W o r ld W a r II, th e p r e se n t e x p a n s io n in m a n u fa c t u r in g e m p lo y m e n t is b a s e d to a c o n s id e r a b ly g r e a te r d e D is t r ic t ’s sh a r e h a s n e v e r th e le s s b e e n d is a p p o in t in g . T h i s C o a s t c o n tin u e s to s u f f e r f r o m in d u s tr y o n th e P a c ific th e h a n d ic a p s o f c o s t d if fe r e n tia ls a n d th e r e la tiv e ly g r e a te r a v a ila b ility o f la r g e s c a le fa c ilit ie s in o t h e r p a r t s o f th e c o u n t r y . 70 September 1951 FEDERAL RESERVE B A N K OF S A N FRA N C ISCO PERCENTAG E D IS T R IB U T IO N EM PLOYM ENT BY p lo y e e s , w h ile th e n u m b e r o f w o r k e r s in m a n u fa c tu r in g O F N O N A G R IC U L T U R A L M A JO R IN D U S T R Y G R O U PS- e x p a n d e d v e r y r a p id ly . T W E L F T H D I S T R I C T , S E L E C T E D D A T E S , 1 9 3 9 -5 1 * A t Prewar * World W ar June 1951 Korea II Mining 3.0 r m “ —- 5.7 Construction ago. A n 6.8 to ta l 8.7 Transportation and Public utilities ^ tim e th a n D is tr ic t as th a t in c r e a s e a cc o u n te d w h ic h in c r e a s e 17.9 16.8 15.8 la b o r fo r occu rred in fo r c e 1951 in by in m ore a d d i fo r c e th e p r o p o r tio n of m a n u fa c tu r in g , as W o r ld le v e ls . T o m a n u fa c tu r in g W a r II w o u ld e m p lo y m e n t o f 5 0 in c r e a s e in c r e a s e 13.1 17.3 17.2 and th e r e q u ir e su b sta n tia l 5 0 percen t a very s h ifts la r g e w ith in th e m a jo r s o u r c e o f la b o r fo r c e 1 9 4 0 ’s w as in -m ig r a tio n ; but w ith e m p l o y m e n t t h r o u g h o u t t h e n a t io n a t a h i g h le v e l, t h is is 16.6 not very \S ✓ ✓ d u r in g a c h ie v e a w o u ld s tr u c tu r e o f e m p lo y m e n t. A / is 1 9 4 0 ’s. I n * percen t over Ju ne Finance and service la b o r in th e e a r ly re q u ir e a n in c r e a s e o f m a n u fa c tu r in g "* 16.2 Government th e it w a s e x p a n s io n , o r a n e m p lo y m e n t great 9.7 10.0 10.5 presen t t i o n , t o t a l e m p l o y m e n t is m u c h h i g h e r n o w t h a n t e n y e a r s p rra 7.0 5.5 th e fu lly e m p lo y e d lik e ly at p re se n t. In th e absen ce of r a p id in - m i g r a t i o n , it w o u l d b e n e c e s s a r y t o i n c r e a s e t h e n u m b e r o f s tu d e n ts a n d h o u s e w iv e s in th e la b o r fo r c e , a n d b r in g about Manufacturing 23.2 36.5 23.0 24.6 a m a jo r cu t in tra d e and se r v ic e e m p lo y m e n t. S h o u ld g r e a te r e m p h a s is b e p la c e d o n m ilit a r y p r o d u c tio n in t h e n e a r f u t u r e a n d t h e d e m a n d s u p o n t h e m a n u f a c t u r in g fa c ilitie s o f th is D is t r ic t b e in c r e a s e d s h a r p ly , s u c h a m o v e m e n t m ig h t d e v e lo p . District employm ent pattern similar to Trade 24.8 24.2 that of p re-W orld W a r II 23.0 18.5 A ls o of in c r e a s e in te re st is th e fa c t th a t, even w ith th e la r g e in m a n u f a c t u r in g fa c ilitie s t h a t h a s o c c u r r e d in th e p a s t te n y e a r s , m a n u fa c tu r in g e m p lo y m e n t c u r r e n tly 1 Prewar data are for October 1939, W orld W a r I I for June 1943, and Korea for June 1950. 2 Includes data for five states only— Arizona, California, Nevada, Utah, and W ashington— comprising more than 65 percent of total nonagricultural em ployment in the District. th e p r o p o r tio n U n ite d c o n tin u e s S ta te s. to In a be s u b s ta n t ia lly good m any D is t r ic t e c o n o m y th is fe a tu r e h a s remains relatively stable of tu r a l e m p lo y m e n t a s it d id b e fo r e W o r l d W a r I I , a n d th e th e Structure of nonagricultural employm ent O ne a c c o u n ts fo r r o u g h ly th e s a m e p r o p o r tio n o f n o n a g r ic u l b e lo w b e e n p o in te d it h a s b e e n a s s u m e d , t h e r e fo r e , th a t in d u s t r y in te r e s tin g d e v e lo p m e n ts in th e stru c tu re tr ic t is u n d e r d e v e lo p e d . T h ere th e in th e q u e s tio n D is but th e th e o r n o in d u s tr y , b u t th e se a re a s a r e fr e q u e n tly h ig h -y ie ld r a th e r la r g e g a in s in m a n u fa c tu r in g a n d g o v e r n m e n t e m i n g a g r ic u ltu r a l r e g io n s o r a r e s p a r s e ly p o p u la t e d . W h a t its d is tr ib u tio n d e s p ite seem s c u r r e d d u r in g th e e a r ly 1 9 4 0 ’s a n d s in c e K o r e a a r e illu s m a n u f a c t u r in g e m p lo y m e n t in th e D is t r i c t is th e u n u s u tra te d . a lly h ig h le v e l o f g o v e r n m e n t e m p lo y m e n t a n d t r a d e a n d It is ap paren t govern m en t th a t m a n u fa c tu r in g e m p lo y m e n t have e m p lo y m e n t becom e som ew h at m o r e im p o r ta n t th a n th e y w e r e a y e a r a g o , b u t th e c h a n g e e v i d e n t in m a n u f a c t u r i n g e m p l o y m e n t is m u c h m o r e m o d era te th a n d u r in g W o r l d W a r I I . o f n o n a g r ic u