Greenbook/Tealbook

Prefatory Note

The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act.

1

In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing).

2

A two-step process was used. An advanced optical character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff.

Content last modified 6/05/2009.

CONFIDENTIAL (FR)

SUPPLEIENT CURRENT ECONOiiIC AND FINANCIAL CONDITIONS

Prepared for the Federal Open Narket Committee

By the Staff Board of Governors of the Federal Reserve System

September 4,

1964.

SUPPLEMENTAL NOTES

The Domestic Economy the labor force in August were small after allowance

Changes in

for seasonal factors.

The unemployment rate increased from 4.9 per cent

of the civilian labor force in July to 5.1 per cent in August, the same as the average since April.

The unemployment rate for adult men

was unchanged in August at 3.7 per cent and for married men it declined slightly to 2.6 per cent.

Unemployment rates for adult women and

teenagers returned to the June levels of 5.1 and 15.0 per cent, respectively,

after declining somewhat in July.

The civilian labor force rose slightly and at 74.3 million was up 1,350,000 from a year earlier.

This increase was 250,000 more

than expected on the basis of long-run trends in labor force participation rates.

Total employment was 1.5 million higher than a year ago.

For workers

first

covered under the minimum wage law by the

1961 amendments, the minimum wage increased on September 3 to $1.15 an hour from $1.00.

The 1961 amendments extended coverage to 3.6

million workers, principally in large retail trade and service establishments.

The change will affect about 565,000 workers who

were receiving less than the new minimum. Seasonally adjusted new construction activity dipped 1 per cent in August, July.

following a 2 per cent upuard revision to a new high in

The annual rate of $66.0 billion in August was 4 per cent above

the rising rate a year earlier; this compared with a year-to-year gain of 8 per cent in the first 3 months as a whole.

Private

construction expenditures changed little in August as residential

activity continued at about its reduced earlier rate while nonresidential expenditures moved higher.

Public construction, which was revised upuard

by 4 per cent for July, declined 3 per cent in August. Nonfarm business has raised somewhat its plans to spend on new plant and equipment this year, according to the Commerce-SEC survey conducted in August.

Outlays are now projected at $44.2 billion this

year, up $5 billion or 12.7 per cent from 1963.

Last May businesses

were planning a 12.0 per cent rise and last February, a 10.1 per cent rise.

Fixed capital outlays are now indicated to rise $5 billion

(annual rate), or 12 per cent, from the fourth quarter of last year to the fourth quarter this year, compared with $4.2 billion, or 10.2 per cent, planned last 6ay. The new quarterly pattern of total expenditures is compared below with the pattern indicated by the Iay survey (figures are in billions of dollars, at seasonally adjusted annual rates):

iay survey August survey

1963 Q-IV

(-I

41.20 41.20

42.55 42.55

1964 Q-II

Q-III

Q-IV

43.35 43.50

44.30 44.55

45.40 46.15

The upward revision in planned expenditures for 1964 was primarily the result of small increases in fixed capital programs of all major nonmanufacturing industry groups.

Within manufacturing,

durable goods producers reported some expansion while nondurable goods firms revised earlier anticipations slightly downward.

NEW PLANT AND EQUIPHENT EXPENDITURES (Billions of dollars)

All industries Nanufacturing industries Durable goods Nondurable goods ining Railroad Transportation (other than rail) Public utilities Communication, commercial and other

Per cent

1963

1964

Per cent

39.22

44.21

12,7

15.69 7.85 7.84 1.04 1.10

18.27 S.19 9.08 1.12 1.46

16 17 16 8 33

1.92 5.65

2.31 6.07

20 7

13.82

14.98

8

._........ncreae

Note.--Based on August Commerce-SEC survey.

The Domestic Financial Situation Bank credit, seasonally adjusted, is estimated to have shoun a large rise in August, possibly as much as $4 billion, following a $900 million decline in July.

For the too months combined, the $3

billion increase represents continuation of the 7 per cent annual growth rate which prevailed over the first half of this year, The drop in July and large rise in August mainly reflects the unusual pattern of Treasury financing this summer, vhen the customary large July financing vas omitted and some borrowing was scheduled in the usually dormant month of August.

As a result, seasonally adjusted

holdings of Government securities showed a sharp decline in July and probably about an offsetting rise in August.

Holdings of municipal

and other securities, after showing little change in July, also rose sharply in August, and for the two months increased considerably faster than the 7-1/2 per cent annual rate of the first half.

.4"

Loan expansion in August is estimated on a preliminary basis at $1.6 billion, a little more than the average so far this year.

But

excluding security loans, the annual growth rate for July and August combined of 11 per cent is close to that in the first half and for the year 1963. The rate of expansion in consumer and real estate loans is continuing at about the same rate that has prevailed all year and in 1963. Business loan expansion, which had accelerated somewhat beginning in April after a first-quarter lull, has continued since the first quarter at a rate of about $500 million per month or 11 per cent on an annual basis.

While this is somewhat above last year's 9 per cent

rise, the rate since December has been a little below 9 per cent. The increased strength in business loan demand since the first quarter has stemmed mainly from construction, miscellaneous manufacturing, and more recently from public utilities.

Outstanding loans to trade

concerns, which had expanded rapidly for part of the second quarter, recently have been fluctuating widely, with no clear indication of trend.

Loans to metals and to petroleum and chemicals companies continue

to show about the usual seasonal movements, while those to the textiles and apparel group, where cash flows recently have been boosted substantially by equalization payments under this year's cotton legislation, have been increasing much less than seasonally.

Money supply now is estimated at $157.1 million in August, $400 million higher than in July.

The rate of expansion slowed in

August from the rapid rate of the two preceding months.

Through

August the seasonally adjusted annual rate of expansion for the year to date is 3.8 per cent, Prices in the corporate bond market weakened further this week. The corporate new issue yield series rose to 4.46 per cent, 9 basis points above the summer low and within 7 basis points of the 2-1/2 year high reached in early Mvay.

This yield, however, was based

entirely on the $40 million Southern California Gas Company issue which was re-offered at a yield level 3 basis points above those quoted on comparably rated recent offerings in the secondary market. In two days of trading 80 per cent of the issue was sold.

Yields on

seasoned, municipal bonds held unchanged in the current week, continuing the stability that has prevailed since early August.

International Developments U. S. exports increased in July and by slightly more than imports.

Both exports and imports had dipped in June.

The July trade

surplus was at a seasonally adjusted annual rate of $6.3 billion as compared with $6.0 billion in the second quarter, but was still below the $7.0 billion surplus recorded in the first quarter.