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November 1957 Number 11 Volume Industrial Growth of the Eighth District iV lA N U F A C T U R IN G A C T IV IT Y rose slightly faster in the Eighth Federal tleserve District than in the nation from 1947 to 1954. Specialization of production in the district has changed little. ; f c t n the St. Louis metropolitan area, manufacturing employment has in creased more slowly than in the nation, and the industrial pattern has changed markedly. Manufacturing employment has risen at a faster rate than in the n«S|bn in Louisville, Memphis, Little Rock and most other areas, but has failed to gain in Evansville or southern Illinois. The growth of manufacturing has aided the rise in district income. I ederal Bank St. L o u i s Survey o f Current Conditions — p . 142 S u b s c r i p t i o n s to the Monthly Review are available to the public without charge. For information concerning bulk mailings to banks, business organizations and educational institutions, write: Research Department, Federal Reserve Bank of St. Louis, P. O. Box 442, St. Louis 3, Missouri. Articles or excerpts may be reprinted. preciated. A credit line would be ap Industrial Growth of the Eighth District “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” L e w is C ar r o ll, Through the Looking-Glass T h e ECONOM IC DEVELOPM ENT of an area has somewhat the same aspect that Alice found in Wonderland. To stand still is to fall behind as the economic expansion of the nation proceeds. To “get somewhere” requires a faster than national rate of growth. Economic development of many areas has been re lated in large part to the growth of manufacturing. Areas where manufacturing employment has expand ed have generally also experienced gains in incomc. Added employment opportunities in manufacturing have afforded jobs for workers released from indus tries in which employment declined, such as farming or mining, and for the normal additions to the labor supply. Industrial growth, then, has become a major means of obtaining the goal of higher income for which so many strive. This article examines changes in manufacturing in the Eighth Federal Reserve Dis trict revealed by the Censuses of Manufactures taken in 1947 and 1954 and employment data for subsequent years.1 1 Industrial grow th is indicated in a num ber o f w ays. Probably forem ost is the increase in em ploym ent and payrolls in m anufacturing activities. A n oth er measure is the value added by m anufacturing, w h ich indicates the relative e c o n om ic im portance o f the various industries and geograph ic areas. (V a lu e add ed is derived by subtracting the cost o f m aterials, supplies and containers, fu el, purchased electric energy, and contract w ork , from the value o f ship m en ts.) T h e number and size o f m anufacturing plants are yet other ways o f indicating the industrialization o f an area. T h e grow th o f m anufacturing can also be indicated by the expenditures fo r plan t and equipm ent. H ow ever, these data are not available fo r sm all geograph ic areas except fo r census years. Trends indicated by the census data require som e qualifications. For one thing, the long-term trend o f an area or industry m ay be different than that indicated by com parison betw een census years w h ich fa ll in different phases o f a business cycle. In 1954, fo r exam ple, m anufacturin g em ploym ent in m any industries declin ed fro m 1953 levels, whereas in 1947 m anufacturin g activity and em ploym ent were at a generally h igh and increasing le ve l. In these industries the 1947-1954 trend w o u ld understate the real lon g-term rate o f grow th . Com parisons o f trends in geograph ic areas are affected by the differences in types o f industry and by the varying im pact o f cy clica l changes on som e industries. Secondly, because o f tw o changes in the scope, data obtained in the 1954 Census o f M anufactures are not strictly com parable w ith the 1947 census. Processors and distributors o f fluid m ilk and other dairy products w ere cla s sified as nonm anufacturing in the 1947 census, but as m anufacturing in 1954. In add ition, lo g g in g cam ps and contractors and sm all saw m ills and p lan in g m ills were n ot includ ed in the 1947 census, but w ere in clu d ed in the 3954 census. W h ere necessary, the difference in coverage has been noted in this article. Manufacturing activity rose slightly faster in the Eighth Federal Reserve District than in the nation from 1947 to 1954. In the Eighth Federal Reserve District manufac turing activity increased slightly faster from 1947 to 1954 than in the nation. As a result of this more rapid growth, employment in district manufacturing estab lishments increased 11 per cent compared with 10 per cent in the nation, and payrolls rose 68 per cent, compared with a national gain of 66 per cent. The slightly faster rise in district manufacturing activity is also indicated by the gain in the value added to goods by the manufacturing process, which increased 63 per cent from 1947 to 1954 compared with a gain of 57 per cent in the nation. The increase in value added by manufacturing reflects a rise in both physical volume of goods produced and the inflation in wages and prices between the two years. The physical volume of output from the district’s manufacturing plants probably increased slightly more from 1947 to 1954 than the 27 per cent increase in the nation. Distribution of Manufacturing in the Eighth District, 1954 I I $999andunder CZJ $1,000- $9,999 110,000- $19,999 |B| S20,000- 449,999 HH $50,000andover Page 135 The faster growth of manufacturing activity here, however, was accompanied by a less rapid increase in the number of establishments than nationally.2 The district also has a greater concentration of large plants than nationally. In 1954, establishments employing 100 or more persons constituted 11 per cent of the district total compared with 9 per cent in the nation. Employment (thousands)......... . . . Payroll ($ millions).......... Value Added ($ millions). .. . . . Establishments: Total............ ...................... . . . With twenty or more employees............ . . . Tobacco Manufactures Leather and Leather Products Lumber and Wood Products Furniture and Fixtures Chemicals and Products Food and Kindred Products Petroleum and Coal Products Stone, Clay and Glass Products MANUFACTURING INDICATORS Eighth Federal Reserve District Relative Specialization in Eighth District Manufacturing, 1954 Total United States 1954 1947 Per cent Increase Per cent Increase 722 2,529 5,121 651 1,506 3,140 11 68 63 66 57 12,872 11,318 14 20 4,171 4,045 3 9 10 Printing and Publishing Apparel and Related Products Pulp, Paper and Products Fabricated Metal Products Primary Metal Industries Machinery Except Electrical Electrical Machinery Misc. Manufactures (incl. ordnance) Rubber Products Transportation Equipment Instruments and Related Products Textile Mill Products .5 Specialization of production in the district has changed little. 1.0 1.5 Ratio to United States Every area earns its economic living by producing goods or services for local consumption and for export to other areas. By specialization in those activities in which it is best suited by virtue of its human and natural resources each area tends toward a higher standard of living. Reflecting its comparative advan tage in other activities, primarily agriculture, the Eighth District is still relatively less industrialized Note: than the nation. Although the district had an esti mated 6.6 per cent of the population of the United with twenty or more employees decreased more rap idly in the district than in the nation. States in 1954, its manufacturing establishments em ployed only 4.6 per cent of the workers in the nation and in terms of value added produced 4.4 per cent of the output. As can be seen in the chart, within the manufactur ing sector a larger share of district plants produce food, leather and tobacco products, lumber, furniture and chemicals than in the nation.3 On the other hand, the district has relatively fewer establishments, com pared to the nation, engaged in the production of textiles, pulp, paper and rubber products, primary metals, machinery and instruments. From 1947 to 1954, little change occurred in the type of manufacturing in the district, with specializa tion continuing primarily in nondurable goods pro duction. The largest shifts in emphasis were in lum2 Difference in coverage, as noted in Footnote 1, accounted for some of the increase and, with considerable lumbering activity located in the district, would tend to increase the district count more rapidly than in the nation. However, the conclusion that the district lagged national growth in number of manufacturing establishments is also indicated when comparison is made of the number of establishments with twenty or more employees, which effectively eliminates the bias introduced by different coverage of small logging camps and sawmills in the two censuses. 3 Based on establishments with twenty or more employees. Page 136 Based on proportion of district plants with 20 or more employees in each industry compared to proportion of each industry in United States. ber and shoe plants. The number of leather and leather product manufacturing establishments with twenty or more employees decreased less rapidly in the district from 1947 to 1954 than in the nation. On the other hand, the number of lumber establishments In some other industries the changes produced rel atively smaller shifts in specialization. The number of large textile plants in the district increased from 56 to 70, while in the nation they decreased slightly. Pulp and paper plants increased at a slightly more rapid rate than for the nation. Large plants producing and fabricating metals, electrical machinery and transpor tation equipment increased less rapidly from 1947 to 1954 in the district than in the nation. Other indus tries showed roughly similar changes as in the nation between the two census dates, and hence showed lit tle change in the degree of specialization. However, since 1954, the small increase in relative specialization in pulp and paper and in chemicals has probably con tinued. While the district as a whole showed primarily minor changes in the structure of industry, particular areas within the district have experienced marked shifts in the types of manufacturing activity. Perhaps one of the outstanding shifts has been the continued migration of the apparel and shoe industry from St. Louis to the smaller cities of the district. Manufacturing Employment in United States and District Metropolitan Areas 25.0 Millions 12.5 3 25 22 5 Donnell Aircraft Corporation, now the area’s largest firm, increased from 3,300 in 1947 to 27,100 in 1957. Two firms also produced aircraft parts for a time dur ing the Korean War, but subsequently withdrew. Ordnance production also reflects the changing de fense needs. Employment in St. Louis area plants increased sharply during the Korean period, reaching a peak of 17,700 in August 1953. However, defense requirements were reduced thereafter and currently only about 5,900 are at work. Recent announcements indicate that further cutbacks are planned, with pos sibly 1,500 to be laid off. Automobile and parts production has also increased substantially, with an