lt u r a l e m p lo y m e n t . in te n s ity of th e m ilita r y s o g r e a t a s in W o r l d W a r prepared n ess II. m ost e m p lo y m e n t, and to th e a ls o to r e la tiv e ly som e lo w e x te n t ly th e r e s u lt o f th e g e o g r a p h ic a l r e la t io n s h ip o f t h is D i s F i r s t o f a ll, th e tr ic t to m a n y p a r ts o f th e w o r ld , p a r tic u la r ly th e O r ie n t . program A n o t h e r f a c t o r is t h e l o n g c o a s t l i n e and th e d e e p -w a te r p o rts and r e p a ir is not It has not been n ecessary, a v a ila b le f o r la r g e la n d a r e a s in th e D is t r ic t , s o m e o f t h e m in th is D is tr ic t a n d in th e n a tio n has fo r o u tle ts la te d fr o m of n a v a l s h ip y a r d s n o n m a n u f a c t u r in g lin e s , p a r tic u la r ly in t r a d e a n d s e r v ic e s . s u p p ly la r g e T h e h ig h le v e l o f g o v e r n m e n t e m p lo y m e n t , r e p r e s e n t and la b o r th e of n u m b e r o f w o r k e r s in c o n s t r u c t io n . t h e r e fo r e , to r e s t r ic t o r d is c o u r a g e e m p lo y m e n t in m a n y The r a tio i n g p r in c ip a lly m i li t a r y e s t a b lis h m e n t s o f l a r g e s i z e , is p a r t S e v e r a l fa c t o r s h a v e c o n t r ib u t e d to th e s ta b ility o f th e p a tte r n s e r v ic e c o n tr ib u te little p lo y m e n t. I n th e a c c o m p a n y in g c h a r t, th e s h ifts th a t o c and to D is tr ic t th a t h a v e th a t th ere s h ift in th e no of o u t, a n d o f n o n a g r ic u lt u r a l e m p lo y m e n t in th e p a s t y e a r h a s b e e n ra th e r m o d e r a te a r e la r g e a r e a s w ith in is th a t fo r d is c u s s io n s c e n te rs m ilita r y s h ip m e n ts . o f p o p u la tio n , o ffe r In fa c ilitie s a d d itio n , th e w id e ly is o e x c e lle n t op por b e e n a d e q u a te , e x c e p t fo r s o m e c r itic a l sk ills , to m e e t th e tu n it y f o r th e lo c a tio n o f a ir b a s e s , m u n it io n s p la n ts , a n d e x p a n s io n a t o m ic e n e r g y in s ta lla tio n s . W o r ld r e q u ir e d b y th e d e fe n s e p r o g r a m W a r to ta l la b o r th u s fa r . In I I , h o w e v e r , d e s p ite a la r g e in c r e a s e in th e fo r c e , m a n u fa c tu r in g c o n d itio n s a c tiv itie s w ere w ere such u n a b le th a t m a n y to r e c r u it T h e h ig h le v e l o f e m p lo y m e n t in t r a d e a n d s e r v ic e s r e non fle c ts th e e x is t e n c e o f h ig h ly d e s ir a b le r e s o r t a n d r e c r e a em t io n a r e a s a n d h ig h in c o m e s in th is D is t r ic t . H is t o r ic a lly , September 1951 71 M O N T H L Y R E V IE W th e r a tio o f e m p lo y m e n t in t r a d e a n d th e s e r v ic e s t o p o p u w id e r a n g e o f p r im a r y a n d fa b r ic a te d m e ta l p r o d u c t in d u s la t io n h a s b e e n h ig h e r in th is D is t r i c t th a n in th e n a tio n tr ie s h a v e in c r e a s e d g r e a tly in s iz e a n d in r e la tio n to o th e r a s a w h o le . E x c e p t fo r th e w a r y e a r s , D is tr ic t tr a d e a n d m a n u f a c t u r in g . F o o d p r o c e s s in g , u n til r e c e n t ly th e m o s t s e r v ic e e m p lo y m e n t h a s g r o w n a lm o s t a s r a p id ly a s o th e r im p o r ta n t ty p e s o f e m p lo y m e n t. n u m b e r o f w o r k e r s e m p lo y e d , h a s d e c lin e d o v e r th e p a s t A g r e a te r p e r c e n ta g e o f to ta l n o n fa r m engaged in th e n a tio n c o n s tr u c tio n a c tiv ity in th e e m p l o y m e n t is D is tr ic t th a n in a s a w h o le . T h e m u c h g r e a te r p o p u la tio n in s in g le in d u s tr y in th e sta te in te rm s of th e d e c a d e in its p e r c e n t a g e s h a r e o f m a n u f a c t u r in g e m p lo y m e n t, as in d e e d have n o n d u r a b le goods in d u s tr ie s in g e n e r a l. c r e a s e in t h e D i s t r i c t o v e r t h e p a s t d e c a d e h a s r e s u lt e d in T h e g e n e r a l p a t t e r n o f d e v e l o p m e n t is s i m i l a r in W a s h m o r e in te n s e a c t iv it y in c o n s t r u c t io n , p a r tic u la r ly in th e in g t o n , w h e r e m u c h th e s a m e in d u s tr ie s a c c o u n t f o r th e r e s id e n t ia l a n d p u b lic fie ld s , th a n in th e n a tio n . A t p r e s p r in c ip a l c h a n g e s in th e s tr u c tu r e e n t, h o w e v e r , to ta l c o n s tr u c tio n sta te . B o th r e s id e n tia l a n d a c t iv it y is t a p e r in g c o m m e r c ia l c o n s tr u c tio n are o ff. d rop S ig n ific a n tly p i n g s h a r p ly a s a r e s u lt , in p a r t a t le a s t, o f v a r io u s G o v u c ts — p a r tic u la r ly th e re p a r tia lly m a c h in e r y o ffse t by th e r is in g v o lu m e of in d u s tr ia l and o f e m p lo y m e n t in th e sh a res of to ta l n o n fa r m em p lo y m e n t a r e a c c o u n te d fo r to d a y b y a ir c r a ft, m e ta l p r o d e r n m e n t a l c o n t