Federal Reserve District, 5th ; Economic development

Gayle Ennis

English

Research Papers in Economics

THE DISTRICT
ECONOMY IN PERSPECTIVE: 1973
During most of 1973 both the U. S. and Fifth
District economies geared down from the hectic pace
of 1972. Inflation, however, continued to plague the
nation as prices rose higher and worldwide shortages
of food and raw materials became a reality. The
consumer price index rose 8.8 percent from December
1972 to December 1973, a growth substantially above
the previous year’s increase. The jobless rate was
trimmed to 4.7 percent in November 1973, as major
industries pushed capacity restraints to meet the
booming demand.
As the year progressed, production growth slowed,
in large part because of capacity limitations. In-
dustrial production was up only 4.5 percent in De-
cember over the comparable 1972 figure. Total
civilian employment, however, advanced rapidly dur-
ing the past year, rising 3.2 percent from December
1972 to December 1973. The productivity of labor
in the private nonfarm economy, as measured by the
output per man-hour, changed little after a very
rapid increase in the first quarter of 1973, and from
late 1972 to late 1973 the increase amounted to less
than 1 percent.
The growth of real output also slowed during 1973
after a healthy 7 percent rise in 1972. Real GNP
rose at an annual rate of 5.5 percent through the first
half of the year, slowed to 3.4 percent in the third
quarter, and dipped to a 1.3 percent rise in the
fourth quarter.
In contrast to slackened production growth during
1973, spending on goods and services surged as a
result of rapid increases in prices. Personal con-
sumption expenditures, after adjustment for seasonal
variation, jumped 10 percent from fourth quarter
1972 to fourth quarter 1973, while business expendi-
tures for new plant and equipment grew at a 14
percent seasonally adjusted annual rate, and govern-
ment spending advanced at a 10 percent rate. The
spending growth in 1973 was accompanied by a rise
in outstanding credit, with commercial bank credit
through October 1973 up 15 percent over a year
earlier.
In most instances, economic developments in the
Fifth District paralleled those of the nation at large.
A closer look at the individual sectors of the Fifth
District economy, however, provides a more complete
perspective on District developments over the past
year.
The Employment Picture Nonagricultural em-
ployment statistics showed moderate to substantial
improvement in the nation and the District during
1973. Employment through the first 11 months of
the year was up 3 percent over November 1972, with
gains of 2 percent in manufacturing and nearly 4 per-
cent in nonmanufacturing industries. A close look at
the major categories of nonmanufacturing employ-
ment illustrates the relative strength of each.
Apart from manufacturing, government is the
leading source of jobs in the District. In Novem-
ber, Federal, state, and local governments supplied
1,550,000 jobs or 21 percent of the District’s total
nonagricultural employment. The 2 percent expan-
sion of government employment during 1973 was
slightly below the 1972 increase. Individual advances
in government employment by states were: 4 percent
for South Carolina, 3 percent for North Carolina
and Virginia, 2 percent for Maryland, and .1 percent
for the District of Columbia. West Virginia experi-
enced a slight .4 percent decline in government em-
ployment. The District of Columbia’s fractional
growth in government employment perhaps reflects
an attempt by the Federal Government to tighten
employment rolls.
Both trade and services categories also posted
sizable increases in employment during 1973. As
the third largest source of nonagricultural employ-
ment, wholesale and retail trade accounted for 19
FEDERAL RESERVE BANK OF RICHMOND 3percent of the District’s nonagricultural jobs in No-
vember, up almost 4 percent for the year. The most
impressive gain was in South Carolina, which posted
a 7 percent increase. Jobs in the service industries
also rose 4 percent between November 1972 and
November 1973, accounting for 15 percent of the
nonagricultural employment in the District, with each
category growing more rapidly than in 1972.
Results of the monthly survey
1 of District business
conditions suggest that manufacturing employment
declined slightly during the latter part of 1973.
Throughout the year numerous respondents reported
work disruptions resulting from raw material and
labor shortages. Scattered lay-offs related to the
energy crisis have recently been reported.
The number of workers employed provides one
key to the growth of manufacturing industries in the
District. After adjustment for seasonal variation,
employment in manufacturing industries grew 2 per-
cent in 1973, slightly below the 1972 growth. Each
state shared in the manufacturing employment
growth, with both South Carolina and Maryland
posting impressive 3 percent gains.
Perhaps an equally important measure of growth
in the manufacturing sector is man-hours. The Dis-
trict man-hour index was up 2 percent in November
over a year earlier, with a 4 percent gain in durable;
and no growth in nondurable manufacturing man-
hours. Although these figures are lower than the
gains posted in 1972, they do reflect a substantial
recovery over the man-hour declines that character-
ized 1971. Year-to-year, the man-hour index in
November was up nearly 5 percent in Maryland, 2
percent in Virginia and South Carolina, and 1 per-
cent in North Carolina. West Virginia and the Dis-
trict of Columbia showed no change over the 1972
index. Survey respondents in January reported de-
creases in hours worked per week during December,
and troublesome labor shortages continued to plague
textile and furniture manufacturers. The low unem-
ployment rate in the District does not portend any
