Knowledge that Transforms

QNLY a few statistical series measuring the volume of business are available for a long enough period to make possible satisfactory comparisons of a considerable number of past cycles with the present. Monthly (or at least quarterly) figures are necessary, and most of the prewar statistics relating to business volumes are on an annual basis. For the measurement of physical volumes, a satisfactory series for pigiron output has been developed by Professor Warren M. Persons, going back as far as I877 in quarterly form, and to I884 in monthly form.' For the measurement of dollar volumes there is the series for bank clearings in seven selected cities outside New York City compiled by Doctor Edwin Frickey, and published in this REvIEw for May and August I930. These figures go back, on a monthly basis, to i875. For the postwar period, bank debits of certain selected cities (again excluding New York, and also certain other cities especially affected by speculative transactions) are used to measure the dollar volume of business. Fluctuations in bank debits paralleled very closely those in the clearing figures for the post-war years, and the differences between the two series are probably less than the inaccuracies unavoidable in comparisons of such series over a long interval of time. This discussion will give chief attention to the clearings or debits figures. Such statistics are, of course, only one way of measuring fluctuations in business activity; but they have the advantage of covering a great variety of payments and are expressed in dollars, in which we are accustomed to reckon business transactions. On the following page, there is presented a chart of the adjusted figures for clearings or debits during periods of business decline and recovery.2 The low points of the indexes have been plotted on the middle line of the chart; when more than one low point appears, the last low point falls on the middle line. The period of d cline (except for I875-79) is from the last significant high point of the preceding period of activity to the low point; the period of recovery, from the low point to normal (in most instances). In i888, and again in I89I, when the fluctuations were mostly or entirely above normal, six months of recovery are shown. In I895, normal wa not reached, though closely approached, on the recovery. The pre-war figures are corrected for trend (as well as seasonal movements). Consideration is now being given to the determination of a trend line (or normal) for the past few years. Until such a normal has been satisfactorily ascertained, it is necessary to show I929-30 without correction for trend. The years I92-22 are likewise shown without such correction. The application of trends would tend to increase the amount of declines, and decrease the amount of advances; but over the short periods for which the figures are shown, such periods embracing wide fluctuations, the correction for trend would form a small proportion of the actual movement. For the I922 recovery, the final point is approximately at normal. The curve for debits in I929-30 is placed on the chart to facilitate comparison with the two declines which appear to resemble its movement most closely those of I920-2I and I883-84. The high point is placed on a level with that shown for I883, and twenty months (the duration of the I920-2I decline) from the middle line. This placing of the curve is not to be regarded as an expression of opinion as to the precise extent of possible further decline, or the exact length of time until the curve turns up. The twenty-month interval is the longest shown on the chart except that of the late seventies, which is not regarded as comparable because of the peculiar movement of the clearing figures in these years, attributable at least in part to the

T HE purpose of this study is to give a general view of the major changes which have taken place in the composition of our laboring force during a period when striking economic changes have occurred in the United States as a whole. The attempt has been made to secure roughly homogeneous occupational groups from the data furnished in the decennial censuses from I850 to I920. The character of these data precludes the obtaining of rigorously demonstrable conclusions; yet the decisiveness and persistence of certain of the tendencies are such as to warrant several interesting inferences. Economic theory indicates that, with the development of a nation along industrial lines, a larger proportion of the population tends to be engaged in the rendering of services, and a smaller proportion in the production of goods. Statistical verification of this tendency has been sought in the present investigation, and the results, though derived from data highly unsatisfactory in many respects, do furnish a definite confirmation of economic theory upon this point. It must be granted at the outset that the present paper can endeavor to utilize data from but a small fraction of the numerous occupational tables. Many other lines of inquiry are suggested from an examination of these decennial reports. The student of social statistics might find greater interest in examining the changes in the relative numbers of women and children engaged in the various gainful occupations. The economic historian might prefer to make international comparisons which would indicate the stages of development of our nation from an industrial point of view. These lines of departure, as well as many others, would undoubtedly prove of interest, but lie wholly beyond the present attempt to give a broad picture of changes in the main groups of our working population for the past three quarters of a century. In I850 the first effort was made to enumerate comprehensively the workers engaged in the various lines of industry. Prior to that year, there had been fragmentary compilations (as early as I820), but nothing which could readily be joined to the more complete data in later reports. From the middle of the nineteenth century onward, however, it is possible to divide the gainfully employed population into six main groups, with sufficiently clear lines of demarcation to avoid serious errors in classification. These six groups, which will be discussed in much more detail below, are: primary production (including farmers, miners, etc.), manufacturing production, trade, transportation, professional service, and domestic and personal service. Continual changes in the compilation of the census material render the computation of such group totals very difficult. For example, the I850 census reported only males over the age of I5 in the various industries; while that of i860 reported both males and females over the age of I5, with no indication of the proportions of the sexes. In I870, both men and women were included for the ages I0-I5, I6-59, and 6o and over. So far as the main age groups are concerned, the I870 model has been followed for subsequent reports. In other respects, however, modifications have continued to be made. Regularly, from one decennial period to the next, there are certain changes in the industrial organization which call for the addition of new categories, and lead to the abandonment of others. In addition, there have been two major revisions of the arrangement and form of the occupational reports, the first in I870, and the second in I9g0. These changes, while improving greatly the utility of the reports, seriously hinder the obtaining of homogeneous groups, and, indeed, in many cases are of such a character that no statistical operation can furnish results which are assuredly trustworthy. A process of chaining has been employed in bridging these years in which sweeping changes in form have been made, and it appears that despite the many uncertainties involved in the handling of individual occupations, the main results give definite indication of the more significant and persisting changes. At first thought, one might suppose that all census reports are highly comprehensive and reliable statistical compilations. Many enumerations are necessarily fragmentary and inexact be-

THE present study is a continuation of that described in a preceding article.' The object of this earlier investigation was to obtain for as long a period as possible prior to the outbreak of the World War an index of business activity as indicated by the fluctuations in a monthly series of aggregate bank clearings based upon a representative group of cities.2 The first installment of the present article contains certain supplementary discussion regarding this aggregate clearings series; the second installment will deal with the analysis of monthly data for eighteen individual cities.

