May 17, 1972
In the opinion of our Directors, economic conditions in the Twelfth District are maintaining the trends of recent months. Employment is rising gradually, but unemployment remains a problem in some areas. Construction, despite some signs of weakness, remains a major source of strength. Consumer expenditures and business investment are at satisfactory levels but do reflect some caution in spending plans. Payrolls are rising across the District, yet there appears to be no immediate prospect of a significant reduction in unemployment. There are such favorable factors as increasing hiring by the previously depressed aerospace industry. Boeing is expected to add another 5,000 workers by the end of 1972 in response to increased sales of jet airliners. In California, the aerospace industry is described "on the upswing and no longer is a drag on the area's economy." Employment increases also are reported for the steel industry in Utah. At the same time, Utah's agricultural employment will be below normal because of crop losses due to late frosts. In fact, agricultural employment throughout the District may be lower through a combination of crop damage in some areas and increased mechanization in others.
Directors report no plans to increase hiring by their own firms. This policy is common both for directors in banking as well as in manufacturing. Hiring is aimed at maintaining present staff levels. Some major banks are planning to reduce their staff slightly, and another company, which planned to layoff 50 workers because of a slowdown in orders, is holding these workers for vacation replacements. Several directors report that their firms continue to be cost conscious and are following a restrictive hiring policy. This view seems quite common. Consequently, the consensus is that no major increase in employment is to be expected, and temporary summer employment will be relatively difficult to find.
Activity in the construction industry is currently strong throughout the District. There are some signs of weakness in a few areas, but the basic situation is favorable for the industry. In Southern California, the high level of apartment and commercial building construction is producing concern over vacancy rates, and lenders are beginning to be more cautious. Banks in such areas as Orange County have tightened their financing standards to protect against the possibility of more difficulties in renting new units. In other parts of the District, such as Idaho and Utah, construction starts "continue at a healthy pace." The ready availability of mortgage financing for most kinds of projects is another favorable influence on maintaining current levels of construction.
The agricultural outlook is favorable for most producers. For example, potato growers expect a good price structure. In part, this is due to reduced plantings in response to the heavy crop of 1971. Fruit crops are also expected to be favorable for producers in those areas that escaped late frosts; serious losses in orchard crops had occurred in Eastern Washington, Idaho and Utah. Drought in parts of California has caused serious problems for ranchers and some crops. Other crops such as rice are expected to reach a normal production level.
Bankers report good loan demand for most categories, including commercial loans. No important changes are reported in banking conditions.