immediate improvement in the labor shortage prob-
lem.
At 3.5 percent in November, the rate of unem-
ployment in the District was below the national rate
of 4.7 percent. Not only was the aggregate rate for
the District below the U. S. figure ; but each state
1 The Fifth District Opinion Survey of Business Conditions is con-
ducted monthly by the Research Department of the Federal Reserve
Bank of Richmond. Respondents represent manufacturing and
retail industries throughout the District.
posted a November 1973 rate of unemployment below
the national average, with the exception of West
Virginia. Overall, joblessness showed a marked de-
cline in the District, with much of the improvement
resulting from an easing of unemployment in West
Virginia and Maryland. State unemployment rates
in November were: West Virginia, 5.5 percent:
Maryland, 3.9 percent; South Carolina, 3.4 percent;
the District of Columbia, 2.9 percent; Virginia, 2.6
percent; and North Carolina, 2.5 percent.
Construction Highlights Total new construction
in the U. S. increased at a 9 percent rate from Janu-
ary to April 1973, showed no expansion during mid-
year, and declined sharply in the fourth quarter as a
result of a decline in residential construction. Deposit
outflows from thrift institutions contributed to re-
duced mortgage lending in the second half ; and con-
sumer resistance to escalating property and construc-
tion costs compounded the problem, resulting in a
35 percent plunge in U. S. housing starts during
1973. In spite of labor and material shortages, how-
ever, the index of construction contracts in the Dis-
trict posted a 7 percent increase in October over a
year earlier. The jump was the result of a 43 percent
increase in nonresidential contract awards combined
with an 18 percent decline in residential awards.
Only Maryland and the District of Columbia showed
gains in the residential sector, while all District states
showed substantial growth in nonresidential awards.
Gains in the nonresidential category measured 109
percent in the District of Columbia, 101 percent in
Virginia, 58 percent in South Carolina, 40 percent
in North Carolina, 26 percent in Maryland, and 18
percent in West Virginia.
Agriculture The pages of history will mark 1973
as a banner year for Fifth District farmers. Their
record earnings highlighted the year as estimated net
farm income climbed to an unprecedented level.
Weather was generally cooperative during the
growing and harvesting seasons, helping to assure an
abundant harvest. As a result, production gains over
1972 ranged from slight to spectacular for most
major crops, with output of soybeans, corn, and
peanuts at record levels.
The bountiful harvest, soaring crop and livestock
prices, and slightly smaller marketings of livestock
and poultry products combined to bring about a
phenomenal gain in cash farm income and to boost
farmers’ gross income to a new high.
4 ECONOMIC REVIEW, MARCH/APRIL 1974But the year was not without its problems. Farm
production expenses also soared to new heights.
Much of the increase resulted from sharply higher
prices of farm-originated production inputs, particu-
larly feed and feeder livestock. These rising costs
led, in turn, to cutbacks in livestock and poultry pro-
duction. And before the fall marketing season ended,
some farmers were feeling the crunch of the fuel
crisis.
Market values of farm real estate continued to
advance rapidly, moving upward throughout the five-
state area. With the growing value of farm real
estate assets and record farm earnings, farmers finan-
cial positions improved greatly.
Banking Developments The 1973 statistics for
member banks in the Fifth District clearly reflect the
strong demand that characterized the year. Through
November 1973, the bank debits index rose 22 per-
cent for the District, exceeding last year’s gain.
Large increases were reported in each state, ranging
from a low of 14 percent in North Carolina to a high
of 37 percent in West Virginia. Unusually strong
business loan demand resulted in a dramatic increase
in loans and discounts by District member banks.
At $21.2 billion in November, loans and discounts
were up 23 percent over a year earlier. In the in-
vestments category, District bank activity was mixed,
with holdings of U. S. Government obligations de-
clining 10 percent to $2.0 billion and other security
holdings climbing 9 percent to $5.6 billion. Total
assets of member banks in the District were $33.9
billion in November, up 17 percent over 1972. By
states, total assets on the last Wednesday in Decem-
ber posted the following year-end increases: South
Carolina, 31 percent; North Carolina, 19 percent;
Virginia, 16 percent; West Virginia, 15 percent; the
District of Columbia, 13 percent ; and Maryland, 12
percent.
District member banks also experienced sizable
deposit expansion during 1973. Total member bank
deposits in November were $27.5 billion, 12 percent
above November 1972. Total deposit gains by state
were 30 percent in South Carolina, 13 percent in
North Carolina, 11 percent in West Virginia and
Virginia, 8 percent in Maryland, and 7 percent in
the District of Columbia. Time deposit volume in
the District showed a sharp increase of 18 percent
during 1973 while demand deposit balances rose only
5 percent. By state, time deposit expansion ranged
from 50 percent in South Carolina to 15 percent in
Virginia and the District of Columbia. Demand
deposit balances grew in each District state, with the
exception of a 2 percent decline in Maryland.
B. Gayle Ennis
FEDERAL RESERVE BANK OF RICHMOND

The District economy in perspectives : 1973

http://www.richmondfed.org/publications/research/economic_review/1974/pdf/er600201.pdf

The District economy in perspectives : 1973

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics