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) SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System February 6, 1970 SUPPLEMENTAL NOTES The Domestic Economy Labor market. Employment and unemployment estimates for January show continued easing of demand for labor: total nonfarm pay- roll employment was unchanged for the third successive month; the factory workweek declined sharply; and the over-all unemployment rate rebounded to 3.9 per cent. This would be the highest rate since 1967.* Much of the rise in the unemployment rate in December reflected higher unemployment among adult men. The weakening of industrial demand continued to be reflected in the unemployment rates of wage and salary workers in manufacturing and for the blue-collar occupation group. At the same time, the jobless rate for adult women was virtually unchanged--both over the month and from a year earlier-suggesting continued firmness in the occupations and industries normally heavily staffed by women. Compared to the low levels of a year earlier, total unemployment was up by 530,000, with three-fifths of the increase among men aged 20 years and over. * These data reflect new seasonal adjustments which reduced the rates for September and October to 3.8 per cent and raised the rates for November and December to 3.5 per cent. SELECTED UNEMPLOYMENT RATES (Seasonally adjusted) I I January Total , 1969* 1970 January December 3,4 3.5 3.9 2.0 3.6 12.0 2.2 3.5 11.8 2.5 3.6 13.8 White Negro and other races 3.0 6.2 3.2 5.7 3.6 6.3 Blue-collar workers Manufacturing workers 3.8 3.2 4.3 3.8 4.6 3.8 Insured unemployed 2.1 2.4 2.5 Men, aged 20 and over Women, aged 20 and over Teenagers, both sexes * The data for 1969 have been revised to reflect the introduction of new seasonal adjustment factors. Preliminary payroll employment estimates (based however on a weaker-than-usual sample, which subjects these figures to a possible large revision) show substantial declines in construction (in part due to extreme cold weather) and State and local government employment in January. The declines were offset by increases in trade and service employment and, with the number of manufacturing jobs unchanged, total payroll employment averaged 70.65 million in January--about the same as in October, November, and December. NONFARM PAYROLL EMPLOYMENT (Seasonally adjusted) January 1970 level (in thousands) ----Total Manufacturing Construction All others 70,649 20,010 3,268 47,371 Change from Decemberea -7 -3 -175 171 Year earlier 1,434 7 -63 1,490 Within manufacturing, there was a decline of 52,000 in the durable goods group, with about half the drop in transportation equipment, mainly autos. There was an offsetting employment increase in the nondurables sector, with the bulk of the rise occuring in the food industry. The average factory workweek fell 0.4 hours to 40.2 hours in January, with most of the decline resulting from cuts in overtime work. Reductionswere widespread but largest in durable goods industries. AVERAGE WEEKLY HOURS (Seasonally adjusted) 1970 January level Manufacturing Overtime Durable goods Overtime Retail sales. 40.2 December Change from Year earlier -,4 -.4 3.2 -.3 -.5 40.7 -.5 -.6 3.2 -.4 -.6 Recent revisions in retail sales suggest that personal consumption expenditures in the fourth quarter may have been lower than previously estimated. The first estimate of December retail sales was revised downward by 1/2 a per cent, changing a slight increase from November to a very slight decrease. November sales also were revised downward, by 0.3 per cent. As a result of the change in the December level and better sales in the final week of the month, the weekly January figures now indicate a slight increase from the previous month, possibly about 1/2 a per cent. RETAIL SALES Per cent change from previous period, seasonally adjusted November 1969 December QIV *0.5 -0.2 0.9 Durable goods Automotive -1.3 -1.3 0.5 -1.8 0.6 1.0 Nondurable goods Food General Mdse. -0.1 -0.3 -0.3 -0.5 -0.1 -0.5 1.1 1.5 0.4 -0.9 -0.7 -0.4 Total Real* * Deflated by all commodities, CPI. Seasonally adjusted outlays for new construction put in place, which were revised downward by about 2 per cent for December and other recent months,/ rate of $89.3 billion. moved up slightly in January to an annual This was 4 per cent below the peak reached last April and below a year earlier in current dollar as well as real terms. For 1969 as a whole, the year-to-year rise had averaged 8 per cent, almost entirely a result of higher costs. Within