r o l s a n d r e g u l a t i o n s a n d t h e d e c li n e is o n ly p u b lic c o n s t r u c t io n . la r g e r has been in a th e a lu m in u m s u b s ta n tia l (in c lu d in g in d u stry in c r e a s e e le c tr ic a l), and in in w h ic h c a p a c ity — , fa b r ic a te d m e ta l p r o d u c ts . L u m b e r a n d fo o d p r o c e s s in g , w h ic h h is to r ic a lly have Com position of m anufacturing employm ent cha ng es been th e d o m in a n t m a n u fa c tu r in g in d u s tr ie s in W a s h i n g t o n , h a v e d e c lin e d in r e la tiv e im p o r t a n c e in th e T h e s e fa c to r s , h o w e v e r , a ct to c o n c e a l th e fu n d a m e n ta l c h a n g e in th e s t r u c t u r e o f m a n u f a c t u r in g a n d its i m p o r ta n c e in th e T w e l f t h D is t r ic t . T h e h e a v ie r in d u s tr ie s , s u c h a s ir o n a n d s te e l, a lu m in u m , a ir c r a ft, a n d m a c h in e r y , p a st ten y e a r s. I n c o u n te d fo r 1 9 4 0 , lu m b e r a n d fo o d p r o c e s s in g a c m o r e th a n 70 p e r c e n t o f a ll m a n u f a c t u r in g e m p lo y m e n t in th e s ta te ; t o d a y t h e y a c c o u n t f o r a little le s s th a n h a lf. h a v e g r o w n m u c h m o r e r a p id ly in th e p a s t te n y e a r s o r so Even th a n th e lig h te r in d u s tr ie s , a n d to d a y a c c o u n t fo r a c o n s id e r a b ly h ig h e r p r o p o r tio n p lo y m e n t th a n n o te d , r e q u ir e e q u ip m e n t a per o f to ta l m a n u fa c tu r in g b e fo r e . T h ese m uch h e a v ie r in v e s t m e n t in o u tp u t, and, u n it of in d u s tr ie s , w hat it is em s h o u ld be p la n t a n d even m ore t h o u g h th is p a tte r n o f in d u s tr ia l e x p a n s io n a n d d iv e r s ific a tio n m a y c o n tin u e and sta te s, o th e r D is tr ic t in C a lifo r n ia , W a s h i n g t o n , th ere is som e lik e lih o o d th a t m a n u f a c t u r in g w ill n o t a c c o u n t f o r s o h ig h a p r o p o r t io n o f n o n a g r ic u ltu r a l in c o m e a n d e m p lo y m e n t in th e T w e l f t h i m p o r t a n t in th e p r e s e n t c o n t e x t , t h e y r e q u ir e a g r e a te r D is t r ic t a s in th e n a tio n . E m p lo y m e n t in tr a d e a n d s e r v a m o u n t o f c a p it a l p e r e m p lo y e e . I t is in t h is ic e s a n d in th e c o n s t r u c t io n in d u s t r y w ill p r o b a b ly te n d to se n se th a t th e D is t r ic t m a y b e t e r m e d m o r e in d u s t r ia liz e d th a n f o r m k e e p p a c e w ith m a n u fa c tu r in g . E v e n a llo w in g fo r a r e d u c e r ly , in s p ite o f th e r e la tiv e s ta b ility o f m a n u fa c t u r in g e m tio n p lo y m e n t r e m a in r e la tiv e ly h ig h in th is D is tr ic t. A s a c o n s e q u e n c e , as a p e rce n ta g e of to ta l n o n a g r ic u lt u r a l em p lo y m e n t. in m ilit a r y a c tiv ity , govern m en t e m p lo y m e n t m ay w h e n p r o d u c tio n o f m ilit a r y g o o d s is s m a ll, m a n u f a c t u r I n C a li f o r n ia , p a r t i c u la r ly , is t h is t r u e . I n d u s t r i e s s u c h a s a ir c r a ft, m a c h in e r y (in c lu d in g e le c tr ic a l), a n d a v e r y in g e m p lo y m e n t m a y n o t g r o w m u c h m o r e r a p id ly th a n to ta l n o n a g r ic u lt u r a l e m p lo y m e n t . EARNINGS AND EXPENSES OF TWELFTH DISTRICT MEMBER BANKS, FIRST HALF 1951 N e t c u r r e n t e a r n in g s o f T w e lft h D is tr ic t m e m b e r b a n k s d u r in g th e fir s t h a lf o f 1 9 5 1 w e r e a lm o s t 1 0 p e rce n t tio n a lly lo w e r th a n ris in g tre n d h ig h e r th a n d u r in g th e c o r r e s p o n d in g p e r io d o f la s t y e a r , b u s in e s s b u t s h a r p ly in c r e a s e d in c o m e t a x e s r e s u lte d in a 5 p e r c e n t th a n co n su m e r drop in n e t p r o fits . T h e 1 3 p e r c e n t y e a r -t o -y e a r g a in in g r o s s e a r n in g s r e fle c te d th e s h ift in g p a tte r n o f b a n k a s s e ts 15 and la r g e s t in th e fir s t h a lf o f 1 9 5 0 , d e s p ite th e o f in te r e s t r a te s . T h i s real e sta te r e g is te r e d s in c e th e s p r in g o f 1 9 5 0 a s b a n k s r e d u c e d th e ir G o v e r n g a in s abundant room f o r lo a n n ess w h o le , m e m b e r b a n k lo a n p r o fits of o th e r p r iv a te D is tr ic t borrow ers. m em ber banks B o th c lo s e ly e a r n in g s and p a r a lle le d th e n a tio n a l tr e n d . Loan e x p a n s io n w as th e p r im e m o v e r a d v a n c e in e a r n in g s o f T w e lf t h In te re st an d d is c o u n t o n lo a n s m o r e th a n in th e y e a r -a g o lim in a r y ta b u la tio n . The in th e g e n e ra l D is tr ic t m e m b e r b a n k s. a m o u n te d to 21 percent p e r io d , a c c o r d in g to th e p r e average v o lu m e of lo a n s o u t o c c u r r in g A s drew in th e ir r a p id ly in lo a n in c o m e , banks w h ose asset p o s itio n a llo w e d e x p a n s io