Federal Reserve Bulletin September 1946

EDERAL E R V E ULLETIN SEPTEMBER 1946 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis EDITORIAL COMMITTEE ELLIOTT THURSTON WQODLIEF THOMAS CARL £. PARRY The Federal Reserve BULLETIN is issued monthly under the direction of the staff editorial committee. This committee is responsible for interpretations and opinions expressed, except in official statements and signed articles. CONTENTS PAGE Review of the Month—The Labor Market in the Transition. 957-964 Liquid Assets and Expenditures Plans of Farm Operators. 965-966 Estimated Durable Goods Expenditures, 1939-45, by Doris Warner and Albert R. Koch 967-973 Index of Department Store Sales and Stocks, by Major Departments. 973 The Balance Sheet of Agriculture, 1946. 974-994 Law Department: Farm Tenant Loans. 995 Silver Legislation. 995 Regulation U 995 Acceptances by Member Banks—Revision of Regulation C. 996-998 Consumer Credit—Amendment to Regulation W. 998 Administrative Procedure Rules: Board of Governors: Rules of Organization. 999-1004 Rules of Procedure. 1004-1011 Federal Open Market Committee: Rules on Organization and Information 1011-1014 Rules on Procedure. 1014-1015 Foreign Funds Control—Treasury Department Releases. 1015-1017 Current Events ... 1018 National Summary of Business Conditions. 1019-1020 Financial, Industrial, Commercial Statistics, U. S. (See p. 1021 for list of tables) 1021-1074 International Financial Statistics (See p. 1075 for list of tables) 1075-1093 Board of Governors and Staff; Open Market Committee and Staff; Federal Advisory Council 1094 Senior Officers of Federal Reserve Banks; Managing Officers of Branches. 1095 Map of Federal Reserve Districts. 1096 Federal Reserve Publications (See inside of bac\ cover) Subscription Price of BULLETIN Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis FEDERAL RESERVE BULLETIN VOLUME 32 September 1946 NUMBER 9 THE LABOR MARKET IN THE TRANSITION The enormous task of converting the na- employment following the end of the war tion's labor force from war to peace has been lies mainly in three factors: substantially accomplished and generally (1) the large demand for all kinds of those seeking work can find it without long peacetime goods and services. The demand delay. This represents a start toward the has been sufficient to make possible the cur- goal of sustained full employment and the rent utilization for peacetirrfe purposes of a task ahead is to develop economic conditions slightly larger total number of civilian man- which will encourage stability of employ- hours of work than was utilized in civilian ment at a high level. Advanced levels based production for both war and nonwar pur- upon speculative price increases would not poses prior to the end of the war; be likely to be maintained. (2) the redistribution of the aggregate About 13.5 million veterans have re- number of manhours worked among a turned to civilian life, nearly 11 million of greater number of workers. Hours of work them since V-J Day. In addition, several performed by the average employee have de- million workers engaged in war production clined substantially from their strained war- have transferred to peacetime employment time levels and now are almost as low as be- or withdrawn from the labor force. This has fore the war. This reduction in hours been accomplished without unemployment worked per employee has permitted an in- rising above the 2.7 million reached in Febru- crease of at least 3 million in the number of ary and March, a level from which it has persons employed; and since declined somewhat. Unemployment (3) the withdrawal from the labor force has remained at relatively low levels in spite of war-induced entrants. Since V-J Day of physical difficulties of rearranging pro- several million of the war-induced entrants duction facilities and equipment, frustrating to the civilian labor force have withdrawn disruptions to production occasioned by from the labor market and are no longer unbalanced material flows and by work stop- either employed or unemployed. Women pages, and continued uncertainties surround- comprise a large proportion of the with- ing prices and costs. On the whole, con- drawals from the labor force. version of the labor force has been achieved These three factors—the reattainment of more smoothly and more rapidly, and with the total volume of manhours worked in less hardship to those involved, than ap- the summer of 1945, the reduction in average peared likely at the end of the war. hours of work, and the withdrawal from the The explanation for the low levels of un- labor force of extra wartime entrants— SEPTEMBER 1946 957 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis REVIEW OF THE MONTH account for the absorption of 9 million veter- result in a business reaction and declining em- ans into civilian jobs in the period since the ployment. This