the private sector, residential construction outlays continued to decline in line with the protracted downtrend in housing 1/ This reflected downward benchmark adjustments for the second half of the year. The adjustments were for the "additions and alterations" component of private residential construction expenditures and for State and local government outlays from levels reported earlier. While the revision for additions and alterations lowered the second half level by $1.6 billion--or by 5 per cent for residential construction as a whole--it had the effect of bringing series back into line with the currently available GNP series for residential structures. For State and local expenditures, the average downward adjustment over the second half year amounted to 3 per cent. starts which apparently continued into the new year. Outlays for private nonresidential construction were projected to have risen in January, but this followed a three-month drop and left the rate still somewhat under the peak of last September. Within the public sector, outlays for State and local projects apparently changed little, at a level nearly a tenth below the record established last February and-as in the case of Federally owned projects--appreciably below the rising rate in January of 1969. NEW CONSTRUCTION PUT IN PLACE (Confidential FRB) January 19701/ ($ billions)- Per cent change from January 1969 December 1969 89.3 +1 -3 Private Residential Nonresidential 62.1 28.3 33.9 -4 +4 -1 -9 +7 Public Federal State and local 27.1 3.3 23.8 -2 -- -7 -6 -7 Total 1/ Seasonally adjusted annual rates; preliminary. Data for the most recent month (January) are confidential Census Bureau extrapolations. In no case should public reference be made to them. The Domestic Financial Situation Bank credit. Total bank credit is now estimated to have declined $3.1 billion in January rather than $2.6 billion as reported on page III-2 of the Greenbook. Data for large commercial banks which became available after the Greenbook was prepared indicate that holdings of U.S. Government securities and loans to businesses, security dealers, and nonbank financial institutions all declined slightly more than previously estimated. Bank sales of loans to their own holding companies and affiliates increased further in the last week of January. These addi- tional sales offset in large part the effect of the downward revisions in outstanding bank credit and as a result, data adjusted for loan sales are little different from those shown in the Greenbook. NET CHANGE IN BANK CREDIT1/ All commercial banks, seasonally adjusted January 1970 2 Billions of dollars Total loans & investments U.S. Gov't. securities Other securities Total loans Business loans Percentage change in annual rates -3.1 -1.8 0.4 -1.6 - 9.3 -41.7 6.9 - 7.0 -0.9 -10.3 -1.2 0.3 - 3.6 1.3 Memoranda: Total loans & investments plus loan sales 3/ Total loans plus loan sales 3/ Business loans plus business loan sales 4/ 0.9 10.1 / Last Wednesday of month series. 2/ All January changes are preliminary estimates based on incomplete data and are subject to revision. 3/ Includes outright bank sales of loans to their own holding companies, affiliates, subsidiaries, and foreign branches. 4/ Includes outright bank sales of business loans to their own holding companies, affiliates, subsidiaries, and foreign branches. Savings and loan associations experienced a $1.4 billion deposit outflow in January, a record for the month and nearly matching the $1.5 billion record outflow in July 1966 (data not adjusted for seasonal variation). According to the FHLBB's sample survey, the with- drawals were relatively well dispersed geographically and throughout The FHLBB intends to monitor deposit experience in early the month. February, and some indication for that period will be available in midFebruary. On a seasonally adjusted basis, the January experience was the worst on record. However, this may be somewhat overstated because of technical difficulties in making the adjustment. DEPOSIT GROWTH* AT NONBANK THRIFT INSTITUTIONS (Seasonally adjusted annual rates, in per cent) Mutual Savings Banks 1969 - QI Savings & Loan Associations Both 6.1 6.0 6.0 QII 4.3 3.7 3.9 QIII 2.0 2.1 2.1 QIV/ 2.9 0.4 1.2 November 4.9 2.4 3.2 December 2.9 0.5 1.3 -6.9 n.a. 1970 - January - n.a. * Because of seasonal adjustment difficulties, monthly patterns may not be significant. p/ Preliminary. N.A. - Not available. Government securities market. Yields on Government notes and bonds have declined some 10 