n . F o r th e n a tio n e a r n in g s w e r e u p 2 6 e x te n d e d G overn m en t s e c u r ity new as a p e rc e n t. lo a n s , th e y h o ld in g s , w h ic h a v e r a g e d 1 6 p e r c e n t le s s d u r in g th e fir s t h a lf o f 1 9 5 1 th a n in th e c o r r e s p o n d in g 1950 p e r io d . In te re st e a r n in g s on G o v e r n m e n t s w e r e o f f o n ly 11 p e r c e n t, h o w e v e r , r e fle c t in g th e h ig h e r y ie ld s in 1 9 5 1 ; th e a v e r a g e ra te o f re tu r n o n G o v e r n m e n t s e c u r itie s h e ld b y T w e l f t h D is t r i c t b a n k s s ta n d in g r o s e s o m e w h a t m o r e r a p id ly th a n d id e a r n in g s d u r in g th e o n lo a n s . T h e o v e r -a ll ra te o f r e tu r n o n lo a n s w a s fr a c annum com p ared in c r e a s e s D is tr ic t m e m b e r b a n k s dow n fa c t th a t m ore 1 5 to 6 9 p e r c e n t, w ith th e m o s t s p e c ta c u la r m e n t s e c u r it y p o r t f o li o s in o r d e r t o e x t e n d c r e d it t o b u s i and r e fle c ts th e in c re a se d lo a n s w h ic h h a v e a h ig h e r y ie ld . A l l th e banks r a n g in g fr o m lo a n s J a n u a r y -J u n e w ith p e r io d 1 .5 5 w as percent a 1 .6 4 year percent per p r e v io u s ly . 72 September 1951 FEDERAL RESERVE B A N K OF SAN FRANCISCO S E elected B a n k s a r n in g s E a n d — T w el fth J a n u a r y D -J x p e n se It e m s U n it e d is t r ic t a n d , u n e of S M b a n k s . T o t a l e x p e n s e s w e r e 1 5 p e r c e n t h ig h e r . A lt h o u g h em ber ta te s a b r e a k d o w n o f t h e e x p e n s e it e m s is n o t y e t a v a ila b le , it , 1950 a n d 1951 is i------------------------- Twelfth District------------------------- ^ f----- A ll banks-----N U . S. 1st half 1st half <--------Percent change--------N percent Interest and discount on loans1 ........................ Interest on Government securities ...................... 195 lp 1950 ^in millions) 177.6 146.7 15 largest + 2 1 .6 A ll + 2 1 .1 Other + 1 9 .1 change— all banks + 2 6 .2 p r o b a b le th a t 53.9 — 10.9 — 11.9 — + 1 4 .9 + 1 4 .2 + 1 7 .9 Other earnings ............... 62.5 54.4 Total e a r n in g s............ 288.1 254.9 Total e x p e n se s............ 1S3.7 159.7 N et current earnings . . Total recoveries and p r o fi t s ............................. Total losses and charge-offs .................... 104.4 95.3 8.5 30.1 13.1 14.5 4.7 4.4 99.8 90.9 7.2 — 6.7 + 1 3 .1 + 1 2 .7 fa c to rs r e s p o n s ib le fo r th e h ig h e r ra te s N e t c u r r e n t e a r n in g s w e r e a lm o s t 1 0 p e r c e n t a b o v e th e 1 9 5 0 to ta l, r e p r e s e n tin g a re tu r n of 1 9 .5 p e r c e n t (a n n u a l r a t e ) o n c a p ita l a c c o u n ts . O f th e 1 5 la r g + 1 2 .2 est + 1 3 .0 m a jo r o f in te r e s t p a id o n t im e a n d s a v in g s d e p o s it s . c o r r e s p o n d in g 48.0 th e in c r e a s e w e r e la r g e r s a la r ie s a n d g e n e r a lly + 1 3 .7 + 1 5 .0 + 1 5 .1 + 1 4 .7 + 1 1 .3 + + + + 1 7 .4 ban ks, tw o recorded fr a c tio n a l d e c lin e s w h ile th e o th e r s ’ n e t c u r r e n t e a r n in g s in c r e a se d b y v a r y in g a m o u n ts u p to 5 0 p e r c e n t. F o r th e U n it e d S ta te s a s a w h o le , m e m N et losses and c h a r g e -o ffs............... Profits before income taxes ................................ 9.6 9.8 9.0 b e r b a n k n e t c u r r e n t e a r n in g s w e r e m o r e th a n 1 7 p e r c e n t above 1950 le v e ls , r e fle c tin g g re a te r e x p a n sio n of lo a n i n c o m e , le s s r e d u c t io n in e a r n in g s o n G o v e r n m e n t s e c u r i tie s , a n d s m a lle r e x p e n s e in c r e a s e s th a n in th e D is t r ic t . D e s p ite th e fa v o r a b le e a r n in g s p ic tu r e , n e t p r o fits a fte r + 9.8 + 8.3 + 1 6 .8 + 1 2 .0 Taxes on net in c o m e .. . 39.1 26.9 + 4 5 .0 + 4 2 .8 + 5 3 .6 + 4 9 .7 N et profits after taxes. 60.7 63.9 — — — — • 4.0 Cash dividends declared2 31.6 24.6 + 2 8 .5 5.0 5.6 + 2 7 .1 2.1 + 3 9 .6 + 9.7 t a x e s w e r e le s s th a n in th e fir s t h a lf o f 1 9 5 0 . I n c o m e t a x e s in c r e a s e d s u b s ta n t ia lly a s a r e s u lt o f h ig h e r t a x r a t e s a n d la r g e r e a r n in g s . I n th e T w e lft h D is tr ic t, th e a m o u n t a b s o r b e d b y in c o m e ta x e s w a s 4 5 p e r c e n t la r g e r th a n in th e Undistributed profits. . . 29.1 39.3 — 26.0 — 28.3 — 16.9 — 12.8 c o r r e s p o n d in g 1 United States loan earnings figures include service charges and other fees on loans, while Twelfth District figures include interest and discount only. Service charges and fees on loans in Twelfth District included in “ other earnings.” 