mortgage indebtedness had been reduced by about $1,000,000,000 as compared with 1928. The total outstanding in 1932, amounting to $8,500,000,000, was, however, higher than the 1920 total, in which year farm prices were approximately at their peak. One of the major sections of the Agricultural Adjustment Act provided for the refinancing of farm mortgages up to a total of $2,000,000,000 through the Federal Land Banks, in order to reduce the principal, cut the interest rate, and postpone the maturity date. The Government guarantees the interest on the bonds issued under this authority, and has recently contemplated the guarantee of the principal.

MANUFACTURING AND MINING

VARYING COURSE OF MANUFACTURING OUTPUT

At the beginning of the year 1933 both manufacturing and mining production were considerably above the "depression low point reached in the summer of 1932. There had been a marked expansion in these industries from midsummer through October, with moderate declines (mostly of a seasonal character) in the final 2 months of the year.

Production of manufactured goods increased in January by the usual seasonal amount but showed no change in February, though INDEX NUMBERS (1923 - 1925 = 100)

130

Chart 14.-Manufacturing production-Federal Reserve Board index adjusted for seasonal variations.

there is usually a gain in that month. This adverse condition was largely a reflection of the financial stress and the increased feeling of uncertainty on the part of business men concerning the policies of the incoming administration. When the banking crisis led to the closing of all banks in the United States early in March, industry was severely hampered, and, as a result, manufacturing production declined nearly 8 percent during the month instead of moving slightly upward as is customary. This drop brought the index of manufacturing production, adjusted for seasonal variation, to the low point of the depression, but the unadjusted index remained slightly above the level of the preceding Julv.

Manufacturing output for the first 3 months of 1933 was equal to only about one half of the production for the same period of 1929. The course of production during this period is shown in chart 14. It should be recognized that this decline does not reflect a decline in the price level, since the index represents the physical volume of produc

tion. The aggregate value of manufactured goods in the first quarter of 1933 was much less than half of the value for the corresponding period of 1929 and probably the ratio was closer to one third.

Aided by the threat of direct and indirect inflation, production reacted strongly in April from the abnormally low level of March, with a gain of 17 percent for the month. Stimulated further by the discussions preceding the passage of the National Industrial Recovery Act and finally by the actual passage of the act with its implication of higher wages and resulting higher prices, production increased phenomenally in May, June, and July. In the latter month the Federal Reserve Board's index of manufacturing production, when adjusted for the usual seasonal variation, reached 101 percent of the average level prevailing for the years 1923 to 1925. The gain of 80 percent in the index between March and July registered the most rapid increase in production that had ever occurred in a 4-month period in the Nation's history.

The gains registered by the different industrial groups in the field. of manufacturing were by no means uniform. Production of iron and steel in July was nearly four times the quantity produced in March, while shipbuilding fell off considerably during the same period. Since seasonal patterns vary greatly in different industries, the seasonally adjusted indexes should be used for comparisons. These indexes show that iron and steel increased 355 percent, rubber tires. and tubes 249 percent, plate glass 178 percent, automobiles 159 percent, and lumber 109 percent from March to July. While all of the above industries more than doubled their output during the 4-month interval, gains of only 19 percent in food products and 15 percent in petroleum refining were registered, and shipbuilding declined 87 percent. Generally those industries which had fallen to the lowest levels were the ones to show the largest relative gains.

Unfortunately, the rate of increase in production was more rapid than the basic situation warranted. In an effort to "beat the codes", to take advantage of the prevailing low level of wages and prices, strenuous efforts were made by distributors and manufacturers to accumulate inventories, and in many lines of activity there was great difficulty in filling orders. Reliable and accurate data on inventories are not available, but those that are available indicate increased stocks of goods in the summer and fall months of 1933.