additional assembly plant and expansion of others occurring in the postwar years. The importance of this industry will increase further in 1959 when a newly announced automobile assem bly plant is to begin operation with 3,500 employees. * Evansville area including Henderson County, Kentucky. In the St. Louis metropolitan area, manufacturing employment has increased more slowly than in the nation, . . . The St. Louis metropolitan area is one of the na tion’s older manufacturing centers which, in the post war period, has grown less rapidly than the rest of the nation, continuing the trend evident throughout the twentieth century. Manufacturing in the metro politan area, employing 274,000 in 1956 and account ing for about one-third of the district total, increased only 5 per cent from 1947 compared with an advance of 11 per cent for the nation. Furthermore, the gain occurred from 1947 to 1953; since then total manu facturing employment has declined slightly. How ever, from 1947 to 1954, value added by manufactur ing rose at a faster pace than in the nation, reflecting in large part the sharp advance in high-value aircraft and ordnance items. Defense requirements of the nation have had a ma jor impact on the area. Increased outlays for defense equipment have resulted in sharp gains in output of aircraft in the postwar period. Employment at M c Chemical production is relatively more important in the St. Louis area than in the nation and has been growing faster in St. Louis than in the rest of the country. The specialization of the area in chemical production is indicated by the larger share of em ployment and value added in manufacturing than in the United States. St. Louis area chemical plants employ 7.5 per cent of all manufacturing workers and in 1954 contributed 11.2 per cent to the total value added to goods by manufacturing compared with 4.9 and 7.9 per cent respectively in the nation. The faster growth of chemicals is shown by value added which rose 81 per cent from 1947 to 1954 compared with a national gain of 71 per cent. St. Louis employment in this industry increased from 17,000 in 1947 to 21,000 in 1953 and has since remained stable. However, com pletion this year of the new Atomic Energy Commis sion facilities located in St. Charles county and expan sions of existing plants will further augment the size of this industry in the area. Oil refining also increased substantially faster from 1947 to 1957 in the St. Louis area than in the nation. Value added by St. Louis area refineries increased 72 per cent from 1947 to 1954, about 2% times the na tional gain, and from 1947 to 1957 capacity of the area’s plants also increased more rapidly than na tionally. Currently, capacity of the St. Louis area re fineries constitutes 3M per cent of the national total. St. Louis is a major center of brewing and meat packing. But from 1947 to 1954 output in food man ufacturing grew at a slower pace than in the nation. The value added by meat-products plants and grain mills increased less rapidly than in the nation, but at beverage plants it increased more. Page 137 The primary metals industry also increased output less rapidly than nationally despite a substantial jump in steel ingot output. Steel production in the St. Louis area increased from 728,000 tons in 1947 to 1,657,000 in 1956, a gain of 128 per cent compared with a 35 per cent gain nationally. Slower growth was also made by the machinery industries. Some nonelectrical machinery plants in the St. Louis area have been closed and several electrical machinery firms have es tablished branch plants in other district cities. As indicated earlier, lower wage rates in the small er cities of the district have attracted apparel and shoe plants from higher wage areas. About 9,000 fewer persons are now employed in these two industries in the St. Louis metropolitan area than in 1947, as a re sult of the transfer of operations out of the area. D e spite this redistribution of manufacturing activity, St. Louis remains a center of the shoe industry. In 1956 shoe firms in and around St. Louis produced 16 per cent of the national total. However, some rela tive decline has occurred since 1947-1948 when 19 per cent of national output came from this area. LEATHER AND LEATHER PRODUCTS NUMBER OF ESTABLISHMENTS 1947 Eighth District Total.................................................... 256 250 St. Louis Metropolitan A re a ..................................... I l l 89 Remainder of District................................................ 145161 1954 Change — 6 1— 22 +16 Railroad equipment manufacturing in the St. Louis area has declined as plants have been closed or have shifted production to different types of goods. The decline reflects primarily the reduced purchases of railroad equipment in the postwar period accompany ing the general shift to other forms of transportation. Nationally, output of railroad equipment in 1956 was 37 per cent below the 1947-49 average. The St. Louis decline also has been affected by the shift of railroads from purchasing equipment from other firms to pro ducing it in their own shops. . . .and the industrial pattern has changed markedly. As a result of the shifting pattern of manufacturing activity in the St. Louis area, durable goods produc tion now constitutes a larger proportion of the total than formerly. The number employed in durable goods manufacturing rose from 48 per cent of the total in 1947 to 57 J.r>er cent in 1956. Tn addition,7 JTproduction of certain nondurables such as chemicals and petroleum products have gained while output of other Page 138 Durable and Nondurable Manufacturing Employment in the St. Louis Metropolitan Area Per