Economic Report of the President 1980 · UNITED STATES GOVERNMENT PRINTING OFFICE ... ECONOMIC REPORT OF THE PRESIDENT ... Recent events in Southwest Asia have underlined the necessity

Economic Report

of the President

Transmitted to the Congress

January 1980

TOGETHER WITH

THE ANNUAL REPORTOF THE

COUNCIL OF ECONOMIC ADVISERS

UNITED STATES GOVERNMENT PRINTING OFFICE

WASHINGTON : 1980

For sale by the Superintendent of Documents, U.S. Government Printing OfficeWashington, D.C. 20402

Stock Number 040-000-00407-6.

CONTENTS

Page

ECONOMIC REPORT OF THE PRESIDENT 3

ANNUAL REPORT OF THE COUNCIL OF ECONOMIC

ADVISERS*. 17

CHAPTER 1. THE ECONOMY IN 1979 25

CHAPTER 2. THE ECONOMIC OUTLOOK 66

CHAPTER 3. LONGER-TERM POLICIES FOR STABILITY AND

GROWTH .,...,.... „. 98CHAPTER 4. THE WORLD ECONOMY—TESTING RESILIENCE 156

APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES OFTHE COUNCIL OF ECONOMIC ADVISERS DURING 1979 185

APPENDIX B. STATISTICAL TABLES RELATING TO INCOME, EM-PLOYMENT, AND PRODUCTION 197

*For a detailed table of contents of the Council's Report, see page 21.

(Ill)

ECONOMIC REPORTOF THE PRESIDENT

ECONOMIC REPORT OF THE PRESIDENT

To the Congress of the United States:

Last year world oil prices more than doubled. This increase willadd some $200 billion to the bill for imported oil paid by consumingnations. Higher oil prices were the major reason for the worldwidespeedup in inflation during 1979 and the dimming of growth pros-pects for 1980.

The United States was severely affected, as were other oil-import-ing countries. Our share of the additional oil bill will come to almost$45 billion this year. Partly, but not solely, because of higher oilprices, inflation accelerated sharply. The consumer price index roseby over 13 percent. The Nation's output of goods and services, whichhad been predicted in last year's Economic Report to grow by 2V4 per-cent over the 4 quarters of 1979, rose by less than 1 percent.

Although growth slowed, our economy offered strong resistance tothe forces of recession. Despite virtually universal forecasts of immi-nent recession, output continued to rise throughout the second halfof last year. Housing sales and construction held up better than ex-pected until late in the year. By reducing their savings, consumersmaintained spending in the face of the multibillion dollar drain ofpurchasing power from higher oil prices. Because business inven-tories have been kept remarkably lean, declines in sales did not leadto major inventory corrections. More generally, the economic recov-ery of recent years has been free of the distortions which, in the past,made the economy sensitive to recessionary forces.

Employment growth held up even better than output, and unem-ployment remained under 6 percent all year. Unfortunately, thestrength of employment gains reflected a sharp decline in productiv-ity—2 percent over the year. This fall in productivity added to costs,and thus bore a share of the responsibility for higher inflation.

While inflation worsened in 1979, a large part of the accelerationwas concentrated in a few areas—energy; homeownership and fi-nance; and, early in the year, farm and food products. Elsewhere con-sumer price inflation was more moderate, as prices rose by 7.5 per-cent over the year. Wage gains were no higher than in 1978, despitethe speedup of inflation. The government's voluntary wage and pricestandards were widely observed and limited sharply the extent to

which inflation spread from oil and a few other troubled sectors tothe rest of the economy.

The Importance of Reducing Inflation

It is my strong conviction that inflation remains the Nation's num-ber one economic problem. Energy and housing prices are still mov-ing up rapidly, adding directly to inflation and continuing to threatena new price-wage spiral in the rest of the economy. Even apart fromthese special problem sectors, inflation is now running at an 8 to 9percent rate, compared to 6 or 6V2 percent several years ago, in partbecause of a disappointing productivity performance.

Our immediate objective for 1980 must be to prevent the spread ofdouble-digit price increases from oil and other problem sectors tothe rest of the economy. My budget and economic policies have thatas their primary goal. We share that same urgent goal with virtuallyevery other oil-importing country. Halting the spread of inflation isnot enough, however. We must take steps to reduce it.

Each new round of inflation since the 1960s has left our countrywith a higher underlying inflation rate. Without long-term policies topull down the current 8 to 9 percent rate, our Nation will remain vul-nerable to still further increases. Another sharp rise in oil prices or aworldwide crop shortage could provide the next turn of the ratchet.Failure to lower inflation after the latest episode would strengthenlong-run inflationary expectations and erode resistance to even largerwage and price increases. Over the longer term, we will either bringinflation down or it will assuredly get worse.

A Strategy for Dealing with Inflation

To fight inflation I propose that we act along four lines. The firstand most immediate of these is fiscal and monetary restraint:

• Under the economic conditions that now confront us we mustconcentrate on reducing the budget deficit by holding downFederal spending and forgoing tax reductions. We cannot afforda permissive economic environment in which the oil-led inflationof 1979 gives rise to a widespread acceleration of wage and priceincreases in 1980 and 1981.

• To reduce inflation in subsequent years, the budget will have tostay tight. That does not mean that it should fail to respond tochanging economic circumstances or that taxes can never be re-duced. But compared to an earlier less inflationary era the roomfor budgetary maneuver has appreciably narrowed.

• Monetary policy will have to continue firmly in support of thesame anti-inflationary goals.

The second line of action is restraint by the private sector in itswage and price decisions. Aided by the deliberations of the Pay andPrice Advisory Committees appointed last year, we have been updat-ing and improving the voluntary wage and price standards.

As a third line of action we must pursue measures to encourageproductivity growth, adapt our economy rapidly to the fact of scarceroil supplies, and improve our competitive standing in the worldeconomy. By dealing with these fundamental aspects of economicperformance, we seek to ensure that the long-term monetary and fis-cal restraints needed to curb inflation go hand-in-hand with a healthygrowth in output, employment and living standards. These measureswill also help us reduce inflationary pressures from the cost side.

Recent history has driven home the lesson that events outside ourcountry—such as worldwide crop shortages or sudden increases inOPEC oil prices—can have major inflationary effects on the domesticeconomy. The fourth line of action, therefore, must be the use ofmeasures relating to energy and food that reduce our vulnerability tooutside inflationary shocks.

The Short-Term Economic Outlook

We face a difficult economic transition in the next year or two. Ac-cording to my economic advisers, our economy is likely to undergo amild recession early this year. Most private forecasters share thisview. Consumer purchasing power is being drained away by risingenergy prices; moreover, construction of new homes may declinesomewhat further because of limited supplies of mortgage credit andhigh mortgage interest rates.

Since economic growth in recent years has been well balanced,there are no serious distortions in our economy to intensify theforces of recession. An economic downturn, if it occurs, shouldtherefore be brief and mild. By year-end our economy should begrowing again, and the pace of expansion is likely to increase in1981.

Unemployment will probably rise moderately this year. Next year astronger pace of economic expansion will create more new jobs, andunemployment will begin to come down again.

Inflation has been building in our country for a decade and a half,and it will take many years of persistent effort to bring it back down.This year energy prices will still go up faster than other prices, butless so than in 1979. Some of the other special factors that contribut-ed to inflation last year should do so to a smaller degree, or not atall, in 1980. Enactment of the budget that I have recommended, andcontinued exercise of reasonable restraint by business and labor intheir wage and price decisions should make it possible to lower the

rate of inflation from 13 percent in 1979 to close to 10 percent in1980, and to a range of 8 to 9 percent in 1981. But that accomplish-ment will still leave inflation running at an entirely unacceptablepace. We cannot, and will not, rest until reasonable price stability hasbeen achieved.

Budget Policies

My budget proposals will reduce the Federal deficit by more thanhalf to $16 billion in fiscal 1981. Accomplishing this reduction, de-spite the effect of slower economic growth on Federal tax revenues,has required severe restraint on Federal spending. Outlays will in-crease from $564 billion this year to $616 billion in fiscal 1981. Al-though real defense spending will rise, total Federal outlays, adjustedfor inflation, will remain virtually constant. I propose to reduce infla-tion-adjusted spending outside of defense.

My 1981 budget is based squarely on the premise that bringing anend to inflation must remain the top priority of economic policy. Notonly are budget expenditures held to the minimum level consistentwith urgent national needs, but tax reductions are forgone. This aus-tere budget policy, accompanied by supportive policies of monetaryrestraint, is a necessary condition for controlling inflation.

Citizens all across our country are facing rising tax burdens be-cause of increased social security taxes and because inflation pushesindividuals into higher income tax brackets. They want, and deserve,tax reductions when cuts can be granted within the framework of aprudent budgetary policy. Businesses need greater incentives to in-vest in the new and modern plant and equipment that is essential togrowth in our productive capacity and to long-run improvement ineconomic efficiency. If we continue to keep the growth of Federal ex-penditures under tight rein, tax reductions will be forthcoming. But Icould not and did not recommend tax relief this year.

I am aware that a mild recession is widely forecast. Indeed the esti-mates of revenues and expenditures in my budget assume its occur-rence. But forecasts are necessarily uncertain. Our economy hasshown remarkable resilience to date, and there is no evidence that arecession has begun. Under those circumstances, to have recom-mended a tax reduction and a much larger budget deficit would havebeen a signal that we were not serious in our fight against inflation.It would have increased inflationary expectations, weakened the valueof the dollar in exchange markets, and risked the translation of lastyear's oil-led inflation into a new and higher wage-price spiral in1980. In recognition of these realities, my budget proposals concen-trate on reducing the deficit.

In this uncertain period, of course, economic policy cannot befixed in place and then forgotten. If economic conditions and pros-pects should significantly worsen, I will be prepared to recommendto the Congress additional fiscal measures to support output and em-ployment in ways and under circumstances that are consistent with acontinued fight against inflation.

Restraint in the 1981 budget has been accomplished while stillmoving forward with Federal programs and expenditures that ad-dress our Nation's critical needs.

• Outlays for defense will increase by over 3 percent in real terms.Both strategic and conventional forces will be strengthened. Ourcommitment to our NATO allies will be met, and our ability todeploy forces rapidly anywhere in the world will be improved.Recent events in Southwest Asia have underlined the necessityfor these actions.

• Expenditures will be raised to expand domestic energy supplies,increase energy conservation, and provide assistance to low-income families least able to pay higher energy prices.

• Support for basic research, enlarged in the past three fiscal years,will be further expanded to a total of $5.1 billion in 1981. Sus-tained commitment to basic research will assure continuedAmerican scientific and technical preeminence.

•A major new initiative, for which $1.2 billion in new budget au-thority is requested, addresses the serious problem of unemploy-ment among disadvantaged youth.

These programs were made possible within the framework of atight budget by pruning less essential programs, increasing adminis-trative efficiencies, and reducing fraud and abuse. Legislative propos-als to reduce Federal spending will save $5Vb billion in fiscal 1981and even more in subsequent years.

Pay and Price Standards

A little more than a year ago, I asked business and labor to joinwith me in the fight against inflation by complying with voluntarystandards for pay and prices. Cooperation with my request was ex-tensive. Last year's acceleration of inflation did not represent abreakdown of the pay and price standards. Skyrocketing energyprices, and rising costs of home purchase and finance lay behind thesubstantial worsening of inflation. Declining productivity also addedto business costs and prices.

The pay and price standards, in fact, have served the Nation well.Although the price standards had only limited applicability to food,energy, and housing prices, in the remaining sectors of the economy,

for which the standards were designed, prices accelerated little dur-ing the first year of the program. Wage increases were no larger thanin 1978, even though the cost of living rose faster. Increases in ener-gy prices did not spill over into wages and the broad range of indus-trial and service prices.

On September 28, 1979, my Administration and leaders of thelabor movement reached a National Accord. We agreed that our anti-inflation policies must be both effective and equitable, and that infighting inflation we will not abandon our effort to pursue the goalsof full employment and balanced growth.

As an outgrowth of that Accord, I appointed a Pay Advisory Com-mittee to work together with my Administration to review and makerecommendations on the pay standards and how they are being car-ried out. A Price Advisory Committee was established to make rec-ommendations with respect to the price standards.

The most immediate problem in 1980 is to ensure that last year'ssharp increase in energy prices does not result in a new spiral ofprice and wage increases that would worsen the underlying inflationrate for many years to come. Understandably, workers, business man-agers, and other groups want to make up for last year's loss of realincome, and they may seek to do so by asking for larger increases inwage rates, salaries and other forms of income. Such efforts wouldnot restore real incomes that have been reduced by rising world oilprices and declining productivity, but they would intensify inflation.Improvements in our living standards can only be achieved by mak-ing our economy more efficient and less dependent on imported oil.

Voluntary standards for wages and prices, together with disciplinedfiscal and monetary policies, are the key ingredients in a strategy forreducing inflation. During the years immediately ahead, monetary andfiscal policies will seek a gradual but steady lowering of inflation. Byitself, restraint on borrowing and spending would mean relatively sloweconomic growth and somewhat higher unemployment and idle capac-ity. Effective standards for moderating wage and price increases willlead to greater progress in lowering inflation and thereby reduce theburden on monetary and fiscal policies and provide scope for fastereconomic growth and increased jobs.

Long-Term Economic Goals

Just before my Administration took office the overall unemploy-ment rate was still close to 8 percent. For blacks and other minor-ities, the rate was over 13 percent and had shown little improvementsince the recovery began in early 1975.

Since then increases in employment have been extraordinarilylarge, averaging nearly 3V2 percent per year. The gains for womenwere twice as large as for men. For blacks and other minority groupsthe percentage rise in employment was half again as large as forwhites. Aided by a strongly expanded Federal jobs program foryouth, employment among black and other minority teenagers grewby over 15 percent. Employment among Hispanic Americans rose byover 20 percent.

Unemployment rates have come down substantially for most demo-graphic groups. Unemployment among black teenagers, however, hasnot fallen significantly and remains distressingly high.

To address the very serious problem of unemployment among dis-advantaged youth, my Administration has substantially expandedfunds for youth employment and training programs over the past 3years. My 1981 budget includes an important new initiative to in-crease the skills, earning power, and employability of disadvantagedyoung people.

In 1978 the Humphrey-Hawkins Full Employment and BalancedGrowth Act was passed with the active support of my Administration.The general objectives of the act—and those of my Administration—are to achieve full employment and reasonable price stability.

When I signed that act a little over a year ago, it was my hope thatwe could achieve by 1983 the interim goals it set forth: to reduce theoverall unemployment rate to 4 percent and to achieve a 3 percentinflation rate.

Since the end of 1978, however, huge OPEC oil price increaseshave made the outlook for economic growth much worse, and at thesame time have sharply increased inflation. The economic policies Ihave recommended for the next 2 years will help the economy adjustto the impact of higher OPEC oil prices. But no policies can changethe realities which those higher prices impose.

I have therefore been forced to conclude that reaching the goals ofa 4 percent unemployment rate and 3 percent inflation by 1983 is nolonger practicable. Reduction of the unemployment rate to 4 percentby 1983, starting from the level now expected in 1981, would requirean extraordinarily high economic growth rate. Efforts to stimulate theeconomy to achieve so high a growth rate would be counterproduc-tive. The immediate result would be extremely strong upward pres-sure on wage rates, costs, and prices. This would undercut the basisfor sustained economic expansion and postpone still further the dateat which we could reasonably expect a return to a 4 percent unem-ployment rate.

Reducing inflation from the 10 percent expected in 1980 to 3 per-cent by 1983 would be an equally unrealistic expectation. Recent ex-

perience indicates that the momentum of inflation built up over thepast 15 years is extremely strong. A practical goal for reducing infla-tion must take this fact into account.

Because of these economic realities, I have used the authority pro-vided to me in the Humphrey-Hawkins Act to extend the timetablefor achieving a 4 percent unemployment rate and 3 percent inflation.The target year for achieving 4 percent unemployment is now 1985,a 2-year deferment. The target year for lowering inflation to 3 per-cent has been postponed until 3 years after that.

MEASURES TO IMPROVE ECONOMIC PERFORMANCE

Achieving satisfactory economic growth, reducing unemployment,and at the same time making steady progress in curbing inflationconstitutes an enormous challenge to economic policy.

To lower inflation, we will have to persist in the painful stepsneeded to restrain demand. But demand restraint alone is notenough. We must work to improve the supply side of our economy—speed its adjustment to an era of scarcer energy, increase its efficien-cy, improve the workings of its labor markets, and expand its capitalstock. We must take measures to reduce our vulnerability to infla-tionary events that occur outside our own economy. Only an ap-proach that deals with both demand and supply can enable the Na-tion to combine healthy economic growth with price stability.

Long-Run Energy Policies

Over the past 3 years I have devoted a large part of my own effortsand those of my Administration toward putting in place a long-termenergy policy for this Nation. With the cooperation of the Congressmuch has already been accomplished or stands on the threshold offinal enactment.

The phased decontrol of natural gas and domestic crude oil priceswill provide strong, unambiguous signals encouraging energy conser-vation and stimulating the development of domestic energy supplies.But decontrol of oil, in the face of very high OPEC prices, inevitablygenerates substantial windfall profits. The windfall profits tax I haveproposed will capture a significant portion of these windfalls for pub-lic use.

The increased Federal revenues from this tax will make it possibleto cushion the poor from the effects of higher oil prices, to increaseour investment in mass transit, and to support programs of acceler-ated replacement of oil-fired electricity generation facilities and in-creased residential and commercial energy conservation. I have alsoproposed incentives for the development of energy from solar andbiomass sources, and have asked the Congress for authority to create

10

an Energy Security Corporation to provide incentives and assistanceon a business-like basis for the accelerated development of syntheticfuels. Other legislation that I have proposed, which is also now be-fore a Conference Committee of the Congress, would create an Ener-gy Mobilization Board to cut the red tape and speed the develop-ment of essential energy projects. I urge the Congress to take thefinal steps to enact the enabling legislation for my energy initiatives.

These policies will sharply increase the efficiency with which ourNation uses energy and widen the range of economically feasible en-ergy sources. In so doing, they will help make our economy less in-flation-prone. They will also drastically cut our reliance on importedoil, and by making our Nation less vulnerable to sudden increases inworld oil prices, reduce the probability of sudden inflationary surges.

By the end of this decade, we will be well on the way to complet-ing the transition toward the new world of scarcer oil supplies. In theinterim, however, our country still remains dangerously exposed tothe vagaries of the world oil market.

I am pursuing measures to deal with this transitional problem. To-gether with other major oil-consuming countries in the InternationalEnergy Agency we are working to devise improved means of match-ing any future cuts in oil supplies with joint action to reduce oil de-mand. By avoiding a competitive scramble for scarce oil, we can re-duce the chances of further large price increases.

Last year I pledged that our country would never again importmore oil than we did in 1977—8.5 million barrels a day. This year Iam establishing a lower import target of 8.2 million barrels a day. Iam prepared to reduce that target in the event that discussions withinthe International Energy Agency produce a fair and equitable agree-ment that requires still lower imports. I will impose a fee on pur-chases of foreign oil if they threaten to exceed the limit that I set.

While international cooperation is essential, so are measures wecan take on our own. In accordance with legislation enacted last yearthe Administration has developed a standby motor fuel rationingplan to deal with major supply interruptions, defined to be a shortfallin supply of 20 percent or more. This plan will be submitted to theCongress in February. But even smaller supply interruptions cancause severe economic problems. We are therefore considering pro-posals for standby measures to be applied if lesser, but still signifi-cant, disruptions occur. The Strategic Petroleum Reserve (SPR) cancushion the impact of an abrupt cutoff in supplies. My budget pro-vides funds for resuming SPR purchases this year if conditions per-mit.

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Improving Labor Markets

The persistence of high unemployment among some groups ofworkers while jobs go begging and unemployment is low elsewhere isnot only a major social problem but a waste of national resources.The lack of skills, the imperfections of the labor market, and in somecases, the discrimination that gives rise to this situation, reduce na-tional productivity and contribute to inflation.

Although our labor market currently works quite well for mostpeople, it does not work well for disadvantaged and minority youth.In recognition of this fact, I have recently sent to the Congress pro-posals designed to deal with teenage unemployment.

The goals of my proposals are:• to teach basic skills in the secondary schools to those youths who

did not master them in elementary school and who need specialhelp;

• to provide part-time employment and training to dropouts if theyparticipate in long-term training to develop skills that will im-prove their prospects; and

• to provide intensive long-term training aimed at helping olderyouths out of school find jobs in the private sector.

The funds will go largely to poor rural areas and central cities,where youth unemployment is particularly high because of inad-equate education, and where local resources are insufficient to rectifythe problem.

Another segment of the labor force needing special assistance isthe working poor. The welfare reforms which I have sent to the Con-gress will provide training, help in seeking jobs, and work opportuni-ties for poor but employable persons.

Reforming Regulation

Regulation has joined taxation, defense, and the provision of socialservices as one of the principal activities of the government. Unneed-ed regulations, or necessary regulations that impose undue burdens,lower efficiency and raise costs.

For the past 3 years I have vigorously promoted a basic approachto regulatory reform: unnecessary regulation, however rooted in tra-dition, should be dismantled and the role of competition expanded;necessary regulation should promote its social objectives at minimumcost.

Working with the Congress we have deregulated the airline indus-try. We are now cooperating with congressional committees to com-plete work on fair and effective legislation that eliminates costly ele-

12

ments of regulation in the trucking, railroad, communications, and fi-nancial industries.

Within the executive branch, we are improving the quality and low-ering the cost of regulations. The Regulatory Council, which I estab-lished a year ago, is helping us comprehend the full scope of Federalregulatory activities and how these activities, taken together, affect in-dividual industries and sectors. A number of regulatory agencies areexperimenting with new regulatory techniques that promise toachieve regulatory goals at substantially lower costs.

Increasing Investment and Encouraging Research and Development

We do not know all of the causes of the slowdown in productivitygrowth that has characterized our economy in recent years. But wedo know that investment and research and development will have toplay an important role in reversing the trend.

To meet the Nation's sharply increased requirement for investmentin energy production and conservation, to fulfill its commitment tocleaner air and water and improved health and safety in the work-place, and at the same time to provide more and better tools for agrowing American work force, our Nation in the coming decade willhave to increase the share of its resources devoted to capital invest-ment.

We took one step in this direction in the Revenue Act of 1978,which provided a larger than normal share of tax reduction for in-vestment incentives. Passage of my pending energy legislation willmake available major new incentives and financial assistance for in-vestment in the production and conservation of energy. When eco-nomic conditions become appropriate for further tax reduction, I be-lieve we must direct an important part of any tax cut to the provisionof further incentives for capital investment generally.

One of the most important factors in assuring strong productivitygrowth is a continuing flow of new ideas from industry. This flow de-pends in the first instance on a strong base of scientific knowledge.The most important source of such knowledge is basic research, thebulk of which is federally funded.

Between 1968 and 1975 Federal spending for basic research, meas-ured in constant dollars, actually fell. But since that latter year, andespecially during the years of my Administration, Federal support forbasic research has increased sharply. In spite of the generally tighteconomic situation, the 1981 budget I am submitting to the Congresscalls for yet another substantial increase in real Federal support forbasic research. Even during a period of economic difficulties, we can-not afford to cut back on the basis for our future prosperity.

132 9 4 - 2 8 9 0 - 8 0 - 2

Agriculture

Because the worldwide demand for food has grown substantially,overproduction is no longer the primary problem in agriculture. Gov-ernment policies now seek to encourage full production, while cush-ioning the American economy and the American farmer from thesharp swings in prices and incomes to which the farm sector is oftensubject. Over the past several years my Administration has created asystem of farmer-owned grain reserves to supplement tjie loan andtarget-price approach to farm income stabilization. In periods of lowprices and plentiful supplies, incentives are provided to place grain inthe reserves, thereby helping to support farm income. The incentivesalso work to hold the grain in reserve until prices rise significantly, atwhich time the grain begins to move out into the market, helping toavoid or to moderate the inflationary consequences of a poor crop.

Over this last year, the reserve has been tested twice. When fearsof poor world harvests threatened to drive grain prices to extraordi-narily high levels last spring and summer, farmers sold grain fromthe reserve, limting the price rise. Since I suspended grain shipmentsto the Soviet Union this month in response to that country's brutalinvasion of Afghanistan, increased incentives to place grain in reservehave been serving as one of our main defenses to protect farmersfrom precipitous declines in prices.

The International Economy

Other countries besides our own suffered important setbacks in1979 from the dramatic increase in oil prices. Growth prospectsworsened, inflation increased, and balance of payments deficits rose.In such difficult times economic cooperation between nations is espe-cially important. Joint action among oil-consuming countries is need-ed to reduce the pressure of demand on supply and to restore orderin world petroleum markets. Cooperation is necessary to protect in-ternational financial markets against potential disruptions arisingfrom the need to finance massively increased payments for oil. Andcooperation is also necessary to prevent a destructive round of pro-tectionism.

Because the dollar is the major international store of value andmedium of exchange, the stability of international financial markets isclosely linked to the dollar's strength. The actions taken in Novem-ber 1978 by the United States and our allies to strengthen and stabi-lize the dollar worked well during the past year. That the dollar didwell despite accelerating domestic inflation is due in part to a signifi-cant improvement in our current account balance during 1979. U.S.exports grew rapidly and thus helped to offset rising payments foroil. During the autumn of 1979, however, the dollar came under

14

downward pressure. The October actions of the Federal ReserveBoard to change the techniques of monetary policy helped moderateinflationary expectations which had been partly responsible for thepressure on the dollar. As a Nation we must recognize the impor-tance of a stable dollar, not just to the United States but to the worldeconomy as a whole, and accept our responsibility to pursue policiesthat contribute to this stability.

The Multilateral Trade Negotiations of the Tokyo Round were suc-cessfully completed and became law in the United States during1979. These trade agreements are a major achievement for the inter-national economy. By lowering tariff barriers both in the UnitedStates and abroad, they will help increase our exports and provideAmericans with access to foreign goods at lower prices. Perhapsmore important, these agreements will limit restrictive and unfairtrade practices and provide clearer remedies where there is abuse.They cannot, by themselves, assure smooth resolution of all trade is-sues. Indeed, the real test will come as we begin to carry them out.Nevertheless the agreements reached last year do represent a clearcommitment to the preservation and enhancement of an open systemof world trade.

Conclusion

The 1970s were a decade of economic turmoil. World oil pricesrose more than tenfold, helping to set off two major bouts of infla-tion and the worst recession in 40 years. The international monetarysystem had to make a difficult transition from fixed to floating ex-change rates. In agriculture a chronic situation of oversupplychanged to one which alternates between periods of short and amplesupplies.

It was an inflationary decade. It brought increased uncertainty intobusiness and consumer plans for the future.

We are now making the adjustment to the realities of the economicworld that the 1970s brought into being. It is in many ways a moredifficult world than the one that preceded it. Yet the problems itposes are not insuperable.

There are no economic miracles waiting to be performed. But withpatience and self-discipline, combined with some ingenuity and care,we can deal successfully with the new world. The 1980s can be a dec-ade of lessened inflation and healthy growth.

January 30, 1980.

15

THE ANNUAL REPORTOF THE

COUNCIL OF ECONOMIC ADVISERS

17

LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERS,Washington, B.C., January 26, 1980.

MR. PRESIDENT:The Council of Economic Advisers herewith submits its 1980 An-

nual Report in accordance with the provisions of the EmploymentAct of 1946 as amended by the Full Employment and BalancedGrowth Act of 1978.

Cordially,

Charles L. SchultzeCHAIRMAN

Lyle E. Gramley

cGeorge C. Eads

19

CONTENTS

Page

CHAPTER 1. THE ECONOMY IN 1979 25An Overview of the Year 25The Voluntary Standards 32

The Operation of the Standards 32Prices of Food, Raw Materials, and Energy 33Productivity and Wages 35

The Major Sectors of Aggregate Demand in 1979 42Personal Consumption Expenditures 43Housing 43Business Fixed Investment 44Inventory Accumulation 45The Foreign Sector 46Government Purchases of Goods and Services 47

Labor Market Developments 48Economic Policy in 1979 49

Fiscal Policy 49Monetary Policy and Financial Markets 51Credit Flows 58

Summing Up 61Supplement I: Improvements in the Method for Estimat-

ing the High-Employment Budget 61Supplement II: Measuring the Restraint from Oil Price In-

creases 64CHAPTER 2. THE ECONOMIC OUTLOOK 66

The Economy in 1980 and 1981 67Fiscal Policy 68Monetary Policy 68World Oil Markets 69The Economic Forecast 69Uncertainties in the Outlook 74

Controlling Inflation 75The Price and Pay Standards 79The Second Program Year 80The Outlook for Inflation 82The Productivity Problem 84Potential GNP 88

Goals of Economic Policy 90Conclusion 96

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CHAPTER 3. LONGER-TERM POLICIES FOR STABILITY AND PageGROWTH 98

The Need to Reduce Inflation 98Controlling Aggregate Demand 100

Improving the Structural Performance of the Economy 104Meeting the Energy Challenge 105

Reducing Vulnerability in the Short Run 105Longer-Term Improvements 107Implications for the Economy < 114Conclusion 116

Striking the Proper Balance in Regulation 116Regulatory Policy and Productivity 117Removing Obsolete Regulatory Structures 118Balancing Costs and Benefits in Individual Regula-

tions 121Coordinating Regulatory Programs 124Setting Priorities 124New Approaches to Regulation 126Conclusion 127

Promoting Flexibility in the Labor Market 127Labor Market Developments in the 1980s 128How Well Can the Labor Market Adjust? 131Policies to Aid Labor Markets 133

Increasing the Rate of Capital Formation (InvestmentPolicy Report) 136

The Adequacy of Recent Investment 136Special Investment Needs 139Saving-Investment Relationship 140Demand for Nonresidential Fixed Capital 141The Sources of Saving 142Capital Markets and the Availability of Credit 144Some Likely Patterns of National Saving in the 1980s . 145The Prospective Policy Mix 146

Adjusting to Equilibrium in Agriculture 147Policy Issues 147The Administration's Agricultural Policies 150Future Policy Problems 154

CHAPTER 4. THE WORLD ECONOMY—TESTING RESILIENCE 156

Developments in Major Industrial Economies 159Growth in 1979 160Inflation in 1979 162The Response of Economic Policy to Rising Oil Prices 163The Outlook for 1980 165Reducing World Oil Demand 166

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CHAPTER 4. T H E WORLD ECONOMY—TESTING RESILIENCE—Con. PageThe Global Pattern of Payments 168

The Recycling Problem 170Foreign Exchange Markets in 1979 174The Dollar in the International Monetary System 177World Trade: Patterns and Issues 180

The Multilateral Trade Negotiations 180Sources of Rising Protectionism 181Needed Responses 183

APPENDIXES:

A. Report to the President on the Activities of the Councilof Economic Advisers during 1979 185

B. Statistical Tables Relating to Income, Employment, andProduction 197

List of Tables and ChartsTables

1. Changes in Consumer Prices and in Producer Prices ofFinished Goods, 1976-79 27

2. Changes in Farm and Food Prices, September 1978 toSeptember 1979 34

3. Measures of Changes in Compensation and EmploymentCosts, 1977-79 37

4. Wage Increases Under Major Collective Bargaining Con-tracts 38

5. Alternative Deflators for Earnings and Compensation,1978-79 39

6. Shares of National Income, 1976-79 417. Shares of Gross Product Originating in Nonfinancial Cor-

porate Business Excluding Petroleum and Coal Compa-nies, 1976-79 41

8. Growth in Major Components of Real Gross NationalProduct, 1978-79 42

9. Changes in Real Business Fixed Investment, 1975-79 4510. Labor Market Developments, 1976-79 4811. Actual and High-Employment Federal Receipts and Ex-

penditures, National Income and Product Accounts, Cal-endar Years 1973-79 50

12. Fiscal and Oil Price Restraint on the Economy, FourthQuarter 1978 to Fourth Quarter 1980 70

13. Economic Outlook for 1980 7114. Changes in Compensation per Hour, Productivity, Unit

Labor Costs, and Prices, 1959-79 7815. Annual Growth in GNP per Employed Worker in Major In-

dustrial Countries, 1963-79 85

23

List of Tables and Charts—ContinuedTables Page

16. Labor Productivity Growth, 1948-79 8517. Potential Gross National Product and Benchmark Unem-

ployment Rate, 1973-79 9018. Changes in Employment and Unemployment by Demo-

graphic Group, Fourth Quarter 1976 to Fourth Quarter1979 91

19. Economic Goals, 1980-85 9420. Gasoline Consumption and Energy Use, 1966-78 10921. Share of Selected Demographic Groups in the Civilian

Labor Force, 1970-85 13022. School Attainment of 25- to 29-Year-Olds, 1940, 1960,

and 1978 13023. Gross Saving and Investment as Percent of GNP, 1965-79.. 14124. Determinants of Business Fixed Investment, 1955-79 14125. Actual and Illustrative Saving-Investment Balances 14526. Growth in Real GNP in Major Industrial Countries, 1978-

80 16027. Inflation in Major Industrial Countries, 1978-80 16028. Changes in Consumer Prices, With and Without Energy,

and Import Unit Values, Major Industrial Countries,1978-79 162

29. Changes in Wages in Major Industrial Countries, 1978-79 . 16330. Current Account Balances, 1975-80 16931. Impact of Oil Price Increase on Terms of Trade 175Charts

1. Personal Saving Rate 302. Real Inventory/Sales Ratio, Nonfarm Business 463. Selected Interest Rates and Bond Yields 524. Fixed-Weight Price Index for Personal Consumption Ex-

penditures 765. Productivity Adjusted for Cyclical Variation 866. Real Nonresidential Fixed Investment as Percent of Real

GNP 137

24

CHAPTER 1

The Economy in 1979

THE ECONOMY OF THE UNITED STATES was dealt a heavyblow by rising OPEC oil prices in 1979. Inflation increased sharply;real earnings of American workers declined and economic growthslowed. Employment continued to rise, however, while productivityfell, and the unemployment rate remained relatively stable at be-tween 5.7 and 5.9 percent. Most major demographic groups sharedin the rise in employment; the gains for blacks and adult womenwere particularly notable.

The economy's resilience in the face of the dramatic increase in oilprices and the attendant worsening of inflation was one of the moresurprising features of economic developments in 1979. Forecasts ofimpending recession were becoming frequent by late 1978, long be-fore the magnitude of the 1979 increase in oil prices by the Organi-zation of Petroleum Exporting Countries (OPEC) was perceived. Bythe middle of 1979 such predictions were common. Growth did slowmarkedly, but the characteristics of cumulating recession were stillnot in evidence at the close of the year.

Developments on the inflation front were the most significant dis-appointment in the 1979 economic performance. At the beginning ofthe year it was widely expected that inflation would moderate. Thosehopes were destroyed, however, by skyrocketing energy prices.

The inflation and energy problems plaguing our economy seriouslythreaten our ability to achieve the economic goals to which theCarter Administration is firmly committed: maintaining healthy eco-nomic growth, providing job opportunities for an expanding laborforce, and reducing the unacceptably high unemployment amongminorities. It is urgent that we increase our energy independenceand reduce the rate of inflation as soon as possible. These are thecentral objectives of the Carter Administration's economic policiesfor the period immediately ahead.

AN OVERVIEW OF THE YEAR

It was evident at the beginning of 1979 that economic growthwould slow from the 5 percent average annual rate of the preceding

25

3 years. Most of the resources idled by the deep recession of 1974-75 had been brought back into productive use, and monetary and fis-cal policies had been shifted toward restraint in an effort to slow in-flation.

The 0.8 percent growth of real gross national product (GNP) actu-ally recorded over the 4 quarters of last year was well below the 2.2percent forecast by the Administration at the beginning of 1979. Theimpact of huge energy price increases on consumers' real incomeswas largely responsible.

Personal consumption expenditures for goods declined slightly inreal terms, but higher outlays for services kept total personal con-sumption rising. Residential construction also fell last year, but aboutin line with expectations at the beginning of the year. The expansionof business fixed investment slowed substantially, to less than 2 per-cent, in 1979. Businesses continued to pursue cautious inventorypolicies, as they had earlier in the recovery, and the rate of inventoryaccumulation in the fourth quarter was well below its level a year ear-lier.

Net exports of goods and services increased substantially in realterms last year, and by the fourth quarter they reached the highestlevel since 1975. The volume of exports rose, while the volume ofimports leveled off. The slowing of U.S, economic expansion, in-creased growth abroad, and the decline of the dollar during 1978 allcontributed to these developments.

The pace of economic expansion in the United States was unevenduring 1979. Real GNP declined in the second quarter, when per-sonal consumption expenditures fell sharply in response to long gaslines, but it rebounded in the summer with the resumption of normalshopping patterns. Growth in the fourth quarter was at a more mod-erate rate; the rise in final sales slowed and inventory accumulationdeclined. Output in the industrial sector did not closely follow thequarterly pattern of GNP growth, but over the 4 quarters of 1979 in-dustrial production rose 0.9 percent, about the same as the increasein real GNP.

Both total employment and the civilian labor force grew by about 2million in 1979. Adult women accounted for about 70 percent of thetotal increase in employment. The proportion of the working-agepopulation employed rose to 59.3 percent, a slight gain.

Very large advances in energy prices and in the costs of home pur-chase and finance were dominant factors in the 13 percent rise in theconsumer price index (CPI) during 1979. Wholesale prices of fin-ished goods sold by producers rose by 12.5 percent over the 4 quar-ters of 1979, compared with 8.7 percent in the previous year. Energyprices were primarily responsible for the larger increase last year.

26

Sharp movements in prices for food, energy, and houses and inmortgage interest costs can have a large influence on the overall rateof inflation recorded in a given year. It is therefore useful to tracethe movements of other prices as one means of ascertaininglonger-term trends in prices—that is, in the underlying inflation rate.

Consumer prices excluding energy, home purchase and finance,and the farm value of food rose by 8.1 percent last year, less than 1percentage point above the 1978 pace (Table 1). The rate of increasein producers' prices for finished goods excluding food and energyrose somewhat more, from 7.9 percent in 1978 to 9.0 percent in1979. By these measures the underlying inflation rate has moved upby about 2 to 3 percentage points since 1976.

TABLE 1.—Changes in consumer prices and in producer prices of finished goods, 1976-79

[Percent change, fourth quarter to fourth quarter]

Item 1976 1977 1978 1979

Consumer prices, total

Farm value of foodEnergy*Home purchase and f inance2 3 .All other3.

Producer prices of finished goods, total..

FoodEnergyAll other

5.0

-13 .36.23.86.4

2.7

- 4 . 45.05.6

6.6

6.88.28.95.9

6.9

7.49.26.4

9.0

20.17.5

13.47.3

8.7

11.66.47.9

12.7

5.836.519.8

8.1

12.5

7.762.0

9.0

1 Includes only prices for direct consumer purchases of energy for the home and for motor vehicles.2 In both the table and the text, "home purchase and finance" consists of home purchase and financing, taxes, and insurance

on owner-occupied homes.3 Estimates.

Sources: Department of Agriculture, Department of Labor (Bureau of Labor Statistics), and Council of Economic Advisers.

Another measure of the underlying inflation rate is found in therise of unit labor costs adjusted for cyclical variations in productivitygrowth. Businesses tend to calculate costs on the basis of longer-termtrends in productivity and to set their prices accordingly. Whennominal wage increases exceed estimated long-term productivitygains, businesses will pass the resulting cost increases through tohigher prices if market conditions permit.

The rate of increase in compensation per hour for all employees inthe private nonfarm business sector declined in 1977, then roseagain. The 1979 increase of 8.8 percent was only slightly more thanthe 8.5 percent recorded in 1976. Increases in actual productivityhave slackened considerably, from 2.2 percent in 1976 to minus 2.2percent in 1979, but this is partly attributable to cyclical develop-ments. In 1976 the economy was emerging from a deep recessionand was growing strongly. In 1979 the recovery was in its fifth yearand economic growth slowed.

27

It is not clear what rate of productivity growth is now being incor-porated in business estimates of longer-term trends in costs. Studiesby the Council of Economic Advisers suggest that the current trendrate of increase in productivity is only about 1 to 1V2 percent; pro-ductivity growth in 1979, even allowing for a cyclical slowdown, wasmuch less than this. With compensation per hour in the private non-farm business sector rising at about 9 percent, the long-term rate ofincrease in unit labor costs—and thus in this measure of the underly-ing rate of inflation—appears to be around TV2 to 8 percent, com-pared to about 6 percent in 1976. If heavier weight is given to theespecially poor productivity experience of 1979, the underlying ratemay now be in the 8 to 9 percent range.

Wage restraint played an important role in limiting the increase inthe underlying rate of inflation during 1979. Aggregate measures ofwage performance indicate that growth in nominal wages did not in-crease last year.

Real disposable income rose temporarily in the first quarter, whenthe personal income tax cut provided by the Revenue Act of 1978took effect, but it fell in the spring. Over the final 3 quarters of 1979real disposable income remained at about the level reached in thefourth quarter of 1978. Higher oil prices were the main cause of thisstagnation in real income. Inflation, by moving individuals into high-er tax brackets, added further to the drag on disposable incomes, asdid overwithholding of personal income taxes. Despite the levelingoff of real income, personal consumption expenditure rose byabout 1V2 percent over the 4 quarters of 1979, as the personal savingrate fell.

The distribution of national income among major classes of in-come recipients changed little in 1979. The shares accruing to corpo-rations as profits and to nonfarm proprietors declined somewhat, asone would expect in a year of weak economic growth and decliningproductivity. The share of rental income in the total continued itslong-term descent. Compensatioin of employees rose slightly as ashare of the total, as did the income of farm proprietors. The net in-terest component of business costs also increased as a proportion oftotal national income, reflecting both rising interest rates and therapid pace of business borrowing.

The greater share of farm income in the total was due primarily tothe rapid increase in cattle prices early in the year and a late springstrengthening in grain prices. Cattle price increases were a conse-quence of reduced marketings and higher consumer demand forbeef; grain prices increased as the extent of a crop shortfall in theSoviet Union became known. Through the first half, the income offarm proprietors was 23 percent higher than in 1978. Livestock

28

prices declined during the summer and autumn as a result of largesupplies of pork and poultry and seasonal increases in beef slaughter.Grain prices also dropped from their early summer peaks, while farmproduction costs continued to increase at about the rate of inflation.Farm proprietors' income in the fourth quarter was 6 percent belowthat recorded a year earlier. For the year as a whole, farm incomeequalled the 1973 record.

Why the Economy Was So Resilient

The fact that the economy did not tip into recession in 1979 hasreceived widespread comment and attention. Periods of economic ex-pansion since World War II have typically come to an end when in-flation accelerated and monetary and fiscal policies shifted toward re-straint. In 1979, despite rising inflation, restraint on aggregate de-mand from monetary and fiscal policies, and a huge "oil tax" leviedby OPEC, the economy continued to move forward.

Fiscal policy began to shift toward restraint in 1978, but the degreeof restraint was lessened somewhat in early 1979 by the tax cut pro-vided in the Revenue Act of 1978. Thereafter the Federal budget be-came moderately more restrictive. The high-employment budget (dis-cussed later in the chapter) shifted from a $7 billion deficit in thesecond half of 1978 to a $13 billion surplus in the second half of1979.

Added to the restraint from the budget was the enormous drain onconsumer purchasing power resulting from the 1979 rise in oilprices. The oil drag at year's end was reducing consumer spendingpower by almost $55 billion at an annual rate, or about 3 percent ofpersonal after-tax income. Fiscal and oil price restraint together werethus draining large amounts from consumer incomes by the fourthquarter of last year. The magnitude of this restraint has no parallel inany postwar year—including 1974, when the first big OPEC price in-crease rocked the economy.

Monetary policy also moved toward restraint over the course oflast year. Growth of the major monetary aggregates slowed slightly.Growth of Mi moderated to 5.5 percent in 1979 from 7.2 percent in1978; however, shifts to ATS and New York NOW accounts (seebelow) are estimated to have reduced Mi growth by 1V2 percentagepoints in 1979. The rise in M2 dropped back to 8.3 percent from 8.7percent in the preceding year. Interest rates shot upward in the sec-ond half. Short-term market interest rates at year-end were approxi-mately 3 percentage points higher than a year earlier, while long-term rates were up about 1 V2 percentage points.

The reasons why the economy was able to absorb these shockswithout going into a steep decline may not be fully understood for

292 9 4 - 2 8 9 0 - 8 0 - 3

some time. Three factors, however, clearly played a role. First, indi-viduals as consumers and home buyers appear to be more stronglyaffected by inflationary expectations now than in the past. Surveys ofconsumers' attitudes indicate that until fairly recently most peopleexpected that an increase in inflation would be temporary. When ac-tual inflation rates were rising, expected rates of inflation lagged wellbehind. After two episodes of double-digit inflation, a different re-sponse is now elicited. When inflation increases, expected inflationrates move up at the same time. As a result, consumers are nowmore likely to accelerate purchases when inflation increases. Wheninflation accelerated markedly in 1973, for example, the personal sav-ing rate rose sharply, even after allowance is made for a large in-crease in the share of total income accruing to farm proprietors. In1979, however, consumers responded to the squeeze on real incomesresulting from inflation by continuing to borrow heavily and by re-ducing their saving as a fraction of disposable income (Chart 1). Al-though the ratio of household borrowing to disposable income de-clined over the course of last year, it remained well above 1973 lev-els.

Chart 1

Personal Saving Rate

PERCENT15

SEASONALLY ADJUSTED

I I I I I I I I I I I I I I I I I I I I I I

1969 70 71 72 73 74 75 76 77 78 79

SOURCE: DEPARTMENT OF COMMERCE.

30

Expected price increases probably exert more influence on deci-sions to buy houses than on purchases of other durable goods. Pricesof new and existing homes have risen considerably faster than pricesof other consumer goods and services over the past decade, and thatfact has not been lost on most individuals. With demographic factorsalso supporting demand, sales of new and existing homes remainedvery strong until late last year, despite a rise of mortgage interestrates to unprecedented heights.

Second, monetary restraint no longer produces the abrupt changesin availability of credit that used to be instrumental in bringing anend to economic expansion. Changes in financial markets over thepast 20 years have removed or reduced constraints which used tolimit the availability of credit to certain borrowers during periods ofmonetary tightness. For example, the legal and constitutional barriersthat once prevented States and their political subdivisions from pay-ing market rates of interest have been raised or eliminated. Usuryceilings have also been liberalized. Commercial banks and thrift insti-tutions have been given more freedom to bid for funds and arehence better able to provide credit to borrowers willing to pay goingrates of interest for loans. In particular, the 6-month money marketcertificates (MMCs) issued by banks and thrift institutions, on whichrates are tied to market yields on Treasury bills, have been a majorfactor sustaining mortgage credit flows since mid-1978.

Changes such as these have altered the way in which restrictivemonetary policies influence aggregate demand. Monetary restraintnow works more through changes in interest rates that influence aborrower's willingness to incur debt, and less through changes in aborrower's ability to obtain credit. For this reason, monetary restraintnow tends to affect aggregate demand less abruptly and with a lessuneven impact across major economic sectors. As events in financialmarkets late in the year attest, however, significant changes in mone-tary policy may still lead to constraints on the availability of credit,particularly for housing.

Third, the resilience of the economy last year reflects the relativeabsence of cyclical imbalances characteristic of earlier periods of eco-nomic expansion. Most notable in this regard is the comparativelybalanced relationship of inventories to sales after nearly 5 years ofeconomic expansion. Better inventory controls and very cautious in-ventory policies prevented a buildup of inventories relative to salesduring the expansion. In fact the aggregate ratio of real nonfarm in-ventories to sales was lower in late 1978 and early 1979 than it wasthroughout most of the preceding 10 years (see Chart 2 on page 45).

When consumer spending weakened in the second quarter of lastyear, therefore, businesses did not find themselves seriously over-

31

stocked. To be sure, auto inventories, particularly for large cars, in-creased substantially, and major auto producers are still trying to re-dress the balance between stocks and sales. In other industries, how-ever, production cutbacks to reduce excess stocks have been modest.

As Chapter 2 indicates, the economy may head into a recession inearly 1980. The factors that sustained growth in 1979 should help tomake the recession moderate in depth and duration. But it is unlikelythat they will cushion the economy's response to shocks to the sameextent that they did in 1979. This fact increases the uncertainty sur-rounding forecasts of economic performance this year.

THE VOLUNTARY STANDARDS

On October 24, 1978, the President announced a comprehensiveanti-inflation program that included actions by the Federal Govern-ment to reduce the relative size of the Federal budget, rationalizeand improve the regulatory process, and work together with Stateand local governments to reduce the inflationary impact of govern-ment actions on the economy. Business and labor were asked to ad-here to voluntary wage and price standards designed to reduce therate of price increase over the following 12 months.

The President announced that the Administration would considernoncompliance with the standards to be a sign of inflationary pres-sure in the markets concerned and would reconsider Federal Govern-ment programs and policies affecting those markets. The FederalGovernment would avoid purchasing from noncompliant firms wherefeasible. The President also proposed a program of real wage insur-ance to help protect workers who complied with the program fromsuffering losses of real income. This innovative proposal was notadopted by the Congress.

THE OPERATION OF THE STANDARDS

The anti-inflation standards administered by the Council on Wageand Price Stability were designed to minimize administrative burdensand provide maximum flexibility to the private sector. Firms wereasked to group their employees into "compliance units": for exam-ple, employees covered by collective bargaining agreements, othernonmanagerial personnel, and business managers. The rate of payincrease for each group was to be limited to 7 percent during thefirst program year, October 1978 through September 1979. Thecomposition of that increase between wages and fringe benefits wasleft to private decisions, as was the distribution of increases amongemployees within each subgroup. An assumed 6 percent rate of infla-

32

tion was used to evaluate cost-of-living adjustment clauses in laborcontracts.

Each firm was asked to restrain its average price increase to one-half of 1 percentage point below its average annual rate of increaseduring 1976-77 (the "price-deceleration" standard). Firms were leftfree to allocate the allowed price increase among their various prod-uct lines, so that they could respond to market conditions for particu-lar products while adhering to the overall anti-inflation goal. Exempt-ed were prices determined in auction markets, such as prices of agri-cultural commodities and industrial raw materials; those set by regu-lation, such as prices of crude oil and natural gas; and most imports.New product lines were also exempt.

For some industries with special characteristics, specific alternativestandards were constructed. For example, since the volatility of agri-cultural prices would make it difficult to apply the price-decelerationstandard to food manufacturers and processors, they could insteadchoose to follow a gross-margin standard, limiting the total markupover raw food prices.

Firms unable to meet the price-deceleration standard, or the spe-cial alternative industry standards, because of uncontrollable cost in-creases were allowed to achieve compliance by meeting a test basedupon a limitation of profit margins.

Compliance with the standards was widespread during 1979. Nev-ertheless the circumstances in which the program operated made itimpossible to prevent overall inflation from increasing. Energy pricesrose very sharply, and prices of both farm products and internation-ally traded raw materials increased substantially in late 1978 andearly 1979. The jump in U.S. prices of internationally traded com-modities stemmed partly from the earlier depreciation of the dollar.These price increases led many firms to shift from the primary price-deceleration standard to the profit-margin limit, so that price in-creases in primary commodities were passed through to prices offinal products. Declining productivity also added substantially tobusiness costs.

PRICES OF FOOD, RAW MATERIALS, AND ENERGY

Food. Pressures on food prices were greatest during the first half ofthe program year. Declining supplies of beef and strong consumerdemand pushed cattle prices up. Higher prices encouraged farmersand ranchers to begin rebuilding their herds, thus reducing currentmarketings further and putting even more pressure on prices. Pricesof pork and poultry, which are competitive with beef, joined in theupward move. In addition, harsh winter weather and a strike in theWest were chiefly responsible for shortages of fruit and vegetables

33

that resulted in rapid price increases for these commodities in early1979.

Consumer food prices rose less rapidly during the second half ofthe program year, when farm prices of food declined. Meat suppliesincreased, particularly for pork and poultry, and vegetable supplieswere also more ample.

Increased marketing costs contributed to rising consumer foodprices in 1979, as did gains in the net earnings of food distributors.Marketing spreads for food—the difference between retail costs andfarm value—ordinarily narrow when farm commodity prices increaserapidly. Early last year, however, these marketing spreads widenedwhile farm prices were rising sharply (Table 2).

TABLE 2.—Changes in farm and food prices, September 1978 to September 1979

[Percent change x]

Itemiiern

Market baskei2

Meat productsDairy productsPoultryFresh vegetablesProcessed fruits and vegetablesCereal and bakery products

Farm value

Sept.1978 to

Mar.1979

13.0

21.27.35.2

31.13.17.1

Mar.1979 to

Sept.1979

- 6 . 0

- 1 2 . 46.2

- 1 8 . 6- 3 2 . 9

1.416.8

Marketing spread

Sept.1978 to

Mar.1979

5.2

5.96.18.8

12.56.04.4

Mar.1979 to

Sept.1979

6.5

13.43.46.5

- 5 . 44.03.8

Retail cost

Sept.1978 to

Mar.1979

8.2

14.86.76.7

18.25.44.8

Mar.1979 to

Sept.1979

1.4

- 2 . 54.9

- 8 . 0- 1 4 . 6

3.55.7

1 Not seasonally adjusted, and not at an annual rate.2 Includes items not shown separately.

Source: Department of Agriculture.

When farm prices for foods began to decline in April, the market-ing spread widened still more. The President met with representa-tives of the food industry in August and asked them to translatechanges in farm prices more quickly into price changes at the retaillevel.

Increases in retail food prices during the fourth quarter weresomewhat below the rate of inflation elsewhere in the economy. Atyear-end, retail food prices were about 10 percent above their level ayear earlier.

Raw materials. Pressures on prices of internationally traded raw ma-terials were also greatest during the first half of the program year.During this period the industrial sector of the U.S. economy was op-erating at high rates of capacity utilization, and growth abroad wasstrengthening. Demand pressures in markets for basic materialstherefore intensified. For example, wholesale prices of crude com-modities other than agricultural products and energy rose 24 percentfrom September 1978 to March 1979. Pressures in these marketseased in the spring, when growth of the U.S. economy began to be

34

adversely affected by energy developments. Prices of some interna-tionally traded goods began to climb steeply in the early autumn,when speculation in gold threatened to spill over into other com-modities. Those pressures were short lived and confined largely tometals, but international political tensions led to a renewed surge ingold and silver prices in December.

Energy. It was the runup in world oil prices that most seriously ag-gravated inflation during 1979. Early in the year cutbacks in Iranianproduction and efforts here and abroad to rebuild oil inventories cre-ated a tight balance between world supply and demand for oil. Thesedevelopments led in the second quarter to rapidly rising spot marketprices of crude petroleum and refined products and contributed tolocal shortages of gasoline in the United States. Premium prices wereimposed by many oil-exporting countries, and supplies moved fromlong-term contracts to the spot market, where much higher pricesprevailed. The Saudi benchmark price of crude oil was raised threetimes: in April, July, and December. By early January 1980 the worldprice of oil reached about $28 per barrel, more than double the levela year earlier.

Phased decontrol of domestic oil prices, which was announced inApril and began to take effect on June 1, added only marginally toaverage crude oil prices in the second half of last year, though de-control will have larger effects in 1980. Wider refining and marketingmargins were a relatively important factor in the increase in prices ofgasoline and home heating fuel.

Gasoline prices at the pump rose 35 cents per gallon over the 4quarters of 1979, compared to an increase of 5 cents that would havebeen needed to keep up with the general rate of inflation. Approxi-mately 14 cents of this increase stemmed from higher prices for im-ported crude oil and products, and 11 cents came from wideninggross margins of refiners, retailers, and distributors. About 10 centsresulted from higher domestic crude oil prices, only a part of whichwas due to decontrol.

Rising energy prices added directly about 2*A percentage points tothe overall rate of consumer price inflation in 1979, considerablymore than they added in 1974.

PRODUCTIVITY AND WAGES

Declining productivity added substantially to business costs duringthe first program year, compounding the difficulties businesses en-countered in complying with the basic price-deceleration standard.For all private nonfarm businesses, productivity decreased 2.2 per-cent from the fourth quarter of 1978 to the fourth quarter of 1979.

35

As a consequence the rise in unit labor costs jumped to 11.3 percentover the same 4 quarters, compared with 7.8 percent during 1978.

Slower growth of real GNP in 1979 contributed to last year's poorproductivity, but the decline was too large to be explained by cyclicalfactors alone. Generally businesses would try to pass cost increasesresulting from lower productivity through to higher prices if theyconsidered the decline to be permanent. Last year, however, prices inthe broad industrial and service sectors rose significantly less thanunit labor costs. Businesses may have absorbed part of the increasedcosts because they believed the productivity decline to be temporary;on the other hand, either market resistance or the standards mayhave prevented businesses from raising prices further.

Under the circumstances that prevailed in 1979, it is hardly surpris-ing that the overall inflation rate increased despite fairly widespreadcompliance with the standards. What is surprising is the modest ac-celeration of inflation that occurred in the broad range of industrialand service prices. As noted earlier, the increase in consumerprices—excluding energy, home purchase and finance, and the farmvalue of food—was less than 1 percentage point higher in 1979 than inthe previous year. The standards played an important role in prevent-ing greater acceleration of prices.

Continued restraint in private wage and price decisions will be im-portant this year. In September 1979 the Administration and theleaders of the American labor movement reached a National Accordrecognizing the need to continue an effective and equitable anti-infla-tion program. (The National Accord and the pay and price standardsfor the second program year are discussed in Chapter 2.)

Measures of Wage Performance

The long-term trend of prices of goods and services produced inthe private nonfarm sector of the economy closely follows the rise ofbusiness costs. Wages, salaries, and fringe benefits account forroughly two-thirds of the total costs of production. If last year'ssharp increases in energy prices and the cost of homeownership hadled to an accelerated rise of wages and fringe benefits, the long-termoutlook for inflation would have greatly worsened. Operation of thepay standard during the first program year helped to prevent thatoutcome.

The 7 percent pay standard provided a guideline to be used in es-tablishing pay policies for nonunion employees and in collective bar-gaining. By and large, businesses followed those guidelines andAmerican workers cooperated by complying with the program.

36

Aggregate measures of wage performance indicate that wage andsalary increases did not accelerate during 1979 (Table 3). For exam-ple, the rate of increase in the adjusted average hourly earningsindex fell from 8.4 percent in 1978 to 8.0 percent in 1979, and thegrowth of compensation per hour in private nonfarm business de-clined slightly from 9.0 percent to 8.8 percent.

TABLE 3.—Measures of changes in compensation and employment costs, 1977-79

[Percent change]

Measure / /

7.5

7.5

6.9.6

7277698.6

3.53.31 7

1978

8.4

9.0

8.3.7

8.07.98.07.9

2.13.52.2

1979 *

8.0

8.8

8.0.8

7.78.47.38.3

2.43.02.6

Fourth quarter to fourth quarter:

Adjusted hourly earnings index

Compensation per hour2

Contribution of:Private wages, salaries, and fringesEmployer contributions for social insurance..

Third quarter to third quarter:

Employment cost index3

Union.Nonunion.

Union wage changes (total effective adjustment) 4 ....Adjustment resulting from:

Current settlement.Prior settlement.Escalator provision.

1 Preliminary.2 Data relate to private nonfarm business sector, all employees.3 Changes are measured from September to September.4 Agreements covering 1,000 workers or more.

Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor (Bureau of Labor Statistics), and Councilof Economic Advisers.

Some deceleration in wage increases occurred last year in the non-union sector. However, both the employment cost index for unionworkers and the effective wage change in collective bargaining unitscovering 1,000 workers or more showed a greater increase in the 4quarters through September 1979 than in the preceding 4 quarters.

New collective bargaining agreements were concluded in five majorindustries in 1979: petroleum, trucking, rubber, electrical machinery,and autos. Increases in wages over the life of the contract are shownin Table 4, with cost-of-living adjustment clauses evaluated at threedifferent rates of inflation.

Without the pay standard, the increases in wages granted in all ofthese contracts might well have been larger. When evaluated at an 8percent inflation rate (the average prevailing over the previous con-tract period) all of the major contracts concluded last year providedfor smaller increases in wages than those in the previous contracts.

37

T A B L E 4.—Wage increases under major collective bargaining contracts

[Percent increase]

IndustryPrior

contract1

1979 contract assuming

6 percentinflation

8 percentinflation

10 percentinflation

Petroleum:2

First year of two-year termTrucking:

Three-year increaseAnnual rate

Rubber:


Electrical:


Autos:


8.9

30.59.3

45.513.3

32.99.9

29.49.0

8.2

24.07.4

27.68.5

20.06.3

24.17.5

8.2

27.4

33.410.1

24.57.6

27.98.5

8.2

30.99.4

39.411.7

28.88.8

32.09.7

1 The previous petroleum contract was signed in 1977; all others were signed in 1976.2 The petroleum contract is a two-year agreement but it was reopened in the second year.

Source: Council on Wage and Price Stability.

Studies by the Council of Economic Advisers reinforce the viewthat the President's program aided in keeping wage rates from accel-erating. Estimates from models of wage and price determination,those developed at the Council as well as others, suggest that wageincreases during the first program year were about 1 to 1V2 percent-age points lower than would be expected, given the basic determinantsof wages. To be sure, many influences could account for the short-fall, the effect of the pay standard being but one. For example, a shiftin the composition of the work force toward less experienced andlower-paid workers occurred during the year. However, this demo-graphic shift could not have accounted for more than a small part ofthe difference between actual and expected wage increases, sinceavailable evidence indicates that percentage wage increases for lower-paid workers were larger than those for higher-paid workers.

Real Wages

Increases in wage rates during the first program year were belowthe rise in consumer prices and hence workers' real incomes de-clined. The rise in prices relative to wages did not result from a gen-eral increase in business profit margins, however, but from othersources. The rise in energy prices, stemming in large measure fromincreased world oil prices, was the major cause.

The magnitude of the decline in real wages last year is itself diffi-cult to estimate. Conclusions differ according to the measure of pricechange to which the rise in wages is compared. The average hourlyearnings index for the private nonfarm sector rose by 8.0 percentover the 4 quarters of last year. Since the consumer price index for

38

urban consumers climbed 12.7 percent, the average hourly earningsindex deflated by the CPI declined by 4.2 percent, compared to thedecline of 0.6 percent in 1978 indicated in Table 5.

TABLE 5.—Alternative deflators for earnings and compensation, 1978-79


1978 1979»

Average hourly earnings index

Deflated by:

Consumer price index (CPI)....CPI with rent substituted for homeownershipCPI with rent substitution and excluding energy

Fixed-weight deflator for personal consumption expenditures (PCE)..Fixed-weight deflator for PCE excluding energy


Deflated by:

Consumer price index (CPI)CPI with rent substituted for homeownership.CPI with rent substitution and excluding energy.

Fixed-weight deflator for PCEFixed-weight deflator for PCE excluding energy.

-4 .2- 2 . 4

.1

- 2 . 5

-3.5-1.6

.9

-1.8

1 Preliminary.2 Less than 0.05 percent.3 Data relate to private nonfarm business, all employees.

Note.—Consumer price index for all urban consumers used.

Sources: Department of Commerce (Bureau of Economic Analysis) and Department of Labor (Bureau of Labor Statistics).

The appropriateness of using the CPI as a measure of the inflationconfronting the average consumer has been called into question inrecent years because of the way this index treats the purchase ofhomes and the associated costs of home financing. The CPI is a priceindex of goods and services that consumers buy; it is not a cost-of-living index. A home is an investment as well as a good purchased byconsumers for current consumption. An increase in home prices isthus as much a return on savings to the homeowner in his role as aninvestor as it is a rise in the cost of living to the individual in his roleas a consumer. Furthermore relatively few individuals purchasehomes in any given year and pay the associated current mortgage in-terest rates; for others the rise in the home purchase and financecomponents of the CPI does not represent an increase in current liv-ing costs. Conversely this year's increase in the costs of home pur-chase and finance, unless reversed, would affect future buyers even ifthis component of the CPI showed no subsequent rise.

During recent years the Bureau of Labor Statistics has reviewed in-tensively the treatment of homeownership in the CPI. Several ap-proaches were developed, but none dealt with the complexities in amanner satisfactory to the major users of the CPI. One alternative isto use a rent index to represent the costs of using the services of ahouse. This may give a better measure of changes in the cost of liv-ing to the average consumer, particularly during periods when the

39

costs of homes and home finance move very sharply. When averagehourly earnings are deflated by the CPI with the rent index substitut-ed for homeownership, real earnings still show a drop in 1979, asTable 5 indicates, but it is more moderate.

Another measure which uses the CPI rent index to represent hous-ing costs is the fixed-weight price index for personal consumptionexpenditures in the national income and product accounts. Averagehourly earnings show a decline of about the same size when deflated bythis index.

In either case, the source of the decline was the sharp increase inenergy prices. Without this rise in energy prices, real average hourlyearnings would have been approximately unchanged in 1979, com-pared with a small increase in the previous year.

The lower part of the table shows compensation per hour deflatedby each of these measures of consumer price change. Compensationper hour includes wages, fringe benefits, and employers' contribu-tions to social insurance, and it has generally increased faster thanwage rates. The broad pattern of change that emerges when thismeasure is deflated by the various price indexes is similar to that foraverage hourly earnings.

There is no doubt that real earnings of American workers declinedin 1979. Sharp increases in energy prices made that decline inevita-ble. The decline in real wages would have been larger if businesseshad fully passed through to higher prices the rise in unit labor costsresulting from declining productivity. Larger increases in nominalwages would at best have improved real wages only temporarily. Byincreasing business costs, they would eventually have led to a stillmore rapid rise in prices.

The Distribution of National Income

Another way of appraising the impact of the standards is to consid-er the changes that occurred during the program year in the distribu-tion of total national income among major income groups.

In the third quarter of 1978, the last quarter before the standardswent into effect, employee compensation excluding employer contri-butions to social insurance accounted for 69.9 percent of total na-tional income (see Table 6). One year later the ratio had risen slight-ly to 70.2 percent. Over the same year the corporate profit share fellfrom 10.0 percent to 9.3 percent. Such changes in the share of na-tional income going into employee compensation and profits aretypical of a period in which economic growth slows. Since productiv-ity declined and the increased costs were not passed through fully toprices, corporate profit margins fell. The share of employee compen-

40

sation in national income was larger than it would have been had thehigher costs been passed through fully to higher prices.

TABLE 6.—Shares of national income, 1976-79

[Percent of total]

Compensation of employees

Employer contributions for social insurance-Wages, salaries, fringe benefits, and other....

Proprietors' income 2

Nonfarm 2

Farm 2

Rental income 3

Corporate profits 2..

Net interest

1976

76.3

5.271.1

6.6

5.21.3

1.6

9.3

6.2

1977

75.8

5.370.5

6.6

5.31.3

1.6

9.8

6.2

1978

75.7

5.570.2

6.8

5.21.6

1.5

9.7

6.4

1979 *

75.8

5.770.2

6.8

5.11.7

1.4

9.3

6.7

Third quarter

19791978

75.4

5.469.9

6.7

5.21.5

1.5

10.0

6.4

75.8

5.770.2

6.7

5.11.6

1.4

9.3

6.8

1 Preliminary.2 With inventory valuation and capital consumption adjustments.3 Rental income of persons, with capital consumption adjustment.

Note.—Quarterly figures based on seasonally adjusted data.Detail may not add to 100 percent because of rounding.

Source.- Department of Commerce, Bureau of Economic Analysis.

The decline in the corporate profit share occurred despite signifi-cant increases in the profit margins of oil companies. For other non-financial businesses, the squeeze on profit margins stemming fromthe decline in productivity growth was larger than the overall num-bers indicate.

Table 7 shows employee compensation and corporate profits as ashare of gross product originating in nonfinancial businesses, exclud-ing petroleum and coal companies. From the third quarter of 1978 tothe third quarter of 1979 the profit share declined by 1 V2 percentagepoints, while the share of employee compensation rose by almostthat much.

TABLE 7.—Shares of gross product originating in nonfinancial corporate business excludingpetroleum and coal companies, 1976-79

[Percent of total]

Item

Compensation of employees

Corporate profits 1

1976

68.2

10.9

1977

68.5

10.9

1978

69.1

10.7

1978

1

69.8

9.4

II

68.9

10.8

III

68.9

11.0

IV

68.8

11.2

1979

1

69.8

10.3

II

70.1

9.8

III

70.2

9.5

1 Corporate profits with inventory valuation adjustment but without capital consumption adjustment, which cannot bedistributed by industry.

Note.—Figures in this table cannot be compared directly to those in Table 6.

Source.- Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers.

41

THE MAJOR SECTORS OF AGGREGATE DEMAND IN 1979

Demand in nearly all major sectors of the economy was weaker in1979 than in the previous year (Table 8). In real terms domestic finalsales declined during the first half, largely because of the pro-nounced drop in consumers' purchases of goods in the second quar-ter, when long gas lines discouraged shopping. Declining residentialconstruction also contributed to the reduction in final sales. The fallin real GNP in the first half was cushioned by a sizable rise of inven-tory investment, primarily traceable to involuntary accumulation inthe second quarter.

TABLE 8.—Growth in major components of real gross national product, 1978-79

[Seasonally adjusted annual rate]

Component1977 IV

to1978 IV

1978 IVto

1979 II

1979 IIto

1979 IV l

Percent change:

Real gross national product

Personal consumption expenditures.Business fixed investmentResidential fixed investment.Government purchases of goods and services.

FederalState and local

Real domestic final sales2

4.8

4.510.5- . 2

1.7

- 2 . 54.0

4.3

- 0 . 6

- .1 .11.9

-10.7- 2 . 6

- 2 . 4- 2 . 6

- 1 . 5

Change as a percent of real GNP:

Inventory accumulationNet exports of goods and services..

2.3

4.51.5

-5.92.9

4.71.8

3.4

-2.11.0

1 Preliminary.2 GNP excluding change in business inventories and net exports of goods and services.3 Less than 0.05 percent.

Source: Department of Commerce, Bureau of Economic Analysis.

Final sales strengthened in the second half of the year, when con-sumer spending picked up noticeably, and government purchasesalso increased. However, continued cautious inventory policies andefforts to reduce swollen stocks of new cars led to a large decline ininventory accumulation.

Purchases by State and local governments declined slightly in 1979after a large increase in 1978 that came partly from the effects of thestimulus package introduced by President Carter in 1977.

Net exports were a source of strength in 1979, particularly in thesecond half. In volume terms, exports of goods and services in-creased by 9 percent, while imports of goods and services rose only 2percent.

42

PERSONAL CONSUMPTION EXPENDITURES

Growth of real personal consumption expenditures over the 4quarters of 1979 was the smallest since 1974, when a decline in realconsumer buying occurred. The 1979 increase would have been stillsmaller if consumers had not been willing to reduce their currentsaving as a proportion of after-tax income and to increase theirindebtedness. The personal saving rate, already low at 4.7 percent ofdisposable income in the fourth quarter of 1978, declined further toa very low level of 3.3 percent by the fourth quarter of last year.

The pattern of consumer spending over the year was uneven. Thesteep second-quarter drop was followed in the summer by a markedpickup that carried into the fourth quarter. While sales of new carsweakened in the fourth quarter, purchases of other goods and serv-ices remained relatively strong despite the continued squeeze on con-sumer purchasing power.

Purchases of durable goods fell 4 percent in real terms; unit autosales in the fourth quarter were 11 percent below their level a yearearlier. The mix of new car sales changed as consumers became in-creasingly concerned about the cost and availability of gasoline. Pur-chases of medium-size and larger cars plummeted in the secondquarter. Some strengthening occurred in the third quarter in re-sponse to very heavy price discounts, but sales fell again later in theyear. Sales of recreational vehicles, vans, and light trucks were alsohit hard. In contrast, more imported models, chiefly fuel-efficient ve-hicles, were purchased in 1979 than in 1978; by the end of last yearimports had captured one-fourth of the domestic market. Althoughsales of the new small American models were limited severely byavailability, domestically produced compact and subcompact cars ac-counted for one-third of total auto sales late last year.

Sales of nondurable goods increased by only 1 percent in realterms during 1979. Declines occurred for energy commodities—gaso-line, fuel oil, and coal—as a result of rising energy prices since 1973and the improved fuel efficiency of automobiles. In 1972, before thefirst large OPEC price rise, consumers' outlays for energy amountedto 6.8 percent of total personal consumption expenditures. Adjustedfor price changes, the ratio in the fourth quarter of 1979 was a fullpercentage point lower.

HOUSING

The decline in residential construction in 1979 was about in linewith expectations at the beginning of the year, although interest ratesincreased much more than had been anticipated. For the year as awhole, real residential construction was 6 percent below the high1978 level, and new housing starts fell to about 1.74 million units

43

from 2 million in the previous year. A decline in single-family startsto below 1.2 million units accounted for most of the overall reduc-tion. Multifamily starts were only slightly below 1978 levels.

A severe winter led to a drop of more than 20 percent in housingstarts in the first quarter. Making up the resulting shortfall helped tosustain construction activity over the next 2 quarters, when housingstarts exceeded an annual rate of 1.8 million. During the fourth quar-ter, housing starts dropped sharply to a rate of about 1.6 million inresponse to a marked increase in mortgage interest rates and re-duced availability of mortgage credit.

The rising cost of mortgage and construction financing depressedhousing sales and starts only moderately until late in the year. Inter-est rates on mortgage loans rose a full percentage point—to about 11percent—from late 1978 to September 1979. Nevertheless sales ofboth new and existing homes continued at a fairly high rate. Whilethis strength was partly attributable to demographic trends, the per-ception of housing as a good hedge against inflation was a major fac-tor sustaining demand. The average price of new homes, adjusted forchanges in quality, increased by about 15 percent last year.

Following Federal Reserve action in early October to tighten mon-etary policy, mortgage interest rates rose sharply, reaching levels wellabove usury limits in many States. In some cases these usury limitsresulted in severe disruptions in local housing markets. In otherStates potential home buyers found mortgage credit less readilyavailable as mortgage lenders raised down payments, made loansonly to established depositors, and took other steps to reduce theirlending. Housing starts fell by 14 percent in November to a 1.5-mil-lion annual rate and remained at that level in December.

BUSINESS FIXED INVESTMENT

Real business fixed investment in the current expansion began torise strongly in early 1976, led by increased outlays for producers'durable equipment, especially vehicles (Table 9). Investment in in-dustrial plant and other structures lagged behind, but it too turnedupward in the middle of 1977. From then until the end of 1978 ris-ing business investment provided strong support for new jobs, higherincomes, and increased total real output. From the end of 1975 tothe fourth quarter of 1978 the share of real GNP devoted to businesscapital formation rose from 9.1 to 10.2 percent, although it remainedbelow the high level attained in late 1973 and early 1974.

44

TABLE 9.—Changes in real business fixed investment, 1975-79


Component

Nonresidential fixed investment

StructuresProducers' durable equipment

Autos, trucks, and busesOther

1 Preliminary.


1975

- 9 . 9

- 7 . 2- 1 1 . 2

2.9- 1 4 . 8

1976

9.6

3.212.7

22.69.7

1977

7.5

4.48.8

20.34.8

1978

10.5

16.08.1

8.08.1

1979 1

1.7

6.0- . 2

- 2 3 . 08.9

Over the 4 quarters of last year, growth of real business fixed in-vestment fell to 1.7 percent, compared with 10.5 percent in the pre-vious 4 quarters. Last year's slowdown in the rise of business fixedinvestment was partly caused by the gradual increase in excess capac-ity and the squeeze on profit margins that accompanied the reducedpace of economic expansion. Purchases of cars and trucks declinedsharply. Excluding the vehicle component, the growth of business in-vestment in equipment during the past 4 quarters was 8.9 percent,compared with 8.1 percent in 1978.

Investment in structures was curtailed in the first quarter becauseof adverse weather, but it recovered in the second quarter and in-creased somewhat further in the second half. Growth during 1979was 6 percent in real terms, well below the increase in 1978.

INVENTORY ACCUMULATION

Inventory investment in 1972 dollars was just under 1 percent ofreal GNP in the first quarter of 1979, about the same ratio as in thepreceding 2 years. In the second quarter the drop in auto sales led tomarked increases in stocks of large cars, trucks, and recreational vehi-cles; inventories of small cars declined, however. Involuntary accu-mulation occurred in other industries also, but in moderate amounts.The ratio of real inventories to final sales rose in the first half of theyear but declined in the second half. Auto stocks were reduced in thelate summer, and other industries adjusted production to avoid unde-sired increases in inventories.

Because cautious inventory policies continued in 1979, the cyclicalimbalances that often occur during economic expansion have beenavoided (Chart 2). As a consequence the slower pace of final salesdid not lead to the magnified reduction in output that would haveoccurred if inventory liquidation had been extensive.

452 9 4 - 2 8 9 0 - 8 0 - 4

Chart 2

Real Inventory/Sales Ratio, Nonfarm Business

RATIO

SEASONALLY ADJUSTED

r Y n i i i 1 i i i I i i i I i i I 1 i i i 1 1 1 1 1 i i i I i 1 1 1 i i 1 1 i 1 1 i i i 1 1 i 1 1 1 i i i 1 i i i I i 1 1 I i 1 1 I i i 1 1 i i I 1 1 i i I i 1 1 n

1960 62 64 66 68 70 72 74 76 78NOTE: RATIO OF REAL INVENTORIES AT END OF QUARTER TO ANNUAL RATE OF REAL FINALSALES FOR QUARTER.SOURCE: DEPARTMENT OF COMMERCE.

THE FOREIGN SECTOR

The volume of U.S. merchandise exports began to grow rapidly inthe first half of 1978 after several years of near stagnation, and thisrapid growth continued through 1979. Over the 4 quarters of lastyear the volume of merchandise exports is estimated to have risen byabout 12 percent.

Although more rapid economic growth abroad helped boost U.S.exports, the most important factor accounting for this surge in for-eign sales was the depreciation of the dollar during late 1977 and1978. Depreciation of the dollar makes U.S. goods more competitiveabroad by lowering their prices in foreign currency. Since trade flowsrespond to changes in relative prices only after a considerable lag,export volumes continued to be affected throughout 1979 by the de-preciation that had occurred earlier.

Growth in agricultural exports to a record level also contributed tothe rising volume of merchandise exported during 1979, particularlyin the second half. A crop shortfall in the Soviet Union resulted in asignificant increase in grain exports and higher domestic grain prices.The price rise was moderated, however, by farmer-held reserves andexcellent domestic crops of corn, wheat, cotton, and soybeans. InJanuary 1980 the President announced a suspension of agriculturalexports to the Soviet Union. At the same time the President took

46

steps to channel the 17 million metric tons of grain exports whichhad been interrupted by this action into the Nation's grain reserves.

The volume of merchandise imports, which had grown stronglyduring 1978, is estimated to have increased by less than 3 percentlast year. Earlier depreciation of the dollar, weak growth of domesticdemand, and reduced energy consumption in the United States wereall contributing factors.

The deficit on merchandise trade narrowed during 1978 from a$48-billion annual rate in the first quarter to about $24 billion in thefourth. This improving trend did not continue in 1979 because of therise in oil prices. In the fourth quarter of 1979 payments forimported oil were about $30 billion higher (at an annual rate) than ayear earlier, even though the volume of oil imports was lower. Netgains in other components of merchandise trade were strong, butthey did not quite offset this rise in oil payments.

The current account position of the United States, after postingdeficits for 7 consecutive quarters, improved sharply to show a smallsurplus in the fourth quarter of 1978. For the year 1979 the currentaccount may have been in near balance, compared with a deficit of$13.5 billion in 1978. This improvement was greater than the year-over-year decline in the merchandise trade deficit because the sur-plus on service transactions, particularly net investment earnings,rose substantially. Overseas earnings were an estimated $9 billionlarger in 1979 than in 1978. Revival of growth abroad, exceptionallystrong earnings by U.S. oil companies on their foreign operations,and the increase in the dollar value of foreign currency earnings dueto the depreciation of the dollar all contributed to this rise.

Net exports, as measured in the national income and product ac-counts, rose about $8 billion in 1972 dollars over the 4 quarters of1979.

GOVERNMENT PURCHASES OF GOODS AND SERVICES

Federal purchases of goods and services, measured in constant dol-lars, rose by slightly more than 1 percent over the 4 quarters of1979. In real terms Federal purchases declined in 1978, and theirlevel at the end of 1979 was still somewhat below the figure posted 2years earlier. Most of the 1979 increase reflected purchases for de-fense. In current dollars, defense purchases increased by 13 percentover the 4 quarters of 1979.

The real value of State and local purchases fell in the first quarterof last year because public construction was curtailed by harsh winterweather in the Midwest and along the Atlantic Coast. These pur-chases recovered somewhat in the second and third quarters of 1979;but over the 4 quarters of the year they declined slightly compared

47

with a 4-percent rise in 1978. This turnaround partly reflects theending of the 1977-78 step-up of Federal assistance. Grants-in-aidfrom the Federal Government rose moderately during 1979, after alarge increase in 1978. The aggregate operating account of all Stateand local governments swung from a small surplus at the end of1978 to a small deficit by the close of 1979. Receipts grew moreslowly than expenditures, partly because the slowdown in economicexpansion limited the rise of taxable incomes.

LABOR MARKET DEVELOPMENTS

Employment growth remained strong in 1979, although well belowthe substantial gains of recent years. Despite a continued fairly rapidexpansion of the labor force, amounting to 2.2 percent during the 4quarters of 1979, the overall unemployment rate remained within afairly narrow range of 5.7 to 5.9 percent. The unemployment ratesfor most major population groups were also relatively stable through-out 1979 (Table 10). The proportion of the working-age populationthat was employed rose slightly last year.

Women contributed most to the growth of the labor force. Theparticipation rate of adult women rose to a new high of 51.0 percent,

TABLE 10.—Labor market developments, 1976-79

Component 1976 IV 1977 IV 1978 IV 1979 IV

Percent change from year earlier1

Increase in civilian employment, total..

Males 20 years and overFemales 20 years and overBoth sexes 16-19 years

WhiteBlack and other

Unemployment rate, to ta l 3

Males 20 years and over.Females 20 years and over.Both sexes 16-19 years.

WhiteBlack and other.

Participation rate, to ta l 4

3.4

2.64.63.0

3.34.2

4.4

3.35.28.0

4.34.7

3.6

2.55.42.6

3.27.0

Percent2

2.1

1.33.9

- . 9

2.02.9

Males 20 years and overFemales 20 years and overBoth sexes 16-19 years

WhiteBlack and other

7.7

6.07.4

19.0

7.013.2

61.8

79.947.354.4

62.159.6

6.6

4.76.7

16.5

5.713.2

62.6

79.948.656.9

62.960.7

5.8

4.05.7

16.2

5.011.5

63.5

79.850.158.5

63.761.9

5.9

4.25.7

16.1

5.111.2

63.8

79.651.058.2

64.161.8

1 Changes for 1978 IV adjusted for the increase of about 250,000 in employment and labor force in January 1978 resultingfrom changes in the sample and estimation procedures introduced into the household survey.

2 Seasonally adjusted.3 Unemployment as percent of civilian labor force.4 Civilian labor force as percent of civilian noninstitutional population.

Source: Department of Labor, Bureau of Labor Statistics.

48

up almost a full percentage point over 1978 and about 4 percentagepoints over 1976. The participation rates of teenagers and adult mendeclined slightly last year.

The increase in employment among adult women accounted forabout 70 percent of the rise in total civilian employment; the per-centage increase was about three times that of adult males. Blacksand members of other racial minorities accounted for over 15 per-cent of the employment increase. Employment for these groups grewone and a half times faster than that for whites.

Nonfarm payroll employment increased 2.4 million from the fourthquarter of 1978 to the fourth quarter of 1979, a smaller gain than the4-million rise in 1978. This increase was concentrated in nonmanu-facturing industries; in particular, mining, construction, and servicesshowed large gains. In the manufacturing sector, most nondurablegoods industries continued to show little or no growth in employ-ment. Employment declined in the apparel, leather products, and to-bacco industries. Some producers of durable goods, notably manu-facturers of electrical and electronic machinery, showed strong gainsin employment.

After a fairly steady drop since mid-1975, the number of personsreporting layoffs as the reason for their unemployment leveled off inthe first half of last year and rose in the second. The number of un-employed persons who were new entrants or reentrants into thelabor force fell for the second consecutive year after having risenquite rapidly through 1977.

ECONOMIC POLICY IN 1979

The principal objective of economic policy in 1979 was to stem ac-celerating inflation. Restraining aggregate demand with fiscal andmonetary policies was a key element of the government's anti-infla-tion program. It was recognized, however, that monetary and fiscalrestraint could not do the job alone. As discussed earlier, the volun-tary standards for prices and wages helped to hold down the rise ofprices in the broad industrial and service sectors of the economy andto maintain wage restraint.

FISCAL POLICY

Federal outlays for fiscal 1979 were $494 billion, an increase of 9.5percent over fiscal 1978 but well below the 12.1 percent average an-nual rate of increase from fiscal 1973 through 1978.

The Revenue Act of 1978 provided for tax relief amounting to$18.9 billion in calendar 1979, with a $14.1-billion reduction in per-sonal taxes, a $6.5-billion cut in business taxes, and a $0.7-billion in-

49

crease in outlays for the earned income tax credit. An employmenttax credit of $2.5 billion was allowed to expire. The tax package off-set the increase in individual income tax rates caused by inflation,and it also encouraged investment in the new and modern plant andequipment needed to improve productivity.

These tax and spending programs yielded a unified budget deficitof $28 billion in fiscal 1979, $21 billion less than the fiscal 1978level. The deficit was $10 billion less than had been originally fore-cast. Outlays were close to original projections, while receipts were$10 billion greater than expected. The excess of actual over pro-jected receipts reflected not only the impact of inflation, but alsosubstantial unanticipated overwithholding.

The High-Employment Budget

Changes in Federal expenditures, receipts, and the deficit are oftenmisleading indicators of fiscal policy because they reflect cyclicalchanges in economic activity as well as changes in fiscal policy. Thisproblem does not arise with the high-employment budget. The ad-justments made to obtain the high-employment budget remove from

TABLE 11.—Actual and high-employment Federal receipts and expenditures, national income and

product accounts, calendar years, 1973-79

[Amounts in billions of dollars; quarterly data at seasonally adjusted annual rate]

Calendar year or quarter

19731974

19751976 .197719781979 2 3

1977:IIIIV

1978:1IIIllIV

1979:| 2

II2

| | | 2

IV2

Actual

Receipts

258.3288.6

286.2331.4375.4432.1498.3

375.8388.2

397.8424.8442.1463.5

475.5486.3505.3

Expendi-tures

265.0299.3

356.8385.0421.7459.8508.0

429.4441.8

447.3449.4462.6479.7

486.8492.9516.1

Surplusor deficit ( —)

Amount

- 6 . 7-10 .7

-70 .6-53 .6-46 .3-27 .7

- 9 . 7

,-53.6-53 .6

-49 .4-24 .6-20 .4-16 .3

-11 .3- 6 . 6

-10 .8

Percentof GNP

- 0 . 5- . 8

- 4 . 6- 3 . 1- 2 . 4- 1 . 3

- . 4

- 2 . 8- 2 . 7

- 2 . 5- 1 . 2- . 9- . 7

- . 5- . 3- . 5

High-employment

Receipts

255.1307.0

327.7361.5395.0444.2515.0

391.6404.9

417.2437.1452.1470.2

483.8504.5524.8546.9

Expendi-tures

264.9297.7

345.9374.9413.6455.7505.2

422.1434.9

442.1445.2458.9476.8

484.1490.3513.3533.1

Surplusor deficit ( —)

Amount

- 9 . 89.3

-18 .2-13 .4-18 .6-11 .6

9.8

- 3 0 . 5-30 .0

-24 .9- 8 . 0- 6 . 8- 6 . 6

- . 414.311.513.8

Percentof GNP !

- 0 . 8.6

- 1 . 1- . 7

- 1 . 0- . 5

.4

- 1 . 5- 1 . 5

- 1 . 2- . 4- . 3- . 3

(4).6.5.5

1 High-employment surplus or deficit as percent of high-employment gross national product.2 Includes proposed tax increases involving foreign tax credits which are retroactive to 1979 and not included in data

published by the Bureau of Economic Analysis.3 Preliminary.4 Less than 0.05 percent.

Note.—Detail may not add to totals because of rounding.

Sources: Department of Commerce (Bureau of Economic Analysis), Department of the Treasury, Office of Management andBudget, and Council of Economic Advisers.

50

actual receipts and expenditures the effects of cyclical fluctuations inthe economy. Consequently this budget shows the surplus or deficitas it would be if the economy were moving smoothly along its poten-tial growth path. It is therefore a better, although still imperfect,measure of discretionary fiscal policy.

Estimates of high-employment budget expenditures and receipts,as measured in the national income and product accounts, indicate asubstantial shift of fiscal policy toward restraint over the past year—from a deficit of $7 billion, annual rate, in the second half of 1978 toa surplus of about $13 billion in the second half of 1979 (Table 11).The procedure for estimating the high-employment budget is dis-cussed in Supplement I to this chapter.

Fiscal and Oil Price Restraint

The shift of the high-employment budget into surplus was less im-portant in restraining aggregate demand in 1979 than were the risingprices of oil and refined petroleum products. To help assess the ef-fects on aggregate demand of these two factors taken together, theCouncil of Economic Advisers has calculated the combined restraintfrom fiscal policy and price developments in the oil sector. These es-timates are at best an approximate measure, but they indicate the un-expectedly severe restraint placed on aggregate demand in 1979.Over the 4 quarters of the year, fiscal and oil price restraint in-creased by about $60 billion, or about 2Vz percent of GNP. (A moredetailed discussion of the procedures used by the Council to measurethe restraint from higher oil prices is provided in Supplement II tothis chapter.)

MONETARY POLICY AND FINANCIAL MARKETS

The principal objective of monetary policy in 1979 was to helpcheck accelerating inflation by limiting the growth of money andcredit. In an environment of sharply expanding demand for moneyand credit, implementation of that policy required a pronounced risein interest rates. The pattern of increases was uneven: rates fellslightly on balance in the first half but advanced rapidly thereafter(Chart 3).

In submitting to the Congress the annual monetary policy reportrequired under the Full Employment and Balanced Growth Act of1978, the Federal Reserve set forth its objectives with regard to in-creases in the monetary and credit aggregates during 1979. For theperiod from the fourth quarter of 1978 to the fourth quarter of 1979the Federal Reserve established a target range of 1 V2 to 4V2 percentfor Mi (demand deposits and currency). The range for M2 (Mi plustime and savings deposits other than negotiable certificates of depos-

51

Chart 3

PERCENT PER ANNUM

Selected Interest Rates andBond Yields

16

14

12

10

8

6

4

SHORT-TERM

A

r \I \A h \

tA H \

IJ1 1 • # *

• v /H /• 6-MONTHTREASURY BILLS

NEW ISSUES)

FEDERAL FUNDS

I\

A\ \\ \

i —

rPRIME J

\ ^ /

t r

r

JLJ/ I

/ Iy i

• * _

ni I I I I I I I I I I I 1 I I I I I I I I I I I I I I I I I I I I I I I 1 I I I I I I I I I I I I I I I I I I I I I I I 1 I I I I I 1 I I I I I I I I I I I I I I I I I I1973 1974 1975 1976 1977 1978 1979

12

10

4 -

LONG-TERM

NEW-HOMEMORTGAGES!/

•'" .?

*^ /

, ' CORPORATE Aaa BONDS

V l i 11 i 11 i i i i i I i | 1 1 i 1 i i i i t I i i i i i 1 i i i i i I i i i i i | i i i i i 1 i i i | i | i i i i i | 11 i i i | i i i i i I i i i i i 1 i i i i i I

1973 1974 1975 1976 1977 1978 1979

UEFFECTIVE RATE ON CONVENTIONAL MORTGAGES IN THE PRIMARY MARKET.

SOURCES: DEPARTMENT OF THE TREASURY, BOARD OF GOVERNORS OF THE FEDERALRESERVE SYSTEM, FEDERAL HOME LOAN BANK BOARD, AND MOODY'S INVESTORS SERVICE.

52

it at large commercial banks) was set at 5 to 8 percent. For M3 (M2

plus time and savings deposits at savings and loan associations, mu-tual savings banks, and credit unions) a range of 6 to 9 percent wasestablished. Commercial bank credit was projected to increase be-tween 7V2 percent and 10V2 percent during the year. In setting theinitial Mi range, the Federal Reserve staff estimated that the intro-duction of automatic transfer services (ATS) and negotiable order ofwithdrawal (NOW) accounts in New York State (discussed below)would reduce growth in Mi by about 3 percentage points over thecourse of 1979. In October the target for Mi was revised upward to arange of 3 to 6 percent because ATS and NOW accounts had grownmuch more slowly than anticipated.

In the first quarter of 1979, Mi actually declined, while M2 rose atan annual rate of about 2 percent. This leveling off in the monetaryaggregates reflected both slower economic growth and shifts of fundsfrom bank deposits to other financial assets because of the higher in-terest rates established late in 1978. Balances in money market mutu-al funds jumped from $11 billion in December to $18 billion inMarch, and households substantially stepped up their purchases ofgovernment securities. The contraction in Mi was also due to therapid growth in ATS and NOW accounts during the first quarter.

The decline in real GNP in the second quarter, combined with un-certainties about the energy situation, led to a widespread belief thatan economic downturn had begun. In this environment the FederalReserve kept monetary policy approximately unchanged. The 9V2percent discount rate established in November 1978 was maintaineduntil July; the Federal funds rate was raised 25 basis points to 10V4percent in May and then held at that level until July.

Growth of the monetary aggregates surged in the second quarterdespite the decline in real GNP. From March to June both Mi and M2

increased at an annual rate of almost 12 percent. This pickup inmoney growth was partly attributable to special factors. Large in-creases in demand balances occurred just before the April and Junetax dates. In addition, after mid-March thrift institutions were nolonger permitted to pay a higher interest rate than banks on the pop-ular 6-month money market certificates. As a result commercial bankscaptured half of the net increase in MMCs in the second quarter,compared to one-third in the first quarter, and this raised the growthrate of M2.

In July monetary growth continued at a rapid pace, and market in-terest rates began to move up. At first the Federal Reserve keptits target for the Federal funds rate unchanged, but it soon be-came apparent that maintenance of the funds rate was resulting ina rapid expansion in bank reserves and the monetary aggregates. Al-

53

though the expansion of the monetary aggregates slowed consider-ably in August, rapid growth of money and credit resumed in Sep-tember, when economic statistics were indicating a rebound of activi-ty in the third quarter and the continuation of a very high rate ofinflation.

During the third quarter the Federal Reserve took steps that led tohigher interest rates. The discount rate was moved up in severalstages to 11 percent in mid-September, and the Federal funds ratewas raised to 11 V2 percent. From the end of June to mid-Septembermost short-term rates had climbed by almost 200 basis points. Never-theless both Mi and M2 were growing rapidly, and it was clear thatthe Federal Reserve's 1979 target ranges would be breached if suchhigh growth rates continued.

During the first 9 months of last year, growth in bank credit waswell above earlier projections and consistently outstripped the expan-sion in bank deposits. To satisfy expanding demands for credit,banks substantially increased their reliance on nondeposit sources offunds, which rose from $85 billion in December 1978 to about $130billion in September.

It was—and still is—difficult to assess the degree of restraint exert-ed by monetary policy in the first 3 quarters of 1979. The spread ofactive liability management among banks, the advances in cash man-agement techniques used by firms, and the growing financial sophis-tication of households have produced a marked shift in the normalrelationships between economic activity and the monetary aggre-gates. The new7 MMCs have played a particularly important role incushioning the effects of monetary restraint on housing. Moreoverthe effects of interest rates on aggregate demand may also havechanged because of heightened inflationary expectations. In anyevent, by September the growth of money and credit, developmentsin the real economy, and signs in commodity markets of an apparentworsening of inflationary expectations were giving unambiguous sig-nals that more monetary restraint was needed. Pressures on the dol-lar reinforced those signals.

Monetary Policy in the Fourth Quarter of 1979

On October 6 the Federal Reserve announced a major shift in itstechnique for implementing monetary policy. Previously it had at-tempted to control the expansion of the monetary aggregates byadopting a target for the Federal funds rate. Under the new approachthe object of open market operations would be to supply the volumeof bank reserves consistent with desired rates of monetary growth.Much greater variation in the Federal funds rate was to be permitted.

54

The Federal Reserve also raised the discount rate to 12 percent andestablished a marginal reserve requirement of 8 percent on increasesin the total of managed liabilities of member banks, Edge Act corpo-rations, and U.S. agencies and branches of foreign banks. Managedliabilities subject to this requirement include large-denominationtime deposits with maturities of less than a year, Eurodollar borrow-ings, repurchase agreements, and borrowings of Federal funds fromlenders not subject to the requirement. This added reserve require-ment raised the effective cost to banks of obtaining funds throughthese sources.

Interest rates climbed to record levels in the first few weeks afterOctober 6 but then declined through late November. In Decemberrates rose again but remained below October peaks. On average,short-term rates during the final month of 1979 were about 1% per-centage points above September levels, while long-term rates hadrisen about 1 percentage point. With the prime bank loan rate at15V4 percent at the end of December, businesses faced short-termborrowing costs that greatly exceeded the rate of inflation in the in-dustrial sector, about 9 percent for producer prices of finished goodsother than food and energy.

Money and credit growth decreased markedly in the wake of theFederal Reserve's action. During the final quarter of last year Mi roseat an annual rate of only 3.1 percent, while growth of M2 dropped toa 7.1 percent rate. Consequently, growth of Mi and M3 fell within thetarget ranges established for 1979, while jthe increase in M2 was justabove the upper end of its range.

Thrift Institution Deposits and Mortgage Credit

Although short-term interest rates nearly doubled from December1977 to December 1979, both thrift institution deposits and the flowof mortgage credit proved more resilient than in earlier periods ofhigh rates.

During past periods of high interest rates, depositors had shiftedtheir funds from accounts at banks and thrift institutions, where de-posit ceilings were fixed by regulation, to market instruments givinga higher rate of return. The introduction in June 1978 of 6-monthmoney market certificates enabled both thrift institutions and banksto compete more effectively for funds. Commercial banks are permit-ted to pay an interest rate on these certificates, which require a$10,000 minimum deposit, equal to the discount rate on 6-monthTreasury bills. Initially thrift institutions were able to pay one-fourthof 1 percent more, but in March 1979 that differential was eliminatedwhenever the 6-month bill rate was 9 percent or higher.

55

Thrift institutions captured 70 percent of the net increase in MMCbalances from June 1978 to March 1979, and 50 percent of thegrowth in MMCs over the last 3 quarters of 1979. By the end of 1979MMCs accounted for about one-fourth of all deposits at thrift institu-tions.

Certificates of deposit sold in amounts of $100,000 or more, whichare not subject to rate ceilings, were also important in maintainingthrift flows during 1979. Those large-denomination certificates ac-counted for about one-third of the increase in deposits with savingsand loan associations last year, compared to only 12 percent in 1978.Regulations were issued in December authorizing federally charteredsavings and loan associations to tap the Euromarkets by issuinglarge-denomination certificates to foreign investors.

In July 1979 a floating ceiling was established for deposits with amaturity of 4 years or more. Thrift institutions were permitted to payan interest rate 1 percentage point below the yield on 4-year Treas-ury issues, and the ceiling for commercial banks was set 25 basispoints below that for thrift institutions. The 4-year certificates didnot play an important role during 1979; short-term rates remainedwell above medium-term Treasury yields throughout the latter partof the year, and the 4-year certificates were less attractive to deposi-tors than MMCs and money market mutual funds. Minimum depositrequirements were also eliminated in July for all deposit categoriesexcept MMCs, and penalties for early withdrawal were reduced.

On January 1, 1980, the floating ceiling was extended to cover de-posits with a maturity of 2% years or more. Under these new regula-tions thrift institutions can pay an interest rate on such accounts thatis one-half of a percentage point less than the 2V2-year Treasuryyield, while the ceiling for banks is 25 basis points less than that forthrift institutions. (Floating ceilings apply only when they exceed thepreviously established fixed ceilings for a given class of deposits.)

Secondary mortgage markets, which have expanded rapidly in re-cent years, also helped sustain the flow of mortgage credit during1979. The Government National Mortgage Association (GNMA)guarantees mortgage-backed securities issued against pools of FHAand VA mortgages. Only $5 billion of such securities were issuedduring 1974, when the GNMA market was just developing. By 1979more than two-thirds of all FHA and VA mortgages were being pack-aged in pools guaranteed by GNMA, and new issues of these securi-ties rose to almost $25 billion. The secondary market for conven-tional mortgages has also expanded in recent years. By making mort-gages attractive to a wider group of investors, the development ofsecondary markets has further reduced the degree to which the avail-ability of mortgage credit depends on the flow of deposits to thriftinstitutions.

56

Despite these developments the October 6 actions of the FederalReserve caused a severe shock in the mortgage credit markets. Thriftinstitutions were confronted with greater uncertainty regarding theirability to attract funds. They also faced the prospect of sharp reduc-tions in earnings because the cost of attracting funds had risen somuch relative to revenues from their loan portfolios, which consistlargely of loans made at lower rates of interest prevailing in earlieryears. In the light of these uncertainties substantial numbers of thriftinstitutions stopped making new mortgage loan commitments alto-gether, and many others tightened their lending policies by raisingrequired down payments or by lending only to long-standing deposi-tors. Mortgage interest rates increased sharply in all States whereusury ceilings were not binding. Where such ceilings prevented mort-gage rates from rising, many mortgage lenders withdrew from themarket.

Potential home buyers in late 1979 were therefore confronted withsharply higher costs of home financing and tighter nonprice terms.Some were unwilling to pay the higher rates, others could not makethe higher down payment required, and still others found it difficultto qualify for loans because of the higher monthly payments. Withboth higher costs and reduced availability of credit driving buyers outof the market, housing starts declined substantially in October and inNovember before leveling off in December.

What the developments in late 1979 imply for the mortgage mar-ket in 1980 cannot yet be fully evaluated. Initially the market mayhave overreacted to uncertainties prevailing in October and Novem-ber. Since late October, interest rates on market securities have de-clined, as have rates on new mortgage loan commitments in some re-gions of the country. Late last year legislation was enacted that per-manently exempted FHA and VA loans from State usury limits andtemporarily exempted other residential mortgage lending from theseceilings. This should bolster home sales and construction in Stateswhere usury limits had been binding. Nevertheless the outlook forhousing construction in early 1980 has been dimmed by conditionsprevailing in mortgage markets late in 1979. This weakness in hous-ing makes it more likely that the economy will slide into recessionthis year.

ATS and NOW Accounts

Two regulatory changes introduced late in 1978 had an importantbearing on the financial services offered to individuals by banks in1979. On November 1, 1978, commercial banks were authorized tooffer customers automatic transfer services whereby funds are shiftedautomatically from savings to demand deposit accounts to cover

57

checks. With ATS the customer need not keep money in his checkingaccount, and his funds can earn interest at the passbook rate in hissavings account. In the same month, banks and thrift institutions inNew York State were authorized to offer NOW accounts. Negotiableorders of withdrawal may be used like checks to make current pay-ments, but they are drawn against an interest-bearing savings ac-count. NOW accounts have been available in all six New EnglandStates for several years.

Both ATS and NOW accounts, as well as credit union share drafts,provide checking privileges on a deposit that earns interest. Since allof these accounts are classified as savings deposits, shifts from regu-lar demand deposits to these accounts reduce the growth of Mi.

In the 5 months through March 1979 the increase in ATS accountsand in NOW accounts at New York banks totaled more than $6 bil-lion. In mid-April, however, a U.S. Court of Appeals ruled that ATSand similar accounts, such as credit union share drafts, were illegaland could not be maintained after January 1, 1980, unless the Con-gress enacted appropriate legislation. After this ruling the spread ofATS was curtailed sharply.

In December the Congress enacted legislation extending authorityfor credit union share drafts and bank ATS systems through March31, 1980. The Senate bill had also included provisions to phase outregulatory interest ceilings on bank and thrift institution deposits overa period of 10 years and to give federally chartered savings and loanassociations and credit unions greater consumer and commerciallending authority. Decision on these steps was deferred until 1980.In May the President had sent a message to the Congress stronglysupporting such measures, which would enable small savers to earn amarket rate of return on their deposits and give thrift institutions theflexibility they need to pay market interest rates and yet maintainadequate earnings. The Administration also proposed granting thriftinstitutions authority to offer variable rate mortgages. Regulationswere issued in July by the Federal Home Loan Bank Board permit-ting all federally chartered savings and loan associations to issue vari-able rate mortgages. Federally chartered associations in Californiaand some State-chartered associations were already offering suchmortgages before July.

CREDIT FLOWS

Borrowing by the private nonfinancial sector of the economy (in-cluding State and local governments) continued to expand during thefirst 3 quarters of 1979, although somewhat less rapidly than privateGNP. The increase in private credit flows was about offset by a re-duction in Federal borrowing that reflected the decline in the Federal

58

budget deficit. The aggregate flow of credit to all nonfinancial bor-rowers thus remained close to its 1978 pace.

The increase in private borrowing stemmed from the business sec-tor. The annual rate of borrowing by nonfinancial businesses duringthe first 3 quarters of 1979 was one-fourth larger than in 1978. Al-though the increase cut across most types of borrowing by business,commercial bank loans accounted for most of the acceleration. Thestrength of business credit demands reflected the slow growth of in-ternal funds relative to capital spending. For nonfinancial corpora-tions the ratio of external funds raised to expenditures for fixed capi-tal and inventories increased from 48 percent in 1978 to 55 percentduring 1979 but remained well below the peak rate of 61 percent re-corded in 1974.

Borrowing by households over the first 3 quarters of 1979 as awhole remained close to the 1978 pace, but the rate of borrowingtended to decline as the year went on. Growth in consumer install-ment credit subsided, and so did the volume of mortgage borrowing.The moderation of growth in installment credit derived primarilyfrom the slower pace of auto sales after the first quarter. The slowerexpansion of household mortgage debt may have stemmed fromhigher mortgage interest rates and the somewhat more limited avail-ability of mortgage credit. During 1978 the increase in householdmortgage debt amounted to 113 percent of household expendituresfor new residential construction. By the third quarter of 1979 theratio was down to 107 percent.

In earlier periods of economic expansion, rising interest rates gen-erally led to sharp changes in the sources of credit supplied to bor-rowers. Constraints on the ability of depository institutions to attractand hold deposits resulted in a marked decline in the share of creditsupplied through financial intermediaries. Correspondingly a highershare was supplied directly to credit markets by households, busi-nesses, and State and local governments. As a result of the innova-tions in financial markets discussed earlier, this shift in sources ofcredit did not occur in the first 3 quarters of 1979, when the propor-tion of funds advanced through private financial intermediaries wasactually somewhat higher than in 1978. During the first half of theyear, the proportion advanced directly by the public also increasedwhile supplies from foreign sources declined, reflecting substantialintervention sales of dollars by foreign central banks as the U.S. cur-rency strengthened in exchange markets.

The Consumer Debt Burden

The ratio of consumer debt repayments to disposable income hasrisen steadily in recent years, reaching a record peak of 18 percent inthe third quarter of 1979. The increase in this ratio has created con-

59

cern that consumers are becoming overextended and has also raisedfears that a high repayment burden might act as a strong constrainton consumer spending during an economic downturn. Repaymentswere equal to 17 percent of disposable income at the top of the lastcycle in 1972-73.

The increase in the debt repayment burden from the last cyclicalpeak to the present is completely accounted for, however, by an in-crease in monthly payments on revolving credit lines. The revolvingcredit figures cover all charges and repayments on credit cards issuedby banks, gasoline companies, and retail stores, including transac-tions of consumers who use credit cards only as a convenience andpay their outstanding balances in full each month. Bank credit cardsaccounted for most of the increase in revolving credit charges andrepayments relative to income. While revolving credit repaymentshave risen rapidly relative to income in the past 6 years, the ratio ofdebt outstanding on revolving credit lines to income has risen onlyslightly. Most of the recorded increase in the debt repayment burdenfor this category of consumer credit can thus be attributed to agreater use of credit cards, particularly bank cards, for convenienceonly.

The monthly repayment burden on fixed-term consumer loans hasnot risen over this period. On the contrary, during the last half of1979 such repayments, which include those on auto loans, were actu-ally somewhat lower in relation to income than they were in 1972-73.Debt outstanding on these loans, however, has increased substantiallyas a proportion of after-tax income. Consumers were able to increasetheir debt without raising required repayments as a share of income,because average maturities have lengthened considerably. The aver-age repayment period on new car loans, for example, has increasedfrom almost 3 years in 1974 to about 3 years and 9 months in thethird quarter of 1979. Maturities on other fixed-term installmentloans have also lengthened, reflecting the easier terms provided bymost categories of lenders.

Consumer indebtedness from auto loans and other fixed-term in-stallment credit declined substantially relative to disposable personalincome during 1974 and 1975 and then increased rapidly in the up-turn. Outstanding balances on revolving credit lines, however, havebeen a fairly constant proportion of after-tax income throughout thepast decade. Last year net borrowing on revolving lines rose at aboutthe same pace as disposable income, while net fixed-term borrowingdropped from about 2V2 percent of disposable income in the fourthquarter of 1978 to less than IV2 percent in the final quarter of 1979.

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Consumers are indeed more indebted today than they were at thepeak of the past cycle, but their fixed-term repayments are actuallysomewhat lower compared to their disposable income than was thecase in 1972-73. While the burden of repayments can be expected torestrain consumer spending as the economy heads into recession, theimpact will probably be no greater than during the last downturn andmight well be less.

SUMMING UP

Huge oil price increases dominated economic developments in1979. Economic growth slowed much more than expected. The de-cline in inflation anticipated at the beginning of the year did not ma-terialize; on the contrary, inflation increased sharply. The fact thatthe increase in inflation was confined largely to energy (and as meas-ured in the CPI, to housing) was a distinct positive element in theeconomic record, but there is still a danger that last year's sharp riseof energy and housing prices may spill over into this year's wagesand costs and thus become built into the underlying inflation rate.Fighting inflation must therefore remain the top priority of economicpolicy.

SUPPLEMENT I

Improvements in the Method for Estimating theHigh-Employment Budget

Beginning with the publication of the 1978 Report, the Council's approachin calculating the high-employment budget changed. In the method used ear-lier, high-employment receipts were determined as the product of real poten-tial GNP, the price level, and estimates of income shares and effective taxrates at high employment. Comparisons of actual receipts—those collected atactual employment levels—with high-employment receipts often yielded animplausible elasticity of receipts with respect to the change in income be-tween actual and potential GNP.

The source of the problem is that estimates of high-employment incomeshares and effective tax rates made with this approach do not reflect all ofthe structural characteristics of the tax system or the economy that are em-bodied in the short-term behavior of actual income shares and effective taxrates. These estimates are unlikely to incorporate such features because theyrely completely on trends of income shares and effective tax rates. Hence es-timates of actual and high-employment budgets can be inconsistent.

612 9 4 - 2 8 9 0 - 8 0 - 5

The revised approach ensures consistency by basing the high-employmentestimates on actual receipts and adding to these receipts the extra revenuesthat would be collected if the gap between actual and high-employment GNPwere closed. Estimates of these additional revenues are based on the averagehistorical behavior of income shares and marginal tax rates or tax elasticitiesover the business cycle. In this way the implied elasticity of receipts with re-spect to the change in income between actual and potential GNP is moreconsistent with past experience.

During 1979 the Council worked with other Federal agencies to improvethe estimates of income shares, marginal tax rates, and tax elasticities used inthis approach, integrating as fully as possible the Council's work on potentialGNP. Cyclical adjustments of expenditures were made for the first time forseveral additional Federal expenditure programs, and separate cyclical ad-justments were made for regular and extended unemployment insurancebenefits.Income Shares

The principal improvement last year to estimates of cyclically adjusted in-come shares was the joint estimation of equations explaining the shares of allmajor components of national income and the difference between nationalincome and GNP. Because the equations were estimated jointly, the sum ofthe gaps between actual and high-employment values for income compo-nents equals the gap between actual GNP and its high-employment level.To facilitate the calculation of the difference between actual and high-employment tax bases for different revenue aggregates, national income wasdisaggregated into six components: wages and salaries, other forms of com-pensation, nonfarm proprietors' income, farm proprietors' income, corporateprofits, and rent plus net interest.Tax Elasticities

Efforts were made on several fronts in 1979 to improve estimates of thepersonal income tax elasticity. Time series analyses related personal tax re-ceipts adjusted for changes in tax law to adjusted personal income (definedas wages and salaries, proprietors' income, rental income, dividends, andpersonal interest income). Cross-sectional analyses using a model from theDepartment of the Treasury's Office of Tax Analysis were also performed forseveral years in the 1970s. Inputs to this model included estimates ofchanges in the components of adjusted personal income that would occur inclosing the gap between actual and potential GNP. The estimated numberand type of additional income tax returns filed by the extra persons em-ployed in closing the gap were also used by the model. These studies sug-gest that estimates of the personal tax elasticity obtained in moving betweenactual and potential GNP are particularly sensitive to assumptions about pro-ductivity, the income distribution, and the filing status of the extra employedpersons. For the calculation shown in this Report, an elasticity of 1V3 wasused. It is recognized that this estimate is subject to a substantial margin of

62

The study of the marginal corporate tax rate used a time series analysis ofthe relationship of corporate profits tax receipts to the product of the statu-tory tax rate and a tax base adjusted for Federal Reserve profits, profits fromforeign operations, and State and local taxes. The investment tax credit wasalso an explanatory factor in the analysis. While it is difficult to control accu-rately for the effects that changes in these factors exert on corporate tax rev-enues, most specifications suggested a marginal corporate tax rate near 40percent in recent years.

During 1979, estimates of the additional contributions for social insurancebrought about by closing the gap between actual and high employment wererefined in several ways. Social insurance revenues were disaggregated intofour subcategories: social security taxes, excluding those paid by the self-employed, and railroad retirement taxes; social security contributions by theself-employed; unemployment insurance taxes; and other taxes (includingFederal employee retirement contributions, supplemental medical insurancepremiums, veterans' life insurance payments, and workmen's compensation).This disaggregation was particularly important because the relative weight ofsocial security taxes in the total has increased materially since the 1950s.

Estimates were made of the cyclical sensitivity of tax bases for each catego-ry of social insurance receipts (except the tax base of other contributions,which was assumed to be insensitive to cyclical influences). Separate tax elas-ticities were then applied to each of these bases. The tax elasticities were cal-culated as a weighted average of an employment elasticity (assumed to be1.0) and an average wage elasticity. For example, the average wage elasticityfor social security taxes (except those paid by the self-employed) and railroadretirement taxes has increased during the 1970s from an estimated 0.57 in1971 to 0.78 in 1979 because of the increase in the taxable earnings baserelative to average earnings. The weights are based on the proportion of thedifference between actual and high-employment wages and salaries attributa-ble to the change in employment, and the proportion attributable to thechange in average wages per worker, in moving from actual to potentialGNP.

Estimates of the elasticity of indirect business taxes with respect to changesin real GNP were revised last year on the basis of studies that analyzed thebehavior of indirect business taxes since the 1950s, after allowing forchanges in tax law. According to these studies the elasticity of total indirectbusiness taxes with respect to real GNP is less than 1, since most of the taxesare on products for which demand is inelastic in relation to income. Thiselasticity has declined from a peak of 0.9 in the mid-1960s to nearly 0.6 inrecent years as a consequence of the repeal of several cyclically sensitive ex-cise taxes, particularly the automobile excise tax.

Expenditure Adjustments

Separate estimates were made of the cyclical sensitivity of regular and ex-tended unemployment insurance benefits. The estimates suggest that ex-

63

penditures for regular unemployment insurance benefits currently rise about$2.5 billion for each 1 percentage point increase in the unemployment rate.The cost of extended benefits is estimated to rise smoothly as a percentageof the cost of regular benefits when the actual unemployment rate rises toabout 7V2 percent from the benchmark unemployment rate of 5.1 percent.This rise occurs as extended benefits payments are triggered in an increasingnumber of States. Near an unemployment rate of IV2 percent, the cost ofextended benefits jumps sharply, because these benefits are triggered for theNation as a whole.

During 1979, cyclical adjustments were made for six additional Federal ex-penditure programs: food stamps, aid to families with dependent children,old age and survivors' insurance, disability insurance, medicaid, and veterans'readjustment benefits (the GI bill). These adjustments were based on a sur-vey of research on these programs, most of it conducted within the FederalGovernment during the last decade. The increase in expenditures for a 1percentage point rise in the unemployment rate is about 1 percent of totalexpenditures on these programs, or $1.4 billion at 1979 expenditure levels.The total cyclical adjustment for these programs was $0.9 billion in 1979.

Further improvements are planned in the estimates of income shares andtax elasticities used in calculating the high-employment budget. During 1980these refinements and historical estimates of the high-employment budgetwill be reported in the Survey of Current Business; and the Bureau of EconomicAnalysis of the Department of Commerce will then regularly publish updatesand revisions of these historical estimates.

SUPPLEMENT II

Measuring the Restraint from Oil Price Increases

In analyzing the economic consequences of higher oil prices the Councilhas found it useful to estimate the magnitude of the "oil price drag," whichhas effects on real output and employment that are analogous to those offiscal drag.

Oil price increases affect the broad performance of the economy in twoprincipal ways. First, the overall price level is raised because of the higherprices of petroleum products and the higher costs of products incorporatingpetroleum. Second, income is transferred from users of petroleum to foreignand domestic producers and also to the government through increased taxcollections.

The effect of higher oil prices on users of petroleum is similar to the im-pact of a higher excise tax. Both raise prices directly, reduce real purchasingpower, and thus depress aggregate demand. But when oil prices rise, oil pro-

64

ducers receive higher net revenues and expand their demands for goods andservices.

The calculations of oil price drag are based on average prices for importedand domestically produced oil and on estimated changes in refining and mar-keting margins. The gross impact of a price increase for imported or domes-tic crude oil used in the United States is calculated by multiplying changes inaverage oil prices by the quantities of oil from each source, after allowing forthe reduction in oil consumption induced by higher prices. To estimate theeffect of higher margins, price increases at each stage in the processing anddistribution of refined products are taken into account, along with the quan-tity of each product used. Where crude oil or refined products are used asinputs in producing other goods, the increased costs are assumed to bepassed through to prices on a dollar-for-dollar basis.

In calculating the drag attributable to higher crude oil prices and increasedrefining and marketing margins, only the increase that exceeds the generalrate of inflation is taken into account. Estimates for 1980 assume no furtherrise in real prices of imported oil above the level prevailing in early 1980 andno further widening of real margins.

Gross oil price drag is defined simply as the gross value of changes in thecost that users of oil and refined products must pay. To calculate a net oilprice drag, estimates of respending on American products from the increasedrevenues of OPEC countries and those of domestic oil producers are sub-tracted. Increased exports of American products resulting from higher worldoil prices are estimated to equal 20 percent of the increase in the U.S. oil billafter 1 year and 50 percent after 2 years. It is assumed that 30 percent of theincremental after-tax revenue of domestic sellers of oil is respent for goodsand services after 1 year and 75 percent after 2 years.

According to the Council's estimates, gross oil drag increased over the 4quarters of 1979 by $59 billion and is expected to rise by an additional $41billion over the 4 quarters of this year. Over the same two 4-quarter periodsthe net oil drag is expected to increase by just under $53 and $24 billionrespectively. By the end of 1980 the net drag will have increased by anamount approximately equal to 3 percent of GNP.

65

CHAPTER 2

The Economic OutlookECONOMIC FORECASTS LAST YEAR tended to underestimate

the strength of private spending and, consequently, the economy'sability to withstand the effects of energy price shocks, fiscal restraint,and rising interest rates.

As indicated in Chapter 1, the resilience of the economy last yearreflected forces that may continue to sustain economic activity in1980. Nevertheless there are a number of reasons for expecting amild recession in the first half of this year. Rising oil prices, coupledwith increases in effective tax rates caused by inflation, will continueto dampen consumers' purchasing power in 1980, and the personalsaving rate is likely to rise from its exceptionally low level at the endof last year. Consequently the growth in consumer spending willslow. Businesses are likely to react to the slowdown in consumerbuying by trimming their capital investment plans. Housing startsturned down sharply late last year and may decline further in re-sponse to reduced availability of mortgage credit and extraordinarilyhigh mortgage interest rates. And inventory accumulation is also like-ly to decline further as final sales weaken.

In most past periods of economic recession both fiscal and mone-tary policy have been eased significantly. At the present time, howev-er, recession is still only a forecast; it has not yet appeared in overallmeasures of economic performance. Moreover the economy has re-cently withstood recessionary pressures far better than most analystsexpected. These facts, together with the seriousness of our inflationproblem, argue against an easing of policy at this time. Such a movewould heighten expectations of inflation and reduce our prospects ofmaking progress toward price stability. An easing of monetary andfiscal policy, in advance of any actual economic deterioration, wouldalso put strong downward pressures on the dollar in foreign ex-change markets. Creating an environment conducive to reduced pres-sures on prices and costs requires restraint in fiscal and monetarypolicies and great caution in making changes.

Fiscal policies cannot, of course, be set to run an unswervingcourse regardless of how actual economic events unfold. The Admin-istration will monitor economic developments closely in 1980 and is

66

prepared to recommend additional policy measures if worsening eco-nomic conditions warrant such action.

THE ECONOMY IN 1980 AND 1981

The expected recession is likely to be mild and brief. Declines inreal gross national product (GNP) should not extend much past mid-year, and economic growth will resume later this year, albeit slowly atfirst. Over the 4 quarters of 1980 real GNP is forecast to decline by 1percent.

Employment should remain almost unchanged despite the fall inreal GNP, as productivity declines and the average length of theworkweek is reduced. However, because job opportunities will notgrow as fast as the labor force, the unemployment rate is likely torise from 5.9 percent in the fourth quarter of 1979 to 7% percent inthe fourth quarter of this year.

In 1980 a major task of economic policy is to prevent the large en-ergy shocks of 1979 from spilling over into wages and industrialprices. Greater slack in the economy will help to hold down inflationby discouraging large wage increases and creating resistance to priceincreases. The rate of increase in home financing costs should slowthis year. Energy prices will continue to rise substantially, althoughmost probably at a slower pace than in 1979. Over the 12 months ofthis year consumer prices are forecast to increase 10.4 percent, com-pared with 13.3 percent in the year just ended. Late in 1980 the an-nual rate of inflation should be between 9 and 9V2 percent.

While several factors will be working to reduce inflation, dramaticprogress cannot be expected because the momentum of past inflationis substantial and expectations of inflation are deeply entrenched.The pay and price standards will continue to help restrain the growthof wages and nonenergy prices, but they cannot be expected to yielda large reduction in inflation. Indeed, to the extent that workers seekand achieve larger nominal wage gains, some increase in the underly-ing rate of inflation—that is, the rate determined by the long-termtrend in industrial costs—could occur this year. The degree of spill-over of last year's price increases into this year's wages will be limit-ed, however, not only by greater economic slack, but also by continu-ation of the voluntary pay and price standards.

Real growth is forecast to increase to a rate of 2% percent over the4 quarters of 1981. Employment growth is also expected to strength-en, and consequently the unemployment rate is forecast to be slightlylower by year's end. Inflation should decline somewhat further, toabout 8V2 percent over the 12 months of 1981, as a result of some

67

improvement in productivity growth and continued slack in labor andproduct markets.

FISCAL POLICY

Fiscal policy must continue to follow a course consistent with re-ducing inflation. This principle is particularly important in light ofthe large rise in oil prices in 1979 and the possibility of spilloverfrom higher oil prices into wages and nonenergy costs.

In fiscal 1980 Federal outlays are projected to be $563.6 billion, anincrease of about 14 percent from the previous year. In fiscal 1981the budget projects outlays of $615.8 billion, a rise of 9 percent.Most of the increase in Federal outlays over the 2 years arises fromthe effects of inflation on the Federal budget. Adjusted for inflation,Federal spending will increase only about 2V2 percent over the 2years. Outlays for defense, in real terms, will rise somewhat morethan 5 percent between fiscal 1979 and fiscal 1981. Inflation-adjustedoutlays for all other Federal programs will be less in fiscal 1981 thanthey were in fiscal 1980.

Fighting inflation continues to be the top priority of economic pol-icy, and hence the President has not recommended any legislatedchanges in tax rates in the 1981 budget. Since individuals will bemoving into higher tax brackets as their incomes increase, the shareof personal income taken by Federal income taxes will rise. Social se-curity tax liabilities are scheduled to increase in January 1981 by $18billion. The resulting rise in effective tax rates, combined with limit-ed growth of Federal outlays, will cause the Federal budget to movesignificantly toward restraint in the next fiscal year.

MONETARY POLICY

The actions taken by the Federal Reserve on October 6 to restrainthe growth of money and credit were followed by a sharp rise in in-terest rates to record postwar levels in the last quarter of 1979.Short-term market interest rates reached a peak in the third week ofOctober but eased somewhat thereafter.

The changed approach to monetary control, with more emphasison controlling the growth of bank reserves and greater willingness topermit fluctuations in interest rates, will help the Federal Reserve tohit its target ranges for the growth of the monetary aggregates.Short-term shifts in the demand for money and credit now show upin movements of short-term interest rates more than in the growth ofthe monetary aggregates.

While the new strategy will lead to more variation in the course ofinterest rates over the short run, it need not alter their central tend-ency. This will continue to be determined by longer-term trends in

68

inflation and the demands for credit and money relative to the availa-ble supplies, which are influenced by the objectives of the FederalReserve. As the year progresses, slowing economic activity and de-clining inflation should make the Federal Reserve's objectives formonetary restraint consistent with lower interest rates. The decline ininterest rates that develops, however, is likely to be moderate com-pared to past periods of recession because of the persistence of ahigh rate of inflation.

WORLD OIL MARKETS

World oil markets are expected to be in a delicate balance in 1980.Although consumer demand for petroleum products has fallen andcan be expected to decline further, continued high levels of stock-building, combined with supply cutbacks by some foreign producers,may offset whatever tendency might exist for the creation of slack inthe international oil market.

The outlook presented here takes into account the most recentprice increases announced by the Organization of Petroleum Export-ing Countries (OPEC). In Caracas, the OPEC members did not agreeon an integrated cartel pricing structure, though some member coun-tries made an effort to narrow existing price differentials within thecartel. Since then some of the countries with the highest prices haveposted additional increases. In early January the world price of oilwas near $28 per barrel, more than twice its level a year earlier. Theforecast makes allowance for the possibility that further increases inworld oil prices may somewhat exceed the inflation rate during 1981.

THE ECONOMIC FORECAST

At this time the economy appears likely to head into a mild reces-sion. Housing starts began to turn down in the fourth quarter of lastyear. New car sales also fell, and auto companies have curtailed theirproduction schedules for the first quarter of this year to reduce ab-normally large inventories, especially of large models.

The downward pressure on consumers' real incomes, resultingfrom rising oil prices and increasing fiscal restraint, is continuing. Inthe 2 years beginning with the final quarter of 1978, the high-em-ployment budget will swing to surplus by $34 billion. Increases incrude oil prices, and in domestic oil refiners' and distributors' grossmargins, in excess of the general rate of inflation will increase therevenues of domestic and foreign producers by $100 billion duringthese years. Some of these receipts will be respent within this time,but a large part will be retained. Allowing for such respending, andadjusting for double-counting, the combination of oil and fiscal re-straint is estimated to rise by almost $80 billion over the 2 years end-

69

ing in the fourth quarter of 1980, about 3 percent of GNP (see Table12).

TABLE 12.—Fiscal and oil price restraint on the economy, fourth quarter 1978 to fourth quarter

1980

[Billions of dollars, annual rate]

Item

Fiscal restraintx

Oil price restraint2 less adjustment for double-counting 3

Total

1978 IVto

1979 IV

2042

62

1979 IVto

1980 IV

143

17

1978 IVto

1980 IV

3445

79

1 Change in the high-employment budget.2 Increase in foreign and domestic producer revenues due to real increases in crude oil prices and refiners' and distributors'

gross margins, less the estimated respending by oil sellers of their additional revenues. The 1980 estimates assume no furtherrise in real imported oil prices from levels prevailing early in 1980.

3 Higher windfall profits taxes and corporate profits taxes due to real increases in crude oil prices and refiners' anddistributors' gross margins, which are included in both the measure of fiscal restraint and the measure of oil price restraint,have been deleted from the latter.

Source: Council of Economic Advisers.

Around the middle of 1980, forces of recovery from recession areexpected to be evident. Reduced restraint in financial markets willpermit housing starts to turn up in response to strong underlying de-mand. As inflation abates, some of the drain on consumer purchasingpower will be relieved. Continuation of fiscal restraint, together withmaintenance of cautious inventory policies by businesses, will resultin a slower pace of recovery than has been typical after earlierpostwar recessions. The rate of economic growth is expected tostrengthen during 1981, however, as businesses step up their capitalspending plans. Table 13 reports the forecast for this year.

Consumer Expenditures

Consumer spending in 1980 will be restrained by the drain on con-sumers' purchasing power imposed by rising energy prices and theincreases in effective tax rates caused by inflation. The rise in energyprices is expected to be smaller than in 1979, and there is likely to besome step-up in the rise of wage rates during 1980. But since em-ployment is projected to change little this year, after-tax income inreal terms will show only a small gain. An increase in tax refunds be-cause of overwithholding of individual income taxes in 1979 will helpto sustain the rise of after-tax incomes.

Last year the personal saving rate declined considerably and endedthe year below 3 Ms percent. Some increase from this exceptionallylow level seems very likely this year, but it should be small as peopletry to maintain their living standards in the face of slow growth ofincome. The expected rise in the saving rate, together with sluggishincome growth, is expected to result in a decline in real consumerpurchases of goods and services of between one-half and 1 percentover the 4 quarters of 1980. This would be the first reduction since1974.

70

TABLE 13.—Economic outlook for 1980

Item

Growth, fourth quarter to fourth quarter (percent):

Real gross national product...

Personal consumption expendituresNonresidential fixed investmentResidential investment...

Federal purchasesState and local purchases

GNP implicit price deflator


Output per hour2

Level, fourth quarter:3

Unemployment rate (percent)Housing starts (millions of units)4

1979 *

0.8

1.61.7

- 8 . 3

1.1- . 4

9.0

8.9- 2 . 0

5.91.6

Forecast range1980

- % to -1V*

- V 2 t o - 1OtO - V 2

- 1 1 to - 1 2

3 to 3V2- P A t o - P A

8% to 9y4

9y2 to 10- y 4 t o - %

7y4 to 7%i y 2 t o i %

1 Preliminary.2 Private business sector, all employees.3 Seasonally adjusted.4 Annual rate.Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor (Bureau of Labor Statistics), and

Council of Economic Advisers.

Expenditures for consumer durable goods will be most affected.Automobile sales for the year will be below 1979 average levels butshould improve in the second half. Purchases of other householddurables may also decline, given the downturn forecast for housingstarts.

Expenditures by consumers on nondurable goods are also expect-ed to decline in real terms in 1980; purchases of energy-related itemsare likely to be cut considerably. Consumption of services will prob-ably continue to rise but at a slower pace than in 1979.

Growth in real consumer spending should resume late this yearand strengthen in 1981, when employment is expected to rise morestrongly while inflation moderates. The increase in social securitytaxes scheduled for January 1, 1981, however, will limit the rise inreal disposable income. In part for this reason, real consumption ex-penditures are likely to grow less rapidly than real GNP next year.

Business Fixed Investment

Current indicators suggest that business fixed capital spending inreal terms should turn down moderately in 1980. New orders fornondefense capital goods, adjusted for inflation, have fallen fromtheir peaks of last spring. Capital appropriations of manufacturingfirms, adjusted for inflation, have also declined since the first quarterof last year. The most recent Department of Commerce survey ofcapital spending plans by business suggests that companies are plan-ning to increase their real outlays by only about 1 to 2 percent on ayear-over-year basis in 1980.

Business spending plans tend to be revised down when the econo-my weakens. With a mild recession early this year, capacity utilization

71

will be falling, profits will be squeezed, corporate cash flow will di-minish, and business spending will slow further. Recovery from therecession will lead to a strengthening of business investment plansearly in 1981, and increased activity in this key sector will provideincreasing support to economic growth next year.

Housing

The outlook for housing is more uncertain in 1980 than in the pastseveral years. Late in the fourth quarter the severe strains evident inthe mortgage market soon after the October 6 tightening of mone-tary policy were eased somewhat. Mortgage lenders appeared to berelaxing their lending terms a little; in some sections of the countrymortgage loan rates were lowered from the extreme highs of a fewweeks earlier. Interest rates on short-term market securities weredown from their October peaks, and depository institutions gainedadditional power to attract funds for lending when the regulatory au-thorities, effective January 1, instituted a floating interest rate ceilingon deposits with a maturity of 2Vfe years or more.

These developments should help to improve the flow of mortgagecredit early next year. Moreover the preemption of State usury ceil-ings by Federal law through March 31, which applies to new residen-tial mortgage commitments made during the period as well as to resi-dential loans closed, could lead to a substantial increase in creditavailable to potential home buyers in almost 20 States.

Very high mortgage interest rates will continue to discourage someindividuals, however, and make it difficult for others to qualify forloans. It may also take time for builders to reassess the prospects forhousing sales. A sample survey in mid-November conducted by theBureau of the Census indicated sharp cutbacks in builders' construc-tion plans for early this year.

Housing starts may therefore fall somewhat further to a trough be-fore midyear. Single-family housing starts will bear the brunt of thedecline. Unlike the 1974-75 experience, starts of multiple-familydwellings are expected to decline relatively little; vacancy rates arelow, and demand is strong in this segment of the housing market.

Later this year housing construction should recover as demand re-sponds to lower mortgage interest rates and continuing strong demo-graphic factors. The favorable after-tax rate of return on housingcompared with other physical and financial assets will also reinforcehousing demand.

Some slowing in the rise of housing prices may occur in 1980, par-ticularly in the first half, when sales will be depressed by the highcost of mortgage credit. This slowdown of inflation in the housingsector may be temporary, however, since the forces underlying thedemand for housing are strong.

72

In 1981 housing starts should continue to increase toward levelsconsistent with their long-term determinants. By the end of next yearhousing starts may be close to a 2-million annual rate.

Inventories

As final demand weakens in the first half of this year, the rate ofinventory accumulation is expected to fall. Since the cautious inven-tory policies followed by businesses during the recovery have pre-vented a large buildup of undesired stocks, no significant decumula-tion is expected. By around midyear, adjustments of stocks to lowerlevels of demand should be largely complete. Resumption of growthof final demand, together with lower rates of interest, will encouragean upturn in the rate of inventory accumulation in 1981.

Government Purchases

Real Federal purchases are projected to increase by about 3 per-cent over the 4 quarters of 1980, led by growth in defense outlays,and will continue to rise moderately during calendar 1981.

State and local government purchases in real terms are expected tocontinue falling in 1980. Concern over the impact of the recession ontax revenues, combined with taxpayers' resistance to expenditures fornew programs, will operate to hold down spending. In 1981, as eco-nomic growth resumes and tax revenues increase, State and localpurchases should increase in real terms, though much more slowlythan real GNP.

Employment and Unemployment

Employment is likely to be almost unchanged in 1980 despite theweakness of overall economic activity. Declining real GNP during thefirst half is expected to lead to a further reduction in output per hourworked and to a somewhat more rapid reduction in the averageworkweek than occurred in 1979. In 1981 employment growthshould be stronger as growth in real output increases.

Growth in the labor force is expected to average about 13A percenta year over the next 2 years. Weak growth of job opportunities willkeep the labor force from growing at the rates of recent years. Never-theless the increase in the number of job seekers will be larger thanthe rise in employment during 1980, and the unemployment rate isforecast to rise to 7% percent by the fourth quarter of 1980. A smalldecline in the unemployment rate, to about 7Vi percent, is expectedby the end of 1981.

Foreign Sector

Economic growth abroad is likely to slow from 4 percent in 1979to an average annual rate of about 2 percent in 1980 and 1981. For

73

the 2 years taken together, growth abroad is expected to be strongerthan in the United States. These developments will add moderatelyto real net exports of goods and services.

The contribution of net exports to real GNP growth this year andnext, however, will be significantly less than during the previous 2years. Imports are projected to decline in volume during the courseof 1980 and to recover only moderately in 1981—reflecting the pat-tern of mild recession and recovery foreseen for the U.S. economy.But the growth of exports is not expected to continue at the strongpace that marked the last 2 years, not only because growth abroad islikely to slow but also because the boost to exports from the past de-preciation of the dollar will largely have run its course.

The deficit on merchandise trade, which was about $28 billion in1979, is expected to increase somewhat over the coming 2 years be-cause the generally favorable developments in non-oil trade will notfully offset the large increase in the oil import bill from 1979 to1981. Agricultural exports, which reached record levels in the secondhalf of 1979, should remain on a high plateau in 1980. This estimatemakes allowance for the recent decision to limit grain sales to the So-viet Union. A small decline in the volume of agricultural exports overthe 4 quarters of 1980 will be nearly offset by a slight increase inexport prices of farm commodities.

The widening deficit on merchandise trade should result in a smallcurrent account deficit in 1980 and again in 1981, even though mod-erate increases in net receipts on invisibles transactions are likely.These developments are not expected to affect the value of the dollaradversely in foreign exchange markets, since the U.S. current accountposition should be stronger than that of other major industrialcountries.

UNCERTAINTIES IN THE OUTLOOK

As in 1979, a major threat to the outlook is that OPEC decisionsabout prices and production may lead to increases in world oil pricesthat go well beyond those announced recently. Such a developmentwould, in the short run, add to the restraint on the economy exertedby oil prices, exacerbate inflation, and lead to lower economicgrowth and higher unemployment. As Chapter 4 indicates, the prob-ability of large price increases for oil will be diminished if the majorconsuming countries join to reduce demand in world oil markets.Discussions toward this end are now proceeding in the InternationalEnergy Agency.

The new orientation of monetary policy poses additional uncertain-ties. If inflation does not decelerate as expected, interest rates maybe under more upward pressure than is now foreseen. On the otherhand, if the Federal Reserve's monetary targets are attained easily be-

74

cause money demand weakens more than expected, the Federal Re-serve's strategy will permit market forces to lower interest rates con-siderably. The central bank's scope for maneuver will be determinedin part by developments in monetary policy abroad and by a varietyof forces influencing the value of the dollar in exchange markets.

The potential behavior of the personal saving rate further compli-cates the assessment of the course of the economy. The saving rate isforecast to rise moderately from its exceptionally low level at the endof 1979. Should it increase further, economic growth would beweaker than expected. As Chapter 1 indicates, past experience pro-vides only limited guidance on how individuals may choose to allo-cate their disposable income between current consumption and sav-ing under present circumstances.

Perhaps the most serious risk for the longer-term performance ofthe economy is the possibility of a large spillover of energy price in-creases into wages and then into industrial goods prices generally. Iftemporary bursts in energy prices became a relatively permanent fea-ture of the underlying cost structure, the outlook for inflation duringthe years immediately ahead would worsen; and, as Chapter 3 pointsout, the costs of bringing inflation back down again would be in-creased. Maintenance of effective pay and price standards is essentialto minimize this spillover.

CONTROLLING INFLATION

Even during the very sharp 1975 recession the underlying rate ofinflation never fell below the neighborhood of 6 percent. In 1976and 1977 inflation remained at about this level. But early in 1978 in-flation began to accelerate, initially on account of a dramatic increasein food prices that resulted from limited supplies of meat and the ef-fects of cold weather on fruit and vegetable production. In 1978 and1979 adverse productivity developments acted to push up unit laborcosts. And around the close of 1978, as the economy was operatingnear the limit of its capacity, excess demand added briefly to upwardpressure on prices. But a dominant factor in the most recent worsen-ing of inflation was the explosion of energy prices in 1979. In theconsumer price index (CPI) energy prices in 1978 had risen by 8 per-cent, somewhat less than the overall rise for other consumer goodsand services. During the 12 months of 1979, however, energy pricesto consumers increased by 37.4 percent, directly adding about 2XApercentage points to overall inflation.

Temporary excess demand or sharply rising food and energy priceswould not affect inflation for more than a limited period if they didnot become built into longer-term trend rates of increase in wagesand other costs. However, as outside shocks drive up materialsprices, businesses may seek to maintain profit margins by raisingprices. The higher prices of finished goods may induce workers to try

75

to protect their real incomes by demanding larger nominal wages.Moreover businesses are less resistant to increases in the cost of ma-terials and labor when demand is relatively strong and these in-creases can be readily passed through to prices of finished products.Temporary shocks that aggravate inflation can thus become embed-ded in underlying inflation.

To the extent that a rise in prices relative to wages reflected asurge of business profits to abnormal levels, wages could rise to re-cover the lost ground. The increase in costs could then be absorbedby businesses without further price rises, and any longer-term in-crease in inflation could be avoided. However, as Table 6 in Chapter1 indicates, in 1979 the rise in prices relative to wages did not stemfrom a general increase in the profit share of national income. In-stead it was the result mainly of rising oil prices. Attempts to recap-ture the lost ground are not likely to lead to a readjustment of in-come shares; the danger is that they may trigger another round ofprice increases.

Trends in the broad range of prices for final industrial goods andservices in the U.S. economy are fairly evident in the fixed-weightprice index for personal consumption expenditures, excluding foodand energy, in the national income and product accounts. Chart 4 in-

Chart4

Fixed-Weight Price Indexfor Personal Consumption Expenditures

PERCENT CHANGE*

14

12

10

8

6

4

2

1960 62 64 66 68 70 72 74 76 78•CHANGE FROM FOURTH QUARTER TO FOURTH QUARTER.SOURCE: DEPARTMENT OF COMMERCE.

76

dicates a rise in that index from a 1 percent rate of increase in 1964to near 8 percent in 1979.

There have been few years in which this measure of price rise hasshown any significant moderation over the past two decades. In 1971and 1972, when mandatory price controls were in effect, inflationshown by this measure declined by more than IV2 percentage points,from 4V2 percent in 1970 to just under 3 percent in 1972. By the endof 1973, however, when a less stringent set of mandatory controlswas in place, inflation in the industrial and service sectors was upagain to 4% percent. Removal of the controls in early 1974 was fol-lowed by an explosion of wages and prices. By the fourth quarter of1974, prices paid by consumers for goods and services, excludingfood and energy, had risen lOVi percent above the level a year earli-er. Once this temporary burst of prices following controls ended, un-derlying inflation settled back to around 6 percent—higher than thelevel before the controls were instituted.

Periods of economic recession over these two decades producedlittle permanent progress in unwinding inflation. In the very mild re-cession of 1970, prices of goods and services other than food and en-ergy rose nearly as fast as they had in 1969 when the economy wasoverheated. Moreover in 1970, when the unemployment rate aver-aged almost 5 percent, the rise of hourly wages and fringe benefitswas almost as large as the rise in 1969, when the unemployment ratewas 3V2 percent. In 1975 the rate of increase of prices (excludingfood and energy) declined significantly, as did the rise of compensa-tion per hour worked. That moderation of inflation, however, cameabout largely because of the termination of the special factors push-ing up prices and wages in 1974. During the latter half of 1975 therates of increase in compensation per hour and in prices, excludingfood and energy, were still higher than they had been in 1973.

The trend of inflation created by these developments is disturbing.Shocks from excess demand and from higher prices of food and en-ergy have at least partly fed back into wages, costs, and prices forgoods other than food and energy. Since the early 1960s the start ofeach period of economic expansion has been marked by higher infla-tion than the start of the previous upswing, and inflation has beenhigher at the end of each expansion than at the beginning.

Developments in productivity have been another important sourceof the upward trend of cost and price increases. In the early 1960sincrements to productivity averaged about 3 percent per year, asTable 14 shows. Rates of advance have dwindled, however, since themiddle years of the 1960s. Adjusted for cyclical developments, pro-ductivity growth in the 2 years ending with the fourth quarter of1978 was only one-half of 1 percent. During 1979 cyclically adjustedproductivity declined sharply. The longer-term reduction in produc-

772 9 4 - 2 8 9 0 - 8 0 - 6

tivity growth would not have influenced the trend of inflation if wageincreases had been correspondingly scaled down.

Table 14.—Changes in compensation per hour, productivity, unit labor costs, and prices, 1959-79

[Percent change per year x ]

Period

1959 to 19641964 to 19691969 to 19721972 to 19741974 to 19771977 to 1979 2

Private nonfarm business sector, allemployees

Compensa-tion per

hour

4.05.96.59.58.28.9

Output perhour

2.91.32.8

- 2 . 02.7

- . 5

Unit laborcosts

1.04.53.6

11.85.39.5

Fixed-weightdeflator for

personalconsumptionexpenditures

excludingfood and

energy

1.13.23.87.56.07.3

1 Changes are measured from fourth quarter to fourth quarter.2 Preliminary.

Sources: Department of Commerce (Bureau of Economic Analysis) and Department of Labor (Bureau of Labor Statistics).

As noted earlier, rising inflation over a long period has influencedthe way prices and wages are set, and these and other structuralchanges may have reduced the response of wages and prices to amoderate degree of slack in the economy. Formal escalator clauses inlabor contracts have become more common. In 1970 only one-fourthof the workers covered by major collective bargaining contracts hadsuch clauses; in 1979 the contracts of nearly 60 percent of such work-ers had these clauses. Nonunion wages have also become more sensi-tive to price increases, perhaps because informal agreements to pro-vide cost-of-living protection for workers have become more com-mon. Econometric studies of the determinants of wage changes indi-cate a larger response to price inflation in more recent periods, andsome studies suggest a smaller response to labor market slack. Theincomes of other groups have been adjusted for inflation as well.Since 1975 social security benefits have been indexed to increases inthe consumer price index.

Widespread belief that inflation will continue, if not worsen, leadsbusinesses to accede to cost increases in the expectation of beingable to pass the added costs forward into higher prices. These higherprices then become the basis for additional rounds of wage increases.Expectations of inflation can also lead individuals and businesses toaccelerate their spending and thus add to the pressure of aggregatedemand on available supplies of goods and services.

Repeated shocks to prices from the energy and food sectors aggra-vate the problem. As shocks become more frequent, the probabilitygrows that a given shock will have a greater effect on expectations ofinflation.

In the present environment we cannot realistically expect that priceand wage increases will respond quickly and strongly to a moderateincrease in the degree of slack in the economy. Nor can it be expect-

78

ed that a sharp but relatively short recession would have a lasting ef-fect on inflation. Expectations of inflation have become much toodeeply entrenched for that to happen.

Aggregate demand restraint is nonetheless critical to the creationof an environment that helps to prevent an acceleration of under-lying inflation in 1980 and to lower it in the years beyond. Fiscal andmonetary policies must be conducted in ways that convince the pub-lic—workers, businesses, consumers, and investors—that our govern-ment will not permit inflation to proceed unchecked. It is particularlycritical at this time to avoid circumstances in which the energy-ledprice increases of 1979 could easily carry over into a general wage-price spiral at double-digit rates of increase. Maintenance of restric-tive fiscal and monetary policies in the face of the forces now weak-ening the economy will unfortunately mean less output and employ-ment in the immediate future than anyone would like. But persis-tence in restraint now is the only way to produce the conditions forsustainable expansion later.

The Administration's fiscal policy exhibits the restraint needed atthis time. As Table 11 in Chapter 1 indicates, the high-employmentFederal budget began to move from stimulus toward restraint earlyin 1978. At that time the high-employment deficit amounted to about1 Vi percent of actual GNP. The budget moved into surplus in early1979 and will move further into surplus throughout 1980 and 1981.By late 1981 the surplus in the high-employment budget will amountto 2V4 percent of GNP; the swing from deficit to surplus over the 4years ending in the fourth quarter of 1981 will be about 4 percent ofGNP. This fiscal policy, and the impact on the economy of higher oilprices, imply a strong degree of restraint on aggregate demand.

The monetary policy being pursued by the Federal Reserve is con-sistent with an overall aggregate demand policy aimed at slowing in-flation and breaking the grip that expectations of inflation have ondecisions affecting wages, prices, and spending. Because the newmethods of implementing monetary policy should make the monetaryauthority better able to achieve its target ranges for growth of themonetary aggregates, they provide greater assurance that monetarypolicy will not inadvertently add to pressures on costs and prices bypermitting excessive increases in supplies of money and credit. At thesame time the new approach will tend to lead fairly promptly tolower interest rates as inflation comes down and economic activityweakens.

THE PRICK AND PAY STANDARDS

The price and pay standards announced in October 1978 recog-nized that our current inflation problem cannot be solved throughaggregate demand policy alone. The costs in forgone output and em-

79

ployment would be unacceptably high. Used in conjunction with pru-dent monetary and fiscal policies, voluntary standards for prices andwages can help limit increases in prices that widen profit margins,lessen the need for catchup wage increases, and minimize the trans-mission of temporary price pressures into wages and other costs.

During their first 15 months the pay and price standards did helphold down inflation, as indicated in Chapter 1. The first year's expe-rience revealed two major problems, both caused in large measure bysharp price increases in sectors where standards cannot effectivelylimit price increases: energy, other raw materials, and food.

Many firms faced with uncontrollable cost increases applied toswitch from the price-deceleration standard to the profit-margin limi-tation. While this limitation restricted both the profit margin and therise in dollar profits that could be secured through higher prices,firms that qualified for the exception were still able to pass throughlarge uncontrollable cost increases to prices of final products. More-over the constraint on the growth of dollar profits had an upwardbias. Firms with low base-year profits were able to increase pricesand raise their profit margins to the average of the best 2 out of 3prior fiscal years, while those with high base-period profits were notcompelled to make a comparable downward adjustment.

On the pay side, a problem of equity was created by the way cost-of-living adjustment (COLA) clauses were treated. Calculations ofwhether a wage contract adhered to the standard assumed a 6 per-cent inflation rate in assessing the cost of a COLA clause. This ap-peared to be a reasonable assumption at the time that the standardwas designed, especially for multiyear contracts. Because of the largeprice increases in the several sectors noted above, however, inflationduring the first program year was far in excess of 6 percent. As a re-sult, many workers with COLAs were in compliance with the paystandard while receiving greater wage increases than the complyingworkers without such clauses—and greater increases than were con-sistent with the desired degree of wage restraint.THE SECOND PROGRAM YEAR

Sharply higher prices led to a substantial reduction in real wages inthe first program year. Because many workers have attributed theloss of real income to the pay standard rather than to its fundamentalcauses, there have been pressures to relax the pay standard in waysthat would aggravate inflation. The American people cannot be whol-ly recompensed for losses of real income due to higher world oilprices. Efforts by workers or other groups to restore real incomethrough larger increases in wages, salaries, or other forms of nominal

80

income will only increase business costs and thus ultimately intensifyinflation. This fact makes the pay and price standards all the moreimportant in the year ahead.

On November 1, 1979, the Council on Wage and Price Stabilityannounced the second-year price standard. Companies are expectedto limit their price increases for the 2 years ending September 30,1980, to the price change for the 2 years from 1976 to 1977. A 2-year standard was chosen to avoid penalizing companies that raisedprices less than the standard allowed during the first year. Any com-pany, regardless of its base-period performance, will be in compli-ance if its prices go up less than 5 percent in the 2 years; any compa-ny whose prices rise by more than 19 percent will be out of compli-ance. Under the profit limitation exception, price increases are per-missible if the growth of dollar profits over the 2 years does not ex-ceed 13.5 percent and the profit margin is no higher than the aver-age in the best 2 out of 3 fiscal years preceding the program. Thespecial adjustment for firms whose base-year profit margin is belowthe profit margin in the best 2 of the last 3 years has been cut in half.

To elicit greater public participation in the standards program, aPrice Advisory Committee has been created. This Committee, whichconsists of six public members appointed by the President, will fromtime to time recommend to the Council on Wage and Price Stabilitymodifications of the price standards and new or revised interpreta-tions of them.

The problem of catchup for workers without COLA clauses whocomplied with the pay standard in 1979 is difficult. Just before theend of the first program year the Council on Wage and Price Stabil-ity allowed a self-administered 1 percent pay increase for complyingworkers not covered by COLA clauses; on a case-by-case basis the in-creases may be more than 1 percent where disparities between wageincreases of workers with COLAs and other workers in similar situa-tions demonstrably require correction.

On September 28, 1979, the Carter Administration and the leader-ship of the American labor movement reached a National Accord.This agreement provides for the cooperation and participation of or-ganized labor in formulating and implementing policies aimed at re-ducing inflation effectively and equitably while furthering ournational goals of full employment and balanced growth.

One immediate result of this accord was the creation of a tripartitePay Advisory Committee with 18 members: six from labor, six frommanagement, and six from the public. Its central task is to recom-mend modifications to the first-year pay standard. The Committeehas been asked to look at the basic standard, the accompanying infla-

81

tion assumption for those workers who have COLA clauses, the ex-emption for low-wage workers, equitable catchup adjustments forworkers not covered by COLA clauses, and the treatment of incre-mental or merit increases.

The Committee has already made a number of recommendationsthat the Council on Wage and Price Stability subsequently adopted.The Committee recommended loosening the exception for tandempay relationships allowed in the first year. Pay increases in "follower"units will be in compliance if they are substantially equal to increasesin "leader" units that are exempt from or in compliance with the paystandard; employee groups whose pay increases follow formal marketsurveys of pay rates will also be in compliance. The Committee fur-ther proposed that the tandem exception be self-administered, withnotification to the Council on Wage and Price Stability after the fact.

The Pay Committee recommended a change as well in the low-wage exemption. The exemption will continue to apply to individualworkers making under $4.00 per hour on October 1, 1978. Employeegroups with an average straight-time hourly wage rate of $5.35 orless during the third quarter of 1979 are exempt from the pay stand-ard in the second program year.

Finally, a recommendation by the Committee clarifies the status ofso-called incremental pay increases. Any promotion or pay raise inestablished pay plans that results from completing a qualification re-quirement or from movement within a preexisting pay structure isexempt from the pay standard.

As this Report went to press, the Committee had just recommendeda basic pay standard that would establish a range of allowable pay in-creases, together with a statement of principles for labor and man-agement to use in determining the appropriateness of particularwage increases.THE OUTLOOK FOR INFLATION

Restraint on aggregate demand in combination with the pay andprice standards can make an important contribution to the control ofinflation in 1980 and help lay the foundation for later reductions ininflation. Price developments in specific sectors such as food, energy,and housing will continue to have a significant impact on inflation.

Over the 4 quarters of 1980 food prices should rise approximatelyin line with general inflation. Prices are expected to climb most rap-idly during the fall. Both the farm value of food prices and mar-keters' margins are expected to move up at about the same rate.

Inflation will continue to raise food marketing costs, which accountfor about two-thirds of consumer food costs. Price increases in foodmarketing operations, including labor, packaging materials, fuels, and

82

transport supplies, are quickly translated into higher retail foodprices.

The pattern of price increases for food during the year will alsodepend on the general level of economic activity and the relativeavailability of food products, primarily meats. Beef supplies for theyear will be about the same as in 1979, making 1980 the first yearsince 1976 that supplies have not declined substantially. However,seasonally lower cattle marketings could put upward pressure on beefprices during the spring, and a reduction in the supplies of othermeats is likely to boost meat prices in the fall. While pork and poul-try production will continue to increase through the first half of theyear, it might slow later because farm prices for these commoditiesmay not cover production costs during the first half of 1980. Porkand poultry prices are consequently expected to remain fairly stablethrough midyear but then to increase, particularly in the fourth quar-ter.

A major uncertainty in the outlook for food prices is consumer de-mand. While food prices tend to be most heavily influenced by theavailability of food products and marketing costs, the slower growthof consumer incomes expected in the first half of this year will helpto moderate food price increases. Prices for highly perishable prod-ucts like meat, fruit, and vegetables are likely to be most affected.

Energy prices to consumers are likely to increase less in 1980 thanin 1979, when they rose 37.4 percent. The outlook for prices ofpetroleum products is very uncertain, however, since it is not clearhow much further world oil prices will rise this year. The forecast as-sumes no further increase in real world oil prices in 1980, after themost recent round of OPEC price increases. As decontrol of domes-tic oil prices proceeds, the ratio of domestic to world oil prices willrise from about two-thirds at the beginning of 1980 to slightly overfour-fifths at year's end. Domestic oil prices will rise substantially overthe 4 quarters of 1980.

The extent to which crude oil price increases are passed on to con-sumers depends heavily upon the balance of supply and demand inthe oil market. In 1979 the market was tight enough not only toallow full pass-through of higher crude oil prices, but also to permita widening of refiners' and distributors' gross margins. Barring an-other severe disruption in world oil supplies, the outlook for the bal-ance of supply and demand in the world oil market, at least in thefirst half of 1980, is not likely to permit a further widening of infla-tion-adjusted margins.

The rate of increase in prices of houses may moderate somewhatearly in 1980 as a consequence of reduced demand attributable todevelopments in mortgage credit markets late in 1979. The rise in

83

home financing costs should also be moderated later in 1980 by de-clining mortgage interest rates.

Available evidence noted in Chapter 1 suggests that the pay stand-ard reduced wage inflation by about 1 percentage point in 1979.The voluntary pay standard will continue this year, although its im-pact on increases in wage costs during 1980 may be somewhat lessthan in 1979, both because the standard has had to be made moreliberal and because of pressures to restore real wage losses sufferedin 1979. Increased slack in the labor market, however, will also helpto hold down the rise of wage rates this year. The increase in averagehourly earnings is expected to range between 8V2 and 9 percent in1980.

Because of the projected cyclical decline in real GNP, the outputper hour of all employees in the private business sector will probablydecline in 1980, but by less than in 1979. As a consequence the in-crease in unit labor costs will be above 10 percent for the secondyear in a row. Not all of these cost increases will be passed throughto consumers, however, because weak aggregate demand will limitprice increases and cut into profit margins in 1980.

Taking all these factors into account, consumer prices are expectedto rise about 10.4 percent over the 12 months of this year, consider-ably less than in 1979. Smaller increases in energy prices and in thecosts of purchasing and financing homes are principally responsiblefor the moderation. Most of the expected slowing of inflation thisyear will occur during the second half, when the direct effects thatOPEC's recent price increases exert on the prices of petroleum prod-ucts will be largely exhausted. Some further winding down of infla-tion is expected in 1981, when the increase in the consumer priceindex is expected to be about 8 V2 percent.THE PRODUCTIVITY PROBLEM

The trend rate of productivity growth in the United States, as inother major industrial countries, has been declining in recent years.In the United States, however, this decline started earlier and haslasted longer than in other industrial economies. Table 15, whichcompares growth in output per worker for the major OECD countries,makes it evident that declines have occurred in all countries.

Table 16 shows growth in output per hour in the United States sincethe end of World War II. During the first 20 years after the war, outputper hour for all employees in the private nonfarm business sector rose atan average annual rate of just under 2V2 percent. From 1965 to 1973the increase was 1V2 percent. Since 1973 the annual growth of pro-ductivity has been less than 1 percent. In the most recent period,years of sharply declining productivity, such as 1974 and 1979, havebeen interspersed with years of fairly good gains, such as 1976.

84

TABLE 15.—Annual growth in GNPper employed worker in major industrial countries, 1963-79

[Percent change per year]

United StatesJapanGermanyFranceUnited KingdomItalyCanada

Country1963

to1973

1.98.74.64.63.05.42.4

1973to

1979 l

0.13.43.22.7

.31.6

.4

1 Estimate.

Source: Organization for Economic Cooperation and Development.

Last year's productivity performance was particularly disappoint-ing. While productivity increased at a rate of 1.1 percent during1978, in line with the recent trend, it declined over the 4 quarters of1979 by about 2 percent. Productivity growth is cyclically sensitivebecause businesses are generally slow to adjust their work force tochanges in production. This tendency causes sharp increases in pro-ductivity when output increases vigorously in the early stages of re-covery; later, near cyclical peaks, very weak growth in productivity oreven declines may occur as growth in real output slows. Still, cyclicalconsiderations cannot account for all of the decline in productivitylast year.

TABLE 16.—Labor productivity growth, 1948-79

[Percent change per year]

Sector

Private business sector

Nonfarm

ManufacturingNonmanufacturing

1948to

1955

2.5

2.4

3.22.1

1955to

1965

2.4

2.5

2.82.2

1965to

1973

1.6

1.6

2.41.2

1973to

1978

0.8

.9

1.5

1978 IVto

1979 IV 1

- 2 . 0

- 2 . 2

1 Preliminary.2 Not available.

Note—Data relate to output per hour for all employees.


Chart 5 shows 4-quarter changes in productivity since 1965, ad-justed for cyclical fluctuations. The productivity pattern of the lastdecade has not been marked by consistently lower growth, but by pe-riods of relatively satisfactory productivity gains interrupted by sever-al intervals of very poor performance. One of the disturbing factorsabout the productivity decline of 1979 was that it did not interrupt aperiod of high growth but followed 2 years in which productivitygains had already been quite low.

Last year's Report evaluated the various explanations for the slowergrowth of productivity in recent years. The Council has continued toexamine the productivity problem and to monitor closely other analy-ses of this topic.

85

Chart 5

Productivity Adjusted for Cyclical Variation

PERCENT CHANGE FROM FOUR QUARTERS EARLIER

4

3 -

2 -

-2 -

1965 66 67 68 69 70 71 72 73 74 75 76NOTE: DATA ARE FOR PRIVATE NONFARM BUSINESS SECTOR. ALL PERSONS.SOURCE: COUNCIL OF ECONOMIC ADVISERS.

77 78 79

The magnitude of the slowdown and numerical estimates of thevarious forces behind it differ according to the period and measureof productivity examined. Most analysts have, however, identifiedbreaks in productivity growth in the mid-1960s and again in 1973,though other sharp reductions in cyclically adjusted productivity ap-pear to have occurred as well. A comparison of estimated productiv-ity growth in the nonfarm economy from 1973 to 1978 with the esti-mated growth from 1948 to 1973 indicates a slowdown of about 1%percentage points. Statistical analyses have been able to identify fac-tors responsible for some of the decline, but a significant part re-mains unexplained.

The slowdown in the growth of the capital-labor ratio may havecontributed about one-fourth of a percentage point to the decline, al-though some estimates put the figure higher. In earlier years theentry into the labor force of many young workers had a measurableimpact on the decline, but this factor has not been so important since1973. Offsetting some of the loss, however, have been the improvedtraining and health of the labor force.

86

The diversion of resources to comply with government regulationmay have accounted for as much as three-tenths of a percentagepoint of the decline, although the impact has not been so large inrecent years. Many of these regulations have of course improved thequality of our environment and the health and safety of workers andconsumers, benefits that are not measured in business output andproductivity statistics. But regulation has not always proceeded in themost effective and efficient manner, and there is ample room for im-provement. Administration initiatives to modernize the regulatorystructure in some industries have improved productivity. (The case ofthe airline industry is discussed in Chapter 3.)

The relevance of research and development spending in explainingthe decline of productivity is controversial. The real volume of re-sources devoted to research and development fell by 7 percent be-tween 1968 and 1975, but since the latter date it has increased stead-ily. However, as a percentage of GNP, total research and develop-ment spending has declined since the mid-1960s, from 3.0 percent in1964 to 2.2 percent in 1979. In private industry, where the links be-tween productivity and research and development are more firmly es-tablished, real expenditures have increased steadily over the last twodecades and have remained relatively stable as a share of GNP. Moreindustrial research and development, however, has been aimed atcompliance with regulatory requirements, and this may affect its con-tribution to measured output, especially in the short term. Moreover,with the recent slowing of growth of the private capital stock, fewertechnological advances may have been embodied in equipment usedin production. Federal support for research and development rosesteadily during the early and middle years of the 1960s, but in realterms declined by about one-fourth from fiscal 1967 to fiscal 1975.Government research and development support is concentrated inbasic research and in military research, however, which affect busi-ness output and productivity only after very long lags. Thus thisslowdown in Federal funding may have had little effect on measuredproductivity so far. And Federal obligations for research and devel-opment have increased by over 14 percent in real terms since 1975.

Finally, some events, such as sudden changes in energy prices orthe impact of inflation on decisions by business and individuals, mayaffect productivity in ways not yet understood. For example, rapid in-creases in energy prices, if sustained, would make the operation ofolder energy-intensive equipment less profitable and may make someof our present knowledge less relevant. To the extent that energyand capital are complements in production, rising energy prices mayslow the rate of growth of the capital-labor ratio, and labor produc-tivity may fall. While this phenomenon probably played a role, the

87

available evidence does not suggest that it represents a major sourceof the decline in productivity since 1973.

Since it is difficult to identify a single cause for a slowdown in pro-ductivity growth, the immediate prospects for a dramatic improve-ment in productivity are not good. Most recommendations for poli-cies to improve productivity have been directed at incentives to in-crease investment in human and physical capital as well as in re-search and development. Since the slower growth of physical capitalis responsible for only a part of the decline in productivity growth,efforts to stimulate business fixed investment will not solve all ourproductivity problem. Still, improved investment performance is al-most surely a necessary condition for higher productivity growth.

In last year's Report the Council estimated the current trend rate ofadvance in productivity at 1 V2 percent. Since the average rate of in-crease during the past 6 years has been below that figure, the trendrate of increase may very well be still lower, perhaps 1 percent. Sucha judgment, however, would give very heavy weight to last year'ssharp decline in productivity, whose causes are not clearly under-stood. The Council has therefore decided to leave its estimate of thetrend unchanged at 1V2 percent. It is recognized, however, that cycli-cally adjusted productivity growth in the immediate future may fallshort of that figure.

POTENTIAL GNP

The uncertainties surrounding the causes and extent of the declinein trend productivity make the assessment of the rate of growth ofthe economy's productive potential most difficult. In last year's Re-port, the Council of Economic Advisers noted that the trend rate ofgrowth of productivity since 1973 was extremely uncertain, but ap-parently it was below the 2 percent figure consistent with the 3 V2percent growth rate of potential GNP previously estimated.

Corollary evidence for this conclusion came from inaccurate pre-dictions of the unemployment rate based on Okun's law, which de-scribes the relation between the unemployment rate and the gap be-tween actual and potential real GNP. If potential GNP growth hadbeen at 3V2 percent from 1968 onward, the unemployment rate in1977 and 1978 would have been substantially higher than its actuallevel.

As a result of these considerations the Council concluded in the1979 Report that potential GNP had grown at only a 3 percent aver-age rate in the 5 years since 1973. With this downward revision, theoverpredictions of the unemployment rate by Okun's law werebrought within historical margins of error. Underlying this estimateof potential GNP growth was an assessment that productivity hadgrown on average at about 1 percent per year, perhaps one-half of 1

88

percentage point below its long-term average. The shortfall of actualproductivity growth from its trend was offset by average annualgrowth in the labor force about one-half of 1 percent above its long-term average.

The projection made in the 1979 Report of potential GNP growthover the 1978-83 period was 3 percent, the same as the revised esti-mate for 1973-78. The estimated trend productivity growth underly-ing this projection was 1V2 percent, implying that some part, but lessthan half, of the 1973-74 drop in productivity represented nonrecur-ring events and that the remainder derived from a lower trend rateof increase.

Developments during 1979 raised further questions about thelong-term trend rate of increase in productivity, as noted earlier.Once again the unemployment rate was substantially less than wouldhave been indicated by a projection based on a comparison betweenthe rate of growth of actual GNP and the assumed growth rate of po-tential GNP. If potential GNP had been rising at 3 percent, actualeconomic growth of 0.8 percent in the 4 quarters of 1979 shouldhave caused the unemployment rate to rise from 5.8 in the fourthquarter of 1978 to about 6V2 percent in last year's final quarter; infact the unemployment rate was unchanged over the period.

One year's experience does not provide sufficient evidence tochange the 1V2 percent estimate of long-term productivity advancethat underlies the Council's projection of a 3 percent annual trendrate of growth in potential GNP. The 1979 drop in productivity,however, in the wake of a similar one in 1974, does reduce the confi-dence with which that estimate can be held. In any event the Councilbelieves that cyclically adjusted productivity growth in the next 2years will not recover fully from its 1979 low and reach the 1 V2 per-cent trend. For this reason the estimate of the rate of growth of po-tential GNP has been reduced from 3 to 2 V2 percent during the 3years beginning with the first quarter of 1979. This temporarily lowergrowth of potential can be divided into the following components: anannual growth in potential employment of near 2 percent, an in-crease in productivity of about 1 percent per year, and a one-half of1 percent per year decline in hours per worker.

This estimate puts potential real GNP at $1,461 billion in 1972dollars in 1979, $30 billion above the actual real GNP of $1,431 bil-lion, as shown in Table 17. By the fourth quarter of 1979 the gapbetween actual and potential GNP was $36.3 billion in 1972 dollars.

During the 1982-85 period productivity growth should increase.Improved growth in investment and a more experienced labor forceshould boost cyclically adjusted productivity growth during this peri-od to a range of 1V2 to 2 percent. A projected average annual in-crease of 1% percent in potential employment, combined with an ex-

89

TABLE 17,—Potential gross national product and benchmark unemployment rate, 1973-79

[Billions of 1972 dollars, except as noted]

Year

[97AZZZZZZZIZZZZZZZZZZZZI1ZZZ

19751976197719781979

PotentialGNP

1,227.01,264.4

1,302.31,341.41,381.61,422.91,461.1

Actual GNP

1,235.01,217.8

1,202.31,273.01,340.51,399.2

1 1,431.1

GNP gap(potential

less actual)

- 8 . 046.6

100.068.441.123.730.0

Benchmarkunemploy-ment rate(percent)

4.95.0

5.15.15.15.15.1

1 Preliminary.

Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers.

pected yearly fall in hours of one-half of 1 percent, yields a growth inpotential output over the 1982-85 period that is near 3 percent.

Projections of potential GNP, and in particular of cyclically adjust-ed productivity, are always subject to wide margins of error. This isespecially true now, when the economy is adjusting to higher energyprices, changes in comparative advantage in international trade, andnew trends in regulation.

GOALS OF ECONOMIC POLICY

In 1978 the Humphrey-Hawkins Full Employment and BalancedGrowth Act, enacted with the support of this Administration, speci-fied procedures for developing and reviewing economic policies with-in the government and required the President to set 5-year goals forthe U.S. economy. Last year the Economic Report of the President and theaccompanying "Annual Report of the Council of Economic Advisers"discussed the act at length. In September 1979 the use of the princi-ples in the act as a framework for making economic policy was reaf-firmed in the National Accord reached by the Administration andAmerican labor leaders.

The Humphrey-Hawkins Act incorporates both general and highlyspecific objectives for two of the most important indicators of thecountry's economic health: the unemployment rate and the rate of in-flation. The general objectives of the act—and those of the Adminis-tration—are to achieve full employment and reasonable price stabil-ity. The act is quite clear that reasonable price stability means ulti-mately achieving a zero rate of inflation. Full employment is not de-fined as any specific unemployment rate. The preamble to the act,however, indicates that the purpose of the legislation is "to translateinto practical reality the right of all Americans who are able, willing,and seeking to work to full opportunity for useful paid employmentat fair rates of compensation." The act also establishes a balancedFederal budget as a high-priority goal of economic policy.

90

The act sets up specific milestones for the reduction of unemploy-ment and inflation as the Nation proceeds toward the ultimate objec-tives. Interim goals of 4 percent for the overall unemployment rate(3 percent for adults) and 3 percent for inflation are set for 1983.The act requires that this year's Economic Report include, along with areview of the numerical goals and timetables for reducing unemploy-ment and inflation, and the goal of a balanced budget, a report tothe Congress on the degree of progress being made in these areas,and a discussion of the policies being used to achieve these goals.

In this and subsequent Economic Reports the President may, if hefinds it necessary, recommend modification of the existing timetableor timetables for achieving the interim goals of 4 percent for the un-employment rate and 3 percent for inflation.

Progress Toward Meeting the Humphrey-Haw kins Goals

At the end of 1976 the overall unemployment rate was still close to8 percent. For blacks and other minorities the rate was over 13 per-cent. The average duration of unemployment exceeded 15 weeks,and 1 million discouraged workers stayed out of the labor force be-cause they believed no jobs were available. A large part of the laborresources idled by the severe recession of 1974-75, the deepest ofthe postwar period, still remained unemployed.

Since the fourth quarter of 1976, increases in employment havebeen extraordinarily large, averaging nearly 3V2 percent per year.Gains in employment have occurred for all major demographicgroups (Table 18).

TABLE 18.—Changes in employment and unemployment by demographic group, fourth quarter 1976

to fourth quarter 1979

[Seasonally adjusted, except as noted]

Group

Unemployment rate(percent)

1976 IV 1979 IV

Employment

Thousands of persons

1976 IV 1979 IVPercentchange 1

Total....

By sex:MaleFemale

By race and origin:WhiteBlack and otherHispanic origin 2....

By age:Adults (20 years and over)Teenagers (16-19 years)

Black and other

7.7

7.013.211.1

6.619.036.6

5.9

5.111.28.6

4.816.134.1

88,242

52,73235,509

78,6899,5773,841

80,9877,255

588

97,665

56,64841,017

86,64011,0484,626

89,6867,979

671

10.4

7.314.9

9.815.220.4

10.59.4

15.7

1 Adjusted for the increase of about 250,000 in employment and labor force in January 1978 resulting from changes in thesample and estimation procedures introduced into the household survey.

2 Data on persons of Hispanic origin are tabulated separately without regard to race, which means that such persons are alsoincluded in the data for white and black and other workers; at the time of the 1970 Census, approximately 96 percent of theirpopulation was white. Data are not seasonally adjusted.


91

For blacks and other minority groups the percentage rise in em-ployment was half again as large as for whites. Gains in employmentamong persons of Hispanic origin, in percentage terms, were abouttwice as large as for all workers. Aided by strongly expanded Federaljobs programs for youth, employment among black teenagers grewby nearly 16 percent. Since the number of black teenagers seekingwork also climbed very sharply, however, their unemployment ratefell less rapidly, and in December 1979 it was still an exceedinglyhigh 34.3 percent.

While unemployment rates declined for all major demographicgroups, disparities among the rates for different groups did notchange appreciably. The unemployment rate late last year for blacksand other minorities was still about twice as high as that for whites;the teenage unemployment rate was more than three times that foradults.

The most distressing feature of the unemployment record is thefact that the unemployment rates of black teenagers failed to declinesignificantly. To address this very serious problem the Administrationhas substantially increased the funds available during the past 3 yearsto support employment and training programs for youth. Indeed de-spite a tight budget it has gone further. An important new initiativeto improve the basic skills and the ability of disadvantaged youth tofind and keep jobs is proposed in this year's budget.

As discussed earlier in this chapter, inflation has not declined dur-ing the past 3 years; in fact, it has increased appreciably since 1976.A large part of the increase was due to developments in the food andenergy sectors, where aggregate demand policies and the voluntarypay and price standards have little influence. The underlying, orlonger-term, rate of inflation, however, has also moved up consider-ably.

Progress in reducing the Federal budget deficit has been signifi-cant. The budget deficit has declined from $66 billion (4.1 percent ofGNP) in fiscal 1976 to a projected level of about $40 billion in the1980 fiscal year (1.6 percent of GNP). The budget for 1981 just sub-mitted to the Congress moves the deficit substantially lower, to $16billion. Sharp increases in oil prices have worsened the outlook foreconomic growth in 1980. If economic growth in 1980 and 1981were strong enough to keep the unemployment rate from rising, theexpenditure programs and tax rates in the 1981 budget would yield asurplus.

Achieving the Goals of the Humphrey-Hawkins Act

The next 2 years will be difficult for the U.S. economy. As indi-cated earlier a mild recession is expected in the first half of this year,

92

and some increase in unemployment is likely. Economic growth is ex-pected to resume later in 1980 and to continue through 1981; andthe unemployment rate should begin to decline, though it is not ex-pected to fall below 7XA percent by the fourth quarter of 1981. Someprogress in slowing inflation from the very high rate that occurredlast year is foreseen; but, given the energy price increases now intrain, the rate of consumer price increases in 1981 is still likely to beclose to 8V2 percent.

After 4 years of relatively rapid growth during the recovery fromthe 1974-75 recession, some slowdown in the rate of economic ex-pansion in 1979 and 1980 would have occurred even under the bestof circumstances. But we have not had the best of circumstances.Huge OPEC oil price increases since the end of 1978 have made theoutlook for economic growth much worse and have at the same timesharply increased inflation. Attempting to offset the deleterious ef-fects on output and employment from the rise in the cost of oil byapplying a very strong economic stimulus would make inflation worseand risk pushing it permanently into the double-digit range. The ef-fect that a further worsening of inflation would have on long-term in-terest rates, the exchange value of the dollar, and investment planswould in turn frustrate the effort to keep output and employment ona rising course. Conversely, applying draconian monetary and fiscalpolicies in an effort to suppress completely the inflationary results ofthe oil price increase and keep the economy on a path toward theHumphrey-Hawkins goal of 3 percent inflation would produce a deepand extended recession without reducing inflation to the desired de-gree. During the next 2 years, appropriate economic policies canhelp the economy adjust to the impact of the OPEC price increases.But no policies can change the realities which those increases im-pose. The world oil situation has caused a tremendous setback in theeconomic progress of all oil-importing nations.

Given this obstacle to economic progress, the goals of a 4 percentunemployment rate and 3 percent inflation by 1983 are no longerpracticable. Reduction of the unemployment rate to 4 percent by1983, starting from the level now expected in 1981, would require agrowth of real GNP averaging about 7 percent per year during 1982and 1983. That would be a rate of growth higher than that in thefirst 2 years following the recession of 1974-75, the deepest of thepostwar period. Indeed no 2 consecutive calendar years since the Ko-rean war have produced a real GNP growth averaging over 7 percenta year. Moreover, efforts to achieve so high a growth rate throughaggregate demand policies would be counterproductive. Their imme-diate result would be extremely strong upward pressure on wagerates, costs, and prices. As already noted, this would undercut the

932 9 4 - 2 8 9 0 - 8 0 - 7

basis for sustained economic expansion and postpone still further thedate at which we could reasonably expect a return to a 4 percent un-employment rate.

Reducing inflation from 8M2 percent in 1981 to 3 percent by 1983is an equally unrealistic expectation. Recent experience indicates thatthe momentum of inflation built up over the past 15 years is ex-tremely strong. A practical goal for reducing inflation must take thisfact into account.

Because of these economic realities, the President has used the au-thority provided to him in the Humphrey-Hawkins Act to extend thetimetable for achieving a 4 percent unemployment rate and 3 percentinflation. The target year for achieving 4 percent unemployment isnow 1985, a 2-year deferment. The target year for achieving 3 per-cent inflation has been postponed until 3 years beyond that. Eco-nomic goals through 1985 consistent with this timetable are shown inTable 19.

TABLE 19.—Economic goals, 1980-85

Item

Employment (millions)

Unemployment rate (percent)

Consumer prices

Real GNP

Real disposable income

Productivity2

1980 1981 1982 1983 1984 1985

Level, fourth quarter l

97.8

7.5

99.7

7.3

102.5

6.5

105.3

5.6

108.0

4.8

110.7

4.0

Percent change, fourth quarter to fourth quarter

10.7

- 1 0

.5

- . 3

8.7

28

1.1

1.3

7.9

5 0

4.7

2.3

7.2

50

4.7

2.5

6.5

48

4.6

2.5

5.8

4 6

4.4

2.5

1 Seasonally adjusted.2 Based on real GNP per hour worked.Source.- Council of Economic Advisers.

The short-term goals represent a forecast for 1980 and 1981. Themedium-term goals for 1982 through 1985 are not forecasts but pro-jections of the economic performance needed to achieve the unem-ployment rate and inflation goals within the Administration's timeta-ble. Long-term policies that will improve the prospects of meetingthese targets are discussed in Chapter 3.

These projections through 1985 assume that growth of real poten-tial GNP is 2V2 percent during this year and next and 3 percentthereafter. Accordingly, given the growth rates forecast for 1980 and1981, real GNP growth from 1982 through 1985 would need to bequite rapid to achieve 4 percent unemployment by 1985. The projec-tion shows growth at a 5 percent rate in 1982 and 1983 followed by adeceleration as the economy approaches 4 percent unemployment.

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The rate of inflation is projected to slow steadily to just under 6percent by 1985. Faster deceleration would be desirable but difficultto attain, particularly in light of the prospect, discussed in Chapter 3,that energy prices will probably continue to rise faster than otherprices. Progress against inflation along the lines projected wouldhave an important salutary effect on inflationary expectations, howev-er, and would greatly add to the chances of reducing inflation stillfurther in subsequent years.

As last year's Economic Report pointed out, reducing unemploymentto 4 percent and at the same time achieving steady progress in curb-ing inflation constitutes an enormous challenge. The rate of unem-ployment has continuously exceeded 4 percent since early 1970.Over the past decade, however, inflation has increased substantially,stimulated by large increases in oil prices and the slowdown in pro-ductivity growth.

The Administration believes that simultaneous progress toward theunemployment rate and inflation goals cannot be made by relyingsolely on aggregate demand policies. The Humphrey-Hawkins Actalso recognizes this fact. To be sure, a reduction of inflation over thelong term will require continued application of restraint in monetaryand fiscal policies. Braking the momentum of inflation will also re-quire the widespread and sustained compliance of business and laborwith the voluntary pay and price standards. If output and employ-ment are to be kept growing satisfactorily while growth of aggregatedemand is restrained, specific policies are needed to improve produc-tivity and reduce the impact from outside inflationary shocks. Chap-ters 3 and 4 in this Report discuss a number of such measures. Firstamong these is the Administration's long-term energy program, de-signed to promote conservation and to help in the development ofalternative energy sources that will make us gradually less vulnerableto OPEC price increases that add to unemployment and inflation.