2 Figures include common-stock dividends only, p— preliminary. N o te : Totals and percent changes are based on unrounded figures. t w o -fift h s p e r c e n t b e lo w percen t p e r io d of la s t year, o f n e t in c o m e . N e t th e d r a w in g o ff p r o fits a fte r t a x e s 1 9 5 0 fir s t-h a lf fig u r e a n d (a n n u a l r a te ) a lm o s t w ere e q u a lle d 5 11 o n c a p ita l a c c o u n t s in c o n t r a s t to la s t y e a r ’s 1 3 p e r c e n t. N a t io n a lly , n e t p r o fits w e r e o f f 4 p e r c e n t. N e t p r o fits o f th e 1 5 la r g e s t b a n k s in th e D is t r ic t , I n t e r e s t e a r n in g s o n G o v e r n m e n t s e c u r itie s o f a ll m e m b e r b a n k s in th e U n i t e d S t a t e s w e r e 7 p e r c e n t le s s t h a n in th e fir s t h a lf o f 1 9 5 0 . d o w n 5 p e r c e n t, s h o w e d w id e v a r ia t io n in th e y e a r -t o -y e a r c o m p a r is o n : u p fo r e ig h t b a n k s , d o w n fo r se v e n . F o r th e s m a lle r b a n k s a s a g r o u p , n e t p r o fits w e r e d o w n T h e d r o p in G o v e r n m e n t s e c u r ity e a r n in g s , a s w e ll a s th e in c r e a s e in lo a n in c o m e , w a s s o m e w h a t g r e a te r f o r th e 1 5 la r g e s t b a n k s th a n f o r th e r e s t o f th e m e m b e r b a n k s in th e D is t r ic t c o n s id e r e d a s a g r o u p . A m o n g th e 1 5 la r g e s t, in c o m e fr o m G o v e r n m e n ts w a s d o w n 2 to 2 0 p e rc e n t fr o m th e fir st T w e lfth s ix m o n th s of la s t year. D is tr ic t m e m b e r b a n k s O th e r w ere 15 e a r n in g s of p e r c e n t h ig h e r t h a n in t h e fir s t h a lf o f 1 9 5 0 . o n ly 2 p e rc e n t. W h ile n e t p r o fits d e c lin e d , T w e lfth D is tr ic t m e m b e r b a n k s n e v e r th e le s s r a is e d th e to ta l a m o u n t o f th e ir d iv i d e n d s . C a s h d iv id e n d s d e c la r e d o n c o m m o n s t o c k w e r e 2 8 p e r c e n t h ig h e r th a n in t h e fir s t h a lf o f 1 9 5 0 . M o r e th a n h a lf th e n e t p r o fits w a s p a id o u t a s c a s h d iv id e n d s . T h e 1 5 la r g e s t b a n k s a s a g r o u p in c r e a s e d c a s h d iv id e n d s 2 7 p e r c e n t, a s s e v e n o f t h e m d e c la r e d d iv id e n d s 2 0 t o 6 0 p e r c e n t T o t a l e a r n in g s w e r e u p 1 3 p e r c e n t , w it h little v a r ia t io n b e tw e e n th e 1 5 la r g e s t b a n k s a s a g r o u p a n d th e s m a lle r h ig h e r th a n la st year, w h ile th e o th e r e ig h t m ade no c h a n g e in d iv id e n d p o lic y . INCOME IN THE TWELFTH DISTRICT, 19501 n c o m e p a y m e n t s t o i n d i v id u a ls in a ll s e v e n s t a t e s o f I th e T w e l f t h D is t r ic t w e r e c o n s id e r a b ly la r g e r in 1 9 5 0 as seco n d t h a n in 1 9 4 9 . I t w o u ld h a v e b e e n m o r e n e w s w o r t h y , h o w N evada e v e r , if t h e y h a d d e c lin e d in s o m e o f th e s t a t e s , s in c e in sta te . com e p a y m e n ts S ta te s fro m in c r e a se d in every sta te in th e 1 9 5 0 . W h a t is m o r e , th e y in c r e a s e d a t r o u g h ly th e sa m e ra te in m o s t s e c tio n s o f th e n a tio n . D is t r ic t in c r e a s e w a s th e s a m e a s th e n a tio n a l— p e r c e n t— a n d th e d e v ia tio n s a b o v e a n d b e lo w 11 th a t m a r k in o th e r m a jo r a r e a s o f th e c o u n tr y d id n o t e x c e e d 3 p e r ce n ta g e p o in ts . The in c r e a se s w ere even sta te in term s of to ta l in c o m e , but r e m a in e d th e th ir d h ig h e s t per c a p ita in c o m e U n ite d 1 9 4 9 to The h ig h e s t d r o p p e d f r o m s ix t h to s e v e n t h p la c e in p e r c a p ita in c o m e . m ore u n ifo r m a m o n g th e T w e lft h D is tr ic t sta te s, r a n g in g fr o m a 9 per Agricultural incom e varies the most T h e v a r ie d ty p e s o f e c o n o m ic str u c tu r e b r o u g h t a b o u t by th e d iv e r s e c lim a te s a n d te r r a in s u s u a lly r e s u lt in a v a r ie t y o f u p s a n d d o w n s in e c o n o m ic a c t iv it y t h r o u g h o u t th e U n ite d S ta te s fr o m y e a r to y e a r. In 1950 , h ow ever, a c t iv it y in c r e a s e d in m o s t lin e s , r e fle c tin g b o t h th e g e n e r a l p ic k -u p in b u s in e s s in th e fir s t h a lf o f th e y e a r and th e c e n t in c r e a s e in I d a h o a n d U t a h to a 1 3 p e r c e n t in c r e a s e K o r e a n w a r in t h e s e c o n d h a lf. in A r iz o n a and N e v a d a . C a lifo r n ia r e ta in e d its p o s itio n A g r ic u ltu r a l in c o m e v a r ie d m o r e th r o u g h o u t th e c o u n aThe present discussion is based on the estimates which appeared in the De partment of Commerce S u r v e y o f C u r ren t B u s in es s , August 1951, pp. 11-21. try th a n o th e r co m p o n e n ts o f in c o m e , c h a n g e s ra n g in g P er C I a p it a P n c o m e a y m e n t s A r i z o n a . . ....................................... California ....................................... Idaho .............................................. Nevada ............................................ Oregon ........................................... Utah ................................................ W ashington .................................. Twelfth District United States — T D w e l ft h 1940 1944 $ 466 803 443 821 575 478 632 $ 959 1,535 1,029 1,383 1,302 1,061 1,495 is t r ic t 1948 , 1940-50 1949 $1,169 1,618 1,307 1,686 1,451 1,216 1,523 $1,138 1,594 1,220 1,667 1,385 1,196 1,470 709 1,443 1,544 1,508 1,656 575 1,160 1,383 1,320 1,436 1944-50 + 29 -j- 14 + 25 + 36 + 17 + 20 + 10 1948-50 + 6 + 8 — 2 + 11 + 5 + 5 + 8 1949-50 + 9 + 1 0 + 5 + 12 + 1 0 + 6 + 12 Twelfth D is t r ic t ...................... + 1 0 3 +134 + 1 5 + 7 + 1 0 United S t a t e s ...........................+ 1 1 1 +150 + + 4 + 24 9 N o te : The above figures supersede those that have been published in previ ous years. Revisions have been made by the Department of Commerce to incorporate the more complete income data that have been made available by the states and adjustments of population estimates to the 1950 census. — 2 8 p e r c e n t in O k la h o m a to + 6 4 ta n a . I n th e T w e lft h c lin e in U ta h , p e r c e n t in M o n D is t r i c t , it r a n g e d f r o m w h ere a g r ic u lt u r a l in c o m e I otal P n c o m e a y m e n t s to I n d iv id u a l s — T D w el fth is t r ic t , 1940-50 $1,240 1,751 1,287 1,875 1,523 1,271 1,642 .................... 1940-50 +166 +118 +191 +128 +165 +166 +160 T 1950 ........................ Percent change 1929-50 Arizona ........................................... + 1 1 6 California ....................................... + 8 5 I d a h o ................................................ + 1 4 8 Nevada ........................................... + 1 2 9 Oregon ............................................ + 1 3 8 Utah ................................................ + 1 3 7 Washington .................................. + 1 3 0 fr o m 73 M O N T H L Y R E V IE W September 1951 (amounts in millions) 1940 Arizona ........................ $ 237 California .................... 5,606 Idaho............................ 232 Nevada ........................ ........ 92 Oregon ........................ 633 Utah.............................. 265 Washington ................ 1,100 Twelfth District . . . . 8,165 United States .......... 75,852 1944 $ 591 13,739 537 213 1,672 644 3,240 20,636 153,306 1948 832 16,937 723 268 2,150 806 3,543 25,259 202,007 Percent change Arizona ........................ California...................... Idaho ............................ Nevada ........................... Oregon.......................... U ta h .............................. Washington ................ Twelfth District ___ United States .......... 1940-50 +295 +231 +229 ■+226 +267 +233 +256 +239 +186 1944-50 + 58 + 35 + 42 +• 41 + 39 + 37 + 21 + 34 + 42 1929-50 +282 +255 +232 — j—305 +285 +225 +254 +257 +163 $ 1949 826 16,731 698 265 2,068 810 3,489 24,887 196,128 1950 935 18,542 763 300 2,322 883 3,912 27,657 217,245 1948-50 + 12 + 9 + 6 +- 12 + 8 4- 10 + 10 + 9 + 8 1949-50 + 13 + 11 + 9 ■+ 13 + 12 + 9 + 12 + 11 + 11 $ $ N o te : The above figures supersede those that have been published in previ ous years. Revisions have been made by the Department of Commerce to incorporate the more complete income data that have been made available by the states. a s m a ll d e a cc o u n ts fo r in d e t e r m in in g t h e s ig n ific a n c e o f c h a n g e s in t o t a l in c o m e a b o u t 1 0 p e r c e n t o f to ta l in c o m e , to a 2 8 p e r c e n t in c r e a s e in in W a s h i n g t o n , w h e r e it a c c o u n t s f o r 8 p e r c e n t o f t o t a l co u n try fr o m any one area. If to ta l in c o m e ris e s 10 percent in a o n e p e r io d to a n o th e r , b u t p o p u la tio n r ise s in c o m e . L a r g e in c r e a s e s in th e v a lu e o f c o t t o n p r o d u c tio n 1 5 p e r c e n t, th e p e o p le o f th e c o u n tr y m ig h t b e w o r s e o ff c o n tr ib u te d d e s p ite th e r is e in to ta l in c o m e , s in c e th e n u m b e r o f p e o to h ig h e r le v e ls o f fa r m in c o m e in A r i z o n a p le th a t a te th e p ie g r e w a n d C a lifo r n ia . G o v e r n m e n t in c o m e p a y m e n t s 1 in c r e a s e d 1 4 p e r c e n t in b o th th e D is t r ic t a n d th e n a tio n , o w in g a lm o s t e n tir e ly to th e d is b u r s e m e n t o f G o v e r n m e n t life in s u r a n c e d iv id e n d s a n d to a n in c r e a s e in c a s h p a y o f m ilit a r y p e r s o n n e l s ta tio n e d in th e co u n try . G overn m ent in c o m e p a y m e n ts m a k e u p a g r e a te r p o r tio n o f to ta l in c o m e in th e T w e lft h D is t r ic t th a n in th e n a tio n a s a w h o le . A v e te ra n s o f W o r ld W a r II a cc o u n ted sta te b o n u s to fo r p a r t o f th e 2 2 p e r c e n t r is e in g o v e r n m e n t i n c o m e p a y m e n t s in W a s h i n g t o n . N e v a d a ’s 3 0 p e r c e n t r is e in g o v e r n m e n t in c o m e p a y 1949 to w id e ly m o r e th a n th e p ie it s e lf. F r o m 1 9 5 0 , c h a n g e s in p e r c a p ita in c o m e v a r ie d m o r e am ong in d