Cent of Total IOO NONDURABLE DURABLE 1947 1956 nondurable goods declined. These changes have fa vorably affected the flow of income, since those in dustries increasing in importance generally have had higher than average wage rates. However, the gain has not been without some costs, for durable goods production is usually more variable than other types and the demand for defense goods, such as aircraft and ordnance, is subject to sharp and often unpredict able changes. Thus, the area has become potentially less stable than before. However, since 1947 total manufacturing employment in the St. Louis area has shown about the same relative amount of fluctuation as nationally. An important trend in St. Louis’ industrial struc ture, not apparent from statistics, is the changing locus of ownership and management. Mergers and acqui sitions in recent years have made branch plants of many which were formerly owned or which had their principal management in St. Louis. The effect of such developments is not always unfavorable for St. Louis employment and income, but in some cases opera tions have been stopped or curtailed after the change. Manufacturing employment has risen at a faster rate than in the nation in Louisville, . . . Turning next to the remainder of the district, other metropolitan areas, except Evansville, and most non metropolitan portions grew at a faster pace than na tionally. Since 1947 manufacturing employment in the Louis ville metropolitan area has grown three times as fast as in the nation and much more rapidly than in St. Louis, Memphis, Evansville or Little Rock, the other major industrial centers in the Eighth District. Tra ditionally a center of whiskey and cigarette produc tion, much o f the postwar growth in Louisville resulted from the transfer of General Electric Com pany’s entire household appliance output to a new plant in Louisville from locations in other cities. Last year employment at this new plant averaged 15,000, making up nearly two-thirds of the 24,000 added to manufacturing employment in that area since 1947. Tobacco manufacturing, which employed 9 per cent o f the total work force in 1954, expanded sub stantially faster in Louisville than elsewhere in the nation. Employment in that industry increased 33 per cent from 1947 to 1954 while in the nation it fell by 15 per cent. Much the same story is told by value added figures: a 362 per cent gain in Louisville com pared with a 54 per cent advance nationally. Chemi cal production, including the output of synthetic rub ber, and the output of transportation equipment also have risen at a faster rate than nationally. On the other hand, value added in the food, lum ber and furniture industries declined from 1947 to 1954. The drop in lumber and furniture plants prob ably reflects the trend toward location in lower wage areas. Ordnance production has varied considerably in the Louisville area, following the general pattern of de fense needs. In 1953 as many as 10,000 were em ployed in ordnance plants, but by 1957 this had de clined to 1,900. Even this figure is to be reduced ao^ cording to plans announced recently. W hile Louisville has experienced a more rapid than national growth in manufacturing employment, the total has fluctuated somewhat more than has the na tion’s. These swings reflect in large part the sharp variations in the area’s output of ordnance, farm equipment and household appliances in recent years. products, furniture, lumber, paper, food and chemi cals and to a slight degree in nonelectrical machinery. Despite the importance of some industries known for their variability, manufacturing employment in Memphis has shown relatively more stability than na tionally since 1947. . . . Little Rock . . . Little Rock is a trade and governmental center whose manufacturing employment has grown about twice as fast as the nation. The increase in value added by manufacturing also was somewhat faster than for the nation from 1947 to 1954. Most of the gain in manufacturing employment occurred from 1947 to 1951. Since 1951 employment at food, ap parel, metal and metal-working plants has increased by about 600, offset however by reductions in chem icals, lumber and w ood products pl'ants. . . . and most other areas, . . . The growth of inanufacturing was diffused through out a large part of the district. In 187 of the 363 Eighth Federal Reserve District counties manufactur ing employment rose at a faster pace from 1947 to 1954 than the national gain of 10 per cent. In 29 counties the increase was less rapid than nationally and in 130 there were actual losses. Data were not available on 17 counties. Among the nonmetropolitan areas of the district the fastest rise in manufacturing employment oc curred in Tennessee, with an increase of 49 per cent from 1947 to 1954. As can be observed from the ac companying chart, the only major regions within the district to show less growth than nationally were the nonmetropolitan portions of Missouri and Illinois. Change in Manufacturing Employment in Nonmetropolitan District Areas 1947 - 1954 . . . Memphis, . . . Per Cent Change 50 I— Manufacturing employment in the Memphis metro politan area increased about twice as fast as in the nation from 1947 to 1956. Over the period manufac turing employment rose from 38,000 to 46,000, a gain of 21 per cent. Growth of employment occurred large ly in fabricated metals, rubber, paper and furniture production, only partly offset by a drop in lumber mill jobs. Memphis area employment is relatively more spe cialized than the nation in the production of rubber U.S: TENN MISS. KY. ARK. IND. MO. ILL - 10 1— Percentage change is for total United States. Page 139 Arkansas