Also included among these longer-term measures and discussed inChapters 3 and 4 are grain reserve policies designed to preventworldwide crop shortages from leading to sharp increases in foodprices; regulatory reform policies to foster competition in currentlyregulated industries and ensure cost-effective social regulations; co-operative efforts with other oil-consuming countries to match oil im-ports with available production and thus avoid a costly scramble forpetroleum supplies; and trade policies designed to secure the advan-tages of a free flow of imports for American consumers, to giveAmerican businesses access to expanding world markets, and to im-prove procedures for the protection of American workers and busi-nesses from unfair trade practices.

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Progress toward the goals of the Humphrey-Hawkins Act will alsorequire policies that reduce structural unemployment through care-fully targeted jobs programs, especially for minorities and youth. TheAdministration has launched a number of such programs since 1976.In 1978 a new structural employment component was added to titleII of the Comprehensive Employment and Training Act (CETA) es-tablishing a category of public service jobs especially for the disad-vantaged and the long-term unemployed. The 1978 legislation alsoprovided new resources for employment and training opportunitiesin private industry, and private industry councils have been estab-lished in nearly all local CETA jurisdictions. In addition, underCETA, particularly in the Youth Employment and DemonstrationProjects Act, special employment and training programs have beenestablished for the young, giving particular attention to the disadvan-taged. Outlays for the Department of Labor's youth employment andtraining programs have tripled since 1976.

The Revenue Act of 1978 contained a targeted income tax creditto encourage the employment of disadvantaged persons, particularlythose between the ages of 18 and 24. The Administration has alsoworked vigorously for its proposed welfare reform, which wouldmake benefit levels uniform and expand work and training opportu-nities for the poor, thus moving the country closer to the President'sgoal of providing job opportunities for all Americans. A major dem-onstration project has been initiated to help in the design of the pro-gram.

Further, as mentioned previously, a significant new initiative is in-cluded in the budget this year to improve basic educational and jobskills among the Nation's disadvantaged young people. This programis described further in Chapter 3.CONCLUSION

Progress toward our goal of a high-employment economy with rea-sonably stable prices was interrupted last year by the effects of sharp-ly rising oil prices on economic growth and inflation. Achieving botha 4 percent unemployment rate and 3 percent inflation by 1983 wasan ambitious goal a year ago; developments of this past year indicatenow that it is impossible. A reasonable degree of success in attainingour objectives will take somewhat longer.

As last year's Economic Report pointed out, the most difficult obsta-cle to achieving our national economic goals is the tendency of infla-tionary forces to intensify as the economy approaches full utilizationof its human and capital resources. This obstacle still exists; in factincreased real prices of energy make it even greater. The challengefor economic policy in the near term is to prevent last year's higherenergy prices from becoming embedded in the structure of costs and

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industrial prices, thereby worsening inflation for years to come anddelaying even longer the achievement of our economic goals. Thechallenge over the longer run is to strengthen our defenses againstthe effects of OPEC price and supply decisions and reduce the infla-tionary forces that accompany high employment through measures toincrease productivity and to lower structural unemployment. Long-term policies to meet these needs are the subject of Chapter 3.

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CHAPTER 3

Longer-Term Policies for Stability andGrowth

THE CONTROL AND REDUCTION OF INFLATION is the Na-tion's highest economic priority, requiring fiscal and monetary poli-cies that restrain demand not only in the immediate future but overan extended period. We also need policies to improve the structureand functioning of the economy in order to increase the effectivenessof demand restraint in lowering inflation and to reduce its depressinginfluence on output and employment. Such supply and structuralpolicies are also important because they address two other tasks fac-ing the American economy: restoring the Nation's productivitygrowth and making the necessary adjustments to scarce energysupplies.

The first part of this chapter outlines the broad framework of ag-gregate demand restraint consistent with a sustained attack on infla-tion and touches briefly on the strengths and limitations of thismeans of controlling inflation over the long run. The bulk of thechapter is devoted to a discussion of supply and structural problems.It examines how productivity and output are affected by the pace ofbusiness investment and by measures to reform regulatory policies,improve the operation of labor markets, promote energy conserva-tion, and expand energy supplies. It also discusses ways to reducethe economy's vulnerability to inflationary shocks in the areas ofenergy and food.

THE NEED TO REDUCE INFLATION

As Chapter 2 emphasized, the most immediate goal of anti-infla-tion policy must be to prevent the recent price increases for energyand housing from spilling over into the rest of the economy. Successin that endeavor will still leave the country's inflation rate far toohigh. On the basis of measures of inflation in sectors other than en-ergy and housing, and taking account of longer-term trends in unitlabor costs, the underlying inflation rate currently appears to be inthe neighborhood of 8 to 9 percent.

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Each new round of inflation since the mid-1960s has left us with ahigher underlying inflation rate. Without long-term policies to re-duce the current underlying rate of 8 to 9 percent, the economy willremain vulnerable to still further increases. These could come from avariety of sources. Another sharp increase in oil prices or a world-wide crop shortage could be the impetus for the next turn of theratchet. A sudden and unanticipated surge in private spending couldtemporarily overheat the economy and spur inflation. Moreover, fail-ure to lower inflation significantly after the latest inflationary episodewould strengthen long-run inflationary expectations and erode resist-ance to future wage and price increases. Over the longer term, there-fore, we must either have policies in place to reduce the underlyingrate of inflation or in all likelihood face worsening inflation.

Successfully unwinding inflation over the coming years will requirepolicies that address each of its three major long-run determinants:the rate of growth of nominal wages, profits, and other income; thepace at which productivity advances; and the occurrence of outsideinflationary events. First, the rise in hourly wages and other incomehas to be reduced in order to bring down the rate at which costs arerising. While the task of economic policy at the moment—after a yearof substantial increase in energy and housing prices—is to preventthe acceleration of wages and other costs, the longer-run objective ofsubstantially reducing inflation can only be achieved by decreasingthe rate of growth in nominal incomes. Second, curbing the rise ofunit costs also requires that the rate of productivity growth be im-proved. For the economy as a whole, short-run changes in the rate ofproductivity growth do not seem to affect the growth of moneywages, which depends principally on the state of aggregate demandand the momentum of past inflation. As a consequence, measuresthat improve efficiency and speed up productivity growth not onlyraise real living standards but retard the growth of unit labor costsand thus lower the underlying rate of inflation. The dismal produc-tivity performance of the American economy in recent years calls ur-gently for improvement. Much of the rise in unit labor costs over thepast several years appears to derive not from an acceleration of wageincreases, but from the fall in productivity growth.

Finally, the Nation must improve its ability to cope with suchshocks as worldwide crop shortages or sudden increases in the worldprice of oil. These periodic events, whose effects have been especiallysevere in the past decade, do not cause merely temporary spurts ininflation. They do more permanent damage through the formal in-dexing and informal mechanisms that many groups in society resortto in an attempt to raise their money incomes and escape the burdenof the initial price shocks. If widespread, these mechanisms cannot

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make up for the loss in real income, but they do raise the underlyingrate of inflation.

CONTROLLING AGGREGATE DEMAND

The President's budget for 1981 calls for increased fiscal restraint.Chapter 2 estimates the degree of restraint and explains the necessityfor using the budget as an anti-inflation tool, even in a period ofweakening economic growth.

The specific fiscal and monetary policies needed to reduce inflationwill necessarily vary from year to year, depending principally uponthe strength or weakness of the private economy and the actualcourse of inflation and unemployment. Nevertheless some broadprinciples can be laid down to guide fiscal and monetary policy to-ward a long-term reduction in the underlying rate of inflation.

Reducing the Groivth of Nominal GNP

While monetary and fiscal policies can to some extent directly af-fect the rate of inflation through their impact on inflationary expecta-tions, their principal influence comes indirectly through their effecton the growth of total spending, or nominal gross national product(GNP). If inflation is to be reduced over the long run, the growth ofnominal GNP must decline. At one level this is simply an arithmetictruism. The growth rate of nominal GNP approximately equals therate of growth of real output plus the rate of inflation. If real outputincreases by 3 percent and prices rise by 10 percent, nominal GNPwill thus increase by about 13 percent. A long-term reduction in therate of inflation in an economy growing at or close to its potentialrate necessarily implies a decline in the growth rate of nominal GNP.

But the proposition is more than a truism. Because there is a mo-mentum to inherited inflation, this year's underlying rate of wage andprice increase is likely to perpetuate itself next year unless otherforces counteract it. In the absence of significant economic slack,therefore, monetary and fiscal policies which aim at a continuation oflast year's rate of growth in nominal GNP are likely to perpetuate lastyear's underlying rate of inflation. Indeed, failure to resist such per-petuation of inflation may arouse inflationary expectations and there-by produce a further increase in inflation—particularly after theeconomy has been shocked by soaring energy prices. On the otherhand, if monetary and fiscal policies reduce the growth of nominalGNP, the persistence of wage and price increases at undiminishedrates would necessarily lessen the growth of output and create moreidle capacity and unemployment. Increased economic slack generatesgreater resistance to wage and price increases; and the degree towhich wage and price increases respond determines the division of

100

reduced growth in nominal GNP between a reduction in output and adecline in the inflation rate.

Unfortunately, as the 1979 Economic Report of the President discussedat length, the overall rate of wage and price increases in the Ameri-can economy, while not immune to the effects of idle capacity andunemployment, is not highly sensitive to moderate changes in eco-nomic slack. Using monetary and fiscal policies to produce a verysharp and immediate reduction in the growth of nominal GNP in thehope of reducing inflation quickly by a large amount would almostsurely fail. It would produce a large decline in output and employ-ment and only a modest reduction in the underlying rate of inflation.In such circumstances the political consensus needed to continuepolicies of restraint on aggregate demand would be short lived. Themost appropriate course is likely to be monetary and fiscal restraintthat aims for a long-term decline in the growth of nominal GNP andproduces a gradual but steady lowering of inflation. Persistence inthis endeavor, moreover, would improve the expectations about fu-ture inflation, and as a result prices and wages might respond morereadily to economic slack than they have in the past.

In the context of such monetary and fiscal policies, standards formoderation in setting wages and prices become a means not only ofreducing inflation but also of increasing jobs and output. If the payand price standards succeed this year in stabilizing the underlyingrate of inflation, they can be directed in later years to the more diffi-cult task of reducing that rate. Over the longer term the challenge isto develop standards and approaches that are sufficiently specific tobe self-administered by most employers and employee groups, butflexible enough to avoid rigidity and misallocation of resources. TheNational Accord between labor leadership and the Administrationprovides a framework for developing such standards.

Similarly, in the context of a long-run aggregate demand policydedicated to reducing inflation, the supply and structural policies dis-cussed later in the chapter also take on a new meaning. Many ofthese measures are designed to speed up the rate of productivitygrowth. To the extent that they succeed, the growth of output is like-ly to be higher for any given reduction in the growth of nominalGNP. Moreover an increase in the long-term rate of productivitygrowth raises the potential growth rate, and thus output can risemore rapidly without putting any greater demand pressure on pro-duct or labor markets. As a consequence, a lesser degree of monetaryand fiscal restraint is needed to produce a decline in the inflationrate. Policies that improve supply thus make possible an eventual re-laxation of the monetary and fiscal constraints on the growth of ag-gregate demand without endangering the effort to reduce inflation.

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Some General Principles

The general principles that must guide economic policies designedto reduce the inherited underlying rate of inflation over the long runcan be summarized in four propositions: (1) The rate of inflation canbe reduced only if fiscal and monetary policies over the long termaim at lowering the rate of growth of nominal GNP. (2) Because ofthe momentum of underlying inflation, such restraint in fiscal andmonetary policies will operate to retard output and employmentsomewhat, compared to what might have been achieved in a nonin-flationary economy. (3) Greater moderation in wage and price deci-sions by business and labor will result in correspondingly smallerlosses in output and employment growth as growth in nominal GNPfalls. (4) Measures that successfully increase the Nation's efficiency inusing its human and capital resources not only directly reduce infla-tion but also improve standards of living and make possible some re-laxation of fiscal and monetary restraint, thereby promoting a fastergrowth in national output and employment.

The goal of a long-term reduction in the nominal growth of GNPstill leaves room for adapting fiscal and monetary policy to shorter-run changes in economic conditions. In the first place the objectiveof a long-term decline in nominal GNP growth has to allow for someyear-to-year variations. In 1980, for example, real output is expectedto decline, while subsequent recovery would raise GNP growth mod-erately above potential for a time. Anti-inflation policy this year willbe successful if it does no more than stabilize the rate of underlyinginflation after a series of huge oil price increases. Substantial reduc-tions in inflation must come later. Taking all of these factors into ac-count, the maintenance of an overall framework of monetary and fis-cal restraint during the next several years is likely to be consistentwith a growth of nominal GNP that declines substantially in 1980 andthen rises in 1981 and 1982.

Furthermore any given growth of nominal GNP might requiremore or less restraint from monetary or fiscal policy, dependingupon the strength of private demand. When the growth of privatespending promises to be very strong, aggregate demand should befurther restrained to prevent nominal GNP from growing too rapidly.When private demand is very weak, the desired growth in nominalGNP may require more expansive policies. The long-term reductionof inflation does not mean that fiscal and monetary policy must belocked into a fixed position. But it does require adjustments aroundan average degree of demand restraint that produces declining infla-tion over the long run and is therefore greater than would be appro-priate in less inflationary times.

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In one respect the necessities of the long-term fight against infla-tion have a very particular implication for the way in which specificdecisions ought to be made about short-run adjustments of monetaryand fiscal policies. Monetary and fiscal policies exert their effects onthe economy only after some time. Hence they must be based oneconomic forecasts, which are often in error; makers of economicpolicy must take this fact into account. A world in which the momen-tum of past inflation is very strong and in which inflationary expecta-tions are easily aroused produces asymmetric risks. If expansive mon-etary or fiscal actions are undertaken on the basis of an erroneousforecast that economic activity will weaken, the underlying inflationrate may well worsen for many years to come. On the other hand, ifexpansive actions are forgone because of a mistakenly optimisticforecast, the resulting unexpected declines in output and employ-ment, while still costly, can be remedied more surely and quicklythan if the error had been in the other direction.

These considerations do not warrant a rigid and unbending policy,but they do indicate the need for continuing prudence and caution inmonetary and fiscal decisions. To be acceptable, the case for relaxingmonetary and fiscal restraint now and in the near future will have tobe more urgent and much clearer than it was in earlier and less infla-tionary periods.

As events of the past decade have made painfully clear, monetaryand fiscal policy must be prepared to cope with sudden inflationaryforces arising from events like a worldwide crop shortage or a largeincrease in world oil prices. Such supply shocks have two inflationaryeffects. First, they directly increase prices of the affected commod-ities; second, they threaten to induce larger wage increases and ef-forts to restore profit margins which generate higher prices through-out the economy.

If, before the supply shock, monetary and fiscal policies were set toproduce a decline in the growth of nominal GNP and in the rate ofinflation, how should they now be adjusted? To suppress even thedirect inflationary consequences of an abrupt increase in food or oilprices, fiscal and monetary policy would have to be sufficiently tight-ened that the reduction in price and wage inflation outside the affect-ed sector would offset the price shock within the sector. But giventhe relative insensitivity of wages and prices to economic slack, sucha policy would lead to unacceptably severe reductions in output andemployment. On the other hand, an effort to avoid any loss in outputand employment from the supply shock would require supporting ag-gregate demand to the point where no resistance would be offered tothe wage-price spiral triggered by the price shock. Such a policywould raise the underlying rate of inflation, setting back for many

103

years the long-term goal of reducing inflation. A practical alternativewould be to accommodate the direct inflationary effects of the shockbut, through a combination of monetary and fiscal policies and wage-price guidelines, to seek to stabilize the rate of wage and price in-crease elsewhere in the economy. Thus monetary and fiscal policywould recognize the inevitability of a temporary addition to inflationbut would fight vigorously any tendencies to increase the underlyingrate. Such a policy would lead to some temporary loss of output. Butthe direct inflationary effects of the supply shock would gradually dis-appear and the economic slack would itself moderate the indirect ef-fects. At some cost, the economy could absorb the supply shock andreturn to its previous path of increasing output and declining infla-tion.

Finally, one must be clear about measuring restraint in fiscal poli-cy. This Administration has committed itself to reducing the share ofFederal spending in GNP. At the same time, however, in the absenceof tax cuts the progressivity of the tax system generates Federal rev-enues that grow faster than GNP, producing increasing fiscal re-straint. (Table 12 estimates the growth of fiscal drag in 1979 and1980.) Tax reductions become necessary at times to prevent exces-sive fiscal restraint and need not in themselves be inconsistent with ageneral policy of fiscal restraint. However, the timing and magnitudeof such reductions must be decided on the basis of prevailing andexpected economic conditions. Tax reductions at the appropriatetime could be quite consistent with the maintenance of restraint;taken prematurely, they could induce an excessive growth in nominalGNP and thus thwart the achievement of long-run anti-inflation ob-jectives. Proper timing for tax reductions must also take into accountthe asymmetry of risks discussed on the previous page. The Presi-dent's budget for 1981 was drawn up in accordance with these con-siderations.

IMPROVING THE STRUCTURAL PERFORMANCE OF THEECONOMY

While a long-term strategy of restraint on the growth of aggregatedemand is essential in bringing down the underlying rate of inflation,it cannot accomplish the task by itself without serious costs in theform of reduced growth in real incomes. Over the longer run there issimply no alternative to increasing the efficiency with which the econ-omy produces goods and services. "Supply-side" policies to achievethis end fall into two general categories: those that improve the pro-ductivity of human and capital resources and those that help insulatethe economy from the price-increasing effects of supply shocks.

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Supply-side policies do not produce quick and dramatic results.They operate slowly and sometimes only after a considerable lag. Butunless we successfully pursue them, we cannot achieve the high ratesof economic growth, stable prices, and full employment set forth asgoals in the Humphrey-Hawkins Act.

MEETING THE ENERGY CHALLENGE

The immediate economic consequences of the sharp rise in worldoil prices in 1979 have focused attention on the short-term effects oftighter energy supplies. Developments over the last year have a deep-er significance, however. They confirm that rising energy prices arenot a transient phenomenon, but something the Nation must adjustto. This adjustment will place a significant burden on the economy,but it cannot be avoided. Attempts to do so will damage the Nation'sgrowth prospects and its competitiveness in the world economy.

Over the long run and with proper policies the United States canmake a successful transition to a world of higher energy prices. Withenergy conservation and the timely development of alternative ener-gy supplies, growth in output and improvements in our living stand-ards need be only modestly reduced by the relative scarcity of energysupplies. The task of energy policy is tw7ofold: to promote over thelong run an efficient and orderly adjustment to a world of scarcerand more costly energy supplies, and in the interim to reduce theNation's vulnerability to the transitional economic costs of sudden in-creases in oil prices and disruptions in supply.

REDUCING VULNERABILITY IN THE SHORT RUN

Over the longer term the Administration's energy program will ac-complish substantial reductions in oil imports. In the short run, how-ever, the Nation's dependence on imported oil is likely to remain un-comfortably high. The President has pledged that the United Stateswill never again import more oil than it did during 1977: a net of 8.5million barrels per day. During 1979 both imports and oil consump-tion fell considerably because of a number of factors, including physi-cal shortages in the spring, conservation induced by the sharp in-creases in energy prices, and policies to promote conservation andconversion to non-oil energy sources. A continuing decline in domes-tic demand for petroleum products is forecast for 1980. However,uncertainty about further sharp price increases and supply disrup-tions keep the balance between supply and demand in the world oilmarket precarious. Measures to limit the Nation's vulnerability overthe shorter term are therefore necessary.

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The most effective means of moderating the impact of supply dis-ruptions is to change the conditions which permit large and suddenprice increases. To the extent that world demand for oil can be re-duced, the price-raising pressures of demand against supply will berelieved. Similarly by developing a mechanism for responding to anycutbacks in oil supply with a coordinated reduction in demand, themajor oil-consuming countries, acting together, can reduce the com-petitive scramble for oil and thus lessen the bidding up of prices inthe spot market. High spot market prices would encourage furtherofficial price increases by the Organization of Petroleum ExportingCountries (OPEC). Chapter 4 discusses the efforts now under way bythe United States and other major oil-consuming countries in the In-ternational Energy Agency to achieve these very important objectives.

While international cooperation is essential, so are national meas-ures. The Strategic Petroleum Reserve (SPR) is intended to cushionthe impact of any abrupt cutoff in supply. Purchases for the SPRwere halted last year at the onset of the Iranian crisis. In August1979 the reserve contained 92 million barrels—far short of its target.If conditions permit during the year ahead, SPR purchases could re-sume. An adequate Strategic Petroleum Reserve, combined with pri-vate stocks, will provide considerable protection for the United Statesagainst supply interruptions. The SPR will also buy time for other re-sponses to disruptions, such as mandatory conservation measures, tobe put in place.

Finally, we also need to have measures in readiness so that if a se-vere disruption occurs available supplies will be distributed both fair-ly and efficiently. While the price system is likely to be the most effi-cient (and in some respects the fairest) way of handling minor inter-ruptions in supply, it should not be relied on as the sole remedy forinterruptions of all magnitudes. In response to recent legislation theAdministration is developing a standby motor fuel rationing plan forsubmission to the Congress. Under that legislation the rationing planmay be put into effect in situations where the shortfall in gasoline,diesel fuel, and heating oil supplies is expected to exceed 20 percentfor more than 30 days. (Using 1979 figures, this shortfall wouldamount to approximately 2 million barrels per day.) A notable fea-ture of the plan is a "white market" for trading unused ration cou-pons. All motorists would be assured a certain minimum supply offuel, but those wishing more would be free to purchase it—at market-clearing prices.

The Nation must also be capable of dealing with smaller supplydisruptions. As we learned this past year, even cutoffs of less than 10percent of supply can significantly disrupt normal activity, and hence

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the Administration is preparing proposals for standby measures to beapplied when smaller disruptions occur.

LONGER-TERM IMPROVEMENTS

A key aim in the Administration's energy program is to move asquickly as feasible to a rational pricing policy for energy. Price con-trols are being removed from domestic oil and natural gas so that themarket can direct efficient use of energy and encourage the produc-tion of additional supplies.

Unfortunately, reliance on the market will not be enough. Habitsof energy consumption learned over decades of falling real energyprices are difficult to change. Furthermore the benefits to our nation-al and economic security from reducing our dependence on foreignoil exceed even the high price we must now pay for this oil. For bothof these reasons there is room for measures that mandate additionalenergy conservation and encourage investment in new sources ofenergy.

Gradual Decontrol of Domestic Natural Gas and Crude Oil Prices

The 1978 enactment of the Administration's proposal for deregula-tion of natural gas began what is to be a gradual decontrol of gasprices. The initial steps toward decontrol have already been benefi-cial. The decline in yearly additions to reserves has been halted, andnatural gas previously confined to intrastate channels can now enterthe interstate market. Price flexibility is also helping to redirect sup-plies to relatively more valuable uses.

In April 1979 the President announced that he would phase outprice controls on domestically produced oil. Decontrol began onJune 1 with the release of controls on the price of newly discoveredoil (oil discovered since January 1, 1979). At that same time 80 per-cent of all "marginal" oil (oil produced from wells of various depthsyielding 10 to 35 barrels per day) was allowed to be sold at a sub-stantially higher (but still controlled) price. In August the Presidentannounced the immediate decontrol of "heavy" crude oil, an ex-tremely viscous oil produced mainly in California. In December thedefinition of heavy oil was broadened slightly, exempting still moreoil from controls. These initial decontrol steps had little impact onthe economy, however, because they affected a relatively small pro-portion of the domestically produced oil.

In January 1980 the pace of decontrol accelerated as the price ofmost domestically produced oil began to move steadily toward theworld price. Decontrol is scheduled to be completed by October 1,1981.

Decontrol of domestic crude oil prices will provide strong,unambiguous signals encouraging conservation and stimulating do-

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mestic energy supplies. According to recent estimates by the Depart-ment of Energy and the Congressional Budget Office, by 1990 de-control will result in U.S. oil imports being at least 2 million barrelsper day lower than they would be otherwise.

The Effect of Higher Prices on Oil Consumption

Some continue to doubt that higher energy prices significantly re-duce energy demand. Because the elasticity of demand for mostpetroleum products is somewhat smaller than that for other familiarcommodities, and is less than unity, economists have called the de-mand for petroleum products inelastic. This fact, combined with awidespread belief that use of energy in general and gasoline in par-ticular is essential, has led to the erroneous conclusion that pricewould have no impact on demand. However, economists who havestudied the question have almost invariably found statistical evidencethat gasoline demand is indeed responsive to price. In the majority ofstudies, estimated short-run (1-year) price elasticities of demand forgasoline range between minus 0.2 and minus 0.4. (Thus a 10 percentrise in price will lead to a reduction of 2 to 4 percent in consump-tion.) Longer-run (5-year) elasticities are significantly higher, general-ly between minus 0.6 and minus 0.8.

Even before the dramatic price rise of last year there were signsthat the price of energy was cutting into demand. Table 20 showsthat after the 1973 oil embargo the growth in per capita gasolineconsumption was much slower than in the years immediately preced-ing it, even though real per capita income rose at approximately thesame rate during the two periods. While this finding is partly ex-plained by improvements in the fuel efficiency of automobiles, therewas also a sharp reduction in automobile use. By the end of 1978 theaverage miles traveled per car was slightly below the 1972 average. Iftrends before the embargo had continued, the 1978 figure wouldhave been 10 percent higher.

Of course, gasoline is not the only energy source whose demand isinfluenced by price. The final item in Table 20 shows that increasesin total per capita energy use slowed dramatically after the 1973 em-bargo. If the trends of the preceding 6 years had continued, total1978 use would have been 16 percent higher—the equivalent ofnearly 6 million barrels of oil per day.

During 1979 additional evidence accumulated that energy demandis responsive to price. Preliminary estimates indicate that demand forall petroleum products (as measured by disappearances from primarystocks) fell by 4.2 percent between the fourth quarter of 1978 andthe fourth quarter of 1979. Demand for gasoline fell by 9.3 percent.Preliminary estimates also suggest that miles traveled per cardropped about 5 percent from 1978 levels. Although waiting in line

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TABLE 20.—Gasoline consumption and energy use, 1966-78

[Percent change]

Item

teal per capita income

teal gasoline price

Per capita gasoline consumption

Per capita total energy use

1966to

1972

17

- 1 2

25

21

1972to

1978

15

21

11

5

Sources: Department of Commerce (Bureau of Economic Analysis), Department of Energy (Energy Information Administration),Department of Labor (Bureau of Labor Statistics), and Council of Economic Advisers.

for gasoline surely contributed to these dramatic reductions, there isno doubt that sharply higher prices were a primary factor.

Side Effects of Crude Oil Decontrol: Windfall Profits and Impact on Lower-Income Groups

Decontrol has inevitable side effects which public policy must ad-dress. Decontrol generates substantial windfall profits and reducesthe real incomes of consumers. Gradual phasing in of decontrol canmitigate those effects, but it cannot entirely eliminate them. Othermeasures are therefore needed.

Decontrol of domestic crude oil will transfer very substantial rev-enues from users of petroleum products to domestic crude oil pro-ducers. While some of these increased revenues will stimulate addi-tional domestic production, a large proportion will represent purewindfalls—revenues that owners of oil properties receive solely be-cause of actions taken by others. Windfalls do nothing to increasesupplies. The windfall profits tax will divert a significant portion ofthese revenues to public uses that will help the economy to adjust tohigher oil prices. Through the combined effect of the corporate in-come tax and the windfall profits tax, the Federal Government willcollect considerably more than half of the additional net revenues ac-cruing to producers. Certain States will also collect substantial addi-tional revenues through their own tax systems.

Recent sharp increases in energy prices have had a significant im-pact on low-income households. A portion of the windfall profits taxwill be used to cushion this blow. Public policy must try to offset thedrain on the incomes of poor households from higher energy priceswithout blunting the incentive to conserve energy. Policies which di-rectly reduce the perceived price of energy should obviously beavoided. But even income supplement programs, which might notappear to influence decisions at the margin, may blunt impulses to-ward conservation. The weaker the link between the amount of as-sistance and the family's actual energy consumption, the less interfer-

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ence there will be with conservation incentives, but the greater thelikelihood will be that some poor families needing relatively largeamounts of energy may have significant losses of income. The Ad-ministration's low-income energy assistance program represents areasonable compromise in adjusting assistance to need without blunt-ing conservation incentives.

The program provides two types of assistance to low-incomehouseholds. The first is the special energy allowance, which providesassistance to recipients of supplemental security income and will pro-vide grants to States to be distributed according to the energy-relat-ed needs of the low-income population. This program will cost $1.2billion in 1980, increasing to $2.0 billion in 1981 and later years.The second is the energy crisis assistance program. It provides pay-ments of $400 million per year that States can use to help low-in-come households with critical emergencies related to energy: theneed to repair home heating systems, pay overdue heating bills, andobtain additional clothing or food. In 1980 the program will be com-pletely financed by the Federal Government, but in 1981 it will be-come a matching-grant program with the States. After 1980, $2.4 bil-lion in windfall profits tax revenues will be used annually for theseprograms to assist low-income individuals and families.

The Case for Additional Conservation and Supply Incentives

Although the incentives for increased energy conservation as wellas for increased energy supplies must come principally from marketprices, a strong case can be made for supplementary measures topush conservation and supply decisions beyond what the market dic-tates. The most telling argument is that the cost to the Nation ofsubstantial dependence on imports exceeds the price that U.S. citi-zens pay for imported oil.

First, the United States is the world's largest importer of oil, ac-counting for about one-fourth of all world oil imports. Reductions inU.S. import demand will help ease pressures for higher prices in theworld oil market. Second, the bill for imported oil adds substantiallyto the Nation's trade deficit. Reducing this bill will tend to strength-en the dollar, thereby lowering the cost of all imports. Third, an in-tangible but exceedingly important consideration is the cost to oursecurity entailed by an excessive reliance on imported oil. The eventsof the past year graphically demonstrate these costs.

The conservation incentives in the Administration's energy policyare targeted to reach nearly every significant use of energy. Illustra-tions here will focus on two such uses: automobiles and residentialspace heating and cooling.

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Fuel economy standards for autos. Automobiles represent the country'ssingle largest user of petroleum products. As of 1978, American mo-torists were burning over 80 billion gallons of gasoline per year, al-most 15 percent of total domestic energy use. Between 1950 and1974 the average number of miles traveled per gallon of fuel con-sumed by newly produced cars dropped by 20 percent.

Even though this trend was reversed in the 1975 model year, theEnergy Policy and Conservation Act passed in December 1975 re-quired that automobile manufacturers substantially increase their im-provements in fuel efficiency. By 1985 the average fuel efficiency ofnew cars must reach at least 27.5 miles per gallon (EPA test basis).While the relation between the Environmental Protection Agency's(EPA) estimates and actual mileage is uncertain, current estimates in-dicate that actual mileage for new cars is about 80 percent of theEPA figures.

Sharply higher gasoline prices in 1979 have caused consumer de-mand to shift toward smaller and more fuel-efficient cars. Due to thestandards, this demand will be more easily accommodated.

The effect that improving the fuel economy of cars will have ondomestic demand for energy will be substantial. Because of the timeit takes to replace the entire fleet of domestic automobiles, the fulleffects of these improvements will not be felt until the mid-1990s.But by then, even if the annual average number of miles driven percar does not fall significantly from present levels, and even if thefleet continues to grow, the total amount of fuel consumed by U.S.passenger cars will be only about two-thirds of what it was in 1979.This savings would translate into about 2 million barrels of gasolineper day. To the extent that higher gasoline prices reduce the milestraveled per car and that further improvements in automobile fueleconomy occur after 1985, the reduction in total gasoline consump-tion could be significantly greater.

Residential space heating and cooling. Residential space heating andcooling account for about 15 percent of all the energy consumed inthe United States. This figure can be significantly cut by several rela-tively simple and inexpensive steps. Raising thermostat settings dur-ing the summer and lowering them during the winter directly reduceenergy use and costs, though they entail some discomfort. Othermeasures, such as increased insulation and making structures moreweatherproof, require investment but increase the efficiency withwhich any given degree of comfort can be attained. It is difficult toinduce millions of individuals to undertake such changes. The singlemost important inducement for residential users to conserve energywill be the higher prices now confronting them. Indeed higher pricesmay be the only way to bring about permanent changes.

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A targeted program of incentives can nevertheless accelerate in-vestments in insulation and weatherproofing. The Administration'sprogram to encourage energy conservation in residential structuresrequires that electric and gas utilities offer to perform "energy au-dits" of their customers' residences, thus enabling households to pin-point sources of serious heat losses and learn how to remedy them.

The program also provides financial assistance to households forinstalling insulation, caulking, weatherstripping, storm windows, andfuel-saving heating equipment. Households at all income levels arehelped in various ways. For example, a 15 percent tax credit on thefirst $2,000 spent on qualified conservation measures is available toany household. Households with low or moderate incomes may applyfor a direct interest subsidy of up to 35 percent with a limit of $1,000per loan. (This limit includes the value of any tax credit taken.) TheWeatherization Grant Program goes even further in assisting familieswith low incomes; it supplies grants for qualified energy-saving meas-ures. Supplementing these provisions, the program requires thatutilities offer to help customers finance the energy-saving measuresthey may need to take.

Special incentives are available to encourage use of solar energy.Builders of new structures utilizing passive solar technology may beeligible for a tax credit up to $2,000 per residence or $10,000 percommercial building. A tax credit of up to $2,200 is available for newhomes with active solar systems. A proposed Solar Bank would pro-vide interest subsidies of up to 40 percent on loans for equipment toconvert to solar energy.

The improvements that these programs and higher energy pricescould produce are impressive. One private study estimates that by in-corporating in existing and new residential structures only thosetechnological improvements in heating systems and building shellsthat are economically justifiable at an energy price equivalent to $30per barrel for oil, the total U.S. consumption of energy for residen-tial heating could be reduced to about half its 1975 level by the year2000. This translates into a reduction in energy demand equivalentto approximately 2 million barrels of oil per day.

Developing Additional Domestic Supplies of Energy

Policies to stimulate savings in energy must be supplemented byprograms to add to domestic supplies of energy. Even after decon-trol, the unaided market place may not in all instances generate theneeded investment in new energy supplies. Or it may do so moreslowly than is desirable, especially in the case of investments involv-ing new technology for increasing the supply of energy.

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The synthetic fuels program. Events of the past few years have demon-strated that future oil prices are hard to estimate. Yet a private inves-tor must predict not only the level but also the path of world oilprices in deciding whether to undertake a development project forsynthetic fuel.

The difficulty is more than statistical. If world oil prices were mar-ket determined, then an investor might reasonably estimate when therising world oil price would so far exceed the cost of commercializinga given synthetic fuel technology that he would be compensated forthe risk of proceeding. But world oil prices are not market deter-mined. The present price reflects both demand considerations (in-cluding the demand for increased stocks) and OPEC's desired pro-duction levels. The latter incorporate the OPEC countries' assess-ment of the oil prices they can charge in the future.

The cost of producing synthetic fuels in commercial quantities,however, can have an important effect on this judgment. As the pros-pects of substantial supplies of synthetic fuels increase, OPEC coun-tries may be induced to expand their own oil production consider-ably because of the depressing effect of this development on the valueof their oil reserves. Thus the potential investor faces a risk that theworld price of oil will be less than his break-even point; he has littlechance of making much more than a going rate of return on his capital.Few private concerns would be willing to invest in synthetic fuels onthe basis of forecasts that world oil prices will rise by a given amount.They would more likely wait until the world oil price came fairly closeto the estimated cost of synthetic fuel production. This would notpresent a problem if a synthetic fuels industry could be developedquickly, but more than a decade will probably be required before muchcapacity can be brought into operation.

A paradox here underlines the need for some governmental role.The more OPEC countries are convinced that high oil prices willbring a large synthetic fuels industry into existence, the more theirown decisions are likely to lead to moderate pricing. But the morepotential investors fear this reaction from OPEC, the less likely theyare to make the investments needed for developing a large-scale syn-thetic fuels industry on their own.

In addition to such price risks, new products like synthetic fuels in-volve serious technological uncertainties. Several processes may beable to produce synthetic liquid fuels. The absolute and relative costsof each are highly uncertain. Given the large capital costs, the risk ofpicking the wrong technology could discourage private, commercial-scale investment in any one.

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The preceding argument applies equally to all of the so-called un-conventional sources of energy. The development of a significant do-mestic capacity to produce liquid fuels from biomass, a substantial in-crease in the use of solar energy, or the development of major newsources of natural gas would all tend to limit the rise in OPEC pricesto a degree that depends on the cost at which each resource could bebrought to market. The Administration is strongly supporting pro-grams in each of these areas tailored to the specific technologicalcharacteristics and the current state of development.

During the past year, techniques which would tap the Nation's vastsupplies of coal and shale and biomass were singled out for specialattention. These now seem to be at a stage where a focused effortmight hasten their commercial use. The Administration has thereforeproposed the creation of an independent government corporation toassist in this major undertaking.

The Energy Security Corporation (ESC) will have a number of in-struments at its disposal. It will be able to use at its discretion bothloan guarantees and outright loans to assist private enterprises pur-suing approved synthetic fuel projects. The Corporation will also beable to shelter to some extent the developing concerns from the risksthey would otherwise face because of the uncertainty of future oilprices. Purchasing agreements or price guarantees will be arranged atfirm prices for the project output, but the agreements will requireprivate enterprise to bear a fair share of the risks. The variety of in-struments available to the Energy Security Corporation increase itsability to assist recipients without removing the normal incentives toexercise prudent judgment and keep costs to a minimum.

The Energy Security Corporation will also be able to participate incooperative or joint ventures with private companies. In an extremelylimited number of cases, it may also construct and operate facilitiesfor processes that have technical merit but cannot be sufficiently de-veloped by other means.

IMPLICATIONS FOR THE ECONOMY

The energy policy initiatives undertaken during this Administrationwill sharply alter both the future consumption of energy in this coun-try and the range of energy sources. Most important, the Nation's re-liance on oil, especially imported oil, will be cut. By the end of thedecade the economy will be well on its way toward completing thistransition—one of the most important and difficult it has ever faced.

Total U.S. energy use in 1978 amounted to 78 quadrillion Btu(quads). Estimates for 1990, made soon after the 1973-74 oil pricerise, were as high as 120 quads. More recent forecasts have been re-

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vised sharply downward and seem to be clustering near 100-110quads. Given recent rapid increases in oil prices, even lower figurescan be expected.

The composition of expected demand for fuels reflects a relativelymore rapid rise in the price of oil. In 1978 nearly half of the coun-try's primary energy demand was met by petroleum. In most presentforecasts this share falls sharply; some project it to be as low as one-third by 1990. Removal of price controls on domestic crude oil willensure that the highest possible share will be met by domesticallyproduced oil.

In mid-July the Department of Energy estimated that the varioussteps already taken or announced would reduce oil imports to ap-proximately 4.5 million barrels per day by 1990—far less than earlierestimates of imports, which were as high as 13 million barrels perday. Events since July have reinforced the belief that record levels ofoil imports are already behind us.

Requirements for Higher Investment Levels

Changes in private consumption and production in response tohigher energy prices, the supplemental conservation measures in-duced by regulation, and the development of new, unconventionalsources of energy in the United States will all require substantial in-vestments by both the private and the public sectors. Estimates vary,but the following figures (all in 1978 dollars) give some idea of thepossible magnitudes.

The Department of Energy has estimated that the domestic oil andgas sector will need to invest an average of $25 to $30 billion annual-ly during the 1980s for exploration, development, production, andrefining capacity just to achieve the lower share of energy supply thathas been projected for it. Other private estimates range as high as$35 billion per year. Comparable expenditures were less than $13billion in 1972 and approximately $20 billion in 1978. The Depart-ment of Energy also estimates that the domestic coal industry willhave to invest between $5 and $6 billion annually during the 1980s ifit is to increase its output as forecast. This compares to actual invest-ments of less than $1 billion in 1972 and $2.4 billion in 1978.

Building a domestic synthetic fuels industry will also be expensive.The costs of developing the technology and installing operating ca-pacity are still highly uncertain; but to create the capacity to produceabout 1 % million barrels of coal liquids and shale oil per day by theearly 1990s at a capacity cost per barrel of output per day of about$40,000, investment will probably average more than $6 billion peryear over the next decade. While the ESC will provide various formsof assistance, most of these funds will come from the private sector.

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The adjustments in consumption induced by decontrol, with itsconsequent higher prices, and the supplementary conservation meas-ures will also be costly. Fuel-saving features installed in old and newdwellings will add at least an additional $4 billion per year to thecost of residential construction. Similar conservation measures fornew and old commercial structures will also add to constructioncosts. Finally, the replacement or refitting of portions of our industri-al plants may have to be accelerated. Facilities that might have beenmarginally profitable for a few more years at pre-1974 or even pre-1979 energy prices may have become unprofitable at current energyprices. Any such acceleration in obsolescence will add to required an-nual investments during the mid-1980s.

CONCLUSION

The developments in the domestic and international energy mar-kets during this past year have profoundly affected the economy. En-ergy consumers and producers have begun in earnest to adjust tohigher prices. These adjustments—belt-tightening in some cases, orfinding more energy-efficient ways to do things—have been costlyand in some cases painful. But as a result, the economy shouldgradually become less dependent on foreign sources of oil and con-sequently less vulnerable to disruptions in supply. It is imperativethat the Nation persevere in these efforts.

STRIKING THE PROPER BALANCE IN REGULATION

That the pace and scope of the government's regulatory activityhave increased sharply over the last decade is obvious. Whether andhow the government should regulate certain activities have becomefamiliar questions in policy debates. In the case of traditional eco-nomic regulatory activities, especially with regard to transportation,communications, and finance, there has been a growing recognitionthat we need to reduce direct regulation and give greater play tocompetitive forces. In these sectors regulatory reform has becomesynonymous with deregulation. But for the newer forms of regulationdealing with social concerns such as the environment, occupationalhealth and safety, and the safety of consumer products, regulatory re-form has come to mean not deregulation but more flexible and morecost-effective regulation. The government is increasingly seen tohave a legitimate role in helping the private sector to attain sociallydesirable ends that cannot be achieved in the market place. Peoplehave also become much more aware that regulation often adverselyaffects productivity, at least as it is conventionally measured.

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Over the last 3 years the Administration has made marked progressin reforming this country's regulatory institutions and procedures. Insome cases regulatory structures existing for decades are being dis-mantled, exposing the industries they protected to new forces ofcompetition. In other areas important procedural reforms have beenput into place to help assure that, subject to legislative mandates,regulations set reasonable goals and meet those goals in a cost-effective manner. The job of reforming the regulatory process is farfrom complete, but an important beginning has been made.

REGULATORY POLICY AND PRODUCTIVITY

Government regulation of individual and corporate behavior takesmany forms, including common law rules of liability, antitrust laws,restrictions on international trade, and regulatory rules of all kinds atthe Federal, State, and local level. The ways in which this activity af-fects productivity are varied and complex, but several broad general-izations can be made:

First, regulations which divert capital and labor from the produc-tion of steel, automobiles, or clothing (where output can be readilymeasured) to the production of environmental cleanliness, workers'safety, or other goods whose values are difficult to measure, entail aloss in measured productivity. This is not necessarily a matter forconcern, since it stems primarily from the limitations of what can becaptured in the national income statistics.

Second, regulatory procedures which cost more in capital andlabor than they yield in social benefits, or which require more re-sources than are necessary to meet stipulated social targets, do re-duce national productivity, both measured and unmeasured.

Third, many economic regulations directly cut productivity. Beforerecent decontrol actions, airline regulations encouraged low load fac-tors on airplanes. Current trucking regulations require needlessempty backhauls and circuitous routing of trucks, both of which re-duce productivity. Many local building codes necessitate the use ofexcessively costly materials. Perhaps an even more important cause oflower productivity is the attempt by many of the older economic reg-ulatory bodies to preserve the domain of some established industries.Such protective measures can suppress the competitive pressures thatforce otherwise staid firms to adopt innovative ideas and improvetheir productivity.

Some loss in measured productivity is a necessary and unavoidableconsequence of regulation. But there are also avoidable losses stem-ming from regulatory activities. Regulatory reform that works toward

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the elimination of outmoded economic regulations and promotes im-provements in the balance and cost effectiveness of social regulationcan contribute to growth in productivity.

REMOVING OBSOLETE REGULATORY STRUCTURES

The reasons why industries were originally made subject to de-tailed economic regulation regarding the prices they charged and theconditions under which they provided service were many and varied.One obvious example was the objection to the so-called "natural mo-nopoly" enjoyed by an industry with such large economies of scalethat meaningful competition was impossible. In other instances fearof "destructive competition" provided the primary rationale for regu-lation. Extending the scope of service was yet another aim behindgovernment intervention. In many cases the original justification isno longer valid; in others it never existed. Legislative and administra-tive action is helping to remove these obsolete regulatory structures.

In late 1978, with the cooperation of the Congress, the Administra-tion succeeded in opening up the domestic airline industry to mean-ingful entry and truly competitive pricing for the first time in at least40 years. This was the culmination of a process of liberalization thathad begun several years earlier. Under regulation, airlines competedthrough quality of service; under deregulation consumers benefitedimmediately from an expanded volume of flights and lower fares. BySeptember 1978 the average level of domestic and foreign air faresfor the 11 largest U.S. airlines had fallen 2.8 percent from the yearbefore and stood only 1.4 percent above their 1976 level. In October1978 air fares were actually lower than 2 years earlier.

Some critics have interpreted recent increases in airline fares asevidence that deregulation, though perhaps successful initially, willbe a failure in the long run. Nothing could be further from the truth.Deregulation of an industry does not render it immune to increasesin prices of factors of production. It does affect the degree to whichsuch increases are translated into higher unit costs and prices. Theairline industry has recently provided graphic proof of how reducedregulation can improve productivity and hence price performance.

As of the end of September 1979, average fares for the 11 domes-tic trunklines were 7.8 percent above their mid-1977 levels. But aver-age weighted input prices for the airlines rose by 35.4 percent overthis same period. These rises in input prices were largely offset byimproved productivity. Load factors—the percentage of seats filled—rose from 56.1 percent during the first 9 months of 1977 to 65.1 per-cent during the comparable period in 1979. The airlines increasedthe number of seats per aircraft by 8.6 percent for the large DC-lOsand L-lOlls, and by 4.3 percent for the smaller 727s. Finally, air-

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lines have used their aircraft fleets more intensively. Airborne hoursper aircraft per day rose by 12 percent between the third quarter of1977 and the third quarter of 1979. Greater use of the airlines' capi-tal stock has reduced passenger comfort and curtailed some otheramenities, but the lower fares it permits compensates for these re-ductions in service.

The record under regulation offers an instructive contrast. Duringthe mid-1970s, airline input prices also rose substantially; in 1977they averaged 56 percent above their level of 1973. During this peri-od, however, the airlines lacked the strong spur to productivitybrought about by deregulation. Fares rose by 32 percent. Althoughairlines' profits have weakened during recent months, orders for new,fuel-efficient aircraft have continued to be strong. The difficulty ofobtaining long-term credit, which accompanied some industry down-turns in the past, as yet shows little sign of occurring.

The experience of the airlines during this past year differs sharplyfrom that of certain segments of the regulated trucking industry.Here lack of fuel, large fuel price increases, and sticky InterstateCommerce Commission rates were significant factors in leading manyof the smaller, independent truckers to go on strike rather than oper-ate their trucks at a loss. The result was a shortage of trucking capac-ity and a disruption in commerce.

It is both impractical and inequitable to dismantle regulatory insti-tutions overnight. Producers and consumers, as well as suppliers andothers indirectly dependent on the industry, must have time to adjustto a less regulated market environment, and some may be hurt byless stringent regulation. Transitions must therefore be planned forthe groups seriously affected by the change. For this reason the Air-line Deregulation Act of 1978 permits a gradual phase-out of theCivil Aeronautics Board's regulatory activity and of the Board itselfover a 6-year period. The act also provides continued subsidies foressential service to communities affected by the easing of abandon-ment restrictions.

Substantially relaxing detailed economic regulation of an industrydoes not mean the end of governmental interest in the industry'sperformance. For example, the eventual abolition of the Civil Aero-nautics Board will not weaken the powers of the Federal Aviation Ad-ministration to regulate airline safety. The Administration is commit-ted to basic reforms in economic regulation and to incorporating inthem the adjustments needed to ease the legitimate problems oftransition. The President has introduced or is supporting legislationembodying these principles, which would substantially reduce Federalregulation in trucking, railroads, telecommunications, and finance. As

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the record of airline deregulation has so graphically illustrated, theseinitiatives offer the prospect of large gains in productivity.

The Administration's trucking bill proposes a sharp reduction inregulatory barriers to competition. Among other things, the bill willmake entry into common-carrier trucking easier and will phase outthe numerous commodity and route restrictions which limit competi-tion between firms in this segment of the industry. It will significantlybroaden the exemption from regulation currently enjoyed by thetransporters of some agricultural commodities and permit the Com-mission to grant similar exemptions to other classes of commodities,if this seems in the public interest. The bill permits freight forward-ers and contract carriers to hold common-carrier certificates andends the artificial limit on the number of shippers that contract carri-ers may serve. Private carriers will be allowed to apply for authorityto haul noncompany commodities, to provide transportation for cor-porate subsidiaries, and to "trip-lease" for single trips to carriersholding certificates. Finally, it will end the exemption granted in1948 (over President Truman's veto) of rate bureaus' activities fromantitrust litigation. Because of the Administration's belief that trucksafety is currently inadequate, the Administration's bill would sub-stantially increase the government's responsibility for this activity andthe Federal resources channeled into it.

The Administration's efforts are also directed at broadening thegains achieved by earlier reform legislation affecting railroads. Theintent of this legislation has been blunted by the Interstate Com-merce Commission's overly restrictive interpretation of certain of itskey provisions. The Administration is working with the Congress tosee how increased pricing flexibility can be achieved in ways that donot reduce the protection offered "captive" shippers, and it has alsosought to make abandonment of unprofitable services less difficult.

In his September 1979 message on telecommunications policy thePresident supported congressional efforts to amend the Communica-tions Act of 1934. Consumers are already benefiting from FederalCommunications Commission (FCC) actions that have increased com-petition in the market for telephone sets and for certain sophisticateddata-processing and private-line services. But in spite of extraordi-nary technological advances that now make it possible to hold meet-ings, transmit messages, perform research, bank, shop, and receive awidening variety of information and entertainment through electron-ics—and that invalidate the assumption that all telecommunicationsenterprises are natural monopolies—the basic statutory frameworkfor regulating telecommunications has remained unchanged. ThePresident's message encouraged legislation to promote competitionwherever it is workable. (If necessary, some markets, such as local

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telephone exchanges, may remain regulated monopolies indefinitely.)He also urged removal of restrictions based on out-of-date marketdistinctions, such as that between telecommunications and data proc-essing, and he advocated allowing the FCC to develop more efficientmeans of assigning nonbroadcast frequencies. At the same time, thePresident reaffirmed the Administration's support for regulations tomake basic telephone service available to all at affordable rates andfor measures to protect the technical quality of the telecommunica-tions network.

In May 1979 the President sent a financial reform message to theCongress urging that deposit interest rates be permitted to rise to marketlevels after a period of orderly transition, and that federally insuredinstitutions be authorized to offer interest-bearing transactions ac-counts to individuals. The President also urged the Congress togrant all federally chartered savings institutions the power to offervariable rate mortgages and to invest up to 10 percent of their assetsin consumer loans. This package was intended to bring the benefitsof market rates to small savers, promote a steadier flow of credit tofinance housing, and improve the efficiency of financial markets. Al-though a bill was passed by the Senate which addressed all of thePresident's May proposals, the House-passed bill was less compre-hensive. Resolution of the broader questions was postponed until1980, but the Congress did pass more limited legislation extendingthrough March 31, 1980, authority for credit union share drafts,automatic transfer services, and savings and loan institutions' remoteservice units. These three services effectively enable depositors toearn interest on deposits that are used for making current transac-tions.

BALANCING COSTS AND BENEFITS IN INDIVIDUAL REGULATIONS

Eliminating large areas of regulation is not the appropriate routeto reform of regulations aimed at environmental protection, health,safety, and other social goals. Rather, attention must focus on theprocesses and techniques of regulation. One especially important taskis to ensure that the individual regulations consider the balance be-tween gains and social costs and the adoption of cost-effective ap-proaches.

The designing of any regulation involves an implicit weighing ofcosts against benefits. How explicit any such balancing should be orcan be is a major question, especially in regulation affecting the envi-ronment, health, and safety. Although any explicit effort to deter-mine the "appropriate" level of health and safety meets with opposi-tion, many similar choices are being made implicitly. It is clear, forexample, that traffic fatalities could be reduced by drastically lower-

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ing maximum speed limits or by providing pedestrian underpasses atall major traffic intersections. The failure of society to take these ac-tions reflects a tacit judgment that the benefits in safety do not war-rant the costs. Society also implicitly recognizes that a risk-free worldis impossible, and that pursuing such a goal would lead to unaccepta-ble reductions in social welfare. Indeed, reducing some risks can gen-erate new risks elsewhere. For example, prohibiting the use of sodi-um nitrite as a meat preservative may cut the risk of cancer but in-crease the risk of botulism.

The Administration has sought to encourage balanced and cost-effective regulation through the requirement for regulatory analysiscalled for in Executive Order 12044, signed by the President onMarch 23, 1978, which applies to executive branch agencies and de-partments but not to the independent regulatory agencies. The orderrequires that agencies' policy makers give increased attention to reg-ulatory issues, provide greater opportunity for public participation inthe development of regulation, and conduct "sunset" reviews of ex-isting regulations. In addition, the order requires that agencies pre-pare a regulatory analysis for each major regulation. The analysismust examine the costs and other burdens imposed by the proposedregulatory action and compare them with those of alternative actionsdiffering in approach, timing, degree of stringency, or scope.

The purpose of regulatory analysis is not to reduce all costs andbenefits to dollar sums that can be mechanically compared. Somemonetary costs cannot be confidently estimated—the costs, for exam-ple, of introducing untested changes in technology or productionprocesses, or of changing the attributes of products or the location ofplants. Even more clearly, many social benefits cannot be easily con-verted to monetary terms. But costs and burdens can be identifiedand in many cases measured. Benefits can be described and oftenanalyzed at least partially in quantitative terms even if not in dollars.

The fundamental premise of the requirement for regulatory analy-sis is that the difficulty of measuring costs and benefits justifies nei-ther indiscriminate regulation nor the elimination of all regulation.The analysis required by the Executive Order is not a cost-benefitanalysis which automatically dictates the decision; it is a proceduralmechanism—a decision-making tool—for examining the costs andother consequences of achieving regulatory goals.

Regulatory analyses are not easy to prepare, but they play an im-portant role. A formal regulatory analysis forces the rulemakingagency to consider explicitly the objectives of a major regulation andthe best route to those goals. It requires consideration of process aswell as outcome. This sort of thinking is a prerequisite for goodrulemaking.

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A draft regulatory analysis is issued when a regulation is first pro-posed. It can thus play a part in the public debate over the rule.Members of the public can examine and evaluate the agency's as-sumptions and objectives. The President has also established aninteragency group to review and comment upon selected regulatoryanalyses. The Regulatory Analysis Review Group comprises repre-sentatives from the Executive Office of the President and from all ex-ecutive branch economic and regulatory agencies. This group, whichis chaired by the Council of Economic Advisers, has completed fivecomprehensive reviews during each of the past 2 years. In 1979 thisgroup's reports, submitted for the public record, covered the Envi-ronmental Protection Agency's hazardous waste standards and newsource performance standards for electric utility plants; the Depart-ment of Energy's proposed and interim final regulations on coal con-version for utilities and industrial boilers; and the Department ofHealth, Education, and Welfare's proposal for labeling to accompanyprescription drugs. At year's end, reports were being prepared re-viewing the Environmental Protection Agency's air carcinogen policy,its guidelines for water effluents in the leather-tanning industry, andthe Department of Energy's standards for the energy performance ofnew buildings.

The number of reviews that the group can undertake in any oneyear is quite limited. Furthermore the Executive Order does notapply to independent regulatory agencies. Comments filed by theCouncil on Wage and Price Stability, however, partially fill the gap.That Council is directed by statute to comment on the economic im-pact of rules and regulations proposed by both the executive branchand the independent agencies. In 1979 the Council on Wage and PriceStability filed 58 comments in rulemaking proceedings.

The Administration's regulatory reform legislation would make theregulatory analysis called for in Executive Order 12044 a permanentrequirement and extend the order to cover the independent regula-tory agencies. Agency heads would be required either to choose theleast burdensome alternative or to explain their proposed course ofaction. Selecting the least burdensome alternative would not be man-datory if there were a justification for choosing another approach.The relevant substantive statute would continue to govern the finaldecision.

Several existing statutes have been interpreted as limiting the ex-tent to which regulatory agencies can consider costs (including addedrisks). However, even for agencies having little or no discretion tobalance costs against benefits, the regulatory analysis allows consider-ation of cost effectiveness. If even this degree of flexibility is notwithin the terms of the statute, the rationale for precluding cost ef-

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fectiveness should be continuously re-evaluated in the light of newknowledge. The Administration supports "sunset" review legislationthat would require just such periodic re-examination of major regula-tory mandates.

COORDINATING REGULATORY PROGRAMS

Improving individual regulations is an important part of long-termeconomic policy, but more is needed for effective management of theregulatory process. Many individual regulations overlap, and sometry to serve conflicting objectives. For example, congressionally man-dated emission standards for automobiles have sometimes tended todecrease fuel economy. When they do this, they make it harder forauto companies to meet the Department of Transportation's stand-ards requiring a steady increase in fuel economy. This is not a caseof confused action but of conflicting goals. In designing an auto-mobile, some balancing may be necessary between cleaner air andenergy conservation.

The President established the Regulatory Council, composed of 36Federal departments and agencies, to help achieve better coordina-tion among regulatory programs and expand efforts to manage theregulatory process more effectively. At the President's direction theCouncil prepares the semiannual Calendar of Federal Regulations. Thisprovides in one document a concise summary and analysis of impor-tant regulations being developed by each of the executive branchagencies and by those independent regulatory agencies that chooseto participate. It includes all major rulemakings in progress or ex-pected during the coming year and thus provides a means of identify-ing potential overlaps or conflicts as well as previewing the impact ofthe rules on affected sectors.

The Regulatory Council will assess the cumulative effects of regu-lations issued by a number of different agencies on particular sectorsor industries. The Council has begun a comprehensive analysis ofhow regulation affects the automobile industry, and it is conductingprojects related to coal, hospitals, and nonferrous metals. In addi-tion, the Council has successfully coordinated a joint policy statementby the five Federal agencies with primary responsibility for regulat-ing carcinogens. The activities of the Council should help reduce twoof the major sources of unnecessary costs of regulation—uncertaintyabout regulatory policies and conflict or duplication in regulatoryactions.

SETTING PRIORITIES

Because we do not live in a world of unlimited resources we can-not simultaneously achieve all desirable social goals. Rational social

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regulation requires priorities in our use of the resources at hand. Nopurely technical means can determine what resources should be de-voted to social goals in any given year. That must come from thepolitical system. Although some implicit balancing of goals occurs,more explicit attention should be devoted to the aggregate and sec-toral consequences of regulation and to the problem of priorities.

Until recently efforts by the Federal Government to promote socialgoals relied principally on direct expenditures. Since 1921 the Con-gress has required that these expenditures appear in the Federalbudget. The budget process allows explicit tradeoffs to be made andthe appropriate level of government action to be debated. But asmore goals are pursued through rules and regulations mandating pri-vate outlays rather than through direct governmental expenditures,the Federal budget is an increasingly inadequate measure of the re-sources directed by government toward social ends.

As a result, proposals have been made that the Federal Govern-ment develop a "regulatory budget," similar to the expenditurebudget, as a framework for looking at the total financial burden im-posed by regulations, for setting some limits to this burden, and formaking tradeoffs within those limits.

However, a regulatory budget is not without problems. In the caseof particular programs in the expenditure budget, past outlays areknown and most future outlays can be predicted with some accuracy.Estimates of the past or future costs of regulation, some of whichmay be important to the development of a regulatory budget, aremuch less certain. It is difficult, for example, to specify all the coststo a firm when it must locate a new plant according to its thirdchoice rather than its first. It is equally hard to measure the cost ofbanning the manufacture of a product.

A regulatory budget would also have to take into account the basicdifference between the processes through which regulation and ex-penditures are determined. For Federal expenditures, the Presidentinitially sets priorities in the budget he submits to the Congress,which has the final word in adjusting those priorities through appro-priation and revenue bills. For social regulations the order is general-ly reversed. The Congress passes regulatory statutes which set forthobjectives with varying specificity. A number of executive branchagencies and independent regulatory agencies are delegated thepower, subject to judicial review, to implement those objectivesthrough specific regulations on a case-by-case basis. Regardless ofwhich branch initiates and which completes the priority-setting, how-ever, it is clear that the regulatory process as yet lacks any mecha-nism analogous to the expenditure budget for comparing and inte-grating priorities among different program areas.