is what happened after end of the Japanese War. World War I when sharp price increases were followed by a period of substantial price INCREASED DEMAND FOR GOODS declines and reduced employment. The strong demand for goods and services Underlying the reattainment of the war- and hence for manpower has tended to en- time volume of civilian manhours worked courage the continuation of some of the has been the strong stimulus of heavy de- employment practices followed during the mand which has made possible the trans- war. Such practices include hiring in antici- fer of the large volume of manhours de- pation of need, carrying overhead employ- voted to war purposes to production of ment at a higher level than necessary in peacetime goods. The potentially deflation- order to be prepared for contingencies, and ary effects of a decline of over 80 per cent in scrutinizing pay roll costs less carefully than Federal war expenditures for goods and would be the case if competition among services between the second quarter of 1945 sellers were greater. These practices have and the present have been offset by the large tended to increase the number of job oppor- backlog demands which, in conjunction tunities available and to reduce the number with the excessively large supply of money of lay-offs occasioned by the shift to peace- and other liquid assets created in the process time production. Partly because of such of war finance, have accelerated consumer factors, output per manhour has not in- and business spending. As a result total creased as much as might have been expected expenditures of all kinds, after declining under conditions of stable high employment, 13 per cent under the impact of reduced and in some industries productivity may have war expenditures, have advanced in response declined in this period. Nevertheless, in the to increased private spending and are now majority of industries productivity is higher only about 6 per cent below the wartime peak. than before the war because of the currently Prices have increased, however, so that the higher rates of plant and equipment utiliza- comparison in real terms is somewhat less tion and also because of war and postwar im- favorable. provements in plant and equipment and The underlying inflationary pressures technology. As industry shakes down to which have tended to push up prices, stable peacetime operations, further sub- within the limits imposed by price and stantial advances in productivity can be ex- other controls, have also acted as powerful pected, judging by developments after World stimuli for overcoming the transition fric- War I when productivity advanced very tions in the labor market. To the extent that sharply for a few years and thereafter in- inflationary pressures have speeded the ab- creased at a more normal rate. sorption of veterans into civilian employment and the transfer of other workers to peace- TRANSITORY FACTORS time activities they have served a useful pur- pose. With conversion largely accomplished, Although conversion has been achieved however, widespread price advances would more rapidly than might have been expected, magnify the elements of instability in the la- the temporary nature of some of the demand bor market and if carried far enough would for labor should not be ignored. Some of 958 FEDERAL RESERVE BULLETIN Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis REVIEW OF THE MONTH the expansion of employment is attributable situation. The beginning, on a moderate to the large backlog demands which accumu- scale, of a back to the farm movement, re- lated during the period of war scarcity. In versing the strong trend away from agricul- some lines employment is being supported ture during the war which resulted in a de- by extravagant expectations about the level cline of one-sixth in the farm population and permanency of future demands. Some between April 1940 and April 1945, may re- of those now at work are engaged in pro- flect an increasing supply of manpower rela- ducing for inventory rather than for current tive to nonagricultural demand. No doubt consumption. Whether a high level of em- some of those who have withdrawn from the ployment can be sustained when the ex- labor force since the end of the war have done pansionary effects of these temporary factors so because of inability to find suitable jobs. have worn off remains to be tested. However, the majority of withdrawals were Currently, there is no question but that the probably voluntary in view of the fact that labor market is fairly tight. This is indicated a large proportion were women in the mar- not only by the low level of unemployment riageable and child-bearing age group and but also by the high rate at which workers young men and women in the school age voluntarily quit jobs, the apparent ease with group.

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