is a good example of the diverse forces at work as industrial development proceeds. Manufac turing employment increased from 75,000 in 1947 to about 88,000 in 1957, a gain of 17 per cent. The gain resulted from increased employment in nearly all major industry groups, which more than offset a loss of 11,000 in lumber mill employment. Industrial growth in Arkansas reflects the development of its natural resources, such as bauxite and pulpwood, the advantage of a large supply of low-cost labor and the general rapid development of the Southwest. The decline in the lumber output has resulted in part from deterioration of saw timber resources and the consequent disappearance of small logging op erations. In addition, technological improvements have further reduced labor requirements. However, in the future Arkansas lumber production should benefit from improvements in forest management and from technical progress in manufacturing processes. . . . but has failed to gain in Evansville . . . While most of the district developed industrially in the postwar period, some areas have been conspicuous for lack of growth. Evansville experienced only little growth in manufacturing employment from 1947 to 1956, although value added to goods processed in its plants rose at a faster pace than nationally from 1947 to 1954. The lack of growth in manufacturing em ployment resulted from offsetting changes, primarily in refrigerators and automobile assembly. Refrigera tor plants employed an average of 13,500 persons in 1948, but only 8,500 in 1957. On the other hand, trans portation equipment plants employed about 2,600 in 1948 and 7,000 in 1957, of which 6,200 were in auto mobile assembly plants. A small loss in employment in fabricated metals was about offset by the gain in employment in food plants. As elsewhere, aircraft production varied sharply in Evansville, with employ ment reaching a peak of 10,900 in October 1952 but falling in recent months to 900. Concentration in durable goods output has result ed in considerable instability in Evansville’s employ ment. For example, in 1954 manufacturing employ ment averaged 26 per cent less than in 1953. The outlook for the area is mixed. The operation of an aluminum plant now being built nearby will afford jobs for many who live in Evansville. On the other hand, Chrysler Corporation officials recently Page 140 announced that the two assembly plants now employ ing about 5,000 will be closed in 1959 when opera tions are transferred to a plant to be built in the St. Louis area. . . . or southern Illinois. Manufacturing employment in the Illinois portion of the district has failed to grow in the postwar period. From 1947 to 1954 employment declined 4 per cent, with reductions occurring in nine of the 14 nonmetro politan areas. By 1956, however, recovery in some areas was indicated by a 5 per cent rise in manufac turing employment covered by the state unemploy ment insurance law. The loss from 1947 to 1954 stemmed from the clos ing of a number of plants in various areas, the rela tively small number of new plants added and the impact of the 1954 recession on employment in exist ing plants. While employment in southern Illinois has increased somewhat in recent years, it has not been sufficient to eliminate the substantial unemployment existing in many of the areas. Five areas in southern Illinois (Harrisburg, Herrin-Murphysboro-West Frankfort, Litchfield, Mount Carmel-Olney, Mount Vernon) are currently classified as having substantial labor sur pluses. The growth of manufacturing has aided the rise in district income. The growth in district manufacturing activity since 1947 has been one of the factors in the rise in district income. Much of the gain occurred in industries with higher than average wage rates. Furthermore, the shift of industries with lower than average wage rates from metropolitan areas to smaller cities has added to the economic base and augmented incomes of smaller areas. Metropolitan areas, too, have gained where loss of employment in low-wage industries has been offset by gains in higher wage industries. However, manufacturing employment has failed to gain in recent years in some of the metropolitan areas. And the overall increase in the district has not been sufficient to stem out-migration from the district. Fur thermore, the economic stability of the district has been potentially reduced by the increased importance of durable and military goods production. W il l ia m H. K ester MANUFACTURING DATA FOR SELECTED METROPOLITAN AREAS IN EIGHTH FEDERAL RESERVE DISTRICT, 1954 (EMPLOYEES IN THOUSANDS, VALUE ADDED BY MANUFACTURING IN MILLIONS OF DOLLARS) Major Industry Group Employees St. Louis Value Added Louisville Employees Value Added Memphis Employees Value Added Evansville Employees Value Adde All industries................................ 251.8 $2,053.1 84.7 $ 845.0 41.8 $ 336.2 32.6 $ 238.2 Food and kindred products. . . . 34.2 316.0 14.0 157.3 7.4 53.7 4.2 39.8 Tobacco manufactures................ 0.7 d 7.9 154.7 d d — — Textile mill products.................. 2.5 12.5 0.7 4.0 d — — Apparel and related products. . 15.0 69.6 2.3 8.2 0.8 1.6 6.2 0.7 Lumber and wood products........ 1.8 9.2 4.9 24.9 4,8 28.1 0.3 1.7 Furniture and fixtures................ 5.2 28.7 3.3 16.6 3.0 14.2 1.3 6.1 2.0 Pulp, paper and products.......... 8.3 53.3 d d 3.2 30.0 Printing and publishing.............. 12.5 87.6 5.0 34.5 d d 0.9 7.2 Chemicals and products............ 18.9 230.8 11.7 164.1 3.5 37.0 1.0 11.4 — — Petroleum and coal products... 8.1 116.0 d d 0.3 3.1 — — Rubber products.......................... 0.5 d * d 3.9 d — — — Leather and leather goods........ 