1252 9 4 - 2 8 9 0 - 8 0 - 9

As the process of regulation develops, more consideration willneed to be given to the impact of regulations on the economy. TheNation must recognize that regulation to meet social goals competesfor scarce resources with other national objectives. Priorities must beset to make certain that the first problems addressed are those inwhich regulations are likely to bring the greatest social benefits. Ad-mittedly, this is an ideal that can never be perfectly realized, buttools like the regulatory budget may have to be developed if it is tobe approached.

NEW APPROACHES TO REGULATION

Growing recognition that social regulations have significant andsometimes unintended indirect effects on the economy is producingpressure to modify regulatory mechanisms. One modification maytake the form of alternatives to, or variations of, the "command-and-control" approach, which uses detailed regulations to specify permis-sible behavior. This approach often creates inflexibilities that add un-necessarily to the burdens imposed by the regulations. In the pastfew years regulatory agencies have begun to experiment with alterna-tives or supplements to traditional regulation. For example, the Envi-ronmental Protection Agency has developed an "offset" policy underwhich firms can set up activities that result in pollution in areas notcurrently attaining air quality standards only if they can purchasegreater reductions in the pollution from existing sources. The agencyhas also recently promulgated a "bubble" policy, to be applied undercarefully controlled conditions, which permits a firm to trade furtherreductions in emissions from one source for increases in emissionsfrom another. Since firms can thereby reduce pollution most wherecosts are least, the same overall reduction of pollution can beachieved at a lower cost (or more improvements realized for thesame cost). A similar approach was taken in permitting corporate-fleet averaging in the present standards for automobile fuel economy.

Regulation can be improved in other ways as well. Although thereis some doubt about the ability of consumers to assess and assimilatecertain information, the strategy of informing the public instead ofbanning questionable products shows promise in some situations.During 1979 the National Highway Traffic Safety Administrationmade data available to potential buyers on how well cars can with-stand crashes, and the Consumer Product Safety Commission contin-ued to publish information about hazardous products as an alterna-tive to outright bans or restrictions. Such programs help consumersbecome better able to judge competing products.

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Increasing the information consumers can draw upon sometimescomplements more traditional structural remedies as a means of fos-tering competition in a market. The Department of Agriculture iscurrently trying to replicate in the United States the results of a re-cent Canadian experiment that achieved price reductions of 3 to 7percent on a typical market basket of food items by disseminatingcomparative price lists for local grocery stores. If successful, thisstrategy of fighting high prices by helping consumers take advantageof price differentials among retailers could have wide application.

CONCLUSION

Regulation has joined taxation, and the provision of defense andsocial services as one of the principal activities of government; it hasjust as much need for effective management. Careful and responsiblemanagement of the government's regulatory efforts is all the morevital because many of their effects on the economy are subtle and dif-ficult to discern. Although some regulation can be largely or whollyeliminated, most of the government's regulatory activities are here tostay. This country will not give up the protection afforded by theseprograms, any more than it will give up education or a sound de-fense. But it has every right to demand its dollar's worth. The Ad-ministration's regulatory reform effort over the past 3 years has beendesigned to assure just that.

PROMOTING FLEXIBILITY IN THE LABOR MARKET

How well the labor market functions will be crucial in any success-ful long-run strategy for reducing inflation. Wages constitute a majorpart of production costs, and the supply and productivity of laborhelp determine how much of which goods and services will be sold atany particular price. The more rapidly and smoothly the labor marketadjusts to changes in the supply and demand for labor, the less delayand cost will be entailed in accommodating such major economic dis-locations as the sharp rise in energy prices. Efficient adjustment inthe labor market makes possible a greater growth in employment andoutput without hindering the long-term reduction in inflation.

Output and the demand for labor do not grow evenly in all indus-tries and occupations. In a poorly adjusting labor market, unsatisfieddemands for labor in rapidly growing sectors or occupations can gen-erate inflationary pressures while unemployment and economic slackare still high elsewhere in the economy. In such situations inflationcan be avoided only by more restrained monetary and fiscal policiesand a slower growth of overall employment than would have beenpossible in a more efficient labor market.

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In a modern industrial society, raising the productivity of labor isless a matter of changing worker motivation than of attracting laborto the sectors of the economy where it is most productive and thencombining it effectively with other resources. Therefore a labor mar-ket in which the demand and supply of labor adjust smoothly raisesthe general productivity of the labor force.

The use of labor market policy as part of an anti-inflation strategyposes three requirements: (1) to identify the sources of potentiallabor market pressures; (2) to consider how well the labor market islikely to cope with these developments; and (3) to ascertain the meas-ures most likely to promote timely and effective labor market adjust-ments.

LABOR MARKET DEVELOPMENTS IN THE 1980s

On the demand side, two developments that will probably requirecontinuing adjustments in the labor market during the years aheadare rising energy prices and the increasing importance of internation-al trade. Governmental policies that help the labor market adjust tothese developments will also help build an energy-efficient economy,pull labor into more productive uses, and thus work to reduce infla-tion.

Energy. Technological adaptation to a higher real price of energyentails two major shifts in employment. First, labor is needed tobuild, operate, and maintain the new sources of energy. Second,workers must adapt to the new productive techniques that becomeeconomically efficient at the higher energy prices.

The amount of labor directly required by the President's energyprogram depends on the mix of energy sources, the technology usedto produce energy, and the labor required for constructing, operat-ing, and maintaining these projects. The Administration's initiativesare expected to increase substantially the demand for labor in the en-ergy sector. Employment in the industries supplying goods and serv-ices to the energy sector will also increase. The distribution of theseadded jobs will not be uniform either geographically or by skills.

In the remainder of the economy, higher energy prices, once ad-justed to, will also lead to changes in employment patterns. Somestudies using data through the early 1970s have suggested that high-er fuel prices cause a substitution of labor for energy and capital inmanufacturing industries, although the evidence on this, as notedearlier, is mixed. Historically, energy and blue-collar workers haveappeared on average to be substitutes in production; energy andwhite-collar workers in manufacturing have appeared to be comple-ments. If those relationships continue as energy prices rise, the con-sequent increases both in gross manufacturing employment and in

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the ratio of blue-collar to white-collar jobs may partially offset atrend of the past several decades. Given the uncertainty about thetechnology that will prevail in a world of sharply higher energyprices, however, predictions about the impact of higher energy priceson employment patterns must remain tentative.

International trade. Over the past two decades U.S. foreign trade hasexpanded very considerably. Real exports have increased steadilyfrom 4.1 percent of real GNP in 1950 to 8.4 percent in 1979. Agrowing role for international trade tends to favor industries forwhich our Nation has particular efficiencies; it also helps provide anadditional competitive force to the market. On both counts, trade hasa moderating effect on inflation. But it also forces shifts in employ-ment. Jobs become fewer in domestic sectors threatened by imports;they increase in industries which are more competitive in world mar-kets. Since the comparative advantage of the United States tends tobe in its high-technology, capital-intensive industries, a growth in ex-ports shifts the demand for labor toward more highly skilled workerswith more advanced training.

Other factors. If the adjustments required by international trade andhigher energy prices are encouraged rather than hindered, changesin the composition of labor demand during the next decade shouldfavor a faster productivity growth. Reducing race and sex discrimina-tion will also improve productivity because human resources will beput to more advantageous use. The virtual disappearance of wagediscrimination against young blacks with high levels of education is afavorable development. Unless the pace of improvement is acceler-ated, however, it will still be many decades before all wage discrimi-nation against blacks is eliminated.

Supply Side

The dominant force on the supply side of the labor market duringthe 1980s will be the aging of the large World War II "baby boom"generation. As Table 21 shows, young people in the 16-24 agegroup have represented one of the fastest growing components ofthe labor force during the 1970s. In the coming years their share ofthe labor force will decline swiftly. At the same time the proportionof the work force accounted for by prime-age and the more experi-enced workers will grow rapidly.

This demographic change should help reduce both inflation andunemployment. The growth in the relative size of the experiencedwork force means that average productivity should rise. The fact thatyoung people, whose unemployment rates are usually higher thanaverage, will represent a smaller fraction of the work force, will itselftend to lower the level of aggregate unemployment at which infla-tionary pressures begin to emerge. Finally, young members of minor-

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TABLE 21.—Share of selected demographic groups in the civilian labor force, 1970-85

Group 1970 19771985(pro-

jected)

Annual percentchange in

share *

1970to

1977

1977to

1985(pro-

jected)

Share (percent)2

All youth (16-24 years)Black and other minority youth (16-24 years)..

All prime-age (25-54 years)'Prime-age women (25-54 years)

21.6 24.3 21.62.6 2.8 2.7

60.922.0

61.024.3

65.728.7

- 1 . 5- . 7

.92.1

1 Percent changes based on unrounded shares.2 Percent of civilian labor force.


ity groups, whose unemployment rates are now exceedingly high,should find it easier to secure entry-level jobs in a work force wherethere are fewer young people seeking such jobs.

The productivity of the labor force depends not only on the num-ber and experience of workers but also on their education. As Table22 shows, a general increase occurred during the past four decadesin the years of schooling of all groups in the labor force, with a dra-matic rise for blacks. School enrollment rates for whites and non-whites are now comparable. Unfortunately, trends in the quality ofeducation have not all been favorable. For elementary school chil-dren an improvement in basic skills and a substantial lessening of ra-cial differentials are evident. But there has been no improvement inthe skills achieved in the secondary schools. Blacks and low-incomecity youths do especially poorly in tests measuring functional literacy,and this weakness may contribute to their unemployment problems.

TABLE 22.—School attainment of 25- to 29-year-olds, 1940, 1960, and 1978

Percent with—

Less than 5 years of school:194019601978

4 years of high school or more:194019601978

4 years of college or more:194019601978

Item All persons

5.928

9

38.160.785.3

5.911.123.3

Blacks

27.770

8

11.637.777.3

1.64.8

11.8

Source: Department of Commerce, Bureau of the Census.

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There is some evidence that the gap between the achievement ofblack and white students has been narrowing. Future improvementsin productivity performance would be aided by continuation of thismovement.

HOW WELL CAN THE LABOR MARKET ADJUST?

Policies that will help the labor market allocate resources so as toraise productivity and reduce the waste of human resources need tobe targeted to areas where the market fails to perform effectively.

The fact is that the labor market worked quite well for most peopleduring the 1970s; the serious failures were concentrated among spe-cial groups. During this period the civilian labor force grew by some21 million workers, or 25 percent. One-third of that growth wasamong young people from 16 to 24 years old, and 39 percent wasamong women between the ages of 25 and 44. Although unemploy-ment rates for those groups rose over the decade, the percentage in-crease in their unemployment rate was less than that of the total un-employment rate. Indeed, the market even works well for mostyouths; they find jobs without difficulty when they enter the full-timelabor force.

There is a large flow of workers through the labor market eachyear as people change jobs and individual firms hire and lay offworkers. In January 1978 a special study by the Bureau of Labor Sta-tistics showed that fewer than 72 percent of those employed had heldthe same job they were in a year earlier. Transfers on so large a scaleimply that the labor market is relatively flexible and capable of mak-ing major adjustments. Moreover, fewer than 42 percent of those un-employed in 1978 were on indefinite layoffs or had lost their jobs.Most were re-entering the labor force, had quit their last job, or hadnever worked before.

While the market has worked well for most groups, it has notworked well for all. The greatest problems are concentrated amongdisadvantaged young people, especially blacks. Approximately three-fourths of the weeks of unemployment reported by youths are ac-counted for by those who have been unemployed for periods totalingmore than 15 weeks within a year. A disproportionate share of thoseyoung people are black. Over the past 15 years the employment-population ratio for black youths has been falling both absolutely andrelative to the record for white youths. A Department of Labor studyfound that among black males aged 16 to 19 the unemployment raterose from 23 percent to 42 percent between March 1964 and March1978. Among black teenage females there was an increase from 35percent to 44 percent over the same period. Increases were especiallylarge for central city black teenagers attending school. The message

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is clear: when major labor market adjustments are required, like theabsorption of the large numbers of young people during the 1970s,the poor or those with other disadvantages have the least chance ofmaking that adjustment successfully. Further, when potential workershave few basic skills and little experience and when the minimumwage and other institutions create wage floors, the result can be un-employment or part-time employment rather than full-time butlower-wage employment. The Administration's targeted jobs taxcredit is an employment subsidy designed to deal with these prob-lems.

Unwarranted differences in the experiences of different groupsimply that there has been failure in the labor market, and the Hum-phrey-Hawkins Act places special emphasis on reducing such differ-ences. While it is not possible to establish detailed employment andearnings goals for disadvantaged youths, older displaced workers, thehandicapped, women, Hispanics, veterans, and other such subgroups,the specific goal can be set forth: to reduce unemployment and raiseearnings for all these groups. Equality of unemployment rates amongall demographic groups is not an appropriate objective, of course,since it would fail to recognize differences in employment needs. Forexample, young people searching for better careers and not greatlyattached to any job should not be expected to have the same unem-ployment rates as older experienced workers. But structural policiesare needed to reduce unjustified disparities among groups, and espe-cially to lower unemployment among those with the most acute prob-lems and those handicapped by childhood poverty. Labor market dif-ferences based on factors which do not affect productivity or reflectvariations in tastes for work and type of job search should be elimi-nated.

Another group for whom labor markets may not work adequately isolder, more experienced workers whose long-time jobs disappear.Workers with skills specific to the needs of a particular firm oftenhave to accept lower wages when they must seek another job. In adynamic economy where the fortunes of individual firms wax andwane, these problems are continual. If they are concentrated in amajor industry or in a large firm, they often become issues for gov-ernment to deal with.

Problems in adjustment will continue in the 1980s as the labormarket responds to changes in energy sources, in patterns of interna-tional trade, and in other economic factors. While no general rulewill serve every occasion, the goals of raising productivity and im-proving living standards are best achieved if governmental policy isdesigned to aid the flow of human resources from obsolescent andlower productivity uses to new and more productive ones.

132

Although there are some general principles for dealing with dis-placed workers possessing firm-specific skills, applying them to par-ticular cases is not easy. It is difficult to tell in advance which dis-placed workers will have trouble. For example, a study of workerswho had been laid off and were eligible for aid under the Trade Ad-justment Act in 1978 showed that about three-fourths eventually re-turned to their previous place of employment. In the same period asample of unemployed manufacturing workers receiving unemploy-ment insurance showed that 58 percent eventually returned to theirprevious jobs.

POLICIES TO AID LABOR MARKETS

The labor market is sufficiently flexible that it can adjust to mostof the pressures of the 1980s without special assistance. Governmen-tal policy still has a role, however, in easing the adjustment for someworkers. This cannot be accomplished through aggregate demandpolicy alone, because attempting to do so would merely add to infla-tion while yielding only minimal benefits for the groups suffering es-pecially from unemployment. Active labor market policies directed atthe structural unemployment of particular groups or at specific rigidi-ties in the market are thus called for.

Nearly 5 percent of the Federal budget goes to education, training,and employment programs, many of which are aimed directly at in-creasing employment. These include public service jobs (some450,000 such jobs will be funded in 1981); a new targeted jobs taxcredit giving subsidies to firms hiring the disadvantaged; antidiscrimi-nation efforts of the Equal Employment Opportunity Commissionand the Office of Federal Contract Compliance; the new Presidentialdirective expanding the hiring of disadvantaged workers in privatesector jobs through Federal economic development programs; andflexitime experiments and employer technical services of the U.S.Employment Service that help restructure jobs to fit workers' needs.Complete evaluations of most of these programs are not yet availa-ble. Some of them may prove effective on a small scale but may notwork so well on a larger scale.

Programs to create public sector jobs provide an example of someof the difficulties faced by structural labor market policies. Such pub-lic jobs programs have three consequences which must be consid-ered: First, the existence of such jobs may attract such large numbersof people into the labor force that the reduction in unemployment issignificantly less than the increase in employment. (To the extentthat new members of the labor force were previously too discouragedeven to seek work, this would of course be beneficial.) Second, the

133

jobs may either displace some public sector workers or end up fi-nancing existing public sector jobs rather than providing new ones.The limits placed on wages payable in public service jobs in the 1978Administration-supported amendments to the Comprehensive Em-ployment and Training Act (CETA) and other amendments shouldeliminate some of the "substitution" problems. Third, such jobs arerelatively short-term solutions for individual workers and may onlypostpone the transition for these workers, without adequately prepar-ing them for unsubsidized employment. To address this problem, the1978 CETA amendments increased the emphasis on preparing work-ers for unsubsidized jobs, and the programs were also changed inother ways that should help workers adjust to labor market needs.

Both the Administration and the Humphrey-Hawkins Act recognizethat the problems of disadvantaged and minority youth make thisgroup a particularly appropriate subject for structural labor marketpolicy. The Administration has tripled expenditures on Labor De-partment programs for youth training and employment. In anticipa-tion of the expiration of authority for some youth activities this yearand in recognition of the persistent needs of disadvantaged youth,the President's budget contains proposals that will form the basis ofthis Administration's policies to alleviate the labor market problemsof young people in the 1980s. These policies recognize that, especial-ly as the proportion of youths in the population declines, there is nogeneral youth problem; but that employment problems are likely tobe serious for the roughly 10 percent of young people who are poorand suffering long-term unemployment. Not all of them require gov-ernment help, but many do. The decline in young people's share ofthe labor force should make it more likely that training and job de-velopment will help that group.

The President's new policies also recognize that the best time toconfront the employment problems of the young is before they leaveschool and experience long stretches of unemployment. Better andmore intensive training in basic skills for junior and senior highschool students before they leave school must have high priority ifwe are to improve their opportunities to find employment. The needto reduce long-term unemployment among labor market entrants ismade more urgent because one of its consequences is lower produc-tivity and earnings in later years. Our economy cannot afford towaste such human potential. So far, however, the amount of govern-ment money spent on compensatory education for secondary stu-dents has been relatively small.

The goals of the President's new initiative are: (1) to teach basicskills in the secondary school to those youths who did not masterthem in elementary school and who need special help; (2) to provide

134

part-time employment and training to dropouts willing to undertakeextended training to develop skills that will improve their labor mar-ket prospects; and (3) to provide intensive long-term training aimedat achieving unsubsidized private sector placements for older youthsout of school. Under the proposal the funds will go largely to poorrural areas and central cities, where a lack of basic skills and high un-employment are most serious.

For principal wage earners in low-income families with children,the Administration has sent to the Congress a set of major proposalsfor welfare reform. One component of these proposals would pro-vide training, help in seeking jobs, and work opportunities for em-ployable persons. The other major component improves the cash-assistance provisions of the welfare system. Together the two parts ofthe program would provide minimum income for those low-wageearners in need, along with jobs for those who can work. The pro-gram is designed to make employment more attractive than cash aid.

Much remains to be learned about the design of effective policiesaimed at other groups in the labor market. Perhaps most important,the efficacy of training programs for adult low-income workers is un-certain. The CETA system and other programs provide such workerswith both work experience and training. Although a new authority,Title II-C of CETA, can be used for retraining and aiding any dis-placed worker, most of CETA has increasingly been targeted towardthe disadvantaged and long-term unemployed. Evaluations of thetraining components of such programs show that they have modestpositive effects, especially for women. These effects seem to diminishfor male participants in the course of time.

Another question in policy design is whether the government orthe unemployed workers themselves are better informed about thetype of training they need and can most benefit from. If the unem-ployed workers are knowledgeable about themselves and the market,schemes giving them vouchers for training through either private orpublic programs should be considered. Some limited experimentsusing this approach for welfare recipients show promise.

A third issue is the success of programs to help workers relocate.Relocation assistance is a feature of the Trade Adjustment AssistanceAct. The concept of providing relocation assistance is sound, but fewworkers now take advantage of such assistance, and many who do re-turn to their home towns within a relatively short time.

As demographic changes begin to reduce some of the problems inthe labor market remaining from the 1970s, significant progress inhelping those groups which suffer the worst unemployment problemsbecomes feasible. By improving the employment opportunities ofthese groups and by making them more productive, labor market

135

policies can increase our supply of goods and services, improve ourefficiency in using the Nation's human resources, and help peoplelead more satisfying lives.

INCREASING THE RATE OF CAPITAL FORMATION(Investment Policy Report)

To reach a number of our important economic goals, the share ofnational output devoted to capital formation will have to increase inthe 1980s. Lifting the growth of productivity from the very low levelsof recent years will require an accelerated rise in the stock of capital.Environmental and related improvements will also demand large in-vestments. Further, as discussed earlier in this chapter, we will needto invest very substantial sums in developing alternative sources ofenergy and improving the energy efficiency of the economy. A largerand more efficient capital stock would also help the United States tocompete in world markets, improve the foreign trade balance, andstrengthen the value of the dollar relative to other currencies in ex-change markets.

Because of the importance of capital formation in determining thelong-run growth of the economy, the Humphrey-Hawkins Act placesconsiderable emphasis on the performance of business fixed invest-ment. One of the requirements of the act is that an Investment PolicyReport be included in each Economic Report of the President. The follow-ing section touches on the topics specified in the act; relevant mat-ters, such as policies dealing with Federal expenditures, Federal reg-ulation, and international trade, are discussed in more detail else-where in this Economic Report.

THE ADEQUACY OF RECENT INVESTMENT

An examination of recent trends in investment raises a number ofquestions. The fraction of GNP devoted to investment in 1978-79has approached the shares realized in the late stages of the last twoexpansions, but this proportion was relatively low during the earlystages of the recovery from the 1974-75 recession. Thus the additionto the stock over the past 4 years has been relatively small, especiallywhen the depreciation of the stock during this period is taken intoaccount. At the same time the growth in the labor force was largerthan in earlier periods, and hence the rate of growth in the capitalstock available per worker fell substantially. Furthermore some of therecent investment has been devoted to meeting increased energyneeds and the requirements of environmental, health, and safety reg-ulations. While such investment is important to national goals, itdoes not directly expand industrial capacity or contribute to meas-

136

ured productivity. Finally, the composition of investment has beenmore heavily weighted toward shorter-lived assets than it was in peri-ods prior to the 1974-75 recession.

Since 1974 the share of gross business fixed investment hasreached 10 percent of GNP only during the last 2 years (Chart 6).Moreover the 1979 gain occurred despite reduced growth in real in-vestment expenditures; real GNP grew at a still lower rate.

Chart 6

Real Nonresidential Fixed Investmentas Percent of Real GNP

PERCENT OF GNP

12

10

8

6

4

2

0

-

—

-

i i i i

PRODUCERS'

1 1 1 1 1

TOTAL /

DURABLE EQUIPMENT

\

\ s' "

STRUCTURES

I I I I I I 1 I 1 1 1 I I I I

-

\ y//'~

—

i i i i i

1948 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78SOURCE: DEPARTMENT OF COMMERCE.

Historically it has not been uncommon for the share of such invest-ment in GNP to rise as growth of the economy begins to slow. Simi-lar behavior occurred in 1960, 1969, and again in 1974. The growthof investment does not always coincide with the overall growth of theeconomy because actual investment expenditures lag the planningand appropriation stages and because expenditures for ongoing proj-ects are not necessarily curtailed in a downturn.

The composition of recent business fixed investment has beenquite different from historical norms. In 1979 the share of invest-ment in producers' durable goods in real GNP (7.0 percent) was the

137

second highest in the last three decades. Both motor vehicles andother equipment attained shares of GNP that approached recordpeaks for the year as a whole, although purchases of vehicles de-clined sharply during the course of 1979. In contrast the share ofreal GNP accounted for by business investment in structures (3.3percent) continued to be less than that realized in every year between1947 and 1974.

A variety of causes could be found for the changing strength of themajor components of business fixed investment. One is Federal taxlegislation, which since 1971 has increased the investment tax creditfor equipment while giving structures only partial coverage. Anotheris that the higher level of inflation in recent years has increased thetax burden on long-lived assets relative to short-lived assets. Uncer-tainty about future economic conditions and about the outcome ofvarious regulatory processes has intensified, and such uncertaintytends especially to penalize investments in assets with long-termpayoffs.

As discussed in Chapter 2, only part of the unsatisfactory produc-tivity of recent years can be blamed on declining rates of capital ac-cumulation. Nevertheless there is little doubt that increased rates ofcapital formation will improve productivity in the future. Capital ac-cumulation increases labor productivity directly by giving labor moreto work with, and some technical advances contribute to productivitygrowth only when they are embodied in the capital stock.

Investment and Innovation

The last point made in the preceding section takes on special sig-nificance in the light of changes in the average age of the capitalstock. From 1948 through 1966 the average age of producers' dura-ble equipment and structures fell about 3 years. The average age fellby about 1 year from 1966 through 1973. Since 1973 the average ageof business capital has not changed significantly. Because the gap be-tween best-practice and average-practice technology is narrowedwhen innovations are put in place, modernization of the capital stockis one way to diffuse innovation that will add to productivity. Not alltechnical progress is embodied in capital, however, and the quality ofsome new capital may change little. Thus the fact that the averageage of the capital stock has remained constant may account for only asmall portion of the recent declines in productivity growth.

A Domestic Policy Review, initiated by the President, recently as-sessed the proper role of the government in fostering industrial inno-vation. On the basis of this review, the President sent an IndustrialInnovation Message to the Congress in which he detailed a numberof steps that the Administration had taken or would soon be taking.

138

Specifically, the President's 1981 budget proposes programs to en-courage the development and transfer of technical information andto improve the patent system. The budget also contains proposals tostimulate small businesses devoted to high technology, including di-rect support to small research and development firms. The Presidenthas directed the Small Business Administration to increase furtherthe availability of venture capital to these firms. Finally, also to in-crease the availability of venture capital, Employee Retirement In-come Security Act regulations have already been changed to allowpension funds to invest in small innovative firms.

Federal support for research and development, measured in realterms, fell substantially between 1969 and 1975. In more recent yearsthe trend has been reversed. The Nation's effort in basic research de-pends on the Federal Government for about two-thirds of its sup-port. The budgets of the Administration have increased that supporteach year, the increase amounting to 22 percent in real terms be-tween 1976 and 1979. The President's 1981 budget proposal contin-ues that policy.

SPECIAL INVESTMENT NEEDS

Compliance with mandates to improve the environment, health,and safety requires substantial investment. The results of this invest-ment—cleaner air, purer water, and a safer working environment—are not included in conventional measures of output, although theybenefit everyone. Investments to meet regulatory requirements are fi-nanced from the same sources as investments that directly increaseindustrial capacity. Thus any given fraction of GNP devoted to in-vestment will yield less measured gain in productivity than historicalrelationships would suggest. Meeting requirements of the Clean Airand Water Acts alone is estimated by the Environmental ProtectionAgency to have absorbed 5.6 percent of business fixed investment, or0.6 percent of GNP, in 1977. Over the decade of the 1980s the in-vestment required to meet existing environmental regulations aloneis expected to average 0.3 to 0.6 percent of GNP. To the extent thatnew regulations are imposed, the share of GNP used may be larger.

The additional private investments directly attributable to increas-ing and diversifying our domestic energy supplies and improving en-ergy efficiency will also be substantial. The requirements outlinedearlier in this chapter, including those stemming from the nationalenergy program, will add the equivalent of about 1 percent of GNPto investment needs. There will be other indirect investment require-ments. Since rapidly rising energy costs increase the rate at which thecapital stock becomes obsolete, replacement investment must alsorise if a reduction in the Nation's productive capacity is to be avoid-ed.

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Even without the special investment needs of energy and the envi-ronment, it is difficult to imagine that healthy economic growth couldbe maintained by a ratio of business fixed investment to GNP of lessthan 10 percent. The direct investment requirements for increasedenergy supplies, plus environmental regulations currently on thebooks, could raise this to over 11 percent. Finally, depending uponhow much investment will be required by new environmental regula-tions and by the need to accelerate the replacement of industrialfacilities made obsolete by higher energy costs, the necessary invest-ment ratio may be higher still. Achieving this level of investment willnot be easy; the highest share attained by the economy in thepostwar period was 10.8 percent in 1966.

SAVING-INVESTMENT RELATIONSHIP

The basic saving-investment relationship as measured in the na-tional income and product accounts is presented in Table 23. Thereported values represent the amount of gross saving by the house-hold, business, and government sectors, along with gross investmentby type of expenditure. Household saving equals disposable personalincome less personal outlays, which consist mainly of personal con-sumption expenditures. Business saving is defined as retained earn-ings plus depreciation. The government sector's contribution to na-tional saving depends on the budget surpluses or deficits of Federal,State, and local governments. The government sector adds to nation-al saving when a combined budget surplus is recorded.

Gross investment consists of domestic investment and net foreigninvestment. Net foreign investment is conceptually similar to the cur-rent account deficit in the balance of payments, with a surplus in thecurrent account corresponding to positive net foreign investment. AsTable 23 shows, saving and investment as fractions of GNP have in-creased in the last 2 years, although they remain slightly below thevalues of the 1965-69 period.

Whether business investment will grow enough to meet the coun-try's needs in the 1980s will depend on two key questions. Will in-vestment incentives be sufficient to bring the demand for businesscapital goods up to the necessary level? And will the share of nation-al saving in GNP expand to permit that investment demand to berealized without adding to inflationary pressures on the economy?While the two questions are related—since additional saving tends tolower long-term interest rates and encourage investment demand—itis useful to examine each of them separately.

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TABLE 23.—Gross saving and investment as percent of GNP, 1965-79

[Percent]

Item 1965-69 1970-74 1975-77 1978-79 »

Gross saving 2 3

PersonalBusinessGovernment

FederalState and local..

Gross investment3

Nonresidential fixedResidential fixedChange in business inventories....

Net foreign

Statistical discrepancy..

15.8

4.411.6- . 2

- . 3

15.8

10.54.01.3.1

15.1

5.010.5- . 5

-1 .2.7

15.3

10.24.5

.8- . 3

.2

13.8

4.211.9

- 2 . 3

- 3 . 31.0

14.2

9.84.1

.4- . 2

15.3

3.211.8

.3

1.2

15.5

10.64.9

.9- . 9

.2

1 Preliminary.2 Includes net capital grants received by the United States, not shown separately.3 Saving and investment may not be equal due to rounding.4 Less than 0.05 percent.

Source: Department of Commerce (Bureau of Economic Analysis).

DEMAND FOR NONRESIDENTIAL FIXED CAPITAL

Future trends in capital formation will reflect both past and futureinvestment incentives. Last year's Economic Report discussed many ofthe factors which appear to influence business decisions to invest.Table 24 presents data for a number of these factors.

Preliminary data for the year 1979 as a whole do not indicate aclear pattern. Two of the measures shown—capacity utilization andthe rate of return on stockholders' equity—rose and were above theiraverage levels for the 1955-69 period. The other three declined and

TABLE 24.—Determinants of business fixed investment, 1955-79

[Percent, except as noted]

Period

1955-69 average1970-77 average

19781979-. First 3 quarters 6

Ratio of realinvestmentto real GNP

9.510.0

10.010.4

Capacityutilization

rate inmanufactur-

ing l

84.280.9

84.486.0

Nonfinancial corporations

Cash flow aspercent of

GNP2

9.48.3

8.88.5

Rate ofreturn on

depreciableassets 3

12.99.4

9.79.2

Rate ofreturn on

stock-holders'equity 4

6.46.4

7.17.7

Ratio ofmarket value

toreplacementcost of net

assets 5

1.097.871

.678

.654

1 Federal Reserve Board index.2 Cash flow calculated as after-tax profits plus capital consumption allowance plus inventory valuation adjustment.3 Profits before taxes plus capital consumption adjustment and inventory valuation adjustment plus net interest paid divided

by the stock of depreciable assets valued at current replacement cost.4 After-tax profits corrected for inflation effects divided by net worth (physical capital component valued at current

replacement cost).5 Equity plus interest-bearing debt divided by current replacement cost of net assets.6 Seasonally adjusted.

Note.—For annual figures for 1955-77, see Appendix Table B-85.

Sources: Department of Commerce (Bureau of Economic Analysis), Board of Governors of the Federal Reserve System, andCouncil of Economic Advisers.

141

294-289 O - 80 - 10

were below their 1955-69 averages. The steady increases in capacityutilization rates since the 1974-75 recession reflect the strength andduration of the subsequent recovery as well as the relatively slow ac-cumulation of additional industrial capacity. The rate of return onstockholders' equity also rose (see Table 24). However, this increaseis not a good measure of the change in the rate of return availableon new equity investments, because it stemmed largely from unantici-pated increases in inflation which reduced the real burden of corpo-rate debt. The slowdown in the growth of profits in 1979 contributedto the declines in the rate of corporate cash flow and the rate of re-turn on depreciable assets. The ratio of market value to replacementcost of net assets declined even further from its low 1978 level as in-flation pushed the replacement cost of physical capital well beyondthe market value reflected in equity and debt prices. All of the invest-ment determinants except the ratio of market value to replacementcost of net assets and the return to depreciable assets were above1970-77 averages, but these averages themselves were equal to orbelow those of the 1955-69 period.

Federal tax policy has an important influence on business fixed in-vestment. The Revenue Act of 1978 lowered the corporate tax rateacross all income classifications. The investment tax credit was madepermanent and was extended to a broader range of investment ex-penditures. The tax rate on capital gains was also reduced by allow-ing a larger proportion of capital gains to be excluded from an indi-vidual's taxable income.

While these reductions in tax rates were occurring, the increase ininflation tended to raise the tax burden on businesses. During peri-ods of rising inflation the real tax burden increases because depreci-ation allowances are based on historical costs rather than on replace-ment costs. Partly for this reason, the ratio of Federal corporate in-come taxes to profits measured on an economic basis was higher in1979 than in 1978 despite the reduction in the corporate income taxrate which took effect in 1979. Since long-lived investment goods suf-fer larger declines in the real value of depreciation allowances overtime, inflation distorts both the amount and composition of invest-ment.

THE SOURCES OF SAVING

In periods of economic slack the production of additional capitalgoods does not require a reduction in the output of consumer goods.In fact the expansion of wage income from the increase in output ofinvestment goods will lead to a simultaneous rise in the demand forand the production of consumer goods.

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In periods of relatively high employment, however, the growth ofnational output is limited to the 2V2 to 3 percent rate given by thegrowth in potential GNP. Investment can grow more rapidly only ifits share in GNP rises, which in turn requires an increase in the shareof GNP that is saved. In order to increase the share of investment inGNP during the 1980s, therefore, total saving will have to rise rela-tive to GNP. Saving frees resources for use in the production of capi-tal goods and provides the flow of funds needed to finance invest-ment outlays. The amount of saving by governments, business firms,and individuals is thus the major determinant of the amount of totalinvestment that can be undertaken. About one-fourth to one-third ofnational saving in the past has been absorbed by residential construc-tion. The bulk of the remainder is available for business capital for-mation.

Recently, as the Federal Government's deficit has narrowed, Feder-al Government dissaving has declined. The Federal deficit (as meas-ured in the national income and product accounts) has declined inevery year since 1975 from an average of 3.3 percent of GNP in1975-77 to 0.8 percent in 1978-79 (see Table 23).

Gross saving in the State and local government sector averaged 1.2percent of GNP during 1978-79. The bulk of this saving was fromnet additions to the surpluses of social insurance and pension funds.Last year the operating budgets of State and local governments wereapproximately in balance. The combined budgets of Federal, State,and local governments recorded a net surplus in 1979, the first suchsurplus since 1973.

In contrast to the recent changes in governmental budgets towardpositive net saving, the personal saving rate has declined substantiallyin recent years. For 1979 as a whole, the rate was 4Vfe percent; it waseven lower by year end. A number of contributing factors have beencited as causes of the recent low saving rate. These include the highproportion of the work force consisting of younger people, the in-creased number of two-earner households, and—in 1979—the effortsof consumers to maintain real consumption in the face of slowgrowth in real income. In addition, inflationary expectations in con-junction with low rates of return on financial assets, low real borrow-ing costs, and the ready availability of credit may have reduced thepersonal saving rate by increasing the attractiveness of real assets rel-ative to financial assets. The relative importance of these factors tothe decline in the saving rate is uncertain.

Business saving—retained earnings plus depreciation—grew at arate of 9.2 percent in 1979, down moderately from the growth of re-cent years. Historically the rate of growth of business saving has var-

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ied substantially; the most recent figure is well within past ranges.Because business saving is an internal source of funds to finance ex-penditures on physical capital, policies designed to increase businesssaving also tend to have a direct impact on business fixed investment.The Revenue Act of 1978 strengthened this source of corporate fi-nancing by lowering the corporate income tax rate.

CAPITAL MARKETS AND THE AVAILABILITY OF CREDIT

Financial markets and institutions play a major role in linking sav-ing and investment. The business sector finances a significant portionof its long-term investment expenditures through such financial inter-mediaries as insurance companies and pension funds. Direct pur-chases of new equities and corporate bonds by households have re-cently been only a minor source of financial capital for businesses. In1978, for example, the nonfinancial corporate business sector raised$20.1 billion in the corporate bond market, while the household sec-tor reduced its net corporate bond holdings by $1.4 billion. Indirect-ly, however, workers and other individuals constitute an importantsource of business funds through pension funds and other forms ofgroup saving.

During most of 1979 businesses had little difficulty in obtainingcredit. Total financial capital raised by the nonfinancial business sec-tor rose by an estimated 17 percent in 1979. Short-term debt was anunusually important source of the business sector's financing. Busi-nesses preferred shorter-term issues because it was thought through-out most of the year that longer-term rates were at or near their cy-clical peaks and would decline in the near future. In fact long-termrates rose sharply during 1979, but this increase had not been widelyanticipated.

To help ensure that financial capital is available to businesses inthe future, the Administration is systematically reviewing Federalcredit activities. In the budget for fiscal 1980 the Administration an-nounced the development of a program to establish a credit-monitor-ing system which covers direct lending by agencies as well as guaran-teed loan programs. The 1981 budget recommends limitations onannual appropriations for a wide range of activities involving Federalcredit. This new monitoring system includes both on- and off-budgetFederal loan and loan guarantee programs. Although some programsare exempt, this review will lead to a more efficient allocation of bothcredit and real resources.

The availability of financial capital in the future will be maintainedby improving the economic environment in the United States, as out-lined in this chapter, and by selective policies designed to meet the

144

needs of small businesses for financing. Through the continuing ef-forts of the Small Business Administration and the programs includ-ed in the President's proposals to foster industrial innovation, morecredit will be available to small businesses. For the economy as awhole, a reduction in inflation will enable monetary policy to ease,thereby improving the flow of funds in financial markets.

SOME LIKELY PATTERNS OF NATIONAL SAVING IN THE 1980s

Table 25 illustrates a pattern for national saving that seems possi-ble under a set of reasonable assumptions for the 5-year period1982-86. The Federal budget is assumed to be balanced on averageover the period. Continued control over spending should make itpossible both to reduce taxes during the period and to have a bal-anced budget in most of those years. State and local governments arelikely to continue, on average, the surpluses of recent years whichstem from an excess of revenues over expenditures in pension andrelated funds for their own employees. Business saving will probablyremain close to historical trends in the absence of future business taxcuts, and the personal saving rate is assumed to increase to slightlyabove its 1975-79 average. In sum, total domestic saving as a pro-portion of GNP can be expected to rise slightly in the 1982-86 peri-od compared to recent years. But the inflow of investment fromabroad, which is the financial counterpart of the U.S. current accountdeficit, should move toward zero as market forces bring receipts andexpenditures in the current account close to balance. The share ofGNP used for housing will increase slightly because of the energy re-quirements discussed earlier in this chapter. With inventory invest-ment taking about the same share of saving as in the recent past, the

TABLE 25.—Actual and illustrative saving-investment balances

[Percent of GNP]

Actual1975-79»

-2 .21.1

11.83.8.

14.5

- .54.5.6

Illustrative1982-86

01.0

11.54.0

16.5

04.8.7

Federal Government surplusState and local government surplusGross business savingPersonal saving

Equals: Total saving

Less: Net foreign investmentResidential fixed investment...Inventory investment

Equals-. Saving available for business fixed capital formation.... 9.9 11.0

1 Preliminary; detail may not add to total because of rounding.

Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers.

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amount available for business fixed investment should be about 11percent of GNP.

It was estimated earlier that to improve productivity, expand capac-ity, make the adjustment to higher energy costs, and meet environ-mental needs the ratio of business capital formation to GNP wouldhave to rise to at least 11 percent and possibly somewhat higher. Theearlier discussion of factors underlying the demand for investmentgoods and the analysis of saving ratios in Table 25 suggest that spe-cific measures to increase investment and saving may be needed inlater years.

THE PROSPECTIVE POLICY MIX

Inflation and economic growth tend to increase average effectivetax rates and thus the share of Federal taxes in GNP. Under currentinflationary conditions, and given the uncertainties in the economicoutlook, the highest priority in the use of additional Federal revenuesis to reduce the budget deficit. This is the policy incorporated in thePresident's 1981 budget proposals. However, continued control ofFederal spending will make possible tax reductions in future yearsthat are quite consistent with the maintenance of an appropriate de-gree of fiscal restraint. Considering the need for additional invest-ment incentives, the design of future tax reductions should give ahigh priority to measures which strengthen investment.

Policies will also be needed to increase the amount of available na-tional saving. One way to do so is to have smaller tax reductions andrun a Federal budget surplus. A budget surplus would increase na-tional saving and thereby provide additional sources of funds for in-vestment. Alternatively, some of any potential budget surplus couldbe used to reduce taxes in ways which increase the after-tax return topersonal saving. There is considerable uncertainty about the likelysize of the response of personal saving to increased after-tax returns.It is clear, however, that each dollar of such tax reduction—whichlowers the potential Federal surplus (and hence total national saving)dollar for dollar—will yield at most a small fraction of a dollar in ad-ditional personal saving.

Tax reductions devoted explicitly to business firms in the form ofincreased investment incentives, on the other hand, will tend to in-crease both business saving and investment. While some part of abusiness tax reduction will go toward higher dividends, a fairly largefraction of it is likely to end up as increased retained earnings.

The fact that an increase in the ratio of saving to GNP may be nec-essary to make possible the desired expansion of investment does notimply, of course, that increasing the saving share will itself guarantee

146

a rise in investment. A higher saving share will tend to reduce realinterest rates and thus encourage investment. But that alone may notbe sufficient. An overall economic climate with inflation being stead-ily reduced and output growing at a sustainable pace would be veryconducive to investment. It may be necessary also, as fiscal drag al-lows statutory tax rates to be reduced, to provide a significant part ofthe reduction in forms which both raise the return to investment andincrease business saving.

ADJUSTING TO EQUILIBRIUM IN AGRICULTURE

During the past decade the role of U.S. agriculture in the nationaland international economy changed dramatically. This change hasimportant implications for inflation, agricultural productivity, and thelong-term performance of the farm sector.

Historically agriculture's productive capacity increased so rapidlyrelative to demand that national agricultural policy had to concen-trate heavily on protecting farm income from the consequences ofoverproduction. But rising world population, increased consumptionof animal products, and the improved capability of some developingnations to purchase food and feed grains—combined in the last dec-ade with dollar devaluations and global crop shortfalls—now requirenearly full use of the land, labor, and capital available to agriculture.Measured in constant dollars, this sector's total exports have in-creased more than 60 percent since 1972. U.S. agriculture appearscloser to resource equilibrium than it has been for many decades.

This situation is likely to persist. While year-to-year fluctuations inweather, world economic performance, or even international affairsmay result in potentially troublesome periods of excess production,the longer-term outlook strongly suggests that production will moretypically be at or near capacity. Growth in world population and im-proved economic conditions in both developed and developing coun-tries will increase their need for and improve their capability to pur-chase food and feed grains.

POLICY ISSUES

The United States is now more vulnerable to agricultural price andincome fluctuations arising from changes in worldwide demand forU.S. farm products than it was in the past. Sustained full use of farm-land, for example, makes it more difficult to increase output in re-sponse to successive world crop shortfalls. Then too, as exports areexpanded, U.S. agriculture becomes even more closely linked with

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world weather and the domestic policies of other nations. Since littlecan be done to influence these factors, domestic agricultural policiesmust operate to cushion the sector and the Nation from the priceand income shocks that they would otherwise experience. Reducingthis vulnerability while improving the sector's productivity and eco-nomic performance is a major objective of the Administration's foodand agricultural policy.

Supply Shocks

The total demand for food is so inelastic that small changes in glo-bal food supply can lead to very large changes in price. And becausethe supply cannot be increased quickly, year-to-year price changes dolittle to alter the quantity offered for sale; rather they increase thepotential for generating oscillations in price and production. Wide-spread crop shortages can set off a general inflationary surge.Bumper crops can reduce market prices below what is needed tocover variable operating expenses. These characteristics, combinedwith the fact that food is a basic raw material, leave us exposed toabrupt price changes in the food sector.

A clear demonstration that small variations in global food supplycan lead to wide variations in producers' incomes and food priceswas furnished by the events of 1972-74. World food production de-clined only about 2 percent globally in 1972. This modest decline ledto an increase of 54 percent in U.S. crop prices in 1973 and to an-other 28 percent increase in 1974. Consumer food prices increased31 percent over these 2 years. Net farm income was a record $33.3billion in 1973, 78 percent higher than in 1972.

The rise in grain prices touched off the most rapid liquidation ofthe domestic cattle herd ever recorded. Cattle prices fell as cattlemarketings increased during 1975 through 1977. Grain prices alsofell during the period, a consequence of increasing world stocks. In1976 net farm income was about equal to its 1972 level. Beginning in1978, food prices rose, reflecting strong consumer demand and thecut in meat supplies that resulted from the earlier slaughter of breed-ing herds. During 1978 and 1979 retail beef and veal prices in-creased more than 50 percent.

Price and Income Support

Government programs in the past have increased farm income byraising commodity prices. These artificially high price supports ofteninterfered with adjustments in production and agricultural tradeflows; farmers frequently based decisions on government price guar-antees rather than on basic forces of demand and supply. Production

148

often exceeded market needs at government-supported prices, andgovernment stocks began to accumulate. As a result, quotas and acre-age allotments were adopted to control output. Agriculture was justi-fiably cited as an example of the inefficiency created by governmentinterference in private markets.

The Agriculture and Consumer Protection Act of 1973 (see the1974 Economic Report for detail) represented a significant change inthe philosophy underlying government support of farm incomesthrough commodity programs. For major crops the price supportmechanism was augmented by a system of direct income paymentsunder which market prices are allowed to fluctuate in response tosupply and demand, thereby promoting a more efficient allocation ofagricultural resources among the crops. By this means consumersand grain-using producers can benefit from lower prices when har-vests are large. When market prices fall below legislatively deter-mined targets, farmers receive direct income payments to make upfor the income lost through the lower prices.

While the 1973 act changed the way incomes were protected, theprimary focus was still on the problem of low incomes. The act madeno provision for cushioning farmers and consumers from the effectsof instability resulting from increased reliance on market prices. Itwas generally believed that the rapid price increases of 1973 werelargely an aberration and that sufficient commercial grain stockswould be available in the future to moderate the price fluctuationsassociated with occasional crop failures. Only in the years that fol-lowed did the inflationary consequences of a continuing policy ofplacing sole emphasis on minimum income protection become clear.

Agricultural Productivity

A sustained and nearly full use of agricultural resources requiresgiving more attention to policies that improve the sector's productiv-ity. Crop production per acre increased at an average annual rate of2.4 percent from 1953 to 1973. Since then the average rate has beenabout 1.1 percent per year. Without the excellent growing conditionsin 1978 and 1979, which pushed yields per acre well above the trend,the rate of increase would have been below 1 percent per year.

The greater use of marginal lands during this decade has undoubt-edly contributed to the slower increase in crop production per acre.After steadily declining for more than 20 years, the number of cropacres harvested increased significantly in 1973. This number has re-mained at about the 1973 level, despite the occasional use of acreageset-asides since then. The rise in agricultural exports has been a sig-nificant factor in increased land use. Today one-third of the U.S.

149

crop acres produce for export, 40 percent more than in the 1960sand 120 percent more than during the 1950s.

Continued intensive use of cropland will lead to a depletion of soiland water resources unless specific resource management schemesare employed. These improved farming practices are becoming evenmore crucial to productivity improvements because the migration oflabor from the sector has slowed and because prices for fuel and fer-tilizer are climbing.

THE ADMINISTRATION'S AGRICULTURAL POLICIES

In January 1977 world grain stocks and prices were returning topre-1972 levels. The domestic cattle herd was being liquidated at arapid rate, and retail meat prices were lower than in 1976. Net farmincome had fallen 44 percent from 1973. Sentiment was growing fora reinstatement of farm programs designed to support producers' in-comes through higher commodity prices. It was uncertain whetherthe 1972-75 situation was an aberration or a signal that price and in-come stability would have to be the major consideration in futurefarm policy.

The Administration, believing that conditions had indeed changed,worked with the Congress in developing the Food and AgricultureAct of 1977. That legislation and the policy directions it implied be-came the basis for a broad range of food and agricultural programsto protect farmers' incomes while supporting the principle of full-capacity production and increased reliance on market prices.

Grain Reserves

In a major departure from past policies the Administration's pro-grams went beyond minimal income protection for grain farmers andestablished a farmer-owned grain reserve. Using existing authorityand the Commodity Credit Corporation (CCC) loan program, theAdministration announced the implementation of a farmer-ownedwheat and rice reserve in April 1977. CCC loans on the 1976 cropswere extended and farmers received government payments for cropstorage. They were allowed to repay the loans without penalty when-ever the market price reached 140 percent of the loan rate on thecrop.

In August 1977 the Administration announced its plan to establishreserves of 30-35 million metric tons of food grain (wheat and rice)and feed grain (corn, sorghum, barley, and oats). Most were to beowned by farmers, but a small government-owned food reserve wasalso planned.

Passage of the 1977 Act formally authorized these reserves. It man-dated the farmer-owned wheat reserve with essentially the same op-

150

erating rules as those announced earlier by the Administration. Theact also provided broader authority for incentives to use the farmer-owned reserve to store crops. It authorized a reserve for feed grainsas well and provided low-interest loans to expand facilities for grainstorage at the farm. By October 1979 more than $1.3 billion in loanswere outstanding to farmers for constructing such facilities.

The Administration achieved its goal for the level of reserve stocksin less than 2 years. By early 1979 more than 11 million metric tonsof wheat and 20 million metric tons of feed grains had entered thereserve.

Explicit rules now govern release of the grain from the reserve.Farmers may not redeem loans or sell the reserve stocks within thecontract period (generally 3 years) without penalty unless marketprices reach a certain percentage of the loan value. If they do, thereserve is "released"; that is, the government ceases storage pay-ments and farmers are allowed (but not required) to repay the CCCloan and sell their reserve stocks. If the market price reaches a higherpercentage of the loan rate the loans are "called"; farmers are re-quired to repay the CCC loans or forfeit the grain. This programthus makes it less likely that grain prices will rise significantly abovethe call price, because grain is released from the reserve in stages.

The combination of the call price and the loan rate establishes aknown corridor of market prices. Price movements within that rangeallocate resources among crops but the probability of excessive fluc-tuations which disrupt planning and increase volatility in agriculturalproduction is much reduced. This arrangement helps to make theNation less susceptible to the inflationary effects of crop shortages.

The first test of how well the managed reserve concept couldweather a period of tight supplies occurred in the spring of 1979.Late plantings in the United States and most of the rest of the North-ern Hemisphere increased the likelihood that 1979 would bring apoor harvest. Reports of a potentially serious production shortfall inthe Soviet Union added to this possibility. The farm-level price ofwheat rose 16 percent between mid-May and mid-June alone. Feedgrain prices also increased rapidly.

Even with the prospect that world carryover stocks might declinemore severely than in 1972, a rapid rise in grain prices was avoided.

The price increases in late spring brought the wheat and the feedgrain reserves into release status. At that point the governmentceased storage payments and farmers were allowed to withdraw grainfrom the reserve without penalty. By mid-October 40 percent of thewheat and sorghum and more than 25 percent of the corn had beenwithdrawn. As this grain came into the market the price increase

151

slowed. As a result, producers of hogs, poultry, and dairy productscould continue to expand their output, and cattle producers couldcontinue to rebuild their breeding herds.

The suspension of sales of agricultural products to the USSR inearly 1980 will provide yet another test of the grain reserve concept.Normally such an action would have substantially reduced farmprices. In announcing the trade suspension the President assured theNation that the burden of that action would not fall unfairly on theagricultural sector. Shortly thereafter the Administration stated thatthe farmer-owned grain reserve would play an important role in iso-lating affected commodities from the market. To remove the immedi-ate price-depressing effect of the Soviet grain suspension, the CCCoffered to assume the contractual obligations for the unshippedgrains. Simultaneously the Administration announced that the rulesgoverning the reserve were being changed to encourage farmers toplace grain in storage. These two actions were expected to reducethe level of free stocks and counter downward pressure on prices.Then, as prices firmed, the government-secured grain could be soldback to the market, thus keeping season-average prices little changed.The flow of grain into reserve stocks would support prices over thecurrent crop year and serve as a buffer against future crop shortfalls.The central role assigned to the use of farmer-owned reserves in thiscase underlines their usefulness as a major tool for cushioning supplyshocks in the farm sector.

The reserve can thus be a moderating force on both the upsideand the downside. If corn prices had reached $3.50 per bushel inearly 1979, as some thought possible, the expansion in the cattle-breeding herd would have been delayed. Hog and poultry producerswould have begun slaughtering their animals immediately. Totalmeat production in 1981 and beyond would have been lower than isnow expected, and food prices would have been higher. Then too,the early 1980 suspension of agricultural trade with the Soviet Union,in the absence of special policy actions, would have resulted in a sig-nificant decline in commodity prices and farm income. Use of thefarmer-owned grain reserve coupled with other policy actions willmitigate these impacts. In both cases food prices and farm incomewill have been stabilized—and, importantly, stabilized around long-term market trends.

International Trade Agreements

The avoidance of excessive price fluctuations in an agricultural sec-tor operating at full capacity with an increased reliance on agricultur-

152

al exports requires improvements in international trade arrange-ments. The grain reserve helps to cushion the effects of fluctuationsin world trade, of course, but better commodity trade communicationbetween nations is also essential.

Since 1970 the communication process has been made more for-mal in a number of ways, perhaps the most important being passageof reporting requirements on export sales. The Agricultural Act of1970 requires that all exporters of major agricultural products reportweekly the type of commodity to be exported, the marketing year ofshipment, and the destination, if known. The Secretary of Agricultureis then required to publish the compiled data each week followingthe week of reporting. The law was amended by the Food and Agri-culture Act of 1977 to allow the Secretary of Agriculture to requirethe daily reporting of export sales.

In addition to requiring these regular reports of export trade theAdministration has been successful in several other related areas.Completion of the Multilateral Trade Negotiations, ratified throughsubsequent passage of the Trade Agreements Act of 1979, is one ex-ample. In addition, the President's Export Council has been revital-ized with a strong subcommittee on agricultural exports. Agriculturaltrade offices have been opened in several overseas locations, and therank of the U.S agricultural attache at important foreign posts hasbeen upgraded. All these actions help to improve our network for in-ternational agricultural trade communications.

The Administration has also moved to moderate the volatility indomestic sugar prices. Acting in concert, the world's sugar producersand importers have established a mechanism for balancing worldsugar supplies more nearly in accord with market needs. When theInternational Sugar Agreement is fully operational, we should be lesslikely to see a repetition of the 450 percent price increase of 1974.

The Meat Import Act of 1979, which provides a new procedure fordetermining meat imports, is further evidence that price stability inthe food and agricultural sector is important to the Administration.Under the predecessor to this legislation allowable meat importswere tied directly to domestic production, and this served to accentu-ate cyclical movements in the beef industry. Presidents were oftenimpelled to take action that would increase the amount of meat avail-able to consumers and would moderate retail price rises in yearswhen domestic production was low. But even suspension of thequota could not increase total supplies for domestic consumption bymuch, since most cattle-producing nations are generally at the samephase in the production cycle.

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The new authority automatically allows imports to increase whendomestic supplies fall. With prior knowledge that the United Stateswill accept greater quantities of imported meat when domestic pro-duction declines, producers around the world can act in ways thathelp to stabilize beef production.

Humanitarian aid has long been an important aspect of U.S. agri-cultural policy. But when crop prices rose sharply in 1973-75, thefood sent to aid the developing nations was substantially reduced,evidencing the need for a policy that would not leave such nations sovulnerable to crop shortages and high prices. As a result the Admin-istration has proposed an International Food Security Reserve, whichwould isolate about 4 million metric tons of wheat from the marketand make it available to developing nations during emergencies. TheCongress has yet to act on the legislation. Title III of Public Law480, the Food for Peace Program, is also a major vehicle of the Ad-ministration's policy related to international food aid. Under TitleIII, qualifying nations are permitted to repay debts for food aid byinvesting in projects which improve their countries' long-term eco-nomic prospects and thereby reduce the future need for emergencyfood assistance.

FUTURE POLICY PROBLEMS

Significant progress has been made in refocusing food and agricul-tural policies toward making the Nation better able to withstandshocks in the food sector. Managing full-capacity production withgrain reserves and better arrangements for long-term internationaltrade and food aid represent a fundamental shift in policy. But muchis still left to be done.

The concept of a farmer-owned grain reserve has been tested, atleast to a point, and has proved capable of moderating volatility ingrain prices. Important questions must still be answered, however,about its operation and impact on the sector's productivity. Thereare misgivings about the appropriate size of the reserve and theprice-trigger rules. There is also a danger that the target price couldeventually be established "too high" and possibly lead to subsequentupward adjustments in both the release price and the call level. Ifthat happens, our grain will become less competitive in world mar-kets, and the flexibility of the reserve policy will largely be negated.

More emphasis needs to be placed on increasing the food and agri-cultural sector's productivity. Past productivity gains in the sectorwere aided by the widespread use of relatively inexpensive energy in-puts, especially petroleum-based fertilizers, and by the migration ofthe rural population to the cities. Today, in the face of the world's

154

growing needs for food, and increased anxiety about inflation, envi-ronmental damage, and the energy shortage, other avenues to ad-vanced productivity will probably need to be found. As an example,the Food and Agriculture Act of 1977 provides targeted, competitivegrants for studying plant growth, a field where research may disclosemany possible ways to improve productivity.

Over the next several years, food prices will continue to commandattention. Although rising commodity prices have been a significantcause of past increases in retail prices, programs to stabilize com-modity prices by buffering annual fluctuations in production cannot,by themselves, lead to significant reductions in food price inflation.Marketing costs, of which labor costs and the price of energy inputsare major components, account for approximately two-thirds of everydollar spent on food. Long-term progress in lowering the annual rateof food price increases will therefore depend on reducing the under-lying general inflation rate.

While we must expect future problems, the accomplishments of re-cent years in certain key commodity areas have been encouraging. Ina relatively brief time the agricultural sector has moved from excesscapacity, supported by policies designed to reduce production, tonearly full utilization of the sector's resources, with sales at worldmarket prices. This change in the operation of the sector made theeconomy more vulnerable to potentially rapid increases in food andcommodity prices, such as those in 1972-74. Administration policiesin agriculture have aimed at reducing this vulnerability, and theevents of the past year are evidence of their promise.

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CHAPTER 4

The World Economy—TestingResilience

ABROAD, JUST AS AT HOME, oil price increases dominated eco-nomic developments in 1979. Both the sharply higher price for oiland the likelihood that oil supplies will continue to be uncertain inthe intermediate future raise difficult questions for economic policyin all countries. Substantial adaptations within and among the world'seconomies are needed to respond to the changing energy situation.

Improvement in economic performance during 1978 had provideda solid base for further expansion in 1979. Outside the United States,inflation pressures had eased somewhat. Growth had begun to in-crease, partly in response to the less restrictive policies that the de-clining inflation made possible. As a result of previous changes in ex-change rates as well as the altered pattern of relative growth amongthe United States and the major foreign countries, external imbal-ances were diminishing rapidly. Actions in November 1978 tostrengthen and stabilize the dollar helped to reduce uncertainties infinancial markets.

Other circumstances also favored continued expansion abroad in1979. Declining real oil prices during 1978 and the appreciation ofmost currencies against the dollar had improved the terms of tradefor many countries. The resulting gain in real incomes began to bereflected in higher spending in late 1978 and early 1979. With dimin-ishing margins of spare productive capacity, strengthening profit po-sitions, and improving business expectations, investment demand re-covered sharply. Trade volumes also grew at a higher rate than hadbeen generally expected despite a virtual collapse in exports to Iran.