THE year I929 carried to a culmination a number of money market movements. Money rates reached high levels and declined. The gold movement, stock prices, brokers' loans, and Federal Reserve policy all changed their direction of movement. The turning point in each case came in the autumn of the year within the span of a relatively few weeks. While the central event of this period of change was a severe decline in stock prices, it would be over-simplifying the picture to ascribe all of the other changes to this stock market reversal. A number of the other changes in fact preceded the stock market change. An orderly account of the year in the money market requires a sequential description of various phases of the market.

ECONOMIC surveys of the United States in the pre-Civil-War period never fail to make note of the revulsion of business which came in the year I857. Sometimes this is indicated as the culmination of a speculative movement of considerable, though uncertain, duration. Sometimes it is spoken of as a peculiar, almost quixotic, affair, deriving immediately from the failure of the Ohio Life Insurance and Trust Company, just as the of i837 is alleged to have flowed directly from the single cause of the famous Specie Circular. Again, where such accounts make allowance for speculative activity as forerunner of the debacle of I857, the chief generative element of this speculation is held to have been the enlargement of gold supplies after the discoveries of the mid-century. Yet little has heretofore been accomplished in the scientific appraisal of business conditions in these years, and in particular little has been done in attempting to array together the several aspects of business experience with the object of discovering the various interrelations of these elements. An important exception to the first statement would be W. L. Thorp's Business Annals; but as his study is non-statistical in character, it lacks close comparability with that here undertaken. In the belief that greater realism may be given the crisis of I857 by the procedure just mentioned, certain data on the volume of trade, and on banking and finance, are here joined to those whiclh have been presented elsewhere upon the course of commodity prices, common stock values, and public land sales; and an effort is now made to reveal some of the differences in these several movements.1 THE VOLUME OF TRADE

W HEN the economist of the future compiles the business annals of the past decade, he will find the key to our prolonged and unprecedented prosperity in the stimulus provided by two great industries building construction and automobile manufacturing. Originally gaining momentum because of a long pent-up demand and then feeding upon the demand caused by the new wealth for which their own activities were primarily responsible, creating a market for the products of the iron and steel and other basic industries and providing employment directly or indirectlyin everyhamlet throughout the country, these two industries have constituted both the prime mover and the chief support of our recent prosperity. For the time being, however, this fruitful partnership in prosperity seems to have been dissolved. During 1929, while the building industry lost ground, slackening its pace some 12 or 13 per cent as compared with 1928, the automobile industry put on an astonishing burst of speed and left all its old records far behind. Today the overproduced condition in the motor industry is regarded by many as perhaps the sorest spot in the entire business situation, whereas the construction industry is now looked upon as the industry which will save us from business collapse, cushioning the decline in business activity and stimulating the forces of recovery. Will construction be able to play this role effectively? This is the crucial question which any forecaster of the new year's business must answer. In this brief summary we can only touch upon the three important favorable factors, (i) the readjustment which has already taken place in the building industry, (2) the stimulus of easy money, and (3) the prompt and aggressive mobilization, under the inspiration of President Hoover, of the campaign to use construction as a balance wheel of industry. The stimulating effect of these three forces will be somewhat retarded by (i) the loss of savings and paper profits in the stock market debacle, (2) the present condition of the savings banks, the building and loan associations and certain other lending institutions, and (3) the fact that supply and demand conditions in some branches of the building industry have not been entirely readjusted. The industry will be affected also of course by the general business situation, being retarded by continuing recession or stimulated by sustained activity, whichever may develop. The level of building costs will be a comparatively unimportant factor, though such influence as it exerts should be favorable, as lower prices for certain building materials, probable increased efficiency of labor in a depressed labor market, and lower money rates should tend toward lower construction costs. In the first place, it is clear that the substantial decline in building volume which took place during 1929 and which, in so far as residential building is concerned, extended over a much longer period has been extremely fortunate. This slowing down has enabled the industry to correct many of the excesses which had developed in the last six or seven years of unprecedented construction activity, but, coinciding as it did with unusual activity in the automobile and many other industries, its depressing effect upon general business was largely counteracted. The readjustment whichwe are nowexperiencing in general business, may be sharp enough; it would be more acute and more protracted had it not been for the year's start gained by the construction industry. However, though it has already made much progress, the building industry has by no means completed its readjustment process. In certain localities there still exists an overproduction of certain kinds of building facilities which must be largely absorbed before these types of construction can resume their usual activity. The extent to which the various classes of building activity will be affected during 1930 by existing surpluses of space will be discussed in a later section of this paper. The second favorable factor, easy money, will undoubtedly exert a powerful influence making for the resumption of normal activities in the industry. Comparison of building volume with bond yields, commercial paper rates, or other indexes of the cost of money over the past ten years reveals a high inverse correlation. Cheap