11.0 47.6 0.2 0.6 — 9.1 90.0 0.2 2.1 0.6 Stone, clay, and glass products. 20.5 0.5 3.2 0.4 Primary metal industriesi............ 165.0 0.5 2.8 0.3 1.7 — Fabricated metal products.......... 20.6 20.0 147.8 10.7 79.4 1.7 12.3 3.0 20.3 Machinery, except electrical. . . . 19.0 139.0 1J.7 102.3 4.5 34.2 10.0 79.6 Electrical machinery.................... 15.9 118.7 1.7 14.5 0.6 7.5 Transportation equipment.......... 28.2 270.1 2.4 d 2.4 28.7 Instruments and related products 2.3 17.3 d d d d Miscellaneous manufactures.......... 18.0 124.3 4.5 d 0.8 3.3 — 8.9 — 0.7 2.6 — — 58.1 — 4.7 d Withheld to avoid disclosing data for individual companies. * Less than 50 employees. Source: 1954 Census of Manufactures Page 141 q f C U R R E N T C O N D |T | O N S Released for publication November 1 T H E generally sidewise movement of most eco nomic activities in the past several months has created an increasingly widespread feeling that the inflationary pressures which beset the economy for the past two years, while not entirely out of view, are receding. The persistence of this high-level lull in business has also aroused an air of disquiet concern ing the nation’s economic future. No doubt the erratic behavior of the stock market in October, following a rather consistent decline since July, reflects some of this apprehension. The Council also estimates that defense spending declined $300 million (annual rate) in the third quarter. This factor together with a decline in the value of American exports can be presumed to have further softened the market for durable manufactures. Estimates recently released by the Council of Economic Advisers confirm this picture of proximate overall stability during the third quarter. The value of the nation’s output increased by $4.7 billion to an unprecedented annual rate of $439 billion. However, allowing for price changes, it is apparent that aggre gate business activity has not increased appreciably. In fact, per capita disposable income is slightly below year-ago rates after adjustment for price rises, indicat ing that the growth of real income has not kept pace with the growth of population. The level of employment remained high in Sep tember, in large measure because the declines which affected manufacturing activity were offset by in creases in other parts of the economy. Consumers increased their rate of spending on nondurable goods and services by $4.5 billion. The rate of saving fell as the increase iji consumption was greater than the rise in disposable income. Other forces serving to sustain the tempo of business activity were a $600 million increase (annual rate) in state and local gov ernment expenditures and an upturn in residential building. Although the overall level of business has con tinued prosperous, there have been substantial adjust ments taking place within the economy. Fortunately for the nation’s economic health, these changes have largely offset each other permitting the economy to absorb them without breaking stride. The total flow of spending for new plants and equipment, which has provided such a strong stimulus to the nation’s business for the past two years, ap pears to be leveling off. In one important sector, new durable goods manufacturing capacity, outlays actually declined about 2 per cent during the third quarter, according to the estimates. Consumer expenditures for durable goods, which started to decline in the second quarter of the year, continued down during the third quarter. Despite increases in prices consumers are spending approxi mately 3 per cent less for durable goods now than they were during the first quarter. Page 142 In general, the level of demand for both consumer and producer durable goods, although still exceeding ly robust, does not seem to have the depth and in tensity that characterized it but a short time ago. Declines in factory employment, production, and sales all reflect a somewhat weakened position. Wholesale prices through the second week in Oc tober continue to reflect the slackening of inflation ary pressure referred to earlier in this article. The wholesale price index was down from its August high by about .7 of one per cent, although it was still above year-ago figures. The consumer price index, which typically lags its wholesale counterpart, in creased in September for the thirteenth consecutive month, but the increment was the smallest since November 1956. In the Eighth District industrial production in Oc tober was up somewhat from September levels. Steel production in the St. Louis area has been averaging about 89 per cent of capacity, some 10 percentage points above the September level, but below that of a year ago. In addition district steel plants were operating closer to capacity levels during October than those of the nation at large. Southern pine production and petroleum output in Eighth District states were up slightly in October from September rates and were approximately the same as year-ago figures. A decline in the number of cattle, calves and sheep slaughtered in the St. Louis area between Septem ber and October more than offset an increase in hog processing. The total number of animals processed in October was about 8 per cent smaller than in Sep tember of this year or October 1956. Employment during September in three major dis trict areas, St. Louis, Memphis, and Little Rock, showed small monthly gains which were associated with the reopening of schools and the expansion of retail payrolls. The Evansville and Louisville areas, however, experienced sizable drops in employment in September when compared with August levels. About 90 per cent of the drop in Evansville resulted from temporary layoffs in the automotive