to 25 basis points, in the first week of February, while Treasury bill rates have fallen about 25 to 35 basis points, with the 3-month issue falling below 7.50 per cent. The market's rally was based on a more hopeful outlook for some relaxation in credit policy which was given further impetus by the weaker labor market indications reported for January. The over-all improvement in market psychology contributed to a strong dealer and investor interest in the three new Treasury notes being offered in the current refunding. Most recently, the 18-month 8-1/4 per cent note was quoted 100.20--.23 (in 1/32's) on a when-issued basis, putting its yield at about 7.73 per cent, offered, while the 42-month 8-1/8 per cent and 7-year 8 per cent notes were quoted 100.23-.26 and 100.24--.27, respectively, yielding 7.86 and 7.84 per cent. Data on the results of the Treasury financing were still unavailable at the time of the Supplement. INTEREST RATES 1970 1969 1969 Low 1970 [ Highs I January 12 February 5 Short-Term Rates Federal funds (weekly averages) 5.95 (1/1) 3-months Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper CD's (prime NYC) Highest quoted new issues Secondary market 6-months Treasury bills (bid) Bankers' acceptances Commercial paper Federal agencies CD's (prime NYC) Highest quoted new issue Secondary I-year Treasury bills (bid) Prime municipals 5.87 6.38 7.06 6.03 6.13 9.61 (9/24) (4/30) 8.08 (12/29) (2/17) 8.62 (12/15) (1/22) 12.50 (6/10) (3/28) 8.39 (11/20) (3/11) 8.25 (12/3) 6.00 6.40 (4/30) 6.00 9.05 (12/31) 5.96 6.50 6.25 6.32 8.09 8.75 8.88 8.58 (4/30) (2/17) (1/7) (1/16) (12/29) ((12/15) (10/8) (11/20) 8.45 (1/7) 7.90 8.75 10.43 8.30 (1/9) 8.25 6,00 9.00 9.21 (2/4) 7.56 8.38 9.46 8.17 8.25 6.75 8.75 7.62 8.88 8.75 8.44 (1/9) 7.57 8.50 8.50 8.38 6.25 9.15 (12/31) 6.25 9.15 7.00 6.50 (1/30) 5.86 (1/16) 3.90 (1/2) 7.86 (11/24) 6.25 (12/11) 7.50 5.60 (1/7) 7.34 5.30 6.11 (1/20) 5.91 (6/5) 8.33 (12/29) 7.14 (12/29) 8.16 6.84 8.18 6.82 6.56 (1/2) 7.26 (2/3) 7.91 (12/31) 8.91 (12/31) 7.91 8.91 7.97 8.80 8.48 (1/9) 8.63 6.25 8.95 Intermediate and Long-Term Treasury coupon issues 5-years 20-years Corporate Seasoned Aaa Baa New Issue Aaa No call protection Call protection 7.03 (1/23) 7.80 (6/20) 6.90 (2/20) 8.85 (12/5) Municipal Bond Buyer Index Moody's Aaa 4.82 (1/23) 4.57 (1/2) 6.90 (12/19) 6.57 (12/26) 6.61 (1/9) 6.41 (1/9) 6.54 Mortgage--implicit yield in FNMA biweekly auction 1/ 7.66 (1/6) 8.87 (12/29) 9.36 9.29 (1/26) 1/ 6.28 Yield on 6-month forward commitment after allowance for commitment fee and required purchase and holding of FNMA stock. Assumes discount on 30-year loan amortized over 15 years. -10Corrections Page I - 3, line 7. Substitute pressure for "business" near the end of the sentence. Page I - 7. Outlook" should read: The second sentence under "Balance of Payments "The December dip in imports held down the fourth-quarter advance in imports to less than we had expected". Page III - 20. The new 8-1/8 per cent note has a 42-month maturity rather than the 39-months stated in the Greenbook. Page IV - 13. In the table on this page, the estimated rate of increase in Japanese real GNP from the second half of 1968 to the second half of 1969 should be 14 per cent. For Germany, in place of the OECD projection of a 3.3 per cent rise in real GNP from the second half of 1969 to the second half of 1970, the Board staff projects a 4-1/4 per cent increase. Page IV - C - 1. In the U.S. merchandise trade chart (in the top left position on this page) the import moving average for October-December should be $37.7 billion, annual rate, instead of $35.9 billion (which was the one-month annual rate in December). Page II - 17, line 7. 548,000 should be 654,000. SUPPLEMENTAL APPENDIX A:. NET INCREASE IN MORTGAGE DEBT OUTSTANDING* For 1969 as a while, the net increase in total mortgage debt This increase outstanding rose $27.1 billion, based on preliminary data. was only slightly less than the record 1968 expansion, and was a fourth larger than in 1966. Mortgage lending last year was supported heavily by an upsurge in the advances from the Federal Home Loan Banks to the S&L's, and by a record volume of net purchases by the Federal National Mortgage Association. MORTGAGE DEBT OUTSTANDING BY TYPE OF HOLDER (Billions of dollars) Outstanding Net increase: 1965 1966 1967 1968 1969p 25.6 21.3 23.0 27.4 27.1 424.6 23.6 5.7 15.8 4.7 18.2 4.6 21.3 6.7 19.1 5.1 339.0 70.9 Mutual savings banks 4.1 2.7 3.2 2.8 2.4 55.8 Savings and loan assns. Life insurance companies 9.0 4.9 3.8 4.6 7.5 2.9 9.4 2.5 9.5 2.1 140.2 72.1 Federal & related agencies-1/ FNMA 1.0 0.5 3.4 1.9 2.7 1.1 3.3 1.6 5.1 3.8 26.8 10.9 Individuals and others 1.1 2.1 2.1 2.9 2.9 58.8 All holders Financial institutions, Commercial banks e - - - e -a-m-m-e - - total m s m - - - - - - - - - m End of 1969p - - - - Per cent Memo: Per cent of total increase financed directly or indirectly by Federal and related agencies, including FHLB advances 6.6 20.2 0.9 15.3 33.6 Preliminary. Federal and related agencies includes - FNMA, GNMA, VA, the Federal Housing Administration, the Federal Land Banks, and the Farmers Home Administration. * Prepared by Fred Taylor, Economist, of Research and Statistics. Capital Markets Section, Division - - SA - 2 Financial institutions, which had led the recovery in mortgage debt following the 1966 slump, reduced their net mortgage acquisitions last year by almost 10 per cent. Reduced savings inflows, particularly during the second-half of the year, to commercial banks and the thrift institutions, and a record demand for policy loans from the life insurance companies limited the funds available for mortgage investment by these institutions. Commercial banks, which had sharply expanded their mortgage portfolios in 1968 and even through the first half of 1969, when the high level of commitments apparently built up earlier were taken down, cut back appreciably during the second half. Mutual savings banks limited the growth of their mortgage holdings throughout the year as mortgages became a relatively less attractive form of investment. The net mortgage debt acquisitions of life insurance companies also declined, with the reduction concentrated in the holdings of 1- to 4-family properties, which have been declining for the last three years. Mortgage investment in income-property by life insurance companies, on the other hand, was largely sustained in response to the appeal of generally higher yields and increased possibilities for equity participation in such projects. Savings and loan associations last year, slightly exceeded their 1968 level of net mortgage acquisitions. However, these associations were able to do so only through a massive injection of FHLB funds, which financed almost half the net increase in S&L mortgage holdings. In addition to the support provided by the FHLB's, the Federal National Mortgage Association became an important factor in 1969. Operating through a restructured secondary market auction system, FNMA's net purchases of Government-assisted home mortgages were double the 1966 total. While they were unable to offset fully the short-falls of the financial institutions during the year, FNMA and the FHLB Banks, along with the other government agencies, financed, either directly or indirectly, over a third of the total increase in mortgage debt. Reflecting in part the strong Government agency support, the 1- to 4-family property average remained relatively advanced throughout the first half year, though, like housing starts and other real estate activity, on a seasonally adjusted basis, it tended downward as the year progressed and at a faster rate than debt on income properties. SA - 3 INCREASES IN MORTGAGE DEBT OUTSTANDING (Seasonally adjusted annual rates in billions of dollars) Total 1-4 family Multifamily & Commercial Farm 1966 21.3 10.3 8.8 2.1 1967 23.0 12.5 8.3 2.1 1968 27.4 15.3 10.1 2.1 1969 27.1 15.5 9.5 2.1 1969 - I 30.4 17.9 10.3 2.2 II 28.5 16.5 9.6 2.3 III 26.4 15.1 9.1 2.0 IV 23.9 13.0 9.0 1.9 Though still comparatively high, net mortgage debt formation for multifamily and commercial properties accounted for all of the yearto-year decline. However, the modest decline reflected in large part a shift to other non-mortgage types of financing, particularly in the case of commercial properties, which along with multifamily structures reached record outlay levels last year. Despite the fact that the net increase in total mortgage debt outstanding last year was little changed from 1968, the seasonally adjusted annual rate of increase for the fourth quarter of 1969 was sharply (a fifth) lower than in the fourth quarter of 1968, with both 1- to 4-family and income properties sharing equally in the decline. 

Federal Reserve (1970, February 9). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19700210_part3

@misc{wtfs_greenbook_19700210_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1970},
  month = {Feb},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19700210_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}