iv id u a l sta te s o f th e n a tio n th a n d id c h a n g e s in to ta l in c o m e . C h a n g e s v a r ie d f r o m — 1 p ercen t to + 1 5 + 5 + 1 2 ita p e r c e n t in th e n a tio n , b u t o n ly f r o m percent p e r c e n t a m o n g th e T w e lft h D is tr ic t sta te s. P e r c a p in c o m e in c r e a se d s lig h tly m ore in th e D is tr ic t as a w h o le th a n in th e n a tio n . L o s s e s th a t h a d b e e n s u s ta in e d fr o m 1948 to 1949 w ere m ade up by a ll D is tr ic t sta te s ex c e p t Id a h o . C h a n g e s since 1940 m e n t s w a s th e g r e a te s t in th e n a tio n . P e r c a p ita in c o m e W hen are in th e D is tr ic t has been u n a b le to g o v e r n m e n t a n d a g r ic u ltu r a l in c o m e p a y m e n t s su b tr a c te d fr o m th e to ta l, th e r e s id u a l p r iv a te n o n k e e p u p w ith th e r a te o f g a in in to ta l in c o m e s in c e 1 9 4 0 , b e c a u se p o p u la tio n h a s in c r e a s e d so m u c h . T h o u g h to ta l fa r m in c o m e is e v e n m ore u n ifo r m in its ch a n g e s th a n in c o m e m o r e t h a n t r e b le d d u r in g th e te n y e a r s , p e r c a p ita to ta l in c o m e . P r iv a te n o n fa r m in c o m e in c r e a s e d s lig h tly le s s in th e D is t r i c t t h a n in th e n a tio n — 1 0 percent as co m p a r e d to 11 p e r c e n t. T r a d e a n d se r v ic e in c o m e , m o r e im in c o m e o n ly d o u b le d . T o t a l in c o m e in c r e a s e d m o r e th a n p e r c a p it a i n c o m e in a ll D is t r i c t s t a t e s , a n d , in f a c t , in a ll b u t f o u r s ta te s in th e n a tio n . T h e d iffe r e n c e in th e r a te o f p o r ta n t in th e D is t r ic t to ta l th a n in th e n a tio n a l, in c r e a s e d in c r e a s e b e tw e e n to ta l a n d p e r c a p ita in c o m e w a s g r e a te r s o m e w h a t le s s h e r e , w h ile m a n u fa c tu r in g p a y r o lls , le s s in th e D is t r i c t , h o w e v e r , t h a n in o t h e r a r e a s . im p o r ta n t h e re , in c r e a se d in c r e a s e a c c o r d in g in to tra d e th e and som ew h at m ore. T h e s e r v ic e D e p a rtm e n t r e fle c tio n o f th e s ta b ility in c o m e of in th e C om m erce, o f in c o m e fr o m s m a lle r D is tr ic t, is p a r tly a m o tio n -p ic tu r e p r o d u c tio n in C a lifo r n ia . C h a n g e s more pronounced in per capita incom e T h o u g h p e r c a p ita in c o m e p r o v id e s n o c lu e to c h a n g e s in t h e d is t r ib u t io n o f i n c o m e , s in c e it is m e r e l y t o t a l in c o m e d iv id e d b y to ta l p o p u la t io n , it is n e v e r th e le s s u s e fu l 1 Government income payments are the total of wages and salaries, interest, social insurance benefits, and other types of income disbursements to indi viduals by Federal, state, and local agencies. I n c r e a s e s in t o t a l i n c o m e s in c e 1 9 4 0 in T w e l f t h D i s t r i c t sta te s w e r e a m o n g th e h ig h e s t in th e n a tio n . A r iz o n a ’s g a in , in fa c t , w a s s e c o n d h ig h e s t . D is t r ic t p e r c a p ita in com e, on th e o th e r hand, th ou g h s till w e ll above th e n a t i o n a l a v e r a g e , w a s n o t s o m u c h a b o v e it in 1 9 5 0 a s it w a s in 1 9 4 0 . T h e o t h e r t w o a r e a s in th e n a tio n w ith th e h ig h e s t p e r c a p ita in c o m e in 1 9 4 0 — th e N e w E n g la n d a n d th e M id d le E a s te r n s ta te s — w e r e a ls o le s s a b o v e th e n a tio n a l average in 1950 tren d to w a rd g re a te r th r o u g h o u t th e n a tio n . th a n in e q u a lity 1940, in p o in tin g per c a p ita out th e in c o m e 74 September 1951 FE D E R A L R ESER VE B A N K OF S A N F R A N C IS C O B U S IN E S S IN D E X E S — T W E L F T H D IS T R IC T 1 (1 9 3 5 -3 9 a v e r a g e = 100) In d u s t r ia l p ro d u ctio n (p h y sic a l v o lu m e )2 Year an d m o n th P etro leum * Lum ber Crude R e fin e d C e m e n t Lead* W heat C o p p e r3 flo u r3 T otal Carm f ’g lo a d in g s E le c t r ic e m p lo y ( n u m ber)2 power m e n t 4 1929................. 1931................. 1933................. 1 9 3 4 ................ 1935................. 1936_________ 1937............... .. 1938............... .. 1939................. 1 9 4 0 -............... 1941................. 1942................. 1943............... .. 1944_............... 1945................. 1946................. 1947................. 1948............... 1949................. 1950................. 