Developments in oil markets, however, began to pose a growingthreat to continued economic progress. In December 1978 the Orga-nization of Petroleum Exporting Countries (OPEC) announced aschedule of gradual price increases to raise the average price ofcrude oil from about $13 pqr barrel to about $14.50 by the end of1979. Following the temporary interruption of Iranian supplies, offi-cial OPEC selling prices rose sharply and prices in spot marketssoared even further. With continued tightness in oil markets, stem-ming in part from a large inventory buildup by consuming countries,

156

world oil prices reached an average level of about $28 by earlyJanuary 1980.

Thus in the course of 13 months oil prices have more than dou-bled. The additional payments for oil imports resulting from thisprice rise represent just over 2 percent of the combined gross nation-al product (GNP) of the industrial countries. Measured in this waythe oil shock of 1979 is fully as large as that of 1974.

The dimensions of the 1979 price increase raise the question ofwhether the 1974-75 pattern of global recession and increased infla-tion will be repeated. There are a number of similarities in the twosituations.

First, direct transfer of purchasing power from oil consumers to oilsuppliers can be expected to lead consumers to spend less on othergoods and services. As in 1975, this reduced consumer spending willnot be replaced fully in the near term by increased purchases by theoil-exporting countries. On the contrary, internal conditions in anumber of these countries suggest that the expansion of imports inresponse to higher revenues will be less rapid now than in 1974-75.

Second, as discussed in Chapter 2, the policy dilemma that becameapparent in 1974 reappeared in 1979. Large oil price increases de-press demand, output, and employment. But by sharply raising con-sumer prices, they also threaten to set off a new wage-price spiral asworkers and other income recipients seek to prevent a reduction inreal income. Stimulative fiscal and monetary measures designed toprevent the adverse effects on output and employment increase thelikelihood that the oil price rise will become embodied in wages andother costs, and thus in underlying inflation. On the other hand, re-strictive fiscal and monetary policies aimed at preventing a spilloverof oil price increases into a more general inflationary surge exacer-bate the harmful effects of the higher oil prices on output andemployment.

Third, international financial markets will once again need to recy-cle very large flows of funds from OPEC countries to countries withcurrent account deficits. While the 1974-75 experience demonstratedthe versatility and flexibility of these markets, serious strains may stillemerge.

There are also major differences between the current situation andthe 1974-75 oil price shock. In one respect the situation is now moredifficult. Following the rise in oil prices in 1974, the oil market beganto ease and from 1975 to 1978 a buyers' market prevailed. An ex-tended easing is less probable in the current situation since moderatereductions in the demand for oil may be matched by reduced sup-plies. Sustained price weakness is not likely unless rapid and substan-tial conservation can be achieved.

157

29H-289 0 - 80 - 11

In other respects, however, the situation is somewhat more hope-ful. Perhaps most important, there is now substantially less aggregatedemand pressure on overall capacity and on labor markets than inthe earlier period. All countries had reached cyclical peaks more orless simultaneously in early 1974, and clear signs of overheating hademerged. Inventory building in particular had become marked byspeculative excess. In order to counter aggregate demand pressures,government policies had turned sharply toward restraint. The shockof rising oil prices reinforced these other tendencies toward weak-ness, and together they produced a global recession in 1975. Theclose synchronization of economic activity across countries in 1974-75 also intensified the transmission of recession from one country toanother through rapidly declining world trade.

Currently elements of cyclical strength persist in a number ofcountries. Signs of a speculative surge in inventory building have notappeared, and prospects are good that a large inventory cycle can beavoided. Continued growth in a number of the larger countries—al-beit at a much reduced rate—will help to sustain world trade in theface of weakening activity and imports in the United States; hence thesecondary repercussions on growth from declining trade will be lesspronounced.

Moreover a good deal has been learned since 1974. The majorcountries recognize more clearly the nature of the constraints im-posed by the rise in oil prices. In at least some countries labor mar-ket participants appear to have recognized that higher oil prices can-not be fully compensated through higher nominal wages. A "wageexplosion" like that in many countries during 1974 is therefore lesslikely. Government policies, too, seem better prepared to limit thespillover effects from the oil market, while avoiding the sharp swingsof fiscal and monetary policy that characterized the earlier period. Fi-nally, the mechanisms for gaining international cooperation and poli-cy coordination have been strengthened since 1974, though muchmore can be done in this regard.

Although oil price increases and the problems they bring dominatethe current economic scene, they cannot be viewed in isolation fromother developments in the international economy. Appropriate poli-cies in trade, international financial relations, and energy can make iteasier to adjust to the rise in oil prices. Conversely if protectionisttrade actions multiply, if energy policies work at cross-purposes, or iffinancial markets become disrupted, then overall economic perform-ance will be that much worse.

158

The remainder of this chapter examines the direct economic as-pects and policy implications of the oil price rise and then considerssome broader questions of managing international economic interde-pendence.

The first section discusses recent and prospective overall economicperformance in the industrial world and explores the challenges forfiscal, monetary, and energy policies to manage this performance.

The second section discusses recent developments in the interna-tional financial and monetary system. Three topics are of particularimportance: the emerging pattern of international payments and theproblem of recycling the OPEC surplus to finance the deficits of de-veloping countries; the evolution of a system of "managed floating"exchange rates among major currencies; and the longer-run role ofthe dollar as the principal international reserve asset and medium ofexchange.

The final section discusses trade and trade policies, focusing onthe process of adjustment to changing patterns of comparativeadvantage.

DEVELOPMENTS IN MAJOR INDUSTRIAL ECONOMIES

Despite the sharp rise in energy prices, average GNP growth forthe six major industrial countries other than the United States wasabout 4 percent in 1979, roughly unchanged from 1978. The mo-mentum of growth appears to have been surprisingly well maintainedinto the second half of the year in most foreign countries. While vir-tually all forecasts suggest that growth will slow sharply this year,clear signs of a general weakening have not yet emerged.

Inflation rates in 1979, as measured by the personal consumptiondeflator, averaged about 7 percent for this same group of countries,a moderate increase from 1978. During the course of the year, how-ever, inflation accelerated sharply as higher oil prices began to worktheir way through these economies.

The most recent projections by the Organization for Economic Co-operation and Development (OECD) are that the average growth ofGNP for these six countries will fall to about 2V2 percent in 1980 andthat inflation will rise to about 9 percent (see Tables 26 and 27). Thefurther increases in oil prices that have occurred since this projectionsuggest that these forecasts understate the extent to which economicperformance is likely to deteriorate.

159

TABLE 26.—Growth in real GNP in major industrial countries, 1978-80

[Percent change]

Country

United StatesJapanGermanyFrance3

United Kingdom 3

Italy 3

Canada

Average excluding United States4

1978

4.45.63.53.33.32.63.4

4.1

1979 »

2.36.04.33.0

.54.02.8

4.1

1980 2

- 0 . 64.82.32.0

- 2 . 02.01.5

2.6

1 Preliminary.2 Forecasts by OECD and Council of Economic Advisers.3 Data are for real gross domestic product.4 Based on 1978 GNP/GDP weights and exchange rates.

Sources: Department of Commerce (Bureau of Economic Analysis), Organization for Economic Cooperation and Development(OECD), and Council of Economic Advisers.

GROWTH IN 1979

The fact that growth abroad remained strong while our owngrowth was slowing stems in part from differences in the earlier paceof recovery. Through mid-1978, economic recovery from the globalrecession of 1974-75 was far more complete in the United Statesthan in most other industrial countries. For that reason economicpolicies here and abroad moved in different directions. In the UnitedStates, where unemployment had fallen to a relatively low level andinflationary pressures were intensifying, a shift toward more restric-tive monetary and fiscal policies was made. In a number of othercountries, particularly Germany and Japan, policies to promote fastergrowth were set in motion.

TABLE 27.—Inflation in major industrial countries, 1978-80

[Percent change in prices1]

Country

United StatesJapanGermanyFranceUnited KingdomItalyCanada

Average excluding United States4

1978

6.84.52.69.38.3

12.17.3

6.1

19792

8.93.34.5

10.812.314.88.5

7.1

1980 3

9.07.35.0

11.515.516.58.5

9.2

1 Change in implicit price deflator for private consumption expenditures for United States, Japan, Germany, United Kingdom,and Canada. Change in consumer prices for France and Italy.

2 Preliminary.3 Forecasts by OECD and Council of Economic Advisers.4 Based on 1978 GNP/GDP weights and exchange rates.

Sources: Department of Commerce (Bureau of Economic Analysis), Organization for Economic Cooperation and Development(OECD), and Council of Economic Advisers.

Perhaps the most important factor accounting for higher growthabroad in 1979, however, was the recovery in private investment,

160

which had been unusually weak since 1974. A pent-up demand forreplacement investment and capacity expansion had developed be-cause of low rates of investment over the preceding several years.Consequently, when business firms perceived a moderate improve-ment in the prospects for overall demand, investment responded rap-idly. The recovery of investment was reinforced by improving profitsand higher cash flows for enterprises. A substantial part of the gainsin the terms of trade experienced by the major foreign industrialcountries during 1978 apparently accrued to businesses in the formof higher profits, since the relative decline in the prices of importedgoods was only partly passed through to final consumers. The gener-ally moderate rise in wages in both 1978 and early 1979 also workedto strengthen profits. Profit positions were further improved ina number of countries by a sharp rise in productivity as outputexpanded.

The acceleration of growth in the second half of 1978 and the firsthalf of 1979 was accompanied by an even sharper acceleration in thegrowth of imports. Import volumes, which had increased at an aver-age rate of about 4 percent for the six major foreign industrial coun-tries during the preceding year, grew by more than 11 percent overthe year from mid-1978 to mid-1979. This more rapid increase in im-ports reflected not only higher final domestic demand but also a risein inventory accumulation and, for Japan, the appreciation of the yenduring 1978. The principal beneficiaries of this strengthened demandfor imports were the United States and a number of the smallercountries of the OECD.

During the second half of last year, imports by the major foreigncountries slowed; and their exports accelerated, primarily because ofthe rapid growth of purchases by the oil-exporting countries. Thecontinuation of relatively rapid growth abroad in the face of thegrowing burden of higher oil prices is explained in large part by thisstrengthening of net exports. Another factor is that abroad as well asin the United States consumers apparently reacted to accelerating in-flation by reducing personal saving rates, so that consumer demandslowed less than personal income.

It is difficult to judge whether the growth momentum that had be-come established abroad would have been sustained in 1980 if oilprices had not risen. Outside Germany, Japan, and a few smallercountries, inflation rates were still very high. Because they probablywould have begun to increase, a strong recovery might have been dif-ficult to sustain in any event. The serious structural problemsbrought on by rigid labor markets and other resource immobilitiescontinue to limit the degree to which full capacity utilization can beapproached without serious inflationary repercussions.

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INFLATION IN 1979

With oil prices rising sharply, inflation increased everywhere. Table28 shows the rate of consumer price increases during 1978 and 1979in major countries. An attempt has been made to separate thechanges in prices into energy and other components. For compari-son, import unit values are also shown.

TABLE 28.—Changes in consumer prices, with and without energy, and import unit values, majorindustrial countries, 1978-79

[Percent change, annual rate >]

Country and item

United StatesConsumer prices2

Energy : i

OtherImport unit value

Japan:Consumer prices

Energy 4


Germany:Consumer prices

Energy4


FranceConsumer prices

Energy 4


United KingdomConsumer prices

Energy 4


ItalV'Consumer prices

Energy 4


Canada:Consumer prices

Energy 4


Dec. 1977to

June 1978

8.57.78.7

17.2

3.8- 5 . 6

4.4- 9 . 8

1.92.11.9

- 2 . 2

9.610.39.51.2

6.4.4

7.02.9

11.511.511.56.8

8.77.28.9

11.0

June 1978to

Dec. 1978

7.78.57.35.0

3.2- 1 1 . 7

4.2- 1 2 . 3

2.99.42.4

- 1 . 6

9.714.29.32.7

10.28.0

10.46.0

11.6.0

12.48.1

8.110.27.9

16.7

Dec. 1978to

June 1979

11.043.68.1

24.2

4.231.62.4

63.2

4.732.82.7

23.4

10.717.310.118.1

12.518.111.910.1

15.68.1

16.125.2

9.57.19.86.6

Latest 3months

overpreceding3 months

10.323.48.5

36.2

6.750.23.9

73.8

7.430.2

5 5.818.8

12.630.810.923.8

33.482.4

5 28.48.9

18.56 61.0

15.535.9

7.110.36.7

30.6

Latestmonth(1979)

December

November

September

October

September

September

September

September

September

September

September

September

September

October

1 Consumer prices are seasonally adjusted; import unit values are not seasonally adjusted.2 Consumer prices with rent substituted for home ownership.3 Gas (piped) and electricity; fuel oil, coal, and bottled gas; and gasoline, motor oil, coolant, etc.4 Fuel and light and gasoline.5 Reflects increases in value-added tax rates in these countries.6 Fuel and light only.

Note.—All data for breakdown of consumer prices between energy and other are estimates.

Sources: Department of Commerce, Department of Labor, Organization for Economic Cooperation and Development, and Councilof Economic Advisers.

While it is not possible to distinguish precisely between "internal-ly" and "externally" generated inflation, a substantial part of the de-clining inflation abroad in 1978 can be traced to the relative modera-

162

tion in import prices during 1978. This moderation resulted not onlyfrom the stability of dollar prices of oil and primary commodities butalso from the appreciation of most currencies against the dollar.Conversely the sharp acceleration in inflation in 1979 predominantlyreflects the turnaround in import prices, a development exacerbatedin Japan by the sharp depreciation of the yen.

The judgment that the domestic component of inflation in mostcountries did not accelerate much in 1979 is borne out by the behav-ior of wages, which have risen at a relatively constant rate in mostcountries (see Table 29). One exception is Italy, where widespreadindexation (the scala mobile) leads inevitably to a rapid transmission ofhigher prices into wages. In the United Kingdom very sharp wage in-creases in new contract settlements signed in October may also signalan acceleration in wages, though the evidence is still scanty. Domes-tic cost pressures in most countries outside the United States werealso eased by relatively strong productivity growth.

TABLE 29.—Changes in wages in major industrial countries, 1978-79

[Percent change]

Country

United StatesJapanGermanyFranceUnited KingdomItaly...Canada

Change from same period a year earlier to

19781st half

7.97.95.5

12.613.217.3

7.4

19782nd half

8.36.35.6

12.715.615.6

7.4

19791st half

8.04.44.9

12.714.517.0

9.1

1979latoct •?

months

8.07.04.8

12.215.120.8

9.3

Latest month(1979)

DecemberOctoberOctoberJuneOctoberSeptemberJuly

Source: National sources.

THE RESPONSE OF ECONOMIC POLICY TO RISING OIL PRICES

The mechanism through which increases in OPEC oil prices reducegrowth and worsen inflation is well understood and is much the samein all countries that rely heavily on imported oil.

Higher prices for imported oil raise the prices of petroleum prod-ucts directly and also increase the costs and prices of goods and serv-ices requiring petroleum for their production. Consumers suffer areal income loss. The result is equivalent to a rise in excise taxes,hence the term "OPEC tax/' Except temporarily, this tax cannot beoffset by increases in nominal wages; such increases, when theyoccur, tend to lead not to a restoration of real incomes but to a risein other prices, a sequence that builds the increase in oil prices intothe underlying inflation rate.

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In the longer run the loss in real income resulting from the OPECtax need not result in a weakening of aggregate demand. To the ex-tent that the higher receipts of OPEC countries lead to a commensu-rate increase in their demand for goods and services, aggregate de-mand would be unaffected. Lower real spending by consumers of pe-troleum products would be offset by stronger exports. Jobs lost inthe consumer goods industries would be replaced by new jobs in ex-port industries. Indeed, by 1978 the industrial countries as a groupwere exporting sufficient goods and services to the oil-producingcountries to pay in full the tax imposed on them by the 1974 rise inoil prices.

In the short run, however, OPEC's imports will not increase as rap-idly as its receipts. Indeed, as discussed in more detail below, it ap-pears probable that the gap between OPEC receipts and expendi-tures that has now reappeared will remain very large for a number ofyears.

The adverse effects on aggregate demand of the current rise in oilprices could be offset, at least in the short run, by changes in privatespending. For example, while the "oil tax" caused economic growthin the United States to decline in 1979 by more than had been ex-pected early last year, the drag on the economy has been softened bya drop in the personal saving rate. A similar though less marked de-cline has occurred elsewhere. This decline may not be sustained,however. Historically, the greater uncertainty associated with higherinflation, the increased job insecurity resulting from adjustment tothe higher oil prices, and the desire of consumers to restore the realvalue of financial wealth that has been eroded by inflation have allinduced more cautious behavior by consumers.

Policy responses of most countries during the past year have notcompensated for the OPEC tax. On the contrary, fiscal and monetarypolicies have shifted toward restraint. Germany and the United King-dom both raised value-added tax rates during the course of 1979,though in the United Kingdom this was partially offset by reductionsin income taxes. Almost everywhere, government deficits in 1979were smaller than had been projected at the beginning of the year.Planned budgets for 1980, furthermore, are generally more restric-tive than those of last year, Italy being the principal exception.

Monetary policies were also tightened during 1979 in all majorcountries. Short-term interest rates abroad rose by over 500 basispoints on average during the year as monetary authorities attemptedto maintain growth of the monetary aggregates within target rangesin the face of rising inflation. The fact that these target ranges werenot changed implies in itself greater monetary restraint on realgrowth, since price levels are higher now because of the oil price rise

164

than had been expected when the targets were set. A number ofcountries have announced lower targets for growth of the monetaryaggregates for 1980.

The major reason for pursuing relatively restrictive economic poli-cies is the overriding need to limit the spillover from higher oilprices into higher nominal wages. In other countries, as in the UnitedStates, preventing an upward ratcheting of the wage-price spiral isviewed as the most pressing task of economic policy. Nominal wagesin most countries have not, so far, shown signs of sharp acceleration.Prospects for limiting wage acceleration seem better in Germany andJapan than elsewhere. In those countries and some others the proc-ess of wage determination is relatively concentrated in wage roundsthat terminate each spring when annual labor contracts for mostworkers are negotiated. In such circumstances it is easier to enforcethe perception that an accelerated growth of wage claims cannot ef-fectively raise real incomes. Synchronization of wage bargaining doesnot by itself assure a moderate wage outcome—both Germany andJapan experienced wage explosions in 1974 when the "consensusmechanisms" broke down. Recognition of this fact perhaps explainswhy those two countries, as well as most others,.are currently practic-ing restrictive demand management as the principal means of limit-ing the inflationary effects of higher world oil prices.

THE OUTLOOK FOR 1980

Most major countries thus face the prospect that growth in 1980will be slowed by both the direct effects of higher oil prices and theshift to more restrictive policies needed to limit the rise in inflation.However, if real oil prices do not rise substantially beyond the $28per barrel average that appears to have been established by early1980, growth will probably remain positive in all major countries ex-cept the United States and the United Kingdom. Investment demandin a number of countries may be relatively well sustained. Japan islikely to benefit from a stronger growth in the volume of exportsduring 1980 as a result of the lower value of the yen (although thegrowth induced by yen depreciation will to some extent displace pro-duction in other countries). The United Kingdom's fall in outputdoes not derive principally from the rise in oil prices but from thevery sharp shift toward restrictive monetary and fiscal policies insti-tuted by the new government.

For at least some countries the rise in inflation may be brief if theincreases in oil prices now begin to moderate. To the extent that thecautious economic policies generally pursued during 1979 succeed inforestalling wage increases induced by higher oil prices, there may bemore room for policy actions to support economic activity in some

165

countries as 1980 proceeds. Hence the slowdown in economicgrowth need not be prolonged.

It is clear, however, that the outlook is precarious. Further substan-tial increases in the price of oil could induce a widespread recessionas well as higher inflation. If wages accelerate more sharply than isnow assumed and, in response, monetary policies tighten further,positive real growth will become less likely. Finally, a sharper slowingof world trade—because of a general move to reduce inventories, in-creased protectionist barriers, or forced retrenchment by developingcountries unable to finance needed imports—could also lead toweaker growth than is currently expected.

REDUCING WORLD OIL DEMAND

The rise in petroleum prices reflects very tight conditions in worldmarkets. If there are no further significant reductions in supply, sometemporary easing in market conditions is likely, at least in 1980, be-cause of price-induced conservation, slower growth in oil-importingcountries, and reductions in the recent rate of stockbuilding demand.Given the relatively low price elasticity of demand for oil in the shortrun, however, the margin between ease and tightness is very narrow.Increased uncertainty of supply, as well as the erosion of previouslyestablished buyer-supplier relationships in the petroleum markets,have tended to raise the demand for oil inventories as a hedgeagainst possible future scarcity. Decisions by a small number of oil-exporting countries to reduce production in response to marketweakness could undo some or all of the benefits of reduced demand.Unless the reductions in demand are substantial, upward pressure onoil prices could continue, even as consumption declines, and thusfurther undermine the prospects for economic performance.

The current situation is marked by strong interdependence amongoil-consuming countries. Increased demand for petroleum in onecountry, by putting pressure on world oil prices, affects inflation andgrowth prospects in all other oil-importing countries. Conversely thebenefits of lower consumption in one country tend to be shared byall in the form of reduced price pressure in the world oil market.Such interdependence creates strong grounds for the coordination ofenergy policies among countries.

Considerable progress toward this end was made during 1979. Butthe problem is difficult, given both the strong perception of nationalinterest that colors each country's views regarding adequate suppliesof oil and the attendant pressure on each to secure its own position.

The basis for cooperation among oil-consuming countries since1974 has been the Emergency Allocation Agreement within the Inter-

166

national Energy Agency, to which the major industrial countries ex-cept France belong. This agreement provides a mechanism for shar-ing available oil supplies among member countries when the supplyshows a substantial shortfall (a 7 percent reduction or more). Theagreement, however, does not provide a mechanism for limiting com-petition among countries when the shortfall is below this threshold.

Early in 1979 it was agreed within the International Energy Agen-cy, and in parallel within the European Economic Community, thatby the end of the year each country should reduce its consumptionby 5 percent relative to trend. While the United States met this ob-jective, there was significantly less success in doing so among mostother countries.

At the Tokyo Summit meeting last June the leaders of the sevenmajor industrial countries took several important steps to establish aframework for cooperation in energy over the medium term. Of cen-tral importance was the acknowledgment of interdependence and rec-ognition of the resulting need for each country to commit itself toimport levels that, in sum, would not exceed the volume of oil likelyto be available. Firm targets for 1985 were laid down. It was furtheragreed to pursue discussions in the International Energy Agency andother forums on steps to reach these targets and develop cooperativeapproaches to limit demand for imports during the intervening years.These discussions resulted last December in a new agreement by theInternational Energy Agency, setting out individual targets for eachcountry's oil imports in 1980. It was further agreed to review the tar-gets each quarter and revise them if necessary to match reductions insupply. The successful carrying out of this approach would do muchto moderate future upward pressure on oil prices, since it provides ameans of averting a competitive scramble for limited oil supplies.

Over the long run, the cut in the availability of oil need not sharplycheck the growth of the world economy. Higher relative prices for oilwill encourage conservation and additional production of energyfrom other sources. While the increased real price of energy maysomewhat slow the substitution of energy-intensive capital for laborand thus curb the growth of productivity, most studies indicate thatthis effect is likely to be quite small. In the shorter term, however,given the wage and price rigidities in all industrial economies, thelimited availability of oil acts as a constraint on growth through itsimpact on the price of oil and in turn on inflation. Coordinated poli-cies to reduce the demand for energy and increase energy productionare therefore essential tools not only of energy policy but of overalleconomic management.

167

THE GLOBAL PATTERN OF PAYMENTS

In 1977 and early 1978 the major imbalances in current accountpositions were among the largest industrial countries: sizable sur-pluses for Japan and Germany and a large deficit for the UnitedStates. During 1978 and into 1979 these imbalances were eliminated.The United States was near balance in 1979, and both Germany andJapan had deficits.

The large shift in Japan's current account, from a surplus of over$16 billion in 1978 to a deficit of about $8 billion in 1979, is particu-larly striking. Primarily as a result of the appreciation of the yen sincemid-1977, the volume of imports into Japan began to acceleratesharply during 1978, while export volumes declined. From June 1978to June 1979 import volumes grew by a remarkable 21 percent. Untillate in 1978, however, these volume trends were not fully reflected ina declining current account balance. The reason was that the appre-ciation of the yen also caused the terms of trade to move strongly inJapan's favor. Import prices in dollar terms grew moderately whileexport prices surged. In late 1978 the yen turned around. During thecourse of 1979 the yen depreciated by 23 percent and at the sametime both oil and other commodity prices rose sharply. The resulting61 percent rise in import prices (October 1978 to October 1979),coupled with the trade-volume trends that had previously become es-tablished, led to a very rapid shift toward deficit in the current ac-count. More recently the growth in the volume of imports into Japanhas begun to slow and export volumes to rise again as the lowervalue of the yen has made Japanese producers more competitive inboth domestic and foreign markets. Since Japanese payments for oilwill rise substantially further this year, it is not now expected thatthese volume shifts will lead to a renewed current account surplus in1980.

While current account positions within the OECD have becomemore nearly balanced, the increase in oil prices has led to a renewedand substantial imbalance in the pattern of payments among thethree major groupings of countries—the OECD, the oil-exportingcountries, and the other developing countries.

Table 30, which is based on estimates by the OECD, shows thepattern of surpluses and deficits among major groups of countries inrecent years. The final column gives projections by the Council ofEconomic Advisers for the distribution of current accounts amongmajor groupings in 1980. Between 1978 and 1980 the OPEC surplusis projected to rise by more than $90 billion. The counterpart to this

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is a near doubling of the deficits of the other developing countriesand a shift into deficit of about $60 billion in the aggregate positionof the OECD countries.

TABLE 30.—Current account balances, 1975-80

[Billions of dollars,- OECO basis]

Country

OECD countries

United StatesJapan.GermanyFranceUnited KingdomItaly...Canada

Other OECD .

OPEC countries 3

Other developing countries

1975

- 0 . 4

18.3- . 73.5

- . 1- 4 . 1

- . 8- 4 . 7

- 1 1 . 8

27.3

- 3 7 . 5

1976

- 1 8 . 2

4.63.73.4

- 6 . 1- 1 . 5- 2 . 8- 3 . 9

- 1 5 . 6

36.5

- 2 5 . 5

1977

- 2 4 . 8

- 1 4 . 110.94.2

- 3 . 3.5

2.5- 4 . 0

- 2 1 . 5

29.0

- 2 4 . 0

1978

9.1

- 1 3 . 916.58.83.92.06.4

- 4 . 6

- 1 0 . 0

7.0

- 3 6 . 0

1979 >

- 3 0 . 0

.0- 7 . 5- 3 . 5

1.5- 5 . 5

6.3- 6 . 0

-15 .3

65.0

- 4 7 . 0

1980 2

- 50

100

70

1 Preliminary.2 Estimates by Council of Economic Advisers.3 Includes Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Oman, Saudi Arabia, United Arab Emirates, and

Venezuela.

Sources: Organization for Economic Cooperation and Development (OECD) and Council of Economic Advisers.

The projected rise in the combined deficits of the non-OPEC de-veloping countries reflects not only the very substantial increase intheir payments for oil but also more slowly growing export receipts.Slower growth in the industrial countries will reduce the demand forthe goods that developing countries export. Rising external debt athigher interest rates will also add to their deficits, the more so be-cause most of their debt to banks is contracted at a floating rate ofinterest.

In relation to GNP, however, the projected rise in the deficit of de-veloping countries is less than that in 1974-75. To some extent thisis explained by the generally better maintenance of world trade thatis foreseen. As a further point, in 1975 most developing countrieschose to finance large deficits, rather than reducing them by slowingtheir demand for imports. It seems probable that adjustment actionsnow will be somewhat more prompt. Most important, however, thecollapse in prices of raw materials, which greatly weakened the termsof trade of the developing countries in 1975, is not expected to berepeated. First, raw materials prices are currently quite low comparedwith production costs, whereas they had soared in 1972-73. Second,low investment since 1975 to expand capacity for producing raw ma-terials has resulted in fairly low levels of excess capacity. Finally, in-ternational commodity agreements may moderate price fluctuationsfor a number of commodities.

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THE RECYCLING PROBLEM

The pattern of large surpluses for OPEC and large deficits for de-veloping countries (as well as for some more developed ones) re-quires that international financial markets once again "recycle" fundson an enormous scale. The problem, while not insuperable, is moredifficult than in 1974-75 in three respects. First, the OPEC surplus islikely to persist longer. Second, debt burdens for many developingcountries are larger now than they were in 1974. The increased in-debtedness that higher oil bills will once again impose comes on topof the debts incurred when oil prices rose in 1974. Finally, banks andother lenders now have a substantially larger exposure in many de-veloping countries than they did in 1974 and may become increas-ingly reluctant to add yet further to their exposure.

Persistence of OPEC Surpluses

In 1974 it was widely predicted that large OPEC surpluses wouldpersist for many years. In fact, however, the OPEC surplus of 1974was cut roughly in half in 1975, largely because the recession in theindustrial countries greatly reduced the demand for oil, while OPECimports continued to rise sharply. The surplus widened somewhat in1976 and 1977 but was increasingly concentrated in the hands of asmall number of "low-absorbing" countries whose revenues werelarge relative to their populations. In 1978 the overall surplus de-clined to modest proportions, and a number of OPEC countriesbegan to incur deficits.

The reduction of the OPEC surplus is likely to be less rapid andcomplete this time. After the initial marked increases in oil prices in1974, world oil prices then declined relative to the prices of thegoods that OPEC imported. Conditions in oil markets likely to pre-vail during the next several years, however, suggest that a sustaineddecline in the relative price of oil is less likely. In a number of impor-tant OPEC countries—and most notably in Iran—trends toward so-cial conservatism may limit the growth of imports, as governmentsscale back development plans in order to minimize the disruptionand social strains that rapid growth sometimes entails.

Debt Accumulation

Judgments differ on the rate of debt accumulation that developingcountries can sustain. The external debts of developing countrieshave grown rapidly since 1974. Debt service obligations have in-creased even faster, since maturities have shortened on average andinterest costs have risen as a result of the increased role of commer-cial relative to concessionary financing. If developing countries incurdeficits on the projected scale, their indebtedness will accelerate sub-stantially in coming years. However, the debt-carrying capacity of

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many developing countries has also been increasing rapidly. With fewexceptions, the most rapid rises in indebtedness have been amongcountries whose growth rates are also high and whose exports are ex-panding rapidly. Consequently debt burdens—as measured by theratio of debt-service payments to exports, for instance—have notrisen sharply on average. Where substantial increases have occurred,they have been largely in those countries whose prospects for longer-term growth are quite favorable.

In such circumstances it is difficult to judge the appropriate combi-nation of adjustment policies to reduce deficits and additional bor-rowing. Faced with sharply higher bills for oil imports, a developingcountry may borrow to sustain the flow of imports devoted to invest-ment and growth. If the borrowed resources are being effectively in-vested, the productivity growth that is preserved by borrowingshould more than cover the debt-servicing costs. While the country'sliving standards will improve more slowly than they would have donein the absence of the oil price rise, borrowing to pay for the in-creased oil import bill can be appropriate and manageable.

For most developing countries, however, some actions to curtailthe growth of imports will be required to compensate for higher oilbills and weaker export revenues. Some countries, where past adjust-ment has been inadequate, may have to begin a stringent retrench-ment. On balance, a general shift to highly restrictive policies is notlikely to be necessary if the rise of oil prices now begins to slow.

Lenders' Exposure

To some extent OPEC countries directly provide loans or grants todeveloping countries. To a far larger extent, however, they have de-posited their surpluses in the banks of industrial countries and theirforeign branches. These banks, in turn, have extended loans to coun-tries needing to finance their balance of payments.

Balance of payments financing is not of course exclusively carriedout through banks. Historically the largest portion of developingcountries' deficits has been financed through other mechanisms, in-cluding direct investment flows, official financing from internationalfinancial institutions, and bilateral development assistance. In recentyears, however, bank credit has become a major source of funds foran increasing number of developing countries. The sustainability oflarge deficits therefore depends very greatly on the amounts, andterms, of resources made available through this channel.

Banks making international loans incur a variety of risks. Two inparticular have received the most attention: "maturity risk" and"country risk." Maturity risk arises from the fact that banks use rela-tively short-term deposits to make longer-term loans. In 1974-75

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some feared that this risk would inhibit the recycling process. IfOPEC deposits proved volatile, individual banks would have difficultymeeting sudden demands of depositors for cash. Such apprehensionproved unwarranted, partly because OPEC deposits were less volatilethan feared. More important, however, was the functioning of the in-terbank lending market. While autonomous deposits in individualbanks fluctuated, the aggregate level of such deposits to the interna-tional banking system as a whole was fairly stable and on a stronglyrising trend. Individual banks could therefore attract funds fromother banks to offset deposit shifts. The depth of this interbank mar-ket is indicated by the fact that interbank deposits account for overtwo-thirds of total gross Eurocurrency liabilities.

Country risk arises from the recognition that countries may be un-able or unwilling to repay all or part of the principal or interest ontheir loans, thereby forcing a rescheduling of loans, which might en-tail losses to the bank. Such reschedulings have occurred periodicallywith respect to individual countries, and no doubt they will continue.Nevertheless, losses to banks from such events have been minimal. In1978, for instance, the ratio of losses on foreign loans to outstandingclaims averaged .01 percent for a sample of 30 U.S. banks. The com-parable loss ratio on domestic loans was .34 percent. On the recordto date at least, international lending is comparatively safe. It is like-ly, however, that country risk will become an increasingly importantconsideration as the debt burdens of a number of countries rise be-yond historical levels.

By far the greatest share in the projected rise of the other develop-ing countries' aggregate deficit will accrue to a small number of gen-erally more prosperous nations that have been substantial borrowersin international markets for a number of years. A further accelerationin borrowing by some of these countries might encounter resistancefrom banks reluctant to increase commensurately their exposure torisk. To some extent banks may be restricted by internally set "coun-try limits," which specify the maximum lending to be undertaken inany one country. National banking authorities, moreover, may exer-cise increased surveillance or, as Japan seems to have done recently,issue more direct guidance to their banks to limit the growth of inter-national lending.

In practice, however, there appears to be a great deal of flexibilityin banks' international lending. The number of banks participating ininternational lending has grown rapidly. Even if individual banks be-come more cautious, the overall flow could well be maintained. In-deed a striking development in the last few years has been the eager-ness of the banking system to provide financing. Interest rate spreadsover the London interbank offered rate have steadily tended down-

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ward for most developing countries seeking loans. These countrieshave used the opportunity to refinance outstanding debts and buildup their reserves by substantial amounts. Larger demands for creditand somewhat tighter monetary conditions in national markets sug-gest that spreads over the London rate on new loans may widen overthe coming year. Front-end fees have already become a little moreexpensive and maturities on new loans have shortened.

A widening of spreads can be expected to serve a useful rationingfunction. Wider spreads, by raising the profitability of lending rela-tive to the cost of obtaining funds, may increase the supply of fundsthat banks make available. By raising the costs of borrowing, widerspreads will also induce borrowing countries to shift their policies inthe direction of greater adjustment in their current account and lessfinancing. This process does not always work smoothly. A generalwidening of spreads may be difficult to achieve even when it is war-ranted by market conditions. Borrowers have resisted such move-ments strongly because they, and other lenders, view a narrow spreadas an indicator of creditworthiness. If an increase in the spread isconfined to one or a few countries, other potential lenders to thesecountries might shy away, with the possible result of a sudden, sharpinterruption of financing.

While judgments differ on the seriousness of these risks, existinginternational channels are probably capable of preventing severe dis-ruptions. The International Monetary Fund in particular has substan-tial resources that can be drawn upon temporarily by countries en-countering financing difficulties while they institute programs toovercome problems with their balance of payments. Implementationof such programs, in turn, is likely to restore the confidence of pri-vate lenders.

Many developing countries, particularly the poorer ones, do nothave sufficient standing to borrow on international markets. For suchcountries an incipient increase in deficits cannot be financed by pri-vate recycling, and in consequence a forced adjustment could arise.While some adjustment may be necessary, retrenchment is not an ac-ceptable solution for poorer countries where large portions of thepopulation are near or below subsistence levels.

In practice, the poorer countries have received a substantial flow ofresources through bilateral and multilateral development assistancefrom outside. This Administration, like the governments of manyother industrial countries, and the International Development Bankshave policies under which a growing proportion of official financingand other aid flows is directed to these countries. Further additionsto such flows would be appropriate even in the absence of the incre-mental oil price rise.

1732 9 4 - 2 8 9 0 - 8 0 - 1 2

While current assessments indicate that existing financing mecha-nisms can prevent major widespread disruption, the rise in oil pricescuts severely into the incomes of most countries. Even rapidly grow-ing countries will be forced into some combination of higher debtservice and lower investment, both of which will adversely affect liv-ing standards. The poorer countries especially can ill afford any suchlosses. Furthermore, financing mechanisms cannot cope with any andall increases in oil prices and the associated financing needs. The cu-mulative effects of large further rises in oil prices could increasinglythreaten to overload the international financial system.

FOREIGN EXCHANGE MARKETS IN 1979

The strong coordinated actions taken by the United States andother major countries in November 1978 to strengthen the dollar,which had been under almost continual downward pressure for morethan a year, had beneficial effects in exchange markets in 1979. On atrade-weighted basis against an average of foreign currencies, thedollar fluctuated within a relatively narrow range during the year. InDecember 1979 the weighted-average dollar exchange rate was 2.5percent lower than a year earlier.

This relative stability of the dollar reflected divergent movementswith respect to individual foreign currencies: a depreciation of about5-10 percent vis-a-vis the mark, most other currencies of the Euro-pean Monetary System, and the British pound; and an appreciationof about 23 percent vis-a-vis the Japanese yen.

Shifts in expectations about inflation rates, uncertainties about theoil market, perceptions of central banks' intentions with respect to in-tervention policy, and, perhaps most importantly, the conduct ofmonetary policy by the major countries affected movements in ex-change rates at various times during 1979. Except for Japan, externalbalance considerations played only a small role, since successful ad-justments had been made. Occasional downward pressure on the dol-lar in the second half of 1979 primarily reflected the market's assess-ment of the strength of continued inflationary pressure in the UnitedStates. Rising oil prices and a less secure supply of oil had an espe-cially important effect on the yen. The United Kingdom's favorableoutlook respecting oil independence tended to strengthen the poundduring much of the year, despite an acceleration of inflation. Themarket's perception of the new government's policies, particularlythe emphasis on tight monetary policy, also helped strengthen thepound.

Exchange rate movements between the dollar and the Germanmark, as well as between the dollar and those currencies linked to the

174

mark through the European Monetary System, tended to reflectchanges in the market's expectations about relative rates of inflationin the United States and Germany and about the course of monetarypolicy. Prior to October 6 exchange markets tended to consider in-terest rates in the United States to be low relative to those in Ger-many, given the inflation rates in the two countries. The dollarstrengthened notably vis-a-vis the mark after the Federal Reserve an-nounced a shift in its operating strategy on October 6, and short-term interest rates in the United States rose strongly; but at the endof the year the dollar weakened again, largely because of the in-creased uncertainty caused by the Iranian situation.

The substantial depreciation of the yen is perhaps the most strik-ing aspect of exchange market developments during the year. Someportion of the decline may represent a reversal from the overshoot-ing during the yen's previous period of appreciation, but the reversalwent beyond that. Of course Japan is particularly vulnerable to therise in oil prices and to a diminished security of supply. Prices ofother raw materials on which Japan is dependent have also risensharply. For the major industrial countries, Table 31 shows estimatedchanges in terms of trade that would have stemmed from the 1979changes in oil prices if exchange rates had remained at their Decem-ber 1978 levels. The terms-of-trade loss is substantially larger forJapan than for other major countries except the United States. Unlikethe United States, Japan does not have large potential sources of al-ternative forms of energy. Some decline in the real value of the yenwould thus be consistent with needed longer-term adjustments in ex-ports and imports. Changes in long-term trade volume in response toexchange rate changes are large, however, and the actual depreci-ation of the yen may have exceeded the requirements of the adjust-ment process.

T A B L E 31.—Impact of oil price increase on terms of trade

[Increased oil bills at 1978 oil import volume as percent of value of 1978 merchandise exports]

United StatesJapan..GermanyFranceUnited KingdomItalyCanada

Country Percent

31.429.811.017.212.223.17.6

Sources: Central Intelligence Agency, International Monetary Fund, and Council of Economic Advisers.

The Japanese government generally resisted the depreciation ofthe yen, notably through heavy intervention sales of dollars. Its mon-etary policies also became somewhat more restrictive, although the

175

rise of interest rates during the year was less in Japan than in a num-ber of other countries.

At several times during 1979 the market's perception of the inter-vention policy of central banks also affected exchange rates, especial-ly the dollar-mark rate. Early in the year the stability of the dollarmay have been due to perceptions in the market that coordinated ac-tions by central banks could effectively counter large short-term ratemovements. Under such conditions market participants faced a "two-way risk" and acted in ways that helped to keep rates relatively sta-ble. By contrast, after midyear, market participants were less certainabout the goals of intervention policy, and their testing of the inten-tions of the monetary authorities led to greater volatility in exchangerates. Problems of this sort inevitably arise when intervention is usedas a tool for limiting erratic fluctuations in exchange rates. On bal-ance, however, the mechanisms of coordination among monetary au-thorities have kept such problems minor. More important, it is clearlyand generally recognized that intervention per se has limited useful-ness when the market is convinced that prevailing exchange rates areinconsistent with its perceptions of underlying economic conditionsand of monetary and other macroeconomic policies.

Foreign exchange intervention and monetary policy actions affectexchange rates in different ways. Intervention results in a change inthe market supply of financial assets denominated in one currencyrelative to those denominated in another. If demands for the twocurrencies are stable, this shift in relative supplies leads to a rise inthe exchange value of the currency whose supply is reduced. Becauseassets denominated in the major currencies appear to be close substi-tutes, however, this exchange rate effect is correspondingly small.The consequences of intervention are therefore likely to be deter-mined mostly by the way market expectations respond. Interventionis most likely to succeed in stemming large unwanted changes inrates if accompanying actions signal an intention to pursue policiesthat will justify the existing exchange rate level over the longer term.

Monetary policy affects exchange rates primarily by influencing thedemands for different currencies. For example, a rise in interest ratesin the United States increases the demand for dollars because the in-terest return on dollar assets is raised. The result is a bidding up ofthe exchange rate for the dollar. There is a limit to such apprecia-tion, however, if it is expected that the dollar exchange rate will sub-sequently move back toward its longer-run equilibrium value. Forthis reason exchange rate changes due simply to changes in interestrate differentials ought not to be very large. Stronger effects, howev-er, are likely when shifts in monetary policy are taken to be a sign ofchanged objectives for overall macroeconomic performance. Thus a

176

rise in interest rates that is interpreted as a shift to a more restrictivepolicy will lead to expectations of slower growth and less inflation.Expectational effects will then reinforce the exchange rate move-ments generated by the attraction of higher interest returns.

How effectively monetary policy can be used to stabilize the do-mestic economy depends on how accurately exchange markets assessthe policy implications of changes in interest rates. In recent years anumber of countries have begun to define monetary objectives interms of quantitative targets for one or more monetary aggregates,rather than targets for interest rates. Last October the Federal Re-serve Board modified its operating techniques to place greater em-phasis on achieving target rates of growth in the monetary aggre-gates. In such a world, even when monetary objectives remain un-changed, short-term interest rates will tend to fluctuate in responseto changes in real growth, or the rate of inflation, or other factors.Thus an economy in which inflation is moderating or economic activ-ity is weakening will experience a decline in interest rates in the con-text of unchanged monetary policy. To avoid unwarranted exchangerate movements, exchange markets must recognize that such interestrate declines do not represent a shift in monetary policy toward ex-pansion, but in fact spring from developments that are anti-inflation-ary in character.

THE DOLLAR IN THE INTERNATIONAL MONETARY SYSTEM

For many years the dollar has been the key currency of the interna-tional monetary system. It is the largest component of official re-serves, although not the only one. Relatively smaller amounts ofother currencies are also held; holdings of special drawing rights(SDRs) and credit positions with the International Monetary Fund arealso reserve assets. Gold holdings are counted in reserves, thoughtheir official use is now quite limited.

The dollar is also the principal intervention currency. For example,if Switzerland wishes to intervene to support the Swiss franc in rela-tion to the German mark, it is likely to do so by selling dollars to buyfrancs. This can put pressure on the dollar if the seller of the Swissfrancs is unwilling to hold the new dollar balances.

Beyond its role in official transactions, the dollar is also the princi-pal international medium in private transactions; international bor-rowing is conducted in dollars, and settlements for internationaltransactions in goods and services take place in dollars, even fortrade contracts denominated in other currencies. While an interna-tional monetary system based on a single currency offers certain mul-tilateral advantages, there is no inherent reason why the dollar

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should continue to play this dominant role. Indeed, the internationalimportance of other currencies has been increasing. Internationaland foreign bond issues, for instance, were 71 percent dollar de-nominated on average in the 1960s; in 1978 only 37 percent weredenominated in dollars. Despite considerable reluctance by the Swissand German monetary authorities to have their currencies held as of-ficial reserves, such holdings have been growing. Recently the Swisshave allowed foreign governments to hold deposits of Swiss francsdirectly with the Swiss National Bank. Until now such holdings havebeen primarily Eurodeposits. Intervention in other currencies is alsoincreasing, particularly with the establishment of the European Mon-etary System, where member countries often intervene directly ineach other's currencies to maintain bilateral rates within agreedmargins.

Over the longer term a declining relative role for the dollar wouldseem a natural consequence of a changing world situation. The U.S.economy today accounts for a smaller share of world trade than itdid when the dollar-based system evolved, and the U.S. economy hasbecome relatively smaller. The European Economic Community'sGNP is almost the same size as that of the United States; the Japa-nese economy alone is almost half the size of the U.S. economy. Therelative preponderance of U.S. capital markets has also diminished.The share of worldwide long-term funds (essentially bonds and equi-ty issues) raised in the United States has declined from 45 percent inthe 1960s to 32 percent in 1978.

However, the evolution of the international monetary system froma system based on the dollar to one based on a number of currenciescould be unsettling. The process of reserve and private portfolio di-versification through which such an evolution would proceed requiresa gradual increase in the supply of assets denominated in foreigncurrencies and a relative reduction in dollar-denominated assets. Ifsuch shifts in relative supplies do not take place to match shifts indemand, exchange markets would come under pressure. Further-more, demand shifts may not always be gradual. Pressures for diver-sification are likely to become greater when expectations for a weakerdollar are strongly held, and to be arrested when expectations for anappreciation of the dollar predominate.

There are, however, certain constraints limiting the developmentof an international role for other currencies. Private holders of liquiddollar assets will continue to need these dollars to finance interna-tional transactions. Many holders of dollar assets also hold dollar-denominated debts and would therefore increase their exposure to riskby selling dollars. Official diversification on a large scale has nottaken place; and it is inhibited by the limited availability of suitable

178

alternative assets, as well as by the recognition that the attempt tosell large quantities of dollars would weaken the dollar and hencecause capital losses on remaining reserves.

Nevertheless it is possible that, if left to evolution, the process ofdiversification could generate episodic downward pressure on thedollar. Such a result might not be welcomed internationally if it tend-ed to generate large current account surpluses for the United States;and it would be unwelcome domestically if it increased inflationarypressures.

It is also widely perceived that a multicurrency system—even with-out considering the transition costs—is far from ideal. Exchange ratesin such a system might be destabilized as a result of shifts in thecomposition of reserve assets by central banks, or of attempted shiftsin private holdings. Transaction costs for both official and privateagents would be raised by the need to manage complex portfolios.

Such considerations have given rise to renewed interest in an alter-native movement that would place greater reliance on a single inter-national reserve asset, the special drawing right, in preference to thedevelopment of a multicurrency reserve system. A number of stepshave been taken to strengthen the role of the SDR. Most recently theInternational Monetary Fund has been considering the possible es-tablishment of a substitution account into which countries could de-posit dollars and perhaps other currencies and receive claims de-nominated in SDRs in exchange.

Such an account could not resolve all the issues raised by the cur-rent role of the dollar in the international monetary system. It wouldnot directly address, for example, the role of the dollar as the princi-pal intervention currency. Countries would still need currencies forintervention. SDR claims could only be used directly for interventionif they were widely held in private portfolios and so could be solddirectly in foreign exchange markets to nonofficial participants, apossibility that could be considered at a future stage of the evolutionof the SDR. In the near term, however, a substitution account wouldestablish a mechanism to reshape the trend toward a multicurrencysystem in a form that did not destabilize exchange markets.

In October 1979 the Interim Committee of the International Mon-etary Fund agreed that a properly designed substitution accountcould make a useful contribution to improving the international mon-etary system. A number of difficult and complex problems must beaddressed, however, before such an account can be established, andit is not clear when or whether these issues can be resolved. Theywill be the subject of continuing international discussion during thecoming year.

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WORLD TRADE: PATTERNS AND ISSUES

The slower average rate of growth in the industrial world since1973 and the more marked decline in the average growth of tradeover the same period have tended in general to intensify the difficul-ties of absorbing the continuing structural adjustments that tradenecessarily imposes. At the same time the large benefits that comefrom open trade are less visible when markets are growing moreslowly. The challenges facing trade policy are difficult: to preserve,and indeed enhance, an open trading system in the face of strength-ened protectionist pressures; to accommodate and absorb the in-creasing ability of a number of developing countries to compete in awidening range of product markets; and to ensure that market proc-esses are not subverted as the primary determinants of evolving com-parative advantage.

THE MULTILATERAL TRADE NEGOTIATIONS

The signing last December of the agreements reached in theTokyo Round of the Multilateral Trade Negotiations strengthens theframework for world trade at a critical time. This set of agreements isan important commitment by industrial and developing nations to re-solve current and future trade problems in ways that preserve thebenefits to world growth that derive from free trade.

The Tokyo Round agreements include significant reductions in tar-iff and nontariff barriers to trade, and they introduce through a se-ries of codes a set of procedures designed to limit nontariff distor-tions of trade patterns. The United States and its trading partnershave made reciprocal tariff cuts; the U.S. reductions average about30 percent, those of Japan 22 percent, and those of the EuropeanEconomic Community 27 percent. Negotiations have not been com-pleted on a safeguards code to sharpen and clarify the conditionsunder which exceptional relief action could be taken. Five majorcodes, however, have been agreed upon in the Tokyo Round. Thegovernment procurement code significantly improves the opportuni-ties for suppliers to compete equally for government orders. Theagreement on standards should speed the certification of foreignproducts. The agreement on customs valuation ensures more consist-ent practices and thus reduces the scope for offsetting tariff conces-sions by changes in valuation rules. The agreements on subsidies andcountervailing duties and on antidumping actions restrict the use ofsubsidies and clarify the circumstances in which countervailing andantidumping duties may be imposed.

These agreements may owe their greatest significance to the specif-ic rules they establish to help regulate the process by which nontariff

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barriers to trade are implemented. They emphasize the importanceof transparency—that is, making visible the requirements for licens-ing and bidding on contracts, and using explicit rather than arbitrarymeasures to regulate imports when this is unavoidable. The role ofprocedures is stressed; in practice, trade policy is made on a case-by-case basis, and procedural safeguards are needed to ensure that rele-vant information is brought to bear on any decisions. The agree-ments embody the realization that the processes whereby trade policyis implemented must be considered fair by all signatories.

The agreements themselves do not guarantee success in resolvingthese difficult and detailed nontariff issues. Only when they are ap-plied in individual circumstances will the procedures specified in theagreements reveal their adequacy. But in facing these questionssquarely, the parties to these agreements have made significant prog-ress in the continuing effort to reduce barriers to trade and strength-en the rules under which trade and investment are conducted. Theagreements should improve markets for U.S. exports and help reduceinflation by lowering our own import barriers.

SOURCES OF RISING PROTECTIONISM

Much needs to be done to consolidate the progress represented bythe Tokyo Round agreements. The growing interdependence of theworld economy and the increased frequency of shocks during thepast decade have led in recent years to a growing skepticism aboutthe benefits of trade. These doubts have several roots: the significantincrease in current account deficits following the oil price increase of1973; the recession and associated high unemployment experiencedin many industrial countries for most of the last 5 years; the develop-ment of long-term structural difficulties in several leading industrialsectors; and the rapid industrialization of a group of middle-incomedeveloping countries, whose growing exports have increased compe-tition in markets for certain manufactured goods.

Oil price increases in 1979 will give further impetus to calls forgreater protectionism. Current account deficits have already widenedsubstantially in a number of countries and are likely to be reduced ata much slower rate than that which followed the 1974 oil price rise.Individual countries may attempt to curtail imports and acceleratepenetration of foreign markets to pay for increasingly expensive oil.The slower rate of growth of domestic markets over the next severalyears will also invite actions to limit imports and to subsidize exports.

The need to adjust capacity and employment so as to reflectchanged patterns of world consumption and production becameacute in several sectors of the major industrial economies after the1974-75 recession. The steel industry has begun the process, and its

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experience suggests the difficult choices that must be made in deter-mining the burden of adjustment within and among countries. Theshipbuilding industry has completed somewhat more of the requisiteadjustment of capacity and employment. The automobile industry isin the early stages of a complex rationalization and consolidation. Asthe adjustments continue, the temptation will be great to put off thedifficult choices by limiting imports.

Calls for higher import barriers will intensify as industrializationcontinues in a number of developing countries. Though acceleratedgrowth in these countries began in the 1960s, the exports integral tothe process aroused concern in the major industrial countries onlyduring the period of rising unemployment after the 1974-75 reces-sion. They can be expected to occasion continuing concern in thenear future.

The world economy has witnessed several instances of rapid indus-trialization earlier in the postwar period. Italy in the 1960s is a par-ticularly good example. Such developments in part reflect the exploi-tation of significant cost advantages in the use of labor or other re-sources. In part they are a natural consequence of the maturation ofproduct design and technology, which allows production to be trans-ferred from more industrialized countries to regions that were initial-ly served by exports. These regions subsequently become able to ex-port back to the industrialized countries, or to third countries. In re-cent years this cycle has accelerated. Technology has been diffusedmore quickly, capital has moved more rapidly, and labor skills havegrown impressively outside the major industrial countries. The inter-national spread of production processes by transnational companieshas also quickened the cycle, particularly for newly industrializingcountries enjoying political stability.

The industrial countries, whose own innovations triggered thisprocess, have responded by focusing production toward more sophis-ticated, knowledge-intensive products, the direction in which theircomparative advantage is evolving. Problems of adjustment have oc-curred, in particular because the increases in exports from the newlyindustrializing countries have been concentrated in a few very narrowproduct lines, such as certain textiles, specific standardized items ofelectronic equipment, or footwear. In the aggregate the share of ex-ports from newly industrializing countries to OECD countries is stillquite small. Furthermore most of the former countries, using thedebt-servicing capability that rapid export growth provides, have in-creased their imports by even larger amounts. Thus increased ex-ports by these countries to OECD countries have been more thanmatched by an increased flow of goods (especially capital equipment)and services in the opposite direction.

182

NEEDED RESPONSES

In developing policies to address these problems one must takeinto account a number of important considerations. The first is thatprotection, even when it appears attractive from the point of view ofan individual country, is very costly to all countries—including theone initiating protection—once the likely retaliatory responses ofother countries are taken into account. Trade actions, when judgednecessary, must therefore be implemented in ways that minimize therisk of an escalating retaliatory cycle. The emphasis on transparencyand procedural safeguards in the Tokyo Round agreements is impor-tant in this regard.

Another consideration is that the counterpart to the adjustmentcosts imposed on some industries that are facing increased competi-tion from abroad is the benefit to consumers from cheaper goodsand the benefit to the nation from lower inflation. In assessing theappropriateness of trade actions, one must weigh such costs andbenefits. The increased use of direct or indirect export subsidies bymany countries creates particularly difficult problems in this regard.In the short run, subsidies provide importing countries with bargain-priced goods. In the longer run, however, the adjustments that thesubsidies induce are likely to be generally harmful. A country that ad-justs out of a sector in which its underlying comparative advantage isfavorable, because foreign subsidies have made the sector appear lesscompetitive, will ultimately face higher prices if foreign subsidies areremoved in the future, or if the market power that subsidies promoteis later used to extract monopoly rents. Because, in the long run, ex-port subsidies reduce the efficiency with which resources are allo-cated globally, such subsidies are undesirable. Where foreign subsi-dies create injury to domestic sectors, countervailing action maytherefore be justified to assure an appropriate worldwide pattern ofproduction.

A final important point is that, over the longer term, expandingimports will be matched by a concomitant growth of export marketsthrough the adjustment process. The loss of jobs in sectors of declin-ing comparative advantage will be offset by the growth of new jobs inhigher-wage, high-technology industries. The principal focus of tradepolicy must therefore be on adjustment not preservation. Only in thisway can foreign trade approach its potential for improving productiv-ity and reducing inflation.

183

Appendix A

REPORT TO THE PRESIDENT ON THE ACTIVITIES

OF THE

COUNCIL OF ECONOMIC ADVISERS DURING 1979

185

LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERS,Washington, D.C., December 31, 1979.

MR. PRESIDENT:The Council of Economic Advisers submits this report on its activi-

ties during the calendar year 1979 in accordance with the require-ments of the Congress, as set forth in section 10(d) of the Employ-ment Act of 1946 as amended by the Full Employment and BalancedGrowth Act of 1978.

Cordially,CHARLES L. SCHULTZE, ChairmanLYLE E. GRAMLEYGEORGE C. EADS

187

Report to the President on the Activities of theCouncil of Economic Advisers during 1979

The Council of Economic Advisers was established by the Employ-ment Act of 1946 to provide economic analysis and advice to thePresident and thus to assist in the development and implementationof national economic policies. The Council also advises the Presidentwith regard to decisions on other matters that affect the health andoperations of the Nation's economy.

With the enactment of the Full Employment and Balanced GrowthAct of 1978—the Humphrey-Hawkins Act—the chartering legislationof the Council of Economic Advisers was substantially revised for thefirst time since 1946. This revision left unchanged the basic missionof the Council of Economic Advisers but created a new frameworkfor the government's pursuit of its economic policies. This act wasdiscussed in detail in the 1979 Report of the Council.

Charles L. Schultze, Chairman, and Lyle E. Gramley, Member, con-tinued to serve in these positions throughout 1979. On February 4,1979, William D. Nordhaus, Member, resigned to return to Yale Uni-versity, where he is Professor of Economics and a member of theCowles Foundation for Research in Economics. On June 6, 1979,George C. Eads became a Member of the Council. He was formerlyDirector of the Regulatory Policies and Institutions Program of theRand Corporation.

RESPONSIBILITIES

Since its creation the responsibilities of the Council of EconomicAdvisers have grown steadily as new economic problems placed newdemands on the Council and its staff. Over the last decade the Coun-cil's activities have broadened with the growing recognition thatmany "noneconomic" decisions have major consequences for oureconomy. Today the Council is responsible for advising the Presidentnot only on Federal fiscal policies but also on regulation and regula-tory reform, energy policies, and international economic policies.

1892 9 4 - 2 8 9 0 - 8 0 - 1 3

Past Council Members and their dates of service are listed below:

Name

Edwin G. NourseLeon H. Keyserling

John D. Clark

Roy BloughRobert C. TurnerArthur F. BurnsNeil H. JacobyWalter W. StewartRaymond J. Saulnier

Joseph S. DavisPaul W. McCrackenKarl Brandt..Henry C. WallichWalter W. HellerJames Tobin<ermit GordonGardner Ackley

John P. LewisOtto EcksteinArthur M. Okun

James S. DuesenberryMerton J. PeckWarren L SmithPaul W. McCrackenHendrik S. HouthakkerHerbert Stein

Ezra SolomonMarina v.N. WhitmanGary L SeeversWilliam J. FellnerAlan GreenspanPaul W. MacAvoyBurton G. MalkielWilliam 0. Nordhaus

Position

ChairmanVice ChairmanActing ChairmanChairmanMemberVice ChairmanMemberMemberChairmanMemberMemberMemberChairmanMemberMemberMemberMemberChairmanMemberMemberMemberChairmanMemberMemberMemberChairmanMemberMemberMemberChairmanMemberMemberChairmanMemberMemberMemberMemberChairmanMemberMemberMember

Oath of office date

August 9, 1946August 9, 1949November 2, 1949May 10, 1950August 9, 1946May 10, 1950June 29, 1950September 8, 1952March 19, 1953September 15, 1953December 2, 1953April 4, 1955December 3, 1956....May 2, 1955December 3, 1956....November 1, 1958....May 7, 1959January 29, 1961January 29 1961January 29, 1961August 3, 1962November 16, 1964.May 17, 1963September 2, 1964..November 16, 1964.February 15, 1968...February 2, 1966February 15, 1968....July 1, 1968February 4, 1969February 4, 1969February 4, 1969January 1, 1972September 9 1971March 13 1972July 23, 1973October 31, 1973September 4, 1974June 13, 1975July 22, 1975March 18, 1977

Separation date

November 1, 1949.