industry. These workers were recalled in October. Unemployment in Louisville in September was in part attributable to labor management difficulties involving almost 3,000 workers, which were resolved October 24. A further decline in employment came largely in ordnance, chemicals, and fabricated metals and machinery. Loans at Eighth District weekly reporting banks rose $27 million or 2 per cent during the five weeks ended October 23, somewhat less than seasonally. The apparent weakness in the demand for credit was occasioned primarily by two special situations in the business category, rather than any marked con traction m activity generally. The principal factor was the relatively modest expansion in advances to finance the movement of cotton, partly the result of a later than usual movement of cotton to market. After the first week in October, a more normal pattern de veloped, and loans to commodity dealers expanded $14 million during the two weeks ending October 23. The second special factor holding the loan expansion down was large net repayment ($8 million) by sales finance companies, reportedly as these companies ob tained funds from other sources. Other types of busi nesses in the aggregate increased their indebtedness about the normal amount for this time. Loans falling in the category of “other,” chiefly consumer, rose at a fairly rapid rate, whereas real estate financing in creased moderately. The weekly reporting banks also increased their holdings of investments $31 million during the five weeks ended October 23. The bulk of the gain cen tered in short-term Federal Government securities, although they added some municipal obligations to their portfolios. District farmers harvested near-record crops in 1957 despite retarded spring planting. October 1 estimates of both corn and soybeans are up from those of September 1. Generally favorable autumn weather contributed to early maturity and harvesting, permitting practically all the corn to escape frost damage. District cash farm income for the first eight months of this year was about 4 per cent less than that for the same months in 1956, and about 8 per cent above that of 1955. The decline this year is due primarily to reduced crop marketings in Arkansas, Mississippi and Tennessee. Nationally, cash receipts from farm marketings for the first nine months of 1957 were approximately the same as for the corresponding months last year. Farm real estate values continued to advance in district states during the four months ending July 1, 1957. The dollar value of farmland per acre in creased 4 per cent in Illinois, 3 per cent in Kentucky and Mississippi (the national average), and 2 per cent in Tennessee, Arkansas and Missouri during the period. Page 143 VARIOUS INDICATORS OF INDUSTRIAL ACTIVITY Steel Ingot Rate, St. Louis area (Operating rate, per cent of capacity)........................... Coal Production Index— 8th Dist. (Seasonally adjusted, 1 9 4 7 -4 9 = 1 0 0 )...................... Crude Oil Production— 8th Dist. (Daily average in thousands of bbls.)......................... Freight Interchanges at RRs— St. Louis (Thousands of cars— 25 railroads— Termi nal R. R. A ssn .).............................................................................. .................................... Livestock Slaughter— St. Louis area (Thousands of head— weekly average)............. Lumber Production— S. Pine (Average weekly production— thousands of bd. ft.). . . . Lumber Production— S. Hardwoods (Operating rate, per cent of capacity)............. S eco n d Sept. 1957* compared with Aug. 1957 Sept. 1956 -0 -% — 10% — 6 — 3 + 22 — 2 Sept. 1957 79 85.3 p 385.0 95.1 114.0 207.1 82 — 9 +18 — 5 — 4 — 6 — 10 — 1 — 16 * Percentage change is shown in each case. Figures for the steel ingot rate, Southern hardwood rate, and the coal production index show the relative percentage change in production, not the change in index points or in percents of capacity. p Preliminary. j EIGHTH DISTRICT WEEKLY REPORTING MEMBER BANKS BANK DEBITS1 (In millions of dollars) Six Largest Centers: Sept. 1957 (In millions) East St. Louis— National Stock Yards, 111................................. $ 144.4 Evansville, In d ............ 171.7 Little Rock, A rk.. . . . 206.8 Louisville, Ky............... 885.0 Memphis, Tenn............. 751.0 St. Louis, M o .............. 2,364.2 Sept. 1957 compared with Sept. Aug. 1956 1957 — 2% — 9 4- 2 — 2 — 15 + 3 Total— Six Largest Centers.................... $4,523.1 Assets Loans1...................................... . $ 1,668 880 Business and Agricultural. . 50 Security................................. 281 Real Estate......................... Other (largely consumer). . 483 844 U.S. Gov’t. Securities......... 227 Other Securities.................... 30 Loans to Banks.................... 903 Cash Assets........................... 46 Other Assets........................... Total Assets.................. . $3,718 + 4% + 12 + 11 + 11 — 4 + 8 2% + 6% 6% 10 3 2 3 6 4 7 + 2 — 6 + 12% — 4 + 5 + 6 — 11 + 10 — 26 — 17 + 11 + 8 + 9 — 9 + 13 + 8 +J - ± M 5 Other Reporting Centers: Alton, 111........................$ Cape Girardeau, M o .. . El Dorado, A rk............ Fort Smith, A rk............ Greenville, Miss........... Hannibal, Mo............... Helena, Ark................. Jackson, Tenn............... Jefferson City, M o........ Owensboro, Ky............. Paducah, K y................. Pine Bluff, Ark............. Quincy, 111................... Sedalia, M o.................... Springfield, Mo............. Texarkana, Ark............. 40.5 16.7 30.6 57.0 27.8 11.3 9.1 24.2 104.5 48.5 28.2 43.0 42.0 16.2 97.6 20.4 + — — — — — + — + 3 — 9 + 2 + Total— 22 Centers. . $5,140.7 + 4% 2% + 6% Percentage Change Jan. thru Aug. Aug. ’ 57 1957 (In thousands Aug. from compared with of dollars) 1957 Aug. ’ 56 1956 1955 Arkansas. . $ 23,795 — 9 % — 18% + 12% Illinois . . . 