148 77 62 67 83 106 113 88 110 120 142 141 137 136 109 130 147 159 151 171 129 83 76 77 92 94 105 110 99 98 102 110 125 137 144 139 147 149 147 144 127 90 81 81 91 98 105 103 103 103 110 116 135 151 160 148 159 162 167 168 110 74 54 70 68 117 112 92 114 124 164 194 160 128 131 165 193 211 202 227 171 104 75 79 89 100 118 96 97 112 113 118 104 93 81 73 98 109 105 113 160 75 26 36 57 98 135 88 122 144 163 188 192 171 137 109 163 154 142 176 106 101 88 95 94 96 99 96 107 103 103 104 115 119 132 128 133 116 104 94 83 82 73 79 85 96 105 102 112 122 136 167 214 231 219 219 256 284 303 333 1950 June_________________ J u ly ._______________ August______________ September__________ October_____________ November___________ Decem ber___________ 181 184 186 176 187 167 168 142 142 145 148 153 154 154 170 170 178 177 177 179 173 244 245 251 248 252 229 229 118 87 96 104 106 111 118 172 172r 177 175 176 195 195 105 113 112 105 99 97 120 1951 January_____________ February____________ M arch ______________ A p r i l _______________ M a y _________________ June_________________ Ju ly-------------------------- 187 171 168 189 199 190 154 154 155 155 155 155 157 156 176 187 179 180 179 179 182 239 255 246 247 278 266 330 101 110 106 101 101 98r 91 181 178 180 195 182 175r 170 134 121 111 110 106 96r 98 W a te rb o rn e D e p ’t fo re ig n store R e ta il trade*»« sales food (va lu e )2 prices3»6 E x p o r t s Im p o r t s ‘ *88 100 112 96 104 118 155 230 306 295 229 181 187 191 183 197 135 91 70 81 88 103 109 96 104 110 128 137 133 141 134 136 142 134 126 131 112 92 66 74 86 99 106 101 109 119 139 171 203 223 247 305 330 353 331 353 13 2 .0 1 0 4 .0 8 6 .8 9 3 .2 9 9 .6 10 0 .3 1 0 4 .5 9 9 .0 9 6 .9 9 7 .6 10 7 .9 1 30.9 1 4 3 .4 1 42.1 14 6 .3 16 7 .4 2 0 0 .3 21 6 .1 2 0 9 .6 2 0 9 .8 124 90 72 86 88 86 112 108 107 86 118 76 69 74 103 110 114 82 90 96 *58 85 57 55 59 *55 78 93 115 131r 331 341 340 339 352 353 345 196 199 207 208 211 209 209 148 125 135 140 131 131 152 343 454 374 368 343 345 376 2 0 5 .9 2 0 9 .4 2 1 2 .5 2 1 1 .0 2 1 4 .1 2 1 6 .0 2 2 2 .9 66 59 48 58 62 68 70 150 110 141 134 148 167 167 361 361 380 378 378 378 393 212 218 219 221 224 226 224 130 124 133 152 142 144 123 420 375 335 346 348 347 364 2 3 0 .8 2 3 0 .2 2 3 4 .5 2 3 3 .0 2 3 5 .3 2 2 3 .5 2 3 4 .6 75 98 110 122 126 146 159 169 174 134 161 B A N K IN G A N D C R E D IT S T A T IS T IC S — T W E L F T H D IS T R IC T (a m o u n t s in m illio n s o f d o lla r s ) Year and m o n th 1929 1931 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 C o n d itio n ite m s o f a ll m e m b e r b a n k s 7 Loans U .S . Dem and and d eposits G o v 't d is c o u n t s s e c u r it ie s a d ju ste d 8 T o ta l t im e d ep osits 2,239 1,898 1,486 1,469 1,537 1,682 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 7,093 495 547 720 1,064 1,275 1,334 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 6,381 1,234 984 951 1,201 1,389 1,791 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 1,790 1,727 1,609 1,875 2,064 2,101 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 6,251 1950 July August September October November December 6,162 6,418 6,664 6,810 6,963 7,093 6,810 6,699 6,495 6,452 6,319 6,381 8,458 8,627 8,754 8,871 9,018 9,254 6,250 6,210 6,213 6,239 6,194 6,251 1951 January February M arch April M ay June July August 7,152 7,184 7,293 7,367 7,422 7,509 7,473 7,630 6,071 5,811 5,734 5,696 5,685 5,708 6,005 6,000 9,190 8,834 8,819 8,828 8,834 8,862 9,052 9,058 6,337 6,352 6,338 6,332 6,357 6,448 6,510 6,547 Bank rates on short-term b u sin e ss lo a n s9 M e m b e r b a n k reserves a n d related ite m s 10 Reserve bank cre d it11 __ + — + — + + + + + + + 3.20 3.35 + + + + 3.29 + 3.37 + + + 3.48 ‘ *3.67* — — + + + 34 21 2 7 2 6 1 3 2 2 4 107 214 98 76 9 302 17 13 39 C o in a n d C o m m e rc ia l T re a su ry cu rre n cy in o p e ra tio n s12 o p e ra tio n s12 c ir c u la t io n 11 0 154 110 198 163 227 90 240 192 148 596 - 1 ,9 8 0 - 3 ,7 5 1 - 3 ,5 3 4 - 3 ,7 4 3 - 1 ,6 0 7 510 + 472 930 - 1 ,1 4 1 + + + + + + + + + 3 2 62 56 24 48 - 149 102 45 93 21 80 + + + + + + 169 125 72 150 42 131 30 32 3 45 13 73 14 159 - 59 38 124 200 162 113 342 80 + + + + + + + + 168 6 130 226 150 199 298 86 23 154 150 257 219 454 157 276 245 420 + 1 ,000 + 2 ,826 + 4 ,486 + 4 ,483 + 4 ,682 + 1 ,329 + 698 482 + 378 + 1 ,198 _ + + + + + + + + + + + + — — — - + + + + + + + 4* + + Reserves B a n k d e b its Index 31 cities*»1* (1935-39— 100)* 6 48 18 4 14 38 3 20 31 96 227 643 708 789 545 326 206 209 65 14 175 147 185 242 287 479 549 565 584 754 930 1,232 1,462 1,706 2,033 2,094 2,202 2,420 1,924 2,026 146 97 63 72 87 102 111 98 102 110 134 165 211 237 260 298 326 355 350 395 0 18 9 10 3 4 1,858 1,863 1,893 1,930 1,983 2,026 382 421 417 428 425 464 68 21 8 26 36 39 19 41 2,284 2,206 2,186 2,180 2,149 2,217 2,186 2,312 455 444 461 431 449 461 429r 443 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; 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. * D aily average. * N ot adjusted for seasonal variation. * Excludes fish, fruit, and vegetable canning. 5 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 col- . lection. M onthly data partly estimated. 8 Average rates on loans made in five major cities during the first 15 days of the month. End of year and end of month figures. 11 Changes from end of previous month or year. 12 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 deposit accounts, excluding inter bank deposits. r— revised.
@FedFRASER