January 20, 1953.

February 11, 1953.August 20, 1952.January 20, 1953.December 1, 1956.February 9, 1955.April 29, 1955.

January 20, 1961.October 31, 1958.January 31 , 1959.January 20, 1961.January 20, 1961.November 15, 1964.July 31, 1962.December 27, 1962.

February 15, 1968.August 31 , 1964.February 1, 1966.

January 20, 1969.June 30, 1968.January 20, 1969.January 20, 1969.December 31, 1971.July 15, 1971.

August 31, 1974.March 26 1973August 15, 1973.April 15, 1975.February 25, 1975.January 20, 1977.November 15, 1976.January 20, 1977.February 4, 1979.

MACROECONOMIC POLICIESFrom the outset the Council's fundamental role has been to advise

the President on comprehensive economic policies designed toachieve the government's objectives for employment, output, andprice stability. To fulfill this responsibility the Council develops eco-nomic forecasts several times each year with the assistance of anInteragency Forecasting Committee. The members of this Committeeinclude, in addition to the Council, representatives from the Office ofManagement and Budget and the Departments of the Treasury,Commerce, and Labor. This group, which is chaired by a Member ofthe Council, meets to analyze the outlook for individual sectors ofthe economy and to develop detailed economic forecasts for the peri-od immediately ahead. The Chairman of the Council presents theseforecasts to the Economic Policy Group (EPG), which is made up ofthe President's principal economic advisers and meets each week todiscuss and develop the Administration's proposals touching on eco-nomic policy. The Chairman of the Council of Economic Advisers isa member of the EPG and of its steering group.

190

In the final months of each year, during the preparation of thePresident's annual budget, the Council works with other members ofthe EPG to develop and present to the President proposals for thestance and structure of Federal fiscal policies during the coming fis-cal year. The Council monitors the progress of the economy and of-fers advice on when changes in fiscal policies are in order. Advisingthe President on macroeconomic policy has remained one of theCouncil's major responsibilities.

In addition, the Council has been heavily involved in the anti-infla-tion program, including the design of the second-year standards andthe discussions with organized labor concerning the National Accord.

The Chairman of the Council also chairs the Interagency Commit-tee on Housing and Housing Finance. In 1979 the Council coordi-nated efforts to ascertain the impact of the October change in mone-tary policy on the housing market and prepared a report to the EPGand the President on the available means for dealing with problemsof housing finance.

MICROECONOMIC POLICIES

Over the years the Council of Economic Advisers has become in-creasingly involved in the analysis of microeconomic issues—thoseeconomic developments and policy actions that affect individual in-dustries, markets, or sectors of the economy. In 1979 the Counciltook part in formulating and articulating the Administration's policieson agriculture, energy, health insurance, hospital cost containment,youth employment, welfare reform, regulatory reform, and interna-tional trade.

In 1979 the Council continued to chair the interagency RegulatoryAnalysis Review Group (RARG) created late in 1977 to review select-ed analyses of the economic effects of major regulatory proposals.The President has ordered that each major regulatory proposal is-sued by a nonindependent regulatory agency must be accompaniedby a regulatory analysis. The analysis is to be developed by the agen-cy originating the proposal and made available in draft form for pub-lic comment before the final regulation takes effect. During the peri-od for public comment the Regulatory Analysis Review Group evalu-ates a select few of these regulatory analyses, and its appraisal is filedin the agency's record of public comment.

In 1979 five regulations were reviewed by RARG: the Environmen-tal Protection Agency's hazardous waste standards and new sourceperformance standards for electric utility plants; the Department ofEnergy's proposed and interim final coal conversion regulations forutilites and industrial boilers; and the Department of Health, Educa-tion, and Welfare's proposal for labeling to accompany prescription

191

drugs. At year's end reports were being prepared reviewing the Envi-ronmental Protection Agency's air carcinogen policy; its guidelinesfor water effluents in the leather-tanning industry; and the Depart-ment of Energy's building-energy performance standards. The Coun-cil's staff served as part of the analytic staff for the RARG and pre-pared a number of the review group's comments. The Council andthe staff also actively contributed to the continuing progress of theAdministration's legislative proposals for regulation reform.

The Council had a strong role in the development and presenta-tion of the Administration's energy policy initiatives, especially these:phased decontrol, the windfall profits tax, low-income energy assist-ance, and the Energy Security Corporation. The Chairman serves asa member of the Executive Committee of the Energy CoordinatingCommittee.

INTERNATIONAL ECONOMIC POLICIES

During 1979 the Council of Economic Advisers continued to takean active part in international economic affairs. The Chairman of theCouncil was elected to serve another year as Chairman of the Eco-nomic Policy Committee of the Organization for Economic Coopera-tion and Development (OECD). As such, he chaired two meetings ofthe Committee, which consists of senior economic officials fromOECD member governments. The Chairman also coordinated thework of a group of senior officials from other countries in drafting acommon position paper on economic policy issues for the TokyoSummit.

The Council is active in the OECD Economic Policy Committee'sworking parties on inflation, balance of payments adjustment, andmedium-term growth. A Member of the Council chairs a task force ofthe special high-level group on positive adjustment policies. CouncilMembers or staff economists represent the U.S. Government at peri-odic meetings of these working parties during the year.

Economic developments in most Western nations were strongly af-fected in 1979 by the continued sharp rise in energy prices and theuncertainty of supplies. Analysis of the impacts of, and appropriateresponses to, the energy price and supply situation dominated manyOECD meetings. The Council assisted in developing the UnitedStates position on energy issues for the Tokyo Summit and in pre-paring for the International Energy Agency Ministerial Meeting, in-cluding the setting of an oil import quota.

PUBLIC INFORMATION

The annual Economic Report is the principal medium through whichthe Council informs the public of its work and its views. It is also animportant vehicle for presenting and explaining the Administration's

192

economic policies, both domestic and international. Distribution ofthe Report in recent years has averaged about 50,000 copies. TheCouncil also assumes primary responsibility for the monthly EconomicIndicators, a publication prepared by the Council's Statistical Office,under the supervision of Catherine H. Furlong. The Joint EconomicCommittee issues the Indicators, which has a distribution of approxi-mately 10,000 copies. Information is also provided to members ofthe public through speeches and other public appearances by theChairman, Members, and staff economists of the Council. In 1979the Chairman and Members made 25 appearances before Commit-tees of the Congress to testify on the Administration's economic poli-cies.

ORGANIZATION AND STAFF OF THE COUNCIL

OFFICE OF THE CHAIRMAN

The Chairman is responsible for communicating the Council'sviews to the President. This duty is performed through discussionswith the President and written reports on economic developments.The Chairman also represents the Council at Cabinet meetings andat many other formal and informal meetings of government officials.He exercises ultimate responsibility for directing the work of the pro-fessional staff.

COUNCIL MEMBERS

The two Council Members directly supervise the work of theCouncil's professional staff and are responsible for all subject mattercovered by the Council. They represent the Council at numerousmeetings of public and private groups, and they assume major re-sponsibility for the Council's involvement in the activities of the gov-ernment that affect the economy.

The Chairman and the Council Members work as a team on mostpolicy issues. Operationally, however, responsibility over major topicsof concern is divided between the two Members. Mr. Gramley hascontinued to take primary responsibility for macroeconomic analysis,including international monetary developments and the preparationof economic forecasts; and for labor market policies. Mr. Eads hassupervised microeconomic analysis, including analysis of policies re-lated to such matters as energy, agriculture, social welfare, and inter-national trade; and the overseeing of regulatory reform activities.

PROFESSIONAL STAFF

At the end of 1979 the professional staff consisted of the SpecialAssistant to the Chairman, 10 senior staff economists, 2 staff econo-mists, 1 statistician, and 5 junior staff economists.

193

The professional staff and their special fields at the end of the yearwere:

Susan J. Irving Special Assistant to the Chairman

Senior Staff Economists

William T. Boehm Agriculture and Food PolicyPaul N. Courant Public Finance, Taxes, State and Local Fi-

nance, Social Security, Health, and WelfareK. Burke Dillon Finance, Money, Housing, and Urban PolicyDavid Harrison, Jr Regulation and Natural ResourcesVal L. Koromzay International Financial and Economic Devel-

opmentsDavid S. McClain Macroeconomic Analysis and Forecasting, Fis-

cal Policy, and International TradeDavid C. Munro Macroeconomic Analysis and Forecasting,

and EnergyV. Vance Roley Investment, Research and Development, and

Potential GNPDaniel H. Saks Labor Market and Anti-Inflation Policies, and

EducationCharles L. Trozzo Regulation and Energy

Statistician

Catherine H. Furlong Senior Statistician

Staff Economists

Michael J. McKee Macroeconomic Analysis and Forecasting,Productivity, Prices, and Anti-Inflation Poli-cies

Kate Stith Pressman Regulation and Energy

Junior Economists

David W. Berson Public FinanceLisa L. Blum International Economic Developments and

TradeStephen G. Cecchetti Labor Market PoliciesJudith R. Gelman Regulation and HealthMatthew D. Shapiro Macroeconomic Analysis and Forecasting

Catherine H. Furlong, Senior Statistician, continued to be incharge of the Council's Statistical Office. Mrs. Furlong has primaryresponsibility for managing the Council's statistical information sys-tem. She supervises the publication of Economic Indicators and thepreparation of all statistical matter in the Economic Report. She also

194

oversees the verification of statistics in memoranda, testimony, andspeeches. Natalie V. Rentfro and Earnestine Reid assist Mrs. Furlong.

In preparing the Economic Report the Council relied upon the edito-rial assistance of Rosannah C. Steinhoff. Also called on for special as-sistance in connection with the Report were Dorothy L. Reid andDorothy Bagovich, former members of the Council's staff.

SUPPORTING STAFF

The Administrative Office of the Council of Economic Advisersprovides general support for the Council's activities. Nancy F. Skid-more, Administrative Officer, prepares and analyzes the Council'sbudget and provides general administrative services.

Elizabeth A. Kaminski, Staff Assistant to the Council, handles gen-eral personnel management, coordinates the schedule for the Econom-ic Report, and provides general assistance to the Council and the Spe-cial Assistant in the management of the Council's activities.

Members of the secretarial staff for the Chairman and CouncilMembers during 1979 were Patricia A. Lee, Linda A. Reilly, Lisa A.Stockdale, and Alice H. Williams. Secretaries for the professionalstaff were Catherine Fibich, Bessie M. Lafakis, Joyce A. Pilkerton,Margaret L. Snyder, and Lillie M. Sturniolo. Bettye T. Siegel pro-vided secretarial assistance in connection with the Report. Robert L.Gilliam served as a clerk during the summer months. Michael J. Han-del served as an intern during preparation of the Report.

DEPARTURES

The Council's professional staff members are in most cases onleave from universities, other government agencies, or research insti-tutions. Their tenure with the Council is usually limited to 1 or 2years. Senior staff economists who resigned during the year wereThomas C. Earley (Schnittker Associates), Robert J. Flanagan (Stan-ford University), Steven W. Kohlhagen (University of California,Berkeley), Susan J. Lepper (Senate Budget Committee), David S. Sib-ley (Civil Aeronautics Board), Lawrence J. White (New York Universi-ty), David A. Wyss (Data Resources, Inc.), and John M. Yinger (Har-vard University). Robert E. Litan, staff economist, resigned to accepta position with Arnold and Porter. Peter G. Gould also resigned fromthe position of Special Assistant to the Chairman to accept a positionwith the Department of Commerce.

Junior economists who resigned in 1979 were James P. Luckett(Brookings Institution), Robert S. Lurie (Yale University), FrederickW. McKinney (Yale University), Elizabeth A. Savoca (University ofCalifornia, Berkeley), and Wanda S. Tseng (International MonetaryFund).

Florence T. Torrison, secretary to the Chairman, also resignedfrom the Council staff.

195

Appendix B

STATISTICAL TABLES RELATING TO INCOME,EMPLOYMENT, AND PRODUCTION

197

CONTENTS

NATIONAL INCOME OR EXPENDITURE: Page

B-l. Gross national product, 1929-79 203B-2. Gross national product in 1972 dollars, 1929-79 204B-3. Implicit price deflators for gross national product, 1929-79 206B-4. Implicit price deflators and alternative price measures for gross na-

tional product and gross domestic product, 1929-79 208B-5. Gross national product by industry in 1972 dollars, 1947-78 209B-6. Gross national product by major type of product, 1929-79 210B-7. Gross national product by major type of product in 1972 dollars,

1929-79 211B-8. Gross national product: Receipts and expenditures by major eco-

nomic groups, 1929-79 212B-9. Gross national product by sector, 1929-79 214B-10. Gross national product by sector in 1972 dollars, 1929-79 215B-ll. Gross domestic product of nonfinancial corporate business,

1929-79 216B-l2. Output, costs, and profits of nonfinancial corporate business,

1948-79 217B-13. Personal consumption expenditures, 1929-79 218B-14. Gross private domestic investment, 1929-79 219B-15. Inventories and final sales of business, 1946-79 220B-16. Inventories and final sales of business in 1972 dollars, 1947-79 221B-l7. Relation of gross national product and national income, 1929-79 ... 222B-18. Relation of national income and personal income, 1929-79 223B-19. National income by type of income, 1929-79 224B-20. Sources of personal income, 1929-79 226B-21. Disposition of personal income, 1929-79 228B-22. Total and per capital disposable personal income and personal

consumption expenditures in current and 1972 dollars, 1929-79. 229B-23. Gross saving and investment, 1929-79 230B-24. Saving by individuals, 1946-79 231B-25. Money income (in 1978 dollars) and poverty status of families and

unrelated individuals by race of head, 1947-78 232

POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY:B-26. Population by age groups, 1929-79 233B-27. Noninstitutional population and the labor force, 1929-79 234B-28. Civilian employment and unemployment by sex and age, 1947-79.. 236B-29. Selected employment and unemployment data, 1948-79 237B-30. Unemployment rate by demographic characteristic, 1948-79 238B-31. Unemployment by duration, 1947-79 239B-32. Unemployment by reason, 1967-79 240B-33. Unemployment insurance programs, selected data, 1946-79 241

199

POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY—Cont'dB-34. Wage and salary workers in nonagricultural establishments, ^aSe

1929-79 242B-35. Average weekly hours and hourly earnings in selected private non-

agricultural industries, 1947-79 244B-36. Average weekly earnings in selected private nonagricultural indus-

tries, 1947-79 245B-37. Productivity and related data, private business sector, 1947-79 246B-38. Changes in productivity and related data, private business sector,

1948-79 247

PRODUCTION AND BUSINESS ACTIVITY:B-39. Industrial production indexes, major industry divisions, 1929-79.... 248B-40. Industrial production indexes, market groupings, 1947-79 249B-41. Industrial production indexes, selected manufactures, 1947-79 250B-42. Capacity utilization rate in manufacturing, 1948-79 251B-43. New construction activity, 1929-79 252B-44. New housing units started and authorized, 1959-79 254B-45. Business expenditures for new plant and equipment, 1947-80 255B-46. Sales and inventories in manufacturing and trade, 1947-79 256B-47. Manufacturers' shipments and inventories, 1947-79 257B-48. Manufacturers' new and unfilled orders, 1947-79 258

PRICES:B-49. Consumer price indexes, major expenditure classes, 1929-79 259B-50. Consumer price indexes, selected expenditure classes, 1939-79 260B-51. Consumer price indexes by commodity and service groups,

1939-79 262B-52. Changes in consumer price indexes, major groups, 1948-79 263B-53. Changes in special consumer price indexes, 1958-79 264B-54. Producer price indexes by stage of processing, 1947-79 265B-55. Producer price indexes by stage of processing, special groups,

1974-79 267B-56. Producer price indexes by major commodity groups, 1929-79 268B-57. Changes in producer price indexes for finished goods, 1948-79 270

MONEY STOCK, CREDIT, AND FINANCE:B-58. Money stock measures, 1953-79 271B-59. Commercial bank loans and investments, 1939-79 272B-60. Liquid asset holdings of private domestic nonfinancial investors,

1952-79 273B-61. Total funds raised in credit markets by nonfinancial sectors,

1971-79 274B-62. Federal Reserve Bank credit and member bank reserves, 1929-79... 276B-63. Aggregate reserves and deposits of member banks, 1959-79 277B-64. Bond yields and interest rates, 1929-79 278B-65. Consumer credit outstanding and net change, 1950-79 280B-66. Consumer installment credit extended and liquidated, 1950-79 281B-67. Mortgage debt outstanding by type of property and of financing,

1939-79 282B-68. Mortgage debt outstanding by holder, 1939-79 283

200

GOVERNMENT FINANCE: Page

B-69. Federal budget receipts, outlays, and debt, fiscal years 1970-81 284B-70. Federal budget receipts and outlays, fiscal years 1929-81 286B-71. Relation of Federal Government receipts and expenditures in the

national income and product accounts to the unified budget,1979-81 287

B-72. Government receipts and expenditures, national income and prod-uct accounts, 1929-79 288

B-73. Federal Government receipts and expenditures, national incomeand product accounts, 1953-81 289

B-74. State and local government receipts and expenditures, national in-come and product accounts, 1946-79 290

B-75. State and local government revenues and expenditures, selectedfiscal years, 1927-77 291

B-76. Interest-bearing public debt securities by kind of obligation,1967-79 292

B-77. Estimated ownership of public debt securities, 1967-79 293B-78. Average length and maturity distribution of marketable interest-

bearing public debt securities held by private investors, 1967-79. 294

CORPORATE PROFITS AND FINANCE:B-79. Corporate profits with inventory valuation and capital consumption

adjustments, 1946-79 295B-80. Corporate profits by industry, 1929-79 296B-81. Corporate profits of manufacturing industries, 1929-79 298B-82. Sales, profits, and stockholders' equity, all manufacturing corpora-

tions, 1950-79 300B-83. Relation of profits after taxes to stockholders' equity and to sales,

all manufacturing corporations, 1947-79 301B-84. Relation of profits after taxes to stockholders' equity and to sales,

all manufacturing corporations, by industry group, 1978-79 302B-85. Determinants of business fixed investment, 1955-79 303B-86. Sources and uses of funds, nonfarm nonfinancial corporate busi-

ness, 1946-79 304B-87. Current assets and liabilities of U.S. corporations, 1939-79 305B-88. State and municipal and corporate securities offered, 1934-79 306B-89. Common stock prices and yields, 1949-79 307B-90. Business formation and business failures, 1929-79 308

AGRICULTURE:B-91. Income of farm people and farmers, 1929-79 309B-92. Farm output and productivity indexes, 1929-79 310B-93. Farm input use, selected inputs, 1929-79 311B-94. Indexes of prices received and prices paid by farmers, 1940-79 312B-95. U.S. exports and imports of agricultural commodities, 1940-79 313B-96. Balance sheet of the farming sector, 1929-80 314

INTERNATIONAL STATISTICS:B-97. Exchange rates, 1973-79 315B-98. U.S. international transactions, 1946-79 316B-99. U.S. merchandise exports and imports by principal end-use

category, 1965-79 318

201

INTERNATIONAL STATISTICS—Continued Page

B-100. U.S. merchandise exports and imports by area, 1973-79 319B-101. U.S. merchandise exports and imports by commodity groups,

1958-79 320B-102. International investment position of the United States at year-end,

selected years, 1970-78 321B-103. World trade: Exports and imports, 1965, 1970, and 1975-79 322B-104. World trade balance and current account balances, 1965, 1970,

and 1975-79 323B-105. International reserves, selected years, 1952-79 324B-106. Growth rates in real gross national product, 1960-79 325B-107. Industrial production and unemployment rate, major industrial

countries, 1960-79 326B-108. Consumer prices and hourly compensation, major industrial coun-

tries, 1960-79 327B-109. Summary of major U.S. Government net foreign assistance, July 1,

1945 to December 31, 1978 328

General Notes

Detail in these tables may not add to totals because of rounding.Unless otherwise noted, all dollar figures are in current dollars.

Symbols used:p Preliminary.—Not available (also, not applicable).

202

NATIONAL INCOME OR EXPENDITURE

TABLE B-l.—Gross national product, 1929-79

[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929...

1933 .. . .

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 *

1977.1IIIIIIV

19781IIIIIIV

19791IIIIIIV P

Grossnationalproduct

103.4

55.8

90.8

100.0124.9158.3192.0210.5212.3209.6232.8259.1258.0

286.2330.2347.2366.1366.3399.3420.7442.8448.9486.5

506.0523.3563.8594.7635.7688.1753.0796.3868.5935.5

982.41,063.41,171.11,306.61,412.91,528.81,702.21,899.52,127.62,368.5

1,820.21,876.01,930.51,971.3

2,011.32,104.22,159.62,235.2

2,292.12,329.82,396.52,455.8

Personalcon-

sumptionexpendi-

tures

77.3

45.8

67.0

71.080.888.699.4

108.2119.5143.8161.7174.7178.1

192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8

324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7

618.8668.2733.0809.9889.6979.1

1,089.91,210.01,350.81,509.8

1,169.11,190.51,220.61,259.7

1,287.21,331.21,369.31,415.4

1,454.21,475.91,528.61,580.4

Grossprivate

domesticinvest-ment

16.2

1.4

9.3

13.117.99.95.87.2

10.630.734.045.935.3

53.859.252.153.352.768.471.069.261.977.6

76.474.385.290.296.6

112.0124.5120.8131.5146.2

140.8160.0188.3220.0214.6190.9243.0303.3351.5386.2

280.4300.0315.7316.9

327.0352.3356.2370.5

373.8395.4392.3383.3

Net exports of goods and

Netexports

1.1

.4

1.1

1.71.3.0

- 2 . 0- 1 . 8- .67.6

11.66.56.2

1.93.82.4.6

2.02.24.36.12.5.6

4.45.85.46.38.97.65.14.92.31.8

3.91.6

- 3 . 37.16.0

20.48.0

- 9 . 9-10 .3

- 3 . 5

- 9 . 2- 6 . 0- 6 . 3

-18 .1

-22.2-7 .6- 6 . 8- 4 . 5

4.0- 8 . 1- 2 . 3-7 .7

services

Exports

7.0

2.4

4.4

5.45.94.84.45.37.2

14.819.816.915.9

13.918.918.217.118.020.023.926.723.323.7

27.628.930.632.737.439.542.845.649.954.7

62.565.672.7

101.6137.9147.3163.3175.9207.2257.4

170.5178.6180.1174.2

184.4205.7213.8224.9

238.5243.7267.3280.0

Imports

5.9

2.0

3.4

3.64.64.86.57.17.87.28.2

10.49.6

12.015.115.816.616.017.819.620.720.823.2

23.223.125.226.428.432.037.740.647.752.9

-58.564.075.994.4

131.9126.9155.4185.8217.5260.9

179.8184.7186.4192.3

206.6213.3220.6229.4

234.4251.9269.5287.7

Government

Total

8.8

8.2

13.5

14.224.959.888.997.082.827.525.532.038.4

38.560.175.682.575.875.079.487.195.097.6

100.3108.2118.0123.7129.8138.4158.7180.2198.7207.9

218.9233.7253.1269.5302.7338.4361.3396.2435.6476.1

380.0391.6400.5412.8

419.4428.3440.9453.8

460.1466.6477.8499.8

Total

1.4

2.1

5.2

6.116.952.081.389.474.617.612.716.720.4

18.738.352.457.547.944.545.950.053.953.9

53.757.463.764.665.267.378.890.998.097.5

95.696.2

102.1102.2111.1123.1129.7144.4152.6166.3

138.2142.6145.6151.2

150.9148.2152.3159.0

163.6161.7162.9177.0

purchases of goods andservices

Federal

Nationaldefensel

1.2

2.213.749.479.787.473.514.89.0

10.713.2

14.033.545.848.641.138.440.244.045.645.6

44.547.051.150.349.049.460.371.576.976.3

73.570.273.573.577.083.786.493.799.0

108.3

91.693.193.996.4

97.698.299.0

101.2

103.4106.0109.0114.6

Non-defense

3.9

3.93.22.61.62.01.12.83.76.07.2

4.74.86.58.96.86.05.75.98.38.3

ST.310.412.714.316.217.818.519.521.221.2

22.126.028.628.734.139.443.350.653.658.0

46.649.551.754.8

53.350.053.357.8

60.255.753.962.4

Stateandlocal

7.4

6.1

8.3

8.18.07.87.57.68.29.9

12.815.318.0

19.821.823.225.027.830.633.537.141.143.7

46.550.854.359.064.671.179.889.3

100.7110.4

123.2137.5151.0167.3191.5215.4231.6251.8283.0309.8

241.8249.0254.9261.6

268.5280.1288.6294.8

296.5304.9314.9322.8

Percentchangefrom

preced-ing

period,gross

nationalproduct2

-4 .2

6.9

10.124.926.821.39.6.9

- 1 . 311.111.3- .4

10.915.45.15.5.0

9.05.45.21.48.4

4.03.47.75.56.98.29.45.89.17.7

5.08.2

10.111.68.18.2

11.311.612.011.3

15.412.812.18.7

8.419.810.914.8

10.66.7

11.910.3

1 This category corresponds closely to the national defense classification in "The Budget of the United States Government, FiscalYear 1981."

2 Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here.Source: Department of Commerce, Bureau of Economic Analysis.

203

TABLE B-2.—Gross national product in 1972 dollars, 1929-79

[Billions of 1972 dollars, except as noted; quarterly data at seasonally adjusted annual rates]

Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 "

1977:|II '.IllIV

1978:1IIIIIIV

1979:1IIIIIIV


314.6

222.1

318.8

343.3398.5460.3530.6568.6560.0476.9

~468.3487.7490.7

533.5576.5598.5621.8613.7654.8668.8680.9679.5720.4

736.8755.3799.1830.7874.4925.9981.0

1,007.71,051.81,078.8

1,075.31,107.51,171.11,235.01,217.81,202.31,273.01,340.51,399.21,431.1

1,315.71,331.21,353.91,361.3

1,367.81,395.21,407.31,426.6

1,430.61,422.31,433.31,438.4

Personal consumption expenditures

TntalIOI3I

215.6

170.7

220.3

230.4244.1241.7248.7255.7271.4301.4306.2312.8320.0

338.1342.3350.9364.2370.9395.1406.3414.7419.0441.5

453.0462.2482.9501.4528.7558.1586.1603.2633.4655.4

668.9691.9733.0767.7760.7774.6820.6861.7900.8924.5

849.2853.1863.7880.9

882.7894.8905.3920.3

921.8915 0925.9935.2

Durablenrtnricgooos

21.5

10.9

19.1

21.824.716.314.513.514.825.830.633.136.3

43.439.938.943.143.552.249.849.746.451.8

52.550.355.760.765.773.479.079.788.291.9

88.998.1

111.2121.8112.5112.7126.6138.2146.7147.0

135.8136.6138.2142.4

139.3147.8147.5152.1

150.2144 8146 9146.0

Non-HiirahloauraDiegoods

98.1

82.9

115.1

119.9127.6129.9134.0139.4150.3158.9154.8155.0157.4

161.8165.3171.2175.7177.0185.4191.6194.9196.8205.0

208.2211.9218.5223.0233.3244.0255.5259.5270.2276.4

282.7287.5299.3309.3303.9306.6321.5332.7343.3349.3

328.9329.6332.1340.0

337.3339.4344.7351.9

34813441349.2356.0

Services

96.1

76.8

86.1

88.791.895.5

100.1102.7106.3116.7120.8124.6126.4

132.8137.1140.8145.5150.4157.5164.9170.2175.8184.7

192.3200.0208.7217.6229.7240.7251.6264.0275.0287.2

297.3306.3322.4336.5344.3355.3372.5390.8410.8428.2

384.5386.9393.3398.5

406.1407.6413.1416.3

423 54261429 9433.2

Gross private domestic investment

Tntali oiai

55.9

8.4

33.6

44.655.829.618.119.827.871.070.182.365.6

93.794.183.285.683.4

104.1102.997.287.7

107.4

105.4103.6117.4124.5132.1150.1161.3152.7159.5168.0

154.7166.8188.3207.2183.6142.6173.4200.1214.3214.8

191.0199.6206.7203.0

209.0216.8214.0217.4

217 22217214 2206.2

Total

51.3

13.3

32.0

38.443.824.418.022.131.458.870.476.870.0

83.280.478.984.185.696.397.195.789.6

101.0

101.0100.7109.3116.8124.8138.8144.6140.7150.8157.5

150.4160.2178.8190.7175.6152.4166.8186.9200.2204.6

179.7186.2190.1191.7

192.5201.2201.8205.5

204 9203 5207 1203.0

Fixed investment

Total

37.0

10.4

20.7

25.730.317.614.018.727.642.048.951.046.0

50.052.952.156.355.461.265.266.058.962.9

66.065.670.973.581.095.6

106.1103.5108.0114.3

110.0108.0116.8131.0130.6113.6119.0129.3140.1148.2

126.3128.3130.8131.7

133.1140.3141.6145.5

147 2146 9150 7148.0

Nonresidential

Structures

20.6

4.9

8.6

9.911.96.74.25.58.3

18.817.318.417.8

19.120.620.622.523.525.328.128.126.426.8

28.829.330.830.833.339.642.541.142.044.0

42.841.742.545.542.537.138.339.143.947.9

37.539.039.940.1

40.243.945.146.5

45.847 948*749.3

Producers'durable

equipment

16.4

5.5

12.1

15.818.510.99.8

13.219.223.231.632.728.2

30.932.331.533.831.835.937.137.932.536.1

37.236.340.142.747.756.063.662.466.170.3

67.266.374.385.588.176.580.790.196.2

100.3

88.889.390.991.5

93.096.496.598.9

101.399 C

101998.7

See next page for continuation of table.

204

TABLE B-2.—Gross national product in 1972 dollars, 1929-79—Continued


Year or

quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 "

1977:1IIIllIV

1978:1IIIllIV

1 9 7 9 :1||IIIIV P

Gross private domestic investment-continued

Fixed investment—continued

Residential

Total

14.3

2.9

11.3

12.813.56.84.03.43.8

16.821.525.824.0

33.227.526.827.830.235.131.929.730.638.1

35.035.138.443.243.843.238.537.242.843.2

40.452.262.059.745.038.847.857.760.156.5

53.557.959.360.1

59.460.960.260.0

57.756.756.555.0

Nonfarmstruc-tures

13.6

2.6

10.6

11.812.56.13.53.03.5

15.519.823.922.3

31.525.925.326.328.833.830.428.329.236.5

33.733.636.941.742.241.636.935.541.141.5

38.950.560.357.943.037.246.055.557.754.1

51.255.757.058.0

56.858.657.757.6

55.654.454.052.5

Farmstruc-tures

0.6

.2

.6

.8

.9

.6

.4

.4

.31.11.31.51.4

1.31.31.21.21.1.9

1.01.0.9

1.0

.81.0.9.9.9.8.9.9.8.9

.6

.7

.7

.5

.9

.7

.7

.91.0.9

1.01.01.0.7

1.1.8

1.01.0

.8

.91.01.1

Pro-ducers'durableequip-ment

0.1

.1

.1

.1

.2

.1

.0

.0

.1

.2

.3

.3

.3

.3

.3

.3

.3

.3

.4

.4

.4

.5

.6

.5

.5

.6

.6

.7

.7

.8

.8

.9

.9

.91.01.11.21.1.9

1.11.31.41.4

1.21.21.31.4

1.41.51.41.4

1.41.41.41.5

Changein

businessinven-tories

4.6

-4 .9

1.6

6.212.05.2.1

- 2 . 3- 3 . 612.2- .25.5

- 4 . 4

10.613.74.31.5

-2 .27.75.81.5

-1 .86.5

4.42.98.17.87.3

11.316.712.08.7

10.6

4.36.69.4

16.58.0

- 9 . 86.6

13.114.110.2

11.313.416.611.3

16.515.612.212.0

12.318.17.13.2


Netexports

2.2

.2

2.0

3.0.8

- 2 . 5- 7 . 3- 7 . 2- 4 . 511.616.68.58.8

4.07.44.92.04.54.77.38.93.5.9

5.56.75.87.3

10.98.24.33.5

- .4- 1 . 3

1.4- . 6

- 3 . 37.6

15.922.615.810.311.017.7

11.110.913.25.8

5.312.313.312.9

17.013.220.120.7

services

Exports

15.6

9.4

13.3

14,614.710.39.0

10.013.526.130.224.224.2

21.725.924.923.825.327.932.334.830.731.5

35.837.039.642.247.849.151.654.258.562.2

67.167.972.787.493.090.096.198.4

108.9119.8

96.599.4

100.597.3

100.7109.2111.9113.8

117.0116.0122.2123.9

Imports

13.4

9.3

11.4

11.514.012.816.317.318.014.613.615.715.4

17.718.520.021.820.823.225.026.027.230.6

30.330.333.935.036.941.047.350.758.963.5

65.768.575.979.977.167.580.488.297.9

102.0

85.488.587.391.4

95.496.998.5

101.0

100.0102.9102.1103.2

Government purchases ofgoods and services

Total

40.9

42.8

62.9

65.297.7

191.5271.2300.3265.3

93.075.484.196.2

97.7132.7159.5170.0154.9150.9152.4160.1169.3170.7

172.9182.8193.1197.6202.7209.6229.3248.3259.2256.7

250.2249.4253.1252.5257.7262.6263.3268.5273.2274.1

264.5267.6270.3271.5

270.7271.3274.7276.0

274.7272.4273.1276.3

Federal

7.0

10.9

22.8

26.761.0

157.4239.6269.7233.7

58.236.142.448.9

47.081.3

107.0114.695.286.985.989.892.891.8

90.895.6

103.1102.2100.6100.5112.5125.3128.3121.8

110.7103.9102.196.695.896.596.4

100.698.699.2

98.4100.3101.8101.8

99.996.698.599.3

101.198.197.4

100.4

Stateandlocal

33.8

31.9

40.2

38.536.734.131.630.631.634.739.341.847.4

50.751.352.555.459.764.066.570.376.478.9

82.087.190.095.4

102.1109.1116.8123.1130.9134.9

139.5145.5151.0155.9161.8166.1166.9167.9174.6174.9

166.0167.3168.5169.8

170.9174.7176.2176.6

173.6174.3175.6175.9

Percentchangefrom

preced-ing

period,gross

n<sti Anolnationalproduct *

- 2 . 2

7.6

7.716.115.515.37.1

- 1 . 5-14.8

- 1 . 84.1.6

8.78.13.83.9

- 1 . 36.72.11.8

- .26.0

2.32.55.84.05.35.95.92.74.42.6

- .33.05.75.5

- 1 . 4- 1 . 3

5.95.34.42.3

8.94.87.02.2

1.98.33.55.6

1.1- 2 . 3

3.11.4

1 Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here.Source: Department of Commerce, Bureau of Economic Analysis.

2052 9 » + - 2 8 9 O - 8 0 -

TABLE B-3.—Implicit price deflators for gross national product, 1929-79

[Index numbers, 1972 = 100, except as noted; quarterly data seasonally adjusted]

Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979"

1977:1IIIIIIV

1978:IIIIIIIV

1979:1IIIIIIV p

Gross

nationalproductl

32.87

25.14

28.48

29.1331.3434.3936.1837.0337.9243.9549.7053.1352.59

53.6457.2758.0058.8859.6960.9862.9065.0266.0667.52

68.6769.2870.5571.5972.7174.3276.7679.0282.5786.72

91.3696.02

100.00105.80116.02127.15133.71141.70152 05165.50

138.34140.93142.59144.82

147.05150.82153.45156.68

160.22163.81167.20170.74


Total

35.8

26.8

30.4

30.833.136.740.042.344.047.752.855.955.7

56.860.561.963.163.664.265.567.669.170.4

71.772.573.674.775.777.179.381.384.688.5

92.596.6

100.0105.5116.9126.4132.8140.4150 0163.3

137.7139.6141.3143.0

145.8148.8151.3153.8

157.8161.3165.1169.0

Durablegoods

43.1

31.7

34.9

35.739.142.145.049.553.761.166.869.169.1

70.874.774.875.573.274.076.079.279.481.9

82.182.783.984.885.785.685.787.490.793.1

95.599.0

100.0101.6108.4117.7124.3129.4136 5144.8

128.4128.7129.5130.9

133.0135.6137.9139.4

142.4144.1145.3147.6

Nondurablegoods

38.4

26.8

30.5

30.933.639.143.746.247.852.158.762.360.3

60.765.866.666.366.666.367.369.471.071.4

72.673.373.974.975.877.380.181.985.389.4

93.696.6

100.0107.9123.8133.4138.1144.7154 6170.9

142.2144.3145.4146.8

150.0153.7155.7158.6

164.1168.9173.2177.3

.Services

31.6

26.1

29.2

29.530.832.434.236.137.338.941.744.446.1

47.449.952.655.457.258.560.262.264.266.0

68.069.170.471.772.874.376.578.882.086.1

90.595.8

100.0104.7113.6123.2131.2140.7150 9163.5

137.1139.4142.0144.1

146.8149.4152.3155.0

158.0161.0165.3169.4

Gross private domestic investment1

Fixed investment

Total

28.2

22.4

27.6

28.530.633.435.636.937.141.348.953.654.8

56.560.862.162.963.464.868.370.970.871.6

71.971.672.072.172.873.876.278.782.186.9

91.195.9

100.0106.0117.1132.3139.7150.5164 4179.7

145.3149.0151.6155.7

158.0162.3166.6170.3

173.0177.8182.4185.7

Total

28.2

22.8

28.2

29.130.933.835.736.636.639.946.851.352.8

54.358.959.961.061.462.667.070.770.672.0

72.271.872.372.973.674.576.879.382.686.6

91.396.4

100.0103.8115.3132.2138.5146.6157 8171.3

142.4145.0147.7150.8

153.0156.0159.6162.3

165.4169.6173.8176.6

Nonresidential

Structures

24.1

19.1

22.8

23.124.728.132.033.433.636.343.748.448.0

48.854.755.856.855.957.061.864.463.363.6

63.162.763.063.564.465.968.871.875.381.1

88.094.4

100.0107.8128.1144.9149.5160.0174 3192.5

154.9159.0161.0164.9

166.5171.5176.5181.4

185.2189.0195.1200.3

Producersdurable

equipment

33.4

26.2

32.0

32.834.937.337.338.037.942.848.552.955.9

57.661.662.563.765.466.571.075.476.578.2

79.379.279.479.680.180.682.184.387.390.0

93.497.6

100.0101.7109.2126.0133.3140.7150 3161.2

137.1138.9141.9144.7

147.1149.0151.7153.4

156.4160.2163.6164.7


206

TABLE B-3.—Implicit price deflators for gross national product, 1929-79—Continued

[Index numbers, 1972=100, except as noted; quarterly data seasonally adjusted]

Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 p

19771IIIIIIV

19781IIIIIIV

1979:1IIIIIIV P

Gross private domesticinvestment1—continued

Fixed investment—continued

Residential

Total

28.2

20.7

26.6

27.429.932.434.938.140.844.653.758.158.7

60.064.466.466.967.168.770.971.371.271.0

71.471.371.570.971.272.374.677.080.787.7

90.694.9

100.0110.8122.3132.8142.5159.3179.7201.7

152.2157.8160.1166.2

169.3176.7183.1189.5

192.6199 2205.5210.1

Non-farmstruc-tures

27.8

19.8

26.3

27.229.731.834.337.340.043.953.057.458.1

59.563.865.866.366.668.270.570.870.770.6

70.970.971.170.570.872.074.276.780.487.5

90.494.8

100.0111.0122.7133.2143.0160.0180.8203.4

152.8158.5160.9167.1

170.2177.9184.3190.8

194 0200 7207.3212.0

Farmstruc-tures

28.6

19.5

23.4

23.626.630.735.740.842.946.652.857.358.0

59.463.865.766.266.568.370.670.970.870.8

71.270.771.370.771.072.374.376.780.587.5

90.595.0

100.0110.7122.7132.9142.6159.7180.3203.3

153.5159.4161.7166.7

171.5176.8183.8189.3

192 7199 8206.0211.3


77.2

58.8

61.1

59.663.871.371.475.084.695.2

105.6111.5107.9

107.4114.9114.6114.2112.4109.1104.3103.4101.9101.8

100.899.196.895.394.392.190.891.093.295.2

97.599.3

100.0100.1105.3116.2121.9126.3132.3139.6

124.2125.9126.5128.2

129.2131.4133.0135.6

138 2139 5139.6140.8

Exports andimports ofgoods andservicesx

Exports

45.0

25.5

33.3

36.840.246.549.252.653.656.765.869.865.5

64.073.173.071.971.271.873.976.475.775.4

77.178.077.377.578.380.582.884.085.387.9

93.196.6

100.0116.2148.3163.6169.9178.7190.3214.9

176.7179.6179.1179.1

183.1188.4191.1197.6

203 92101218 7226.0

Imports

43.8

22.1

29.6

31.533.237.439.641.143.649.760.766.162.7

67.881.879.175.876.976.878.379.576.575.7

76.776.174.575.677.178.079.780.180.983.3

89.193.5

100.0118.2171.0188.0193.3210.7222.1255.7

210.5208.7213.4210.3

216.6220.2223.9227.2

234 5244 9264.0278.7

Government purchasesof goods and services

Total

21.6

19.3

21.5

21.725.531.232.832.331.229.633.838.039.9

39.445.347.448.548.949.752.154.456.157.2

58.059.261.162.664.066.069.272.676.781.0

87.593.7

100.0106.7117.5128.9137.2147.6159.4173.7

143.7146.3148.1152.0

154.9157.8160.5164.5

167 51713175.0180.9

Federal

20.5

19.4

22.7

22.127.833.034.033.131.930.235.139.441.8

39.947.148.950.250.451.153.455.758.158.7

59.160.061.863.364.867.070.172.676.480.0

86.492.6

100.0105.8115.9127.5134.6143.6154.8167.6

140.4142.1143.0148.6

151.1153.4154.6160.1

161.9164 8167.2176.3

Stateandlocal

21.8

19.2

20.7

21.021.722.923.824.925.928.632.536.638.0

39.042.444.245.146.647.850.452.853.855.4

56.858.360.361.963.365.168.472.576.981.9

88.394.5

100.0107.3118.4129.7138.8150.0162.1177.2

145.6148.9151.3154.1

157.1160.3163.8166.9

170.8174 9179*3183.6

Grossdomesticproduct

32.8

25.2

28.5

29.131.334.436.237.037.943.949.753.152.6

53.657.257.958.859.660.962.865.066.067.5

68.669.270.571.672.774.376.879.082.686.8

91.496.0

100.0105.7115.6126.8133.3141.2151.5164.6

137.8140.4142.0144.3

146.5150.2152.9156.1

159.51631166 2169.7

Percentfrom pr

per

Grossnationalproductimplicitprice

deflator

21

— 7

2.37.69.75.22.32.4

15.913.16.9

- 1 . 0

2.06.81.31.51.42.23.23.41.62.2

1.7.9

1.81.51.62.23.32.94.55.0

5.45.14.15.89.79.65.26.07.38.8

6.07.74.86.4

6.310.67.28.7

9.3938 58.7

changeecedingod2

Grossdomesticproductimplicitprice

deflator

- 2 . 0

- .7

2.37.69.75.22.32.4

15.913.06.9

- 1 . 0

2.06.71.31.51.42.23.23.41.62.2

1.7.9

1.91.51.62.23.33.04.55.1

5.35.14.15.79.39.75.15.97.38.7

5.77.84.76.6

6.210.67.28.7

9.192808.6

1 Separate deflators are not available for gross private domestic investment, change in business inventories, and net exports ofgoods and services.

2 Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here. Quarterly dataare at annual rates.


207

TABLE B-4.—Implicit price deflators and alternative price measures for gross national product and gross

domestic product, 1929- 79

[Quarterly data seasonally adjusted]

Year or quarter

1929 . .

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979"

19771IIIIIIV

19781IIIIIIV

19791IIIIIIV

Index numbers, 1972 = 100

Gross nationalproduct

Implicitprice

deflator

32.87

25.14

28.48

29.1331.3434.3936.1837.0337.9243.9549.7053.1352.59

53.6457.2758.0058.8859.6960.9862.9065.0266.0667.52

68.6769.2870.5571.5972.7174.3276.7679.0282.5786.72

91.3696.02

100.00105.80116.02127.15133.71141.70152.05165.50

138.34140.93142.59144.82

147.05150.82153.45156.68

160.22163.81167.20170.74

Fixed-weighted

priceindex(1972

weights)

68.'f"69.1

70.371.172.072.873.775.077.279.583.087.1

91.696.1

100.0106.0116.8127.7134.8143.5154.2168.7

140.1142.4144.2146.7

149.1152.6155.7159.0

162.8166.6170.6174.7

Gross domesticproduct

implicitprice

deflator

32.8

25.2

28.5

29.131.334.436.237.037.943.949.753.152.6

53.657.257.958.859.660.962.865.066.067.5

68.669.270.571.672.774.376.879.082.686.8

91.496.0

100.0105.7115.6126.8133.3141.2151.5164.6

137.8140.4142.0144.3

146.5150.2152.9156.1

159.5163.1166.2169.7

Fixed-weighted

priceindex(1972

weights)

68 069.1

70.271.172.072.873.775.077.279.683.087.1

91.796.2

100.0105.9116.4127.2134.4142.9153.7168.0

139.6141.9143.7146.2

148.7152.1155.2158.5

162.3166.0169.9173.8

Percent change from preceding periodx

Gross national product

Implicitprice

deflator

- 2 1

- 7

237697522324

15 913169

- 1 0

2068131514223234162.2

1.7.9

1.81.51.62.23.32.94.55.0

5.45.14.15.89.79.65.26.07.38.8

6.07.74.86.4

6.310.67.28.7

9.39.38.58.7

Fixed-weighted

priceindex(1972

weights)

1.6

1.71.11.31.11.21.82.93.04.35.0

5.24.94.06.0

10.29.35.66.47.59.4

7.46.65.17.2

6.89.68.38.9

9.99.5

10.09.9

Chainpriceindex

1.6

1.71.21.41.31.41.93.13.04.45.0

5.35.04.16.09.99.45.66.37.48.9

7.26.65.06.8

6.89.48.28.6

9.78.88.99.2

Gross domestic product

Implicitprice

deflator

- 2 0

- 7

237697522324

15 913 069

- 1 0

2067131514223234162.2

1.7.9

1.91.51.62.23.33.04.55.1

5.35.14.15.79.39.75.15.97.38.7

5.77.84.76.6

6.210.67.28.7

9.19.28.08.6

Fixed-weighted

priceindex(1972

weights)

1.6

1.71.21.31.11.21.83.03.04.45.0

5.24.94.05.99.99.35.66.47.59.3

7.16.85.07.3

6.89.78.38.9

9.99.49.69.7

Chainpriceindex

1.6

1.71.21.51.31.41.93.13.14.45.0

5.35.04.15.99.69.45.66.27.48.8

6.96.74.97.0

6.79.48.28.7

9.68.78.48.9

1 Changes are based on unrounded data and therefore may differ slightly from those obtained from published indexes shown here.Quarterly data are at annual rates.


208

TABLE B-5.—Gross national product by industry in 1972 dollars, 1947-78

[Billions of 1972 dollars]

YearGross

nationalproduct

Agricul-ture,

forestry,and

fisheries

Con-struction

Manufacturing

Total

Durablegoodsindus-tries

Non-durablegoodsindus-tries

Transpor-tation,

commu-nication,

andutilities

Whole-saleand

retailtrade

Financeinsur-ance,andreal

estate

Services

Govern-mentand

govern-mententer-prises

Allother1

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

468.3487.7490.7

533.5576.5598.5621.8613.7

654.8668.8680.9679.5720.4

736.8755.3799.1830.7874.4

925.9981.0

1,007.71,051.81,078.8

1,075.31,107.51,171.11,235.01,217.8

1,202.31,273.01,340.51,399.2

26.128.027.8

29.128.229.030.331.1

31.931.430.832.030.9

32.232.332.332.832.1

33.031.332.632.433.0

34.336.135.435.935.7

37.036.238.338.7

22.926.526.5

29.332.533.834.836.0

38.240.940.942.145.5

46.146.648.349.853.7

57.059.059.562.561.2

57.157.158.058.356.0

49.853.856.659.2

114.9121.5115.0

131.3146.0150.7161.2149.6

165.8166.9167.8153.3170.7

172.0171.2186.2201.0215.7

235.1254.0254.1268.4276.2

260.6264.1288.8313.0291.9

277.1303.5325.8341.6

68.572.066.3

78.189.994.3

102.691.7

103.4102.5102.988.8

100.7

101.599.3

110.1119.0129.3

144.1157.0157.2165.5169.1

154.4155.3171.9189.0176.0

162.2178.4192.5203.8

46.449.648.8

53.256.156.458.657.9

62.464.464.964.570.0

70.572.076.282.186.4

91.097.096.9

102.9107.2

106.2108.7116.8124.1115.9

114.9125.2133.3137.8

38.338.736.4

39.644.244.345.945 6

49.452.353.452.255.7

58.059.162.165.668.9

74.380.082.388.292.9

95.197.3

103.6112.6112.4

113.5118.6124.9134.4

76.178.079.9

87.688.391.194.094.6

103.2106.2108.0107.9115.8

117.9119.2126.7131.7139.7

148.6156.9160.7170.6174.5

178.4186.8201.2212.0205.7

206.2218.9228.0239.1

55.457.160.7

64.466.771.174.077.7

82.085.789.893.598.1

101.9106.8115.3115.3119.3

127.2131.4136.5142.9149.3

152.9160.6167.3171.1180.3

182.3192.0205.8216.1

55.156.757.2

59.460.661.663.063.1

67.571.173.375.880.3

82.285.488.692.296.9

101.2106.5112.7116.3121.4

124.7126.6134.5143.1144.7

145.2151.9159.5169.1

68.569.073.1

75.489.896.696.494.9

95.497.6

100.1101.7103.6

107.2111.1115.1118.3122.6

127.4136.4143.5148.1151.8

152.0153.1154.9157.3160.0

162.7164.7165.5168.6

11.112.014.1

17.520.220.222.321.1

21.416.616.821.020.0

19.423.624.524.125.6

22.125.425.722.418.4

20.425.727.731.731.2

28.533.536.132.3

1 Mining, rest of the world, and residual (GNP in 1972 dollars measured as the sum of final products less GNP in 1972 dollarsmeasured as the sum of gross product by industry).

Note.—The industry classification is on an establishment basis and is based on the 1972 Standard Industrial Classification.


209

TABLE B-6.—Gross national product by major type of product, 1929-79

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 p.

1977:1IIIllI V

1978:1IIIllI V

1979:1IIIllIV P


103.4

55.8

90.8

100 0124.9158.3192.0210.5212.3209.6232.8259.1258.0

286.2330.2347.2366.1366.3399.3420.7442.8448.9486.5

506.0523.3563.8594.7635.7688.1753.0796 3868.5935.5

982.41,063.41,171.11,306.61,412.91,528.81,702.21,899.52,127.62,368.5

1,820.21,876.01,930.51,971.3

2,011.32,104.22,159.62,235.2

2,292.12,329.82,396.52,455.8

Finalsales

101.7

57.4

90.4

97 8120.4156.5192.5211.5213.4203.2233.2254.4261.1

279.4319.9344.0365.7367.8393.3416.0441.4450.4481.2

502.2521.1557.3588.8629.9678.6738.7786 2860.8926.2

978.61,057.11,161.71,288.61,404.01,539.61,692.11,877.62,105.22,350.2

1,800.91,853.61,902.91,952.9

1,988.52,078.42,139.52,214.5

2,272.92,296.42,381.92,449.5

Inven-tory

change

1.7

-1.6

.4

2.24.51.8-.6

-1.0-1.06.4-.54.7

-3.1

6.810.33.1.4

-1.56.04.71.3

-1.55.2

3.82.26.5 16.05.89.514.310.17.79.4

3.86.49.417.98.9

-10.710.021.922.318.4

19.322.527.518.5

22.825.820.020.6

19.133.414.56.4

Goods

Total

Total

56.1

27.0

49.0

56 072.593.7120.4132.3128.9125.3139.8154.4147.7

162.4189.5194.6203.1196.1214.5223.3232.3228.2247.4

254.3256.5278.0289.7309.0336.6373.9387 3418.9446.2

456.2479.8526.0598.8638.6686.6762.7842.2930.0

1,030.5

812.2834.2855.5866.6

873.0922.5940.9983.8

1,011.81,018.11,036.01,056.2

Finalsales

54.4

28.6

48.6

53 868.091.9121.0133.3129.9118.9140.3149.7150.8

155.6179.2191.5202.7197.6208.5218.6231.0229.7242.2

250.6254.3271.5283.7303.2327.1359.6377 2411.2436.8

452.4473.5516.6580.9629.7697.3752.7820.2907.7

1,012.2

793.0811.8828.0848.2

850.2896.7920.8963.2

992.7984.6

1,021.51,049.9

Inven-tory

change

1.7

-1.6

.4

224.51.8-.6

-1.0-1.06.4-.54.7

-3.1

6.810.33.1.4

-1.56.04.71.3

-1.55.2

3.82.26.56.05.89.514.310.17.79.4

3.86.49.417.98.9

-10.710.021.922.318.4

19.322.527.518.5

22.825.820.020.6

19.133.414.56.4

Durable goods

Finalsales

16.1

5.4

12.4

15 423.834.554.258.550.131.844.146.948.3

54.762.567.671.569.078.282.387.380.587.4

89.190.298.4105.4115.0127.0139.0143.5157.4169.2

170.7179.8202.1229.6240.8267.9300.6333.9366.5409.7

329.8329.9336.7339.3

340.1364.9372.3388.9

407.1398.0417.1416.4

Inven-tory

change

1.4

-.5

.3

1?3.11.0.0

-.6-1.35.31.7.7

-2.1

4.16.91.1.9

-2.53.02.81.3

-2.82.7

2.4-.13.62.73.96.610.0535.06.1

.01.86.310.97.1

-8.95.311.913.913.7

8813.014.611.3

18.613.110.313.4

18.424 37.34.6

Nondurable goods

Finalsales

38.3

23.2

36.2

38.444.257.466.874.879.887.196.2102.8102.5

100.9116.7123.9131.2128.7130.3136.3143.7149.2154.8

161.4164.1173.2178.3188.2200.1220.6233 7253.8267.6

281.7293.7314.5351.3389.0429.4452.0486.3541.2602.5

463.1481.9491.3508.9

510.1531.8548.6574.3

585.5586.6604.4633.4

Inventorychange

0.3

-1.1

.1

101.4.7

-.6_ 3.21.1

-2.24.0

-1.0

2.73.42.0-.51.02.91.9.01.32.5

1.42.32.93.31.92.94.3482.83.3

3.74.63.27.01.8

-1.84.710.08.44.7

10 49.512.97.1

4.212.79.77.2

.7917.21.8

Services

35.9

25.9

34.3

35.740.650.662.972.276.968.671.376.781.9

88.2102.9113.1121.0125.7135.3145.2157.5166.9179.5

193.2206.7221.5236.2254.4272.7297.73261356.6388.7

424.6465.5510.8560.5626.8697.6776.7866.4969.3

1,085.3

833 5851.7878.7901.9

934.1956.2981.7

1,005.3

1,041.41,064.21,100.61,135.0

Struc-tures

11.4

2.9

7.5

8.311.814.08.76.16.515.721.728.028.4

35.637.839.442.044.549.552.253.053.859.5

58.460.164.368.972.478.881.482 993.0100.7

101.6118.1134.3147.2147.4144.7162.7190.9228.2252.7

174 4190.1196.3202.8

204.2225.6237.0246.0

238.9247.5259.8264.6

Autooutput

7.38.912.0

15.513.412.216.314.921.517.219.614.619.6

21.618.122.925.626.531.831.128 836.636.8

30.642.245.150.742.945.662.472.377.576.1

72 771.570.674.2

73.979.675.880.6

84.377 571.271.4


210

TABLE B-7.—Gross national product by major type of product in 1972 dollars, 1929-79

[Billions of 1972 dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter


Finalsales

Inven-tory

change

Goods

Total

Total Finalsales

Inven-tory

change

Durable goods

Finalsales

Inven-tory

change

Nondurable goods

Finalsales

Inventorychange

ServicesStruc- Auto

output

1929..

1933..

1939..

1940..

1941..1942..1943..1944..1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..1955..1956..1957..1958..1959..

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 "....

1977:I

1978:IIIIllI V

1979:IIIIllIV....