137,167 — 1 + 13 + 5 Indiana . . . 87,685 + 1 + 3 + 2 Kentucky. . 28,116 — 2 — 6 + 4 Mississippi. 26,163 — 23 — 17 + 11 Missouri. . 78,053 — 1 i+ 1 2 + 1 Tennessee. 28,455 — 1 — 4 + 7 7 States . 409,434 — 3 - 0+ 8 — 4 8 th District1 168,717 — 6 + 8 Source: State data from USDA preliminary es timates unless otherwise indicated. 1 Estimates for Eighth District revised based on 1954 Census of Agriculture. 1956 Sept. Aug. Sept. 171.7 180.1 161.8 1 Debits to demand deposit accounts of individuals, partnerships and corporations and states and political subdivisions. DEPARTMENT STORES Percentage of Accounts and Notes Receivable Outstanding Aug. 31, ’57, collected during Sept. Net Sales 9 mos. ’ 57 Sept. 1957 to same Instal. compared with Aug. ’ 57 Sept., ’56 period ’56 Accounts — — — — — — — + — — — — — 3% 2 10 3 7 5 6 4 1 3 10 7 5 + + — — — — — — + 1% 1 7 3 1 3 6 5 6 - 0- 0— 6 — 10 Manufacturing and Mining: Food, liquor and tobacco............. $ + 9 Textiles, apparel and leather . . . . — 6 Metals and metal products........... — 5 Petroleum, coal, chemicals and rubber................ —0— Other.......................................... Trade Concerns: Wholesale. . . Retail............. —0— ...................... ..+ 5 ...................... ...+ 1 e, 1% Seasonally Adjusted (1947-1949= 100) 1957 1% 1 2 4 1 1 5 5 2 2 4 2 — 3 + — — — + — — + + — + 15 Excluding Instalment Accounts 49 36 26 Quincy, 111. ...................... Evansville Area, Ind. . . . 18 47 Louisville Area, Ky., Ind. Louisville (C ity)........... Paducah, Ky.1 .................. 16 56 St. Louis Area, Mo., 111. St. Louis (City) ........... Springfield Area, Mo. . 32 12 Memphis Area, Tenn. All Other Cities2 ................ 1 In order to permit publication of figures for this city (or area), a special sample has been constructed which is not confined exclusively to department stores. Figures for any such nondepartment stores, however, are not used in computing the district percentage changes or in computing department store indexes. 2 Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes, Indiana; Danville, Hopkinsville, Mayfield, Owensboro, Kentucky; Chillicothe, Mis souri; Greenville, Mississippi; and Jackson, Tennessee. Outstanding orders of reporting stores at the end of September 1957 were one per cent less than on the corresponding date a year ago. + 1 + 7 + 27 >+ i + 2 — 10 + 2 $ + 52 Principal Changes in Commercial and Industrial Loans2 Net Change During 5 Weeks Ended Business of Borrower 10-23-57 Liabilities and Capital Commodity dealers...............................+ 2 1 Sales finance companies.......................— 8 Demand Deposits of Banks. . . $ 719 $ + 23 Public Utilities (including + 9 Other Demand Deposits......... 2,011 transportation)............................... ...+ 8 Time Deposits........................... 607 + 4 Construction...................................... . — 4 Borrowings and Other L iab.. . 86 +13. All Other............................................ -0 Total Capital Accounts........... 295 + 3 Total Liab. and Capital. . $3,718 $ + 52 Total............................................ $ + 21 1 Loans are adjusted to exclude loans to banks; the total is reported net; breakdowns are reported gross. 2 Changes in business loans by industry classification from a sample of banks holding roughly 90% of the total commercial and industrial loans outstanding at Eighth District weekly reporting member banks. INDEX OF BANK DEBITS— 22 Centers 8th F.R. District Total Fort Smith Area, Ark.1 1957 $ + 27 + 24 CASH FARM INCOME Total— Other Centers.................... $ 617.6 * 7 • ta d '* Oct. 23, 1957 Change from CONSTRUCTION CONTRACTS AWARDED IN EIGHTH FEDERAL RESERVE DISTRICT * (Value of contracts in thousands of dollars) Aug. 1957 July 1957 Aug. 1956 T otal..................$129,843 53,151 Residential......... Nonresidential. . 50,963 Public Works and Utilities . 25,729 $127,375 58,969 38,330 $107,332 43,408 36,431 30,076 27,493 * Based upon reports by F. W . Dodge Corpo ration. INDEXES OF DEPARTMENT STORE SALES AND 8TH DISTRICT Sept. Aug. 1957 1957 Sales (daily average), unadjusted3..................131 119 Sales (daily average), seasonally adjusted3. . .129 131 Stocks, unadjusted4............................................ n.a. 135 Stocks, seasonally adjusted4 .............................n.a. 135 n.a. Not Available. 3 Daily average 1947-4 9= 100 4 End of Month average 1947-4 9= 100 Trading days: Sept. 1957— 24; August 1957— 27; Sept. RETAIL FURNITURE STORES STOCKS July 1957 104 135 129 141 Sept. 1956 130 127 145 134 1956— 24. Net Sales Sept. 1957 compared with Aug. ’57 Sept. ’ 56 8th Dist. Total1 ................................................................... — 12% + 1% St. Louis Area..................................................................... — 8 + 4 Louisville A rea................................................................... — 24 —• 9 Memphis A rea..................................................................... — 25 — 5 Little Rock Area................................................................... — 19 + 15 Springfield Area................................................................... — 20 — 5 1 In addition to the following cities shown separately in ihe table, the total includes stores in Blytheville, Fort Smith, Pine Bluff, Arkansas; Owensboro, Kentucky; Greenwood, Mississippi; Evansville, Indiana, and Cape Girardeau, Missouri. Note: Figures shown are preliminary and subject to revision.