PRESIDENT'S REEMPLOYMENT AGREEMENT

With the signing of the National Industrial Recovery Act on June 16, 1933, preparation of codes of fair competition began immediately. It was soon realized that this was to be a slow process. The President's Reemployment Agreement campaign was inaugurated late in July in an effort to bring about an immediate increase in wage rates and shortening of hours of work per week, pending the adoption of permanent codes for the various industries. Within a remarkably short time business firms throughout the Nation accepted the President's reemployment agreement and displayed the Blue Eagle as a sign of their cooperation in the plan. The immediate result of the President's Reemployment Agreement was to check the feverish rush of business men to produce for inventory in anticipation of the codes

The downward trend of average hourly earnings and the upward trend of hours worked per week in manufacturing establishments were reversed at this time.

TREND OF MANUFACTURING PRODUCTION

After the first of August the rate of manufacturing activity declined steadily until November. In the final month of the year, the decline was arrested and activity in numerous industries turned upward. Although the drop in manufacturing production from July to November canceled more than half of the March-to-July increase, this decline was necessary in view of the general state of business. Production had increased without an equivalent gain in pay rolls and employment. This failure of consumers' purchasing power to rise proportionately with production made it impossible for the goods being produced to be immediately consumed.

The decline after July varied greatly as between different industries. The iron-and-steel, plate-glass, and rubber-tires-and-tubes adjusted indexes in December were more than double the March figures, while the seasonally adjusted index of the physical production of all manufactures was 30 percent higher in December than in March, and cement production and shipbuilding were below the March level.

The monthly average of manufacturing production for the entire year was approximately 21 percent above the 1932 average, 5 percent below the 1931 average, and 36 percent below the 1929 level. The ratio of 1933 production to 1929 production varied from 35 percent for lumber, 36 percent for automobiles, 37 percent for cement, and 41 percent for iron-and-steel production to 95 percent for food products, 93 percent for leather and products, and 86 percent for petroleum refining. As expected, these data reveal the greater decline in the producers' and durable-goods industries as compared with consumers'-goods industries.

The act of Congress in the spring of 1933 which permitted the manufacture and sale of 3.2 percent beer, and the repeal of the prohibition amendment late in the year, resulted in increased activity in the beverage industry. These developments were reflected in a substantial amount of business for the principal supply industries.

MINERAL PRODUCTION

Mineral production, which increased markedly from 1932 to 1933, showed wide monthly fluctuations during the latter year. The low point of 1933 was reached in April, but neither the adjusted nor the unadjusted index during this month was as low as the levels of the previous June and July (see chart 15). The rise in production of minerals during the late months of 1932 continued into the early part of 1933, and the adjusted index in March was higher than during any month in 1932, with the exception of March. From March to April the index declined 11 percent and then increased 26 percent in the next 4 months, bringing the August index to the highest level since the spring of 1931. There was a moderate decline thereafter until the final month of the year, when the adjusted index turned upward.

THE NATIONAL INDUSTRIAL RECOVERY ACT

In no field of economic endeavor was the National Industrial Recovery Act more effective in precipitating changes than in the field of manufacturing. The act brought about a sharp rise in hourly rates of pay, a substantial reduction in the length of the working week, the elimination of child labor, the curtailment of unfair trade practices and unfair competition; and finally it developed a better spirit of cooperation within industry.

By the end of 1933 the National Recovery Administration's codes of fair competition, approved by the President, numbered 195, and

Chart 15.-Mineral production-Federal Reserve Board index adjusted for seasonal variations.

more than 90 percent of these concerned industries in the field of manufacturing and mining. Numerous other industries, for which codes had not yet been approved, had adopted the National Recovery Administration's minimum-wage and maximum-hour requirements by signing the President's Reemployment Agreement. The first code approved was that submitted by the cotton-textile industry, and it was signed on July 9, to become effective 8 days later. Within a few weeks thereafter the lumber-and-timber products, iron-andsteel, petroleum, automobile-manufacturing, and bituminous coalmining industries were operating under the National Recovery Administration codes. Both the iron-and-steel and automobile industry codes were adopted for only a few months' operation, and in each case the industry petitioned for an extension of the expiration date.