314.6

222.1

318.8

343.3

398.5460.3530.6568.6560.0476.9468.3487.7490.7

533.5576.5598.5621.8613.7654.8668.8680.9679.5720.4

736.8755.3799.1830.7874.4925.9981.0

1,007.71,051.81,078.8

1,075.31,107.51,171.11,235.01,217.81,202.31,273.01,340.51,399.21,431.1

1,315.71,331.21,353.91,361.3

1,367.81,395.21,407.31,426.6

1,430.61,422.31,433.31,438.4

310.0

226.9

317.2

337.1

386.4455.1530.5570.9563.6464.7468.5482.2495.1

522.9562.8594.2620.3615.8647.1663.0679.4681.3714.0

732.4752.4791.0823.0867.1914.6964.3995.7

1,043.11,068.2

1,071.01,100.91,161.71,218.51,209.91,212.11,266.41,327.41,385.11,421.0

1,304.41,317.81,337.31,350.0

1,351.31,379.61,395.11,414.6

1,418.41,404.11,426.21,435.2

4.6

-4 .9

1.6

6.2

12.05.2

.1- 2 . 3-3 .612.2- . 25.5

-4 .4

10.613.74.31.5

- 2 . 27.75.81.5

- 1 . 86.5

4.42.98.17.87.3

11.316.712.08.7

10.6

4.36.69.4

16.58.0

- 9 . 86.6

13.114.110.2

11.313.416.611.3

16.515.612.212.0

12.318.17.13.2

143.9

97.2

153.9

171.2

197.4221.1263.5286.8279.2238.0236.8244.2239.9

261.5283.1292.3306.9292.2316.3320.9321.8312.0332.5

337.1338.1362.0373.0394.0421.5455.6461.9481.1492.3

483.4491.6526.0569.0554.2538.3578.4615.6639.5652.9

605.0610.6622.5624.2

621.4637.2641.8657.3

658.6647.3651.3654.5

139.3

102.1

152.3

165.0

185.4215.9263.4289.1282.8225.8237.0238.7244.3

250.9269.4288.0305.4294.4308.6315.1320.3313.8326.1

332.8335.2353.8365.2386.7410.2438.9449.9472.4481.7

479.1484.9516.6552.5546.2548.0571.8602.4625.4642.8

593.7597.2605.9612.9

604.9621.6629.6645.3

646.3629.1644.2651.3

4.6

-4 .9

1.6

6.2

12.05.2

.1- 2 . 3- 3 . 612.2- . 25.5

-4 .4

10.613.74.31.5

- 2 . 27.75.81.5

- 1 . 86.5

4.42.98.17.87.3

11.316.712.08.7

10.6

4.36.69.4

16.58.0

- 9 . 86.6

13.114.110.2

11.313.416.611.3

16.515.612.212.0

12.318.17.13.2

40.7

17.6

35.6

43.1

57.576.0

119.3135.9121.960.574.975.676.1

84.492.6

100.6105.9101.7112.9113.5114.6104.8110.6

111.6112.6121.1128.4139.2152.6165.2166.6175.7183.3

179.1181.5202.1225.9222.7219.8233.2248.6261.4270.7

248.5246.9249.9249.0

248.5262.8263.6270.6

275.2265.1272.9269.5

3.5

-2 .1

3.4

8.23.5

.7- 1 . 8-3 .710.81.81.5

-3 .7

6.39.81.81.4

- 3 . 64.23.71.5

- 3 . 43.3

2.9- . 14.43.45.08.0

11.96.45.66.8

.11.86.2

10.65.6

- 7 . 03.78.08.67.6

6.18.59.67.6

11.87.96.38.5

10.813.23.72.7

98.6

84.5

116.7

121.8

127.9140.0144.1153.2161.0165.3162.1163.1168.2

166.5176.8187.4199.5192.7195.7201.6205.6209.0215.5

221.2222.7232.7236.8247.5257.7273.7283.3296.7298.4

300.0303.4314.5326.6323.5328.2338.6353.9364.0372.1

345.2350.3356.0364.0

356.4358.8366.0374.7

371.2364.1371.3381.8

1.1

- 2 . 8

2.8

3.81.7

- . 6- . 5

.11.3

- 2 . 04.0

4.23.92.5

.11.43.52.1

.01.63.2

1.53.03.74.32.33.34.85.63.23.7

4.24.83.25.92.4

-2.72.95.25.52.6

5.24.97.03.7

4.77.65.93.5

1.44.93.4

126.8

110.9

134.6

139.5

157.6192.7240.9263.6261.9199.7186.9190.9197.0

206.0229.0240.6245.5247.0257.6267.2279.3285.6298.0

310.7325.5339.9354.0372.2389.1410.2432.7449.9465.4

477.2491.1510.8531.1546.4560.1582.6604.4630.3649.8

596.2599.6608.2613.8

624.2627.9633.1636.0

645.2647.3652.0654.7

44.0

14.0

30.3

32.6

43.446.426.318.118.939.244.752.553.7

66.064.465.669.474.580.980.779.981.989.9

89.091.797.2

103.8108.1115.3115.2113.1120.9121.1

114.6124.9134.3134.8117.2104.0112.1120.5129.5128.4

114.5121.1123.2123.3

122.1130.1132.4133.3

126.8127.7130.0129.2

12.914.718.9

24.020.418.423.922.931.324.425.820.024.7

26.822.627.530.331.137.436.733.540.640.0

32.542.145.150.640.139.449.955.254.951.5

56.155.354.255.1

53.656.853.056.3

58.152.947.547.5


211

TABLE B-8.—Cross national product: Receipts and expenditures by major economic groups, 1929-79

[Billions of dollars]

Year or quarter

1929

1933

1939

1940194119421943194419451946-194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 "

Persons

Disposable personal income

Total1

82.3

45.5

69.9

75.292.0

116.5132.9145.5149.0158.6168.4187.4187.1

205.5224.8236.4250.7255.7273.4291.3306.9317.1336.1

349.4362.9383.9402.8437.0472.2510.4544.5588.1630.4

685.9742.8801.3901.7984.6

1,086.71,184.51,305.11,458.41,623.2

Less-.Inter-estpaidand

trans-fers2

1.9

.7

.9

1.01.1

.8

.7

.8

.91.41.72.12.3

2.72.93.34.04.34.85.65.96.06.5

7.47.78.39.4

10.511.712.613.314.115.6

16.617.318.921.523.423.926.130.235.640.6

Equals:Total

excludinginterestpaid andtransfers

80.4

44.8

69.1

74.391.0

115.6132.1144.6148.0157.3166.7185.3184.9

202.8221.9233.1246.6251.4268.6285.7301.0311.1329.6

342.0355.2375.6393.4426.5460.4497.8531.2574.0614.8

669.4725.5782.4880.2961.3

1,062.71,158.51,274.91,422.81,582.6

Personalcon-

sumptionexpendi-

tures

77.3

45.8

67.0

71.080.888.699.4

108.2119.5143.8161.7174.7178.1

192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8

324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7

618.8668.2733.0809.9889.6979.1

1,089.91,210.01,350.81,509.8

Per-sonalsaving

ordis-

saving(-)

3.1

-1.0

2.1

3.310.227.032.736.528.513.44.9

10.66.7

10.814.816.017.015.614.919.720.621.718.8

17.120.220.418.826.130.333.040.938.135.1

50.657.349.470.371.783.668.665.072 072.8

(

Net receipts

Tax andnontaxreceipts

oraccruals

11.3

9.3

15.4

17.725.032.649.251.253.251.056.958.955.9

69.085.290.194.689.9

101.1109.7116.2115.0129.4

139.5144.8156.7168.5174.0188.3212.3228.2263.4296.3

302.6322.2367.4411.2455.1468.5538.3606.6685 7771.9

Less:Trans-fers,inter-estand

subsi-dies3

1.5

2.5

4.1

4.33.84.24.46.09.9

18.017.118.520.9

22.519.118.319.021.323.025.128.232.633.4

36.140.942.444.146.549.554.962.270.277.8

93.1106.8117.8135.4155.6194.4212.7229.9250 4281.8

Equals:Net

receipts

9.8

6.9

11.3

13.521.228.444.745.243.333.039.940.435.0

46.566.271.875.668.678.184.688.082.496.0

103.4103.9114.3124.4127.5138.9157.4166.0193.2218.5

209.5215.5249.6275.8299.5274.1325.6376.7435 3490.1

lovernmen

Expenditures

Totalexpendi-

tures

10.3

10.7

17.6

18.428.864.093.3

103.092.745.642.550.559.3

61.079.293.9

101.697.098.0

104.5115.3127.6131.0

136.4149.1160.5167.8176.3187.8213.6242.4268.9285.6

311.9340.5370.9404.9458.2532.8574.0626.1686 0757.9

Less:Trans-fers,inter-

fn'dsubsi-dies3

1.5

2.5

4.1

4.33.84.24.46.09.9

18.017.118.520.9

22.519.118.319.021.323.025.128.232.633.4

36.140.942.444.146.549.554.962.270.277.8

93.1106.8117.8135.4155.6194.4212.7229.9250 4281.8

Equals:Pur-

chasesof

goodsand

serv-ices

8.8

8.2

13.5

14.224.959.888.997.082.827.525.532.038.4

38.560.175.682.575.875.079.487.195.097.6

100.3108.2118.0123.7129.8138.4158.7180.2198.7207.9

218.9233.7253.1269.5302.7338.4361.3396.2435 6476.1

Surplusor

deficit(-),

nationalincome

andproduct

accounts

1.0

- 1 . 4

- 2 . 2

- .7- 3 . 8

-31.4-44 .1-51.8-39 .5

5.414.48.4

- 3 . 4

8.06.1

- 3 . 8- 6 . 9- 7 . 1

3.15.2

.9-12.6

- 1 . 6

3.1- 4 . 3- 3 . 8

.7- 2 . 3

.5- 1 . 3

-14.2- 5 . 510.7

- 9 . 4-18 .3

- 3 . 56.3

- 3 . 2-64.4-35.7-19 .5

_ 314.0


212

TABLE B-8.—Gross national product: Receipts and expenditures by major economic groups, 1929-79—

Continued


Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979"

Business

Grossretained

earnings4

11.7

3.2

8.8

10.912.014.816.717.716.015.821.830.031.4

30.834.637.138.041.047.548.751.151.358.5

58.759.867.070.176.284.691.293.798.2

101.7

101.4115.7131.0140.2137.9176.2203.3230.7252.9276.0

Grossprivate

domesticinvest-ment5

16.2

1.4

9.3

13.117.99.95.87.2

10.630.734.045.935.3

53.859.252.153.352.768.471.069.261.977.6

76.474.385.290.296.6

112.0124.5120.8131.5146.2

140.8160.0188.3220.0214.6190.9243.0303.3351.5386.2

Excess ofearnings

or ofinvest-ment( — )

- 4 . 4

1.8

-.5

- 2 . 2- 5 . 8

4.910.910.55.4

-14 .9-12 .1-15 .8

- 3 . 8

- 2 3 . 0-24 .6-15 .1-15 .3-11 .7-20 .8- 2 2 . 3-18 .1-10 .6-19 .0

-17 .7- 1 4 . 5- 1 8 . 2-20 .1- 2 0 . 4-27 .4-33 .3-27 .1- 3 3 . 3-44 .5

-39.5-44.3-57.3-79.8-76.7-14.8-39.7-72.6-98.6

-110.2

International

Nettrans-

fers andinterestpaid toforeign-

ers •

0.4

.2

.2

.2

.2

.2

.2

.3

.82.92.64.55.6

4.03.52.62.52.32.52.52.52.42.6

2.62.83.03.13.23.33.53.73.63.8

4.35.56.57.78.58.58.79.7

13.315.8


Exports

7.0

2.4

4.4

5.45.94.84.45.37.2

14.819.816.915.9

13.918.918.217.118.020.023.926.723.323.7

27.628.930.632.737.439.542.845.649.954.7

62.565.672.7

101.6137.9147.3163.3175.9207.2257.4

services

Less:Imports

5.9

2.0

3.4

3.64.64.86.57.17.87.28.2

10.49.6

12.015.115.816.616.017.819.620.720.823.2

23.223.125.226.428.432.037.740.647.752.9

58.564.075.994.4

131.9126.9155.4185.8217.5260.9

Equals:Netex-

ports

1.1

.4

1.1

1.71.3

.0- 2 . 0- 1 . 8

- .67.6

11.66.56.2

1.93.82.4

.62.02.24.36.12.5

.6

4.45.85.46.38.97.65.14.92.31.8

3.91.6

- 3 . 37.16.0

20.48.0

- 9 . 9- 1 0 3- 3 . 5

Excessof net

transfersand

interestor ofnet

exports( - ) 7

- 0 . 7

- .2

- .9

- 1 . 5- 1 . 1

.22.22.11.4

- 4 . 6- 9 . 0- 2 . 0

- .6

2.1- .3

.21.9

.3

.3- 1 . 8- 3 . 6

- .12.0

-1 .7- 3 . 0- 2 . 4- 3 . 2-5 .7- 4 . 3- 1 . 6- 1 . 2

1.42.0

.33.99.8

.62.5

-11 .9.7

19.623 519.3

Totalincome

orreceipts

102.3

55.1

89.4

98.9124.3159.1193.8207.8208.2208.9231.0260.3257.0

284.1326.2344.5362.8363.3396.8421.5442.6447.2486.7

506.7521.7559.8591.0633.5687.2749.8794.6869.1938.8

984.51,062.11,169.41,303.91,407.11,521.51,696.01,892.02,124.22,364.6

Statis-tical

discrep-ancy

1.1

.7

1.4

1.1.5

- .8- 1 . 8

2.74.1

.71.8

- 1 . 21.0

2.04.02.73.33.02.5

-.8.2

1.7-.2

-.71.64.03.72.2

.93.21.7

-.6- 3 . 3

- 2 . 11.31.72.65.87.46.17.53.34.0


orexpend-

itureiiure

103.4

55.8

90.8

100.0124.9158.3192.0210.5212.3209.6232.8259.1258.0

286.2330.2347.2366.1366.3399.3420.7442.8448.9486.5

506.0523.3563.8594.7635.7688.1753.0796.3868.5935.5

982.41,063.41,171.11,306.61,412.91,528.81,702.21,899.52,127.62,368.5

1 Personal income less personal tax and nontax payments (fines, penalties, etc.).2 Interest paid by consumers to business and net personal transfer payments to foreigners.3 Government transfer payments to persons and foreigners, net interest paid by government, subsidies less current surplus ofgovernment enterprises, and disbursements less wage accruals.4 Undistributed corporate profits with inventory valuation and capital consumption adjustments, corporate and noncorporate capitalconsumption allowances with capital consumption adjustment, and private wage accruals less disbursements.

• See Table B-14.6 Net transfers to foreigners by persons and government and interest paid by government to foreigners.7 Capital grants received by the United States (net) less net foreign investment.Source: Department of Commerce, Bureau of Economic Analysis.

213

TABLE B-9.—Gross national product by sector, 1929-79


Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 *

19771IIillIV

19781IIIIIIV

19791IIIIIIV P


103.4

55.8

90.8

100.0124.9158.3192.0210.5212.3209.6232.8259.1258.0

286.2330.2347.2366.1366.3399.3420.7442.8448.9486.5

506.0523.3563.8594.7635.7688.1753.0796.3868.5935.5

982.41,063.41,171.11,306.61,412.91,528.81,702.21,899.52,127.62,368.5

1,820.21,876.01,930.51,971.3

2,011.32,104.22,159.62,235.2

2,292.12,329.82,396.52,455.8

Total

102.6

55.5

90.5

99.6124.5157.9191.6210.1212.0209.0231.8257.9256.9

284.8328.7345.7364.6364.5397.3418.5440.5446.6484.0

503.5520.2560.2591.1631.4683.4748.8791.8863.7931.1

977.81,056.81,164.11,297.51,399.81,518.31,687.71,881.72,107.02,343.3

1,802.91,858.51,911.71,953.8

1,992.02,083.22,138.92,213.9

2,267.92,306.12,369.52,429.7

Total

95.4

49.1

80.6

89.4112.6139.9162.8174.2172.8183.8210.0234.9231.5

257.5294.4307.3324.9323.9354.0372.1390.8393.1427.7

442.5455.3490.4516.5550.7596.6651.1682.7742.2798.1

831.5896.9989.5

1,108.01,193.71,289.21,437.71,609.01,807.82,017.7

1,538.71,590.01,637.41,669.7

1,701.11,787.51,837.61,904.9

1,951.41,984.52,042.02,092.8

Sross domestic product

Business

Ni-mwon-

farm1

84.7

43.8

72.9

81.8103.1127.7149.3156.2152.7164.2188.0212.7211.7

235.5267.4282.5301.2301.3332.8354.3372.3370.7408.9

423.0433.4465.9492.2529.2573.8625.0658.8720.2776.2

807.6867.9955.8

1.055.21,139.91,232.61,385.21,552.21,745.01,944.2

1,481.41,533.51,582.11,612.0

1,641.81,725.81,774.81,837.5

1,880.81,915.21,964.8

Farm

9.7

4.6

6.3

6.58.9

13.015.315.316.018.920.223.318.8

20.022.922.220.319.618.818.618.420.719.1

20.220.220.520.519.322.022.922.222.625.2

25.927.732.050.148.049.246.449.259.569.5

48.247.947.653.2

56.359.458.963.3

70.070.668.968.3

Statis-ticalTICdl

discrep-ancy

1.1

.7

1.4

1.1.5

- .8- 1 . 8

2.74.1

.71.8

- 1 . 21.0

2.04.02.73.33.02.5

- .8.2

1.7- .2

- .71.64.03.72.2

.93.21.7

- .6- 3 . 3

- 2 . 11.31.72.65.87.46.17.53.34.0

9.18.67.74.6

3.02.33.94.1

.6- 1 . 3

8.3

House-holdsand

insti-tutions

2.9

1.7

2.3

2.42.52.93.23.74.14.55.15.65.9

6.46.97.27.88.19.19.8

10.511.412.3

13.814.415.516.617.819.221.123.926.429.2

31.634.737.240.544.850.556.462.669.677.2

60.461.463.265.4

67.368.970.372.1

74.875.877.980.4

Governmeni

Total

4.3

4.7

7.6

7.89.4

15.125.632.235.220.816.717.419.4

20.927.431.231.932.534.236.639.142.144.0

47.150.554.358.062.967.676.585.195.2

103.7

114.7125.2137.4149.1161.4178.6193.5210.1229.6248.4

203.7207.1211.1218.7

223.6226.8231.0237.0

241.8245.8249.6256.6

Federal

0.9

1.2

3.4

3.55.0

10.620.927.229.814.69.48.9

10.0

10.716.218.918.617.818.419.019.620.520.9

21.722.624.125.227.028.332.435.639.341.8

44.746.850.151.954.959.062.466.471.877.0

65.265.365.669.6

70.270.771.574.8

75.575.876.380.6

2

Stateandlocal

3.5

3.5

4.2

4.34.44.54.74.95.46.27.38.59.4

10.111.212.313.314.715.817.619.621.623.1

25.527.930.232.935.939.344.149.555.961.9

70.078.587.397.1

106.5119.6131.2143.7157.8171.4

138.6141.7145.5149.1

153.4156.1159.4162.2

166.3170.0173.3175.9

Restof theworld

0.8

.3

.3

.4

.4

.4

.3

.4

.3

.5

.91.21.1

1.31.51.51.51.82.02.22.32.22.4

2.53.13.63.74.34.74.24.64.84.5

4.66.67.09.1

13.110.514.517.820.525.2

17.417.618.817.5

19.321.020.721.2

24.223.726.926.1

Percentchangefrom

preced-ing

period,gross

domesticproduct3

- 4 . 1

7.0

10.125.026.821.49.6

.9- 1 . 410.911.3- .4

10.915.45.25.5

-.09.05.35.21.48.4

4.03.37.75.56.88.29.65.79.17.8

5.08.1

10.111.57.98.5

11.211.512.011.2

15.012.912.09.1

8.119.611.114.8

10.16.9

11.510.6

1 Includes compensation of employees in government enterprises.2 Compensation of government employees.3 Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here. See Table B- l

for percent changes in gross national product.


214

TABLE B-10.—Gross national product by sector in 1972 dollars, 1929-79


Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979"

19771IIIIIIV

19781IIIIIIV

1979.IIIIIII V


314.6

222.1

318.8

343.3398.5460.3530.6568.6560.0476.9468.3487.7490.7

533.5576.5598.5621.8613.7654.8668.8680.9679.5720.4

736.8755.3799.1830.7874.4925.9981.0

1,007.71,051.81,078.8

1,075.31,107.51,171.11,235.01,217.81,202.31,273.01,340.51,399.21,431.1

1,315.71,331.21,353.91,361.3

1,367.81,395.21,407.31,426.6

1,430.61,422.31,433 31,438.4

Gross domestic product

Total

312.8

220.5

317.7

342.0397.2459.2529.7567.5559.2475.8466.7485.9488.8

531.5574.7596.7619.9611.4652.2666.1678.0676.5717.3

733.6751.2794.3825.8868.7919.9975.6

1,001.91,045.71,073.1

1,069.81,100.31,164.11,227.41,211.01,197.51,266.21,332.91,391.11,423.2

1,308.31,323.61,346.01,353.9

1,359.91,386.81,399.21,418.4

1,421.71,414.21425 31,431.7

Total

271.1

179.7

260.6

282.0326.3361.0385.2403.5397.9384.9392.8411.2409.4

448.6477.2492.8515.6508.0546.5557.2566.0561.9600.5

611.8625.6663.9692.0730.4776.4822.4839.8878.2901.5

898.3927.6989.5

1,050.41,031.21,013.61,079.71,143.71,197.51,227.7

1,120.91,135.61,155.91,162.4

1,167.51,193.61,205.11,223.9

1,226.91,219.01229 31,235.8

Business

hlnnnon-

farm1

244.2

152.1

230.7

253.8299.1336.0363.9372.7366.4362.2370.8387.2382.1

417.9445.9460.7480.6473.4512.5529.3538.7528.2569.6

580.5590.9629.6658.4697.1746.7791.1807.8850.6877.4

871.3894.9955.8

1,013.2993.7975.3

1,039.91,100.71,160.01,190.7

1,079.11,093.51,111.31,118.7

1,126.61,156.21,169.11,188.0

1,193.11,184.71 189 41,195.5

Farm

23.8

25.0

25.3

24.726.328.727.827.325.825.823.925.725.5

26.925.826.327.628.329.228.828.129.328.2

29.529.629.530.029.230.128.529.629.429.9

31.132.832.032.332.233.732.434.434.234.7

32.333.035.936.2

35.734.233.633.2

33.435.134 935.3

PociHKcSIQ-

ual2

3.1

2.6

4.7

3.6.9

- 3 . 8- 6 . 6

3.55.8

- 3 . 0- 1 . 9-1 .7

1.8

3.85.55.77.36.24.8

-.9- .84.42.7

1.85.14.83.64.0

-.42.82.4

- 1 . 8- 5 . 9

- 4 . 2- .11.74.95.34.77.48.73.42.4

9.59.18.77.5

5.33.22.42.7

.4-.8505.0

House-holdsand

insti-tutions

15.6

12.2

15.1

16.115.916.415.215.115.015.116.016.717.3

18.318.718.619.319.421.422.523.124.224.9

26.827.228.329.029.931.132.834.835.936.6

36.336.637.238.138.039.440.742.243.645.0

41.441.742.543.2

43.043.443.944.1

44.444.745 445.7

Government3

Total

26.1

28.7

42.0

43.955.181.8

129.3149.0146.275.857.958.062.2

64.678.885.385.083.984.486.588.990.491.8

94.998.5

102.1104.8108.4112.4120.4127.2131.7135.0

135.2136.0137.4138.9141.9144.4145.8147.0149.9150.5

146.0146.2147.6148.3

149.4149.8150.2150.4

150.4150.5150 6150.3

Federal

5.2

6.6

16.9

18.629.656.7

105.0125.2121.849.729.829.231.3

32.746.251.649.647.245.945.645.844.544.5

45.246.248.348.248.548.753.057.258.158.2

55.252.550.148.348.648.548.548.749.149.1

48.648.648.748.7

48.949.049.249.3

49.249.149 249.0

Stateandlocal

20.9

22.0

25.1

25.325.525.024.423.824.526.128.128.830.9

31.932.633.735.536.738.440.843.145.847.3

49.752.353.956.660.063.667.570.073.676.8

80.183.587.390.693.396.097.398.4

100.8101.3

97.497.698.899.5

100.5100.8100.9101.1

101.2101.41015101.2

Restof theworld

1.9

1.6

1.2

1.31.21.11.01.0.8

1.11.61.81.9

1.91.81.82.02.32.52.72.93.03.2

3.24.14.84.95.76.15.45.86.15.7

5.57.27.07.66.84.96.87.68.17.9

7.47.67.97.4

7.88.48.18.1

8.98.1806.7

Percentchangefrom

preced-ing

period,gross

domesticproduct4

- 2 . 2

7.7

7.716.115.615.47.2

-1 .5-14.9

-1 .94.1.6

8.78.13.83.9

-1 .46.72.11.8

_ 2

6!o2.32.45.74.05.25.96.12.74.42.6

- .32.85.85.4

- 1 . 3- 1 . 1

5.75.34.42.3

8.84.76.92.4

1.88.13.65.6

.9-2 .1

321.8

1 Includes compensation of employees in government enterprises.2 The difference between gross product in 1972 dollars measured as the sum of final products and that measured as the sum of

gross product by industry.3 Compensation of government employees.4 Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here. See Table B-2

for percent changes in gross national product in 1972 dollars.Source: Department of Commerce, Bureau of Economic Analysis.

215

TABLE B-ll .—Gross domestic product of nonfinancial corporate business, 1929-79


Year orquarter

1929..

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 "

1977:1IIIllIV

1978:IIIIllIV

1979:1IIIllIV "

Grossdomes-

ticproduct

ofnon-

financialcorpo-ratebusi-ness

50.1

24.4

43.7

50.465.682.998.7

102.195.399.3

120.0137.3133.5

151.9174.5182.3195.0191.9216.7231.6242.3236.3265.7

277.3284.5311.0330.9357.6392.1430.7452.9498.4541.8

560.6602.5671.0752.0808.8874.1988.0

1,106.31,246.91,388.3

1.054.61.093.31,128.91,148.6

116911,236.51,267.91,314.1

1,346.41,370.41,401.3

Capitalconsump-

tionallow-anceswith

capitalconsump-

tionadjust-ment

5.4

4.2

4.7

4.85.36.06.16.26.47.39.1

10.711.6

12.614.615.717.017.919.221.523.724.926.0

27.027.828.729.831.032.835.739.343.047.8

53.158.262.668.780.896.8

106.8116.0126.9140.8

111.7114.5117.5120.5

123 2125.8128.2130.5

133.4138.4143.4148.0

Net domestic product

Total

44.7

20.2

39.1

45.660.477.092.695.988.992.1

110.9126.5121.9

139.3159.9166.7178.1174.1197.5210.1218.5211.4239.7

250.3256.7282.3301.1326.6359.3394.9413.6455.4494.0

507.5544.2608.4683.3728.0777.3881.2990.3

1,120.01,247.5

942.9978.8

1,011.41,028.1

1045 81,110.81,139.71,183.5

1,213.01,232.01,257.9

Indi-rectbusi-nesstax,

etc.1

3.4

3.8

5.1

5.56.46.87.38.18.9

10.111.212.112.6

14.115.216.818.217.419.220.822.422.825.4

28.330.133.035.638.441.142.945.851.657.1

61.868.273.580.585.792.699.8

107.8117.2126.3

104.9106.3109.1111.1

113 2117.4117.5120.7

122.8124.2127.6130.7

Domestic income

Total

41.3

16.4

34.0

40.153.970.185.387.880.081.999.8

114.4109.3

125.2144.7149.8159.9156.6178.3189.2196.2188.6214.4

222.0226.5249.2265.6288.3318.2352.0367.9403.8437.0

445.7476.0534.8602.8642.3684.6781.5882.5

1,002.71,121.2

838.1872.5902.4917.0

932 6993.4

1,022.21,062.8

1,090.21,107.81,130.31,156.4

Compen-sation

ofemploy-

ees

32.3

16.7

28.2

31.239.851.062.265.161.967.279.187.885.3

94.7110.2118.3128.7126.5138.5151.4159.1155.9171.6

181.1185.1199.8210.7226.3246.1273.5291.9321.6357.4

377.1399.4443.8503.8552.9576.9650.2732.6834.7940.7

700.5723.6742.8763.4

791 4824.6846.5876.5

910.0928.4949.7974.5

Corporate profits with inventory valuation and capitalconsumption adjustments

Total

7.6

- 2 . 0

4.3

7.512.817.922.021.717.214.119.925.823.0

29.633.430.329.928.638.236.135.030.139.7

37.437.444.950.056.766.171.267.272.166.4

51.658.772.076.059.576.9

100.9116.5128.3133.3

106.2116.4125.5117.8

104 3130.0135.1143.8

135.9133.9132.3

Total

8.4

.6

6.1

8.816.420.123.622.217.822.029.131.824.9

38.539.133.834.932.142.041.839.833.743.1

39.539.243.748.354.664.4(39.565.471.968.4

55.163.375.992.7

102.9101.3130.0143.5166.1190.8

137.4143.5145.4147.5

140 2167.3171.3185.7

189.5184.2192.7

Profits before tax

Prof-itstaxlia-

bility

1.2

.5

1.4

2.77.5

11.213.812.610.28.6

10.811.89.3

16.921.217.818.515.620.220.119.116.220.7

19.219.520.622.824.027.229.521.133.633.3

27.329.933.539.642.740.652.559.668.875.4

57.459.960.260.9

56 569.571.277.9

74.771.876.3

Profits after tax

Total

7.3

.1

4.7

6.19.08.99.89.67.6

13.418.320.015.6

21.617.916.016.416.421.821.820.717.522.3

20.319.723.125.530.737.240.037.738.335.1

27.933.342.453.160.260.777.483.897.4

115.5

80.083.685.186.6

83 897.8

100.1107.8

114.8112.5116.3

Divi-dends

5.2

2.0

3.3

3.64.03.84.04.24.25.15.96.56.5

7.97.87.88.08.29.4

10.110.410.210.8

11.511.712.714.115.317.218.118.920.720.7

19.920.021.723.926.028.533.137.241.847.2

35.636.637.639.1

40 440.042.844.1

46.247.346.348 8

Undis-tributedprofits

2.0

- 1 . 9

1.4

2.54.95.15.75.43.48.3

12.413.59.1

13.610.18.18.48.2

12.411.610.37.3

11.5

8.78.0

10.311.415.420.021.918.817.614.4

8.013.320.729.234.232.244.346.655.568.3

44.547.047.547.5

43 357.757.363.7

68.665.270.0

Inven-tory

valua-tion

adjust-ment

0.5

- 2 . 1

- .7

_ 2-2^5- 1 . 2- .8- .3- .6

- 5 . 3- 5 . 9- 2 . 2

1.9

- 5 . 0- 1 . 2

1.0- 1 . 0- .3

- 1 . 7- 2 . 7- 1 . 5- .3- .5

.3

.1

.1- .2_ 5

-L9- 2 . 1- 1 . 7- 3 . 4- 5 . 5

- 5 . 1- 5 . 0- 6 . 6

-18 .6-40.4-12.4-14 .6-15 .2-25.2-41 .9

-18 .7-15.9

- 8 . 9-17.0

- 2 3 9-25 .1-23 .0-28 .8

-39 .9-36 .6-44 .0-46 .9

Panitali>apiiai

consump-tion

adjust-ment

- 1 . 3

- .5

- 1 . 0

- 1 . 1- 1 . 1- 1 . 0- .8- .2- .1

- 2 . 7- 3 . 3- 3 . 9- 3 . 8

- 3 . 9- 4 . 5- 4 . 4- 4 . 0- 3 . 2- 2 . 1- 3 . 0- 3 . 3- 3 . 4- 2 . 9

- 2 . 3- 1 . 8

1.01.92.63.63.83.63.63.5

1.5.5

2.71.8

- 3 . 0-11 .9-14.4-11 .8-12 .6-15 .6

-12 .5-11.2-10 .9-12.7

— 12 1-12 .1-13 .2-13 .1

-13 .6-13 .8-16 .4-18 .7

Netinter-est

1.4

1.7

1.5

1.41.31.31.11.01.0.7.8.9

1.0

.91.11.21.31.61.61.72.22.73.1

3.53.94.54.85.36.17.48.7

10.113.1

17.017.919.123.129.930.830.433.439.747.2

31.432.534.035.8

37 038.840.642.4

44.245.548.350.7

1 Indirect business tax and nontax liability plus business transfer payments less subsidies.Source: Department of Commerce, Bureau of Economic Analysis.

216

TABLE B-12.—Output, costs, and profits of nonfinancial corporate business, 1948-79

[Quarterly data at seasonally adjusted annual rates]

Year or quarter

19481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979"

19771IIIIIIV

19781IIIIIIV

19791IIIII

Gross domesticproduct of

nonfinancialcorporate

business (billionsof dollars)

Currentdollars

137.3133.5

151.9174.5182 3195.0191.9

216.72316242.3236.3265.7

277.3284.5311.0330.9357.6

392.1430.7452.9498.4541.8

560.6602.5671.0752.0808.8

874.1988.0

1,106.31,246.91,388.3

1,054.61,093.31,128.91,148.6

1,169.11,236.51,267.91,314.1

1,346.41,370.41,401.3

1972dollars

229.7219.9

247.5270.2275 2292.0283 5

315.13241328.3313.4347.3

358.9366.7399.7425.4455.2

494.6532.9545.8581.6607.3

600.6619.3671.0720.4695.0

680.0730.4770.7818.7844.0

755.2766.1778.5782.9

789.8817.1826.3841.4

846.6841.0842.4

Current-dollar cost and profit per unit of output (dollars)l

Totalcostand

profit2

0.598.607

.614

.646663.668.677

.688715

.738

.754

.765

.773

.776

.778

.778

.786

.793

.808

.830

.857

.892

.933

.9731.0001.0441.164

1.2851.3531.4361.5231.645

1.3961.4271.4501.467

1.4801.5131.5351.562

1.5901.6291.664

Capitalcon-

sumptionallow-anceswith

capitalcon-

sumptionadjust-ment

0.047.053

.051

.054

.057

.058

.063

.061

.066

.072

.080

.075

.075

.076

.072

.070

.068

.066

.067

.072

.074

.079

.088

.094

.093

.095

.116

.142

.146

.151

.155

.167

.148

.149

.151

.154

.156

.154

.155

.155

.158

.165

.170

Indirectbusi-nesstax,

etc.3

0.053.057

.057

.056

.061

.062

.061

.061064.068.073.073

.079

.082

.083

.084

.084

.083

.080

.084

.089

.094

.103

.110

.110

.112

.123

.136

.137

.140

.143

.150

.139

.139

.140

.142

.143

.144

.142

.143

.145

.148

.151

Compen-sation

ofemploy-

ees

0.382.388

.383

.408

.430

.441

.446

.439

.467

.484

.497

.494

.505

.505

.500

.495

.497

.497

.513

.535

.553

.589

.628

.645

.661

.699

.796

.848

.890

.9511.0201.114

.928

.945

.954

.975

1.0021.0091.0241.042

1.0751.1041.127

Netinterest

0.004.004

.004

.004

.004

.004

.006

.005

.005

.007

.009

.009

.010

.011

.011

.011

.012

.012

.014

.016

.017

.022

.028

.029

.028

.032

.043

.045

.042

.043

.048

.056

.042

.042

.044

.046

.047

.047

.049

.050

.052

.054

.057

Corporate profits withinventory valuation and

capital consumptionadjustments

Total

0.112.105

.120

.124

.110

.102

.101

.121112

.106

.096

.114

.104

.102

.112

.118

.125

.134

.134

.123

.124

.109

.086

.095

.107

.105

.086

.113

.138

.151

.157

.158

.141

.152

.161

.150

.132

.159

.163

.171

.161

.159

.157

Profitstax

liability

0.051.042

.068

.079065.063055

.064062.058.052.060

.053

.053

.052

.054

.053

.055

.055

.051

.058

.055

.045

.048

.050

.055

.061

.060

.072

.077

.084

.089

.076

.078

.077

.078

.071

.085

.086

.093

.088

.085

.091

Profitsaftertax4

0.061.062

.051

.045046.039.046

.057050.048.044.055

.051

.049

.061

.064

.072

.079

.078

.072

.066

.055

.041

.046

.057

.050

.024

.053

.066

.074

.073

.069

.065

.074

.084

.073

.061

.074

.077

.078

.072

.074

.066

Output

u p e r thour of

allemploy-

ees(1972

dollars)

5.2015.428

5.5395.7155.9926.2386.475

6.6856.8286.9067.1337.154

7.1477.3897.6317.7907.492

7.7267.9738.0648.142

8.0638.0428.1108.059

8.0568.1388.1798.201

8.1598.1008.095

Compen-sation

per hourof all

employ-ees

(dollars)

2.5872.682

2.7952.8852.9963.0893.218

3.3253.5043.6943.9444.207

4.4874.7665.0475.4475.961

6.5547.0987.6668.302

7.4807.5967.7387.859

8.0718.2128.3798.544

8.7708.9419.127

1 Output is measured by gross domestic product of nonfinancial corporate business in 1972 dollars.2 This is equal to the deflator for gross domestic product of nonfinancial corporate business with the decimal point shifted two

places to the left.3 Indirect business tax and nontax liability plus business transfer payments less subsidies.4 With inventory valuation and capital consumption adjustments.Sources: Department of Commerce (Bureau of Economic Analysis) and Department of Labor (Bureau of Labor Statistics).

217

TABLE B-13.—Personal consumption expenditures, 1929-79


Year orquarter

Personalcon-

sumptionexpendi-

tures

Durable goods1

Total

Motorvehicles

andparts

Furni-tureand

house-hold

equip-ment

Nondurable goods1

Total Food

Cloth-ingand

shoes

Gaso-lineand

Fueloilandcoal

Services1

TotalHous-ing2

Householdoperationx

TotalElec-tricityandgas

Transpor-tation

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 P

1977:IIIIllIV

1978:IIIIllIV

1979:IIIIllIV P

77.3

45.8

67.0

71.080.888.699.4108.2119.5143.8161.7174.7178.1

192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8

324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7

618.8668.2733.0809.9889.6979.1

1,089.91,210.01,350.81,509.8

1,169.11,190.51,220.61,259.7

1,287.21,331,21,369.31,415.4

1,454.21,475.91,528.61,580.4

9.2

3.5

6.7

7.89.76.96.56.78.015.820.422.925.0

30.829.829.132.531.838.637.939.336.842.4

43.141.646.751.456.362.867.769.680.085.5

84.997.1111.2123.7122.0132.6157.4178.8200.3212.8

174.3175.7178.9186.4

185.3200.3203.5212.1

213.8208.7213.4215.5

1.04.16.68.0

10.6

13.712.211.313.913.017.815.817.214.818.9

19.717.821.524.426.029.830.129.735.837.7

34.943.850.655.248.053.470.081.691.291.3

81.780.680.583.7

84.193.592.494.9

97.789.189.888.6

4.7

1.9

3.4

3.84.84.63.93.84.58.4

10.611.511.3

13.714.014.014.614.616.217.116.916.617.8

17.717.918.920.322.824.727.729.532.635.0

36.739.444.850.754.958.064.070.977.685.7

68.169.871.674.0

72.476.578.982.7

82.184.287.389.4

37.7

22.3

35.1

37.042.950.858.664.371.982.790.996.694.9

98.2108.8113.9116.5118.0122.9128.9135.2139.8146.4

151.1155.3161.6167.1176.9188.6204.7212.6230.4247.0

264.7277.7299.3333.8376.3408.9443.9481.3530.6597.0

467.7475.5483.0499.2

505.9521.8536.7558.1

571.1581.2604.7631.0

19.5

11.5

19.1

20.223.428.433.236.740.647.452.354.252.5

53.960.463.464.465.467.269.973.676.479.1

81.183.285.587.892.798.9

106.6109.6118.3126.1

136.3140.6150.4168.1189.8209.6227.1246.7271.7301.9

283.8245.8248.0254.4

260.6267.7274.5283.9

292.9296.7303.1315.1

9.4

4.6

7.1

7.58.8

11.013.414.616.518.218.820.119.3

19.621.221.922.122.123.124.124.324.726.1

26.727.428.729.531.933.536.638.241.845.1

46.650.555.161.365.370.175.982.491.299.6

79.279.782.887.9

85.489.992.796.8

95.596.9

101.0105.0

1.8

1.5

2.2

2.32.62.11.31.41.83.44.04.85.3

5.56.16.87.47.88.69.4

10.210.611.3

12.012.012.612.913.514.716.017.018.420.4

22.023.424.927.836.439.542.946.750.965.1

46.546.646.447.3

48.149.051.555.0

58.460.268.373.4

5.45.56.37.79.6

10.212.013.114.018.3

13.412.813.013.1

14.614.413.413.6

15.417.220.420.0

30.3

20.1

25.2

26.228.231.034.337.139.645.350.455.358.2

63.068.574.080.686.192.199.2

105.9112.8121.9

130.7138.1147.0156.1167.1178.7192.4208.1225.6247.2

269.1293.4322.4352.3391.3437.5488.5549.8619.8700.0

527.1539.3558.7574.1

596.0609.1629.1645.1

669.3686.0710.6733.9

11.7

8.1

9.4

9.710.411.211.812.312.814.216.017.919.6

21.724.327.029.832.234.336.739.342.045.0

48.151.254.758.061.465.569.574.179.986.8

94.0102.7112.3123.2136.5150.2166.2187.3212.2241.6

178.7184.3190.0196.1

202.5209.0215.0222.1

229.5236.3244.9255.7

4.0

2.8

3.8

4.04.34.85.25.96.46.87.58.18.5

9.510.411.112.012.614.015.216.217.318.5

20.121.022.223.424.826.328.030.632.735.5

38.341.645.950.256.164.572.882.091.4

102.0

80.678.784.084.8

90.488.992.593.7

99.199.7

103.5105.6

1.2

1.1

1.4

1.51.51.61.71.81.92.12.32.62.9

3.33.74.14.55.05.56.16.57.17.6

8.38.89.49.9

10.410.911.512.213.114.2

15.517.018.920.624.129.333.038.342.648.8

38.435.739.839.3

43.440.842.843.4

47.747.349.650.5

2.6

1.5

2.0

2.12.42.73.43.74.05.05.35.85.9

6.26.77.17.87.98.28.69.09.3

10.1

10.711.211.712.212.813.715.016.217.418.9

21.123.826.027.930.732.637.943.649.255.8

40.642.944.446.6

47.648.649.750.8

52.954.556.858.9

1 Total includes "other" category, not shown separately.2 Includes imputed rental value of owner-occupied dwellings.


218

TABLE B-14.—Gross private domestic investment, 1929-79


Year or quarter

1929

1933.

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 p

1977:1IIIIIIV

1978:1IIIIIIV

1979-1IIIIIIV

Grossprivate

domesticinvest-ment

16.2

1.4

9.3

13.117.99.95.87.2

10.630.734.045.935.3

53.859.252.153.352.768.471.069.261.977.6

76.474.385.290.296.6

112.0124.5120.8131.5146.2

140.8160.0188.3220.0214.6190.9243.0303.3351.5386.2

280.4300.0315.7316.9

327.0352.3356.2370.5

373.8395.4392.3383.3

Fixed investment

Total

14.5

3.0

8.8

10.913.48.16.48.1

11.724.334.441.138.4

47.048.949.052.954.362.466.367.963.472.3

72.772.178.784.290.8

102.5110.2110.7123.8136.8

137.0153.6178.8202.1205.7201.6233.0281.3329.1367.8

261.1277.5288.2298.5

304.1326.5336.1349.8

354.6361.9377.8376.9

Nonresidential

Total

10.5

2.4

5.8

7.59.46.05.06.8

10.116.822.926.224.3

27.131.131.234.334.038.343.746.741.645.3

47.747.151.253.659.771.381.482.189.398.9

100.5104.1116.8136.0150.6150.2164.9189.4221.1253.9

179.8186.1193.2198.6

203.7218.8225.9236.1

243.4249.1261.8261.3

Structures

Total

5.0

.9

2.0

2.32.91.91.31.82.86.87.68.98.6

9.311.311.512.813.214.417.418.116.717.0

18.218.419.419.621.526.129.229.531.635.7

37.739.342.549.054.553.857.362.676.592.3

58.162.164.266.2

66.975.279.784.4

84.990.595.098.7

Non-farm

4.8

.9

1.9

2.22.81.81.21.72.66.16.88.17.8

8.610.510.612.012.413.716.617.416.016.1

17.317.518.518.620.525.128.128.230.434.3

36.137.841.146.951.851.354.759.873.388.6

55.559.261.263.3

63.872.076.481.1

81.286.891.494.9

Producers'durable

equipment

Total

5.5

1.4

3.9

5.26.44.13.75.07.39.9

15.317.315.7

17.819.919.721.520.823.926.328.624.928.3

29.528.731.834.038.245.152.252.657.763.3

62.864.774.387.096.296.4

107.6126.8144.6161.6

121.7124.1129.0132.4

136.8143.6146.3151.8

158.5158.6166.7162.6

Non-farm

4.8

1.3

3.3

4.55.53.53.24.26.39.0

13.414.712.8

14.916.917.118.718.421.324.126.221.925.2

27.026.128.930.634.641.247.948.053.458.9

58.159.969.180.188.287.497.4

116.3132.6147.3

110.9113.6118.8121.8

126.4131.9133.5138.9

146.1144.5150.0148.5

Residential

Total

4.0

.6

3.0

3.54.02.21.41.31.67.5

11.515.014.1

19.917.717.818.620.324.122.621.221.827.0

25.025.027.430.631.231.228.728.634.537.9

36.649.662.066.155.151.568.191.9

108.0113.9

81.391.495.099.9

100.5107.7110.2113.7

111.2112.9116.0115.6

Non-farmstruc-tures

3.8

.5

2.8

3.23.71.91.21.11.46.8

10.513.812.9

18.716.616.617.519.223.021.420.020.725.8

» 23.923.826.329.429.929.927.427.233.136.3

35.147.960.364.352.749.565.788.8

104.4110.0

78.388.391.797.0

96.8104.3106.4110.0

107.8109.1112.0111.2

Farmstruc-tures

0.2

.0

.1

.2

.2

.2

.2

.1

.1

.5

.7

.9

.8

.8

.8

.8

.8

.7

.6

.7

.7

.7

.7

.6

.7

.6

.7

.7

.6

.7

.7

.6

.7

.6

.7

.7

.61.2.9

1.11.51.81.9

1.61.61.61.2

1.91.41.91.9

1.51.82.02.3


0.1

.0

.1

.1

.1

.1

.0

.0

.0

.2

.3

.3

.3

.4

.4

.4

.4

.4

.4

.5

.5

.5

.6

.5

.5

.5

.6

.6

.7

.7

.7

.8

.9

.91.01.11.21.21.11.31.61.92.0

1.51.51.61.7

1.92.01.91.9

1.92.02.02.1

Change inbusiness

inventories

Total

1.7

- 1 . 6

.4

2.24.51.8

- .6- 1 . 0- 1 . 0

6.4- .54.7

- 3 . 1

6.810.33.1

.4- 1 . 5

6.04.71.3

- 1 . 55.2

3.82.26.56.05.89.5

14.310.17.79.4

3.86.49.4

17.98.9

-10.710.021.922.318.4

19.322.527.518.5

22.825.820.020.6

19.133.414.56.4

Non-farm

1.8

- 1 . 4

.3

1.94.0

.7-.6- .6-.66.41.33.0

- 2 . 2

6.09.12.11.1

- 2 . 15.55.1

.8- 2 . 3

5.3

3.51.95.85.26.48.5

14.59.47.69.2

3.75.18.8

14.710.8

-14 .312.120.721.316.6

20.121.525.615.7

22.025.318.519.3

18.832.612.62.3


219

TABLE B-15.—Inventories and final sales of business, 1946-79

[Billions of dollars, except as noted; seasonally adjusted]

Year and quarter

Fourth quarter:1946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979".

1977:1IIIIIIV

1978:1IIIIIIV

19791IIIIIIV P

Total

73.786.990.681.0

98.8112.1109.4110.1107.2

112.1121.8126.7128.9132.3

136.2138.4145.2151.5157.6

172.7189.1202.2215.3236.2

244.2261.9288.6355.8425.6

428.3460.5506.0586.9684.3

474.6479.2490.1506.0

526.4544.7563.2586.9

613.4635.1662.9684.3

Farm

21.825 823.419.5

24.226.523.121.620.5

17.618.320.924.923.6

24.825.026.626.925.7

29.728.929.230.433.4

31.736.844.666.261.9

64.360.861.576.781.8

61.557.657.161.5

66.169.071.576.7

79.881.279.981.8

Inventories1

Total

51.961167.261.4

74.685.686.388.586.7

94.6103.5105.8103.9108.7

111.3113.4118.6124.6131.8

143.0160.2173.0184.9202.8

212.5225.1243.9289.6363.7

364.0399.7444.5510.2602.5

413.0421.6433.0444.5

460.3475.7491.7510.2

533.5553.9583.0602.5

Nonfarm

Manufac-turing

26.731.834.831.0

37.446.247.349.347.0

51.457.557.956.057.5

58.159.562.564.868.5

73.783.491.197.4

107.1

110.8113.6120.4143.6186.4

187.9203.9222.5253.7305.3

208.7213.2217.4222.5

230.3237.0245.5253.7

267.4277.7294.4305.3

Whole-sale

trade

9.610.612.111.7

14.314.914.915.115.4

16.717.818.118.119.2

19.620.220.922.423.6

25.328.630.632.435.3

38.341.245.755.269.8

68.176.686.4

102.0118.6

80.281.083.486.4

90.994.297.1

102.0

106.9111.0116.3118.6

Retailtrade

11.914.115.314.3

17.718.317.918.518.7

20.921.822.922.924.1

25.625.126.728.229.8

33.136.637.840.744.4

45.651.055.964.472.3

72.180.591.6

105.4118.7

83.685.788.991.6

95.098.8

102.0105.4

107.6111.6114.5118.7

Other

3.74.64.94.4

5.26.26.25.55.6

5.66.46.96.98.0

8.18.78.69.29.9

10.911.613.514.416.1

17.719.221.826.435.2

35.938.844.149.159.9

40.541.743.244.1

44.145.747.049.1

51.653.557.859.9

Finalsales2

192.0219.6235.7234.6

259.8295.6313.3325.8330.1

356.5377.0392.7405.0426.7

442.1465.3492.7524.2553.1

610.7647.5688.0757.6804.5

839.4915.2

1,019.91,120.51,216.0

1,355.11,480.91,651.31,884.32,086.5

1,519.51,567.61,609.91,651.3

1,678.31,761.71,817.61,884.3

1,932.21,951.12,027.52,086.5

Inventory—finalsales ratio

Total

0.384.396.384.345

.380

.379

.349

.338

.325

.315

.323

.323

.318

.310

.308

.297

.295

.289

.285

.283

.292

.294

.284

.294

.291

.286

.283

.318

.350

.316

.311

.306

.311

.328

.312

.306

.304

.306

.314

.309

.310

.311

.317

.325

.327

.328

Non-farm3

0.270.278.285.262

.287

.290

.275

.272

.263

.265

.274

.269

.257

.255

.252

.244

.241

.238

.238

.234

.247

.251

.244

.252

.253

.246

.239

.258

.299

.269

.270

.269

.271

.289

.272

.269

.269

.269

.274

.270

.271

.271

.276

.284

.288

.289

1 End of quarter.2 Annual rates.3 Ratio based on total final sales, which include a small amount of final sales by farms.Note.—The industry classification of inventories is on an establishment basis and is based on the 1972 Standard Industrial

Classification (SIC) beginning in 1948 and on the 1942 SIC prior to 1948.Source: Department of Commerce, Bureau of Economic Analysis.

220

TABLE B-16.—Inventories and final sales of business in 1972 dollars, 1947-79

[Billions of 1972 dollars, except as noted; seasonally adjusted]

Year and quarter

Fourth quarter:19471948 ....1949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979 p.

1977:1IIIIIIV

1978.1IIIIIIV

1979:1IIIIIIV

Inventories1

Total

118.6124.1119.7

130.2143.9148.2149.7147.5

155.3161.1162.6160.8167.2

171.6174.5182.6190.4197.7

209.0225.7237.7246.4257.0

261.3267.9277.4293.9301.8

292.1298.7311.8325.9336.1

301.5304.8309.0311.8

315.9319.8322.9325.9

328.9333.5335.3336.1

Farm

25.726 726.2

27.529.130.430.231.1

31.530.731.432.432.4

32.833.234.535.735.1

36.236.036.837.037.3

37.739.239.842.141.8

43.041.141.041.342.3

40.740.740.741.0

41.041.041.241.3

41.441.541.742.3

Nonfarm

Total

93.097.393.5

102.7114.8117.9119.6116.5

123.7130.3131.2128.4134.8

138.8141.2148.1154.7162.6

172.8189.7200.9209.4219.7

223.6228.8237.6251.8260.1

249.1257.6270.8284.6293.8

260.8264.2268.2270.8

274.9278.8281.7284.6

287.6292.0293.5293.8

Manufac-turing

49.951.348.6

51.862.565.266.963.3

66.771.671.168.671.1

72.474.278.480.884.7

89.199.0

105.9110.7115.8

117.1115.4117.5123.6128.6

124.2126.8131.0136.3143.5

127.6129.3130.4131.0

132.6134.3135.6136.3

138.4141.1142.5143.5

Whole-sale

trade

13.816.116.1

18.318.919.219.419.7

21.422.021.921.823.7

24.325.025.927.829.1

30.533.735.536.638.2

40.442.044.447.450.6

47.250.353.758.259.5

51.451.852.853.7

55.556.356.858.2

59.359.460.059.5

Retailtrade

20.521.320.9

23.923.923.924.524.6

27.227.528.428.229.6

31.530.632.534.136.0

39.442.743.145.347.7

47.351.954.458.256.5

54.056.861.664.865.1

57.959.060.661.6

62.663.564.464.8

64.465.865.365.1

Other

8.78.67.8

8.79.59.68.78.8

8.49.29.89.8

10.5

10.711.411.412.012.8

13.814.316.316.818.0

18.819.521.322.724.5

23.623.624.525.325.8

23.824.124.424.5

24.324.724.925.3

25.525.725.725.8

Finalsales2 '

i

397.2412.0415.1 |

442.6476.5499.1516.2517.0

547.4557.6565.3577.2596.8

609.0636.6664.2699.3730.7

791.3809.2837.2882.8892.2

891.7935.0

1,007.61,031.81,005.3

1,043.31,092.71,151.21,212.01,232.6

1,109.61,122.21,139.31,151.2

1.151.01,178.01,192.91,212.0

1,214.61,200.91,222.21,232.6

Inventory—finalsales ratio

Total

0.299.301.288

.294

.302

.297

.290

.285

.284

.289

.288

.279

.280

.282

.274

.275

.272

.271

.264

.279

.284

.279

.288

.293

.287

.275

.285

.300

.280

.273

.271

.269

.273

.272

.272

.271

.271

.274

.271

.271

.269

.271

.278

.274

.273

Non-farm3

0.234.236.225

.232

.241

.236

.232

.225

.226

.234

.232

.222

.226

.228

.221

.223

.221

.223

.218

.234

.240

.237

.246

.251

.245

.236

.244

.259

.239

.236

.235

.235

.238

.235

.235

.235

.235

.239

.237

.236

.235

.237

.243

.240

.238

1 End of quarter.2 Annual rates.3 Ratio based on total final sales, which include a small amount of final sales by farms.

Note.—The industry classification of inventories is on an establishment basis and is based on the 1972 Standard IndustrialClassification (SIC) beginning in 1948 and on the 1942 SIC prior to 1948.


221291-289 O - 80 - 15

TABLE B-17.—Relation of gross na^ onal product and national income, 1929-79


Year or quarter

1929 . .

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 p

1977:1IIIIIIV

19781IIIIIIV

1979:1IIIIIIV P


103.4

55.8

90.8

100.0124.9158.3192.0210.5212.3209.6232.8259.1258.0

286.2330.2347.2366.1366.3399.3420.7442.8448.9486.5

506.0523.3563.8594.7635.7688.1753.0796.3868.5935.5

982.41,063.41,171.11,306.61,412.91,528.81,702.21,899.52,127.62,368.5

1,820.21,876.01,930.51,971.3

2,011.32,104.22,159.62,235.2

2,292.12,329.82,396.52,455.8

Less:

Capitalconsump-

tionallowances

withcapital

consump-tion

adjustment

9.7

7.5

8.7

9.010.011.211.51' 3U.313.817.220.322.0

23.927.629.631.633.135.338.942.044.146.1

47.749.150.552.254.657.561.767.073.882.5

90.898.8

105.4117.7137.7162.0177.8195.4216.9243.0

186.9191.9198.7204.3

209.1214.4219.6224.6

229.9239.0247.9255.1

Equals:Net

nationalproduct

93.7

48.3

82.1

91.0114.9147.1180.5198.7200.0195.7215.6238.8236.1

262.3302.6317.6334.5333.2364.0381.8400.8404.8440.4

458.3474.2513.3542.5581.2630.6691.3729.3794.7853.1

891.6964.7

1,065.81,188.91,275.21,366.91,524.41,704.11,910.72,125.6

1,633.31,684.11,731.81,767.0

1,802.21,889.81,940.02,010.6

2,062.22,090.82,148.52,200.8

PIUS:

Subsidiesless

currentsurplus

ofgovern-

mententer-prises

- 0 . 2

- .0

.4

.4

.1

.1

.1

.6

.7

.9- .2-.1- .3

.1-.1- .3- .5- .3- .0

.7

.71.1

.1

.41.71.81.11.71.62.51.61.31.8

2.72.43.63.91.02.31.03.14.22.3

1.51.22.86.8

4.34.62.85.1

1.82.63.21.5

Less:

Indirectbusinesstax andnontaxliability

7.1

7.1

9.4

10.111.311.812.814.215.517.118.420.121.3

23.425.327.729.729.632.235.137.538.741.8

45.448.051.654.658.862.665.370.278.886.4

94.0103.4111.0120.2128.6139.2151.4165.1178.1189.5

160.1162.7166.9170.6

173.6179.3177.2182.1

184.8186.9191.1195.2

Busi-ness

transfernav-

ments

0.6

.7

.5

.4

.5

.5

.5

.5

.5

.5

.6

.7

.8

.8

.91.01.21.11.21.41.51.61.8

2.02.02.12.42.72.83.03.13.43.8

4.04.24.75.45.97.68.08.79.2

10.2

8.68.78.98.9

8.99.09.29.5

9.69.9

10.410.8

Statis-tical

discrep-ancy

1.1

.7

1.4

1.1.5

-.8- 1 . 8

2.74.1

.71.8

- 1 . 21.0

2.04.02.73.33.02.5

-.8.2

1.7_ 2

- .71.64.03.72.2

.93.21.7

-.6- 3 . 3

- 2 . 11.31.72.65.87.46.17.53.34.0

9.18.67.74.6

3.02.33.94.1

.6- 1 . 3

8.3

Equals:Nationalincome

84.8

39.9

71.3

79.7102.6135.7169.1181.9180.6178.3194.6219.0212.7

236.2272.3285.8299.7299.1328.0346.9362.3364.0397.1

412.0424.2457.4482.8519.2566.0622.2655.8714.4767.9

798.4858.1951.9

1,064.61,136.01,215.01,359.81,525.81,724.31,924.2

1,456.91,505.31,551.11,589.8

1,621.01,703.91,752.51,820.0

1,869.01,897.91,941.9


222

TABLE B-18.—Relation of national income and personal income, 1929-79


Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 P

1977:1IIIII .IV

1978:1IIIIIIV

1979:1IIIIIIV P

Nationalincome

84.8

39.9

71.3

79.7102.6135.7169.1181.9180.6178.3194.6219.0212.7

236.2272.3285.8299.7299.1328.0346.9362.3364.0397.1

412.0424.2457.4482.8519.2566.0622.2655.8714.4767.9

798.4858.1951.9

1,064.61,136.01,215.01,359.81,525.81,724.31,924.2

1,456.91,505.31,551.11,589.8

1,621.01,703.91,752.51,820.0

1,869.01,897.91,941.9

Less

Corporateprofitswith

inventoryvaluation

andcapital

consump-tion

adjust-ments

9.2

- 1 . 7

5.3

8.714.119.323.523.619.016.622.229.126.9

33.738.135.435.534.644.642.942.137.548.2

46.646.954.959.667.077.182.579.385.881.4

67.977.292.199.183.695.9

126.8150.0167.7178.5

137.1148.9160.8153.0

141.2169.4175.2184.8

178.9176.6180.8

Netinterest

4.7

4.1

3.6

3.33.33.12.72.42.21.62.12.12.2

2.32.73.03.44.34.85.26.58.08.8

9.811.212.814.315.918.521.924.326.830.8

37.542.847.052.369.078.683.894.0

109.5129.7

89.392.795.898.2

101.5106.8111.9117.6

122.6125.6131.5138.9

Contribu-tions for

socialinsurance

0.2

.3

2.1

2.32.83.54.55.26.16.15.85.45.9

7.18.59.09.1

10.111.512.914.915.218.0

21.121.924.327.328.730.038.843.448.154.9

58.764.873.691.5

103.8110.6126.0142.5164.1189.8

137.7140.7143.8147.6

158.3162.6165.7170.0

184.6187.7191.1195.9

Wageaccruals

lessdisburse-

ments

0.0

.0

.0

.0

.0

.0

.2- .2

.0- .0

.0

.0- .0

.0

.1- .0- .1

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.6

.0- . 1- .5

.0

.0

.0

.2- .2

.0

.0

.0

.0

.0

.0

.5

.4

.1- .9— 1

.2

Plus

Govern-ment

transferpayments

topersons

0.9

1.5

2.5

2.72.62.72.53.15.6

10.811.210.611.7

14.411.612.112.915.116.217.320.124.325.2

27.030.831.633.434.837.641.649.556.562.7

75.989.999.4

113.5134.9170.6185.8199.6214.9241.9

194.5195.6202.4206.0

208.5209.8219.1222.3

227.7233.7250.4255.8

Personalinterestincome

6.9

5.5

5.4

5.35.35.25.15.25.96.47.37.78.2

8.99.6

10.311.412.713.815.317.418.820.9

23.324.627.130.233.337.241.845.049.655.9

64.369.374.684.1

103.0115.5127.0141.7163.3191.8

135.6140.2143.9147.2

152.2159.4167.2174.3

181.0187.6194.4204.3

Dividends

5.8

2.0

3.8

4.04.44.34.44.64.65.66.37.07.2

8.88.58.58.89.1

10.311.111.511.312.2

12.913.314.415.517.319.119.420.121.922.6

22.923.024.627.831.031.937.542.147.252.7

40.841.542.743.4

45.146.047.849.7

51.552.352.854.4

Businesstransfer

payments

0.6

.7

.5

.4

.5

.5

.5

.5

.5

.5

.6

.7

.8

.8

.91.01.21.11.21.41.51.61.8

2.02.02.12.42.72.83.03.13.43.8

4.04.24.75.45.97.68.08.79.2

10.2

8.68.78.98.9

8.99.09.29.5

9.69.9

10.410.8

Equals

Personalincome

84.9

46.9

72.4

77.895.3

122.4150.7164.4169.8177.3189.8208.5205.6

226.1253.7270.4286.1288.2308.8330.9349.3359.3382.1

399.7415.0440.7463.1495.7537.0584.9626.6685.2745.8

801.3859.1942.5

1,052.41,154.91,255.51,381.61,531.61,717.41,923.1

1,472.51,509.01,548.51,596.4

1,634.81,689.31,742.51,803.1

1,852.61,892.51,946.62,000.5


223

TABLE B-19.—National income by type of income, 1929-79


Year orquarter

Nationalincome1

Compensationof employees

TotalWages

andsalaries

Supple-ments

towages

andsal-

aries 2

Proprietors' income with inventory valuation and capital consumptionadjustments

Total

Farm

Total Income3

Capitalconsump-

tionadjust-ment

Nonfarm

Total Income4

Inven-tory

valua-tion

adjust-ment

Capitalconsump-

tionadjust-ment

1929

1933

1939...

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 »

1977:

IIIllIV

1978:I

1979:IIIIV P

84.8

39.9

71.3

79.7102.6135.7169.1181.9180.6178.3194.6219.0212.7

236.2272.3285.8299.7299.1328.0346.9362.3364.0397.1

412.0424.2457.4482.8519.2566.0622.2655.8714.4767.9

798.4858.1951.9

1,064.61,136.01,215.01,359.81,525.81,724.31,924.2

1,456.91,505.31,551.11,589.8

1,621.01,703.91,752.51,820.0

1,869.01,897.91,941.9

51.1

29.5

48.1

52.164.885.3

109.5121.2123.1118.1129.2141.4141.3

154.8181.0195.7209.6208.4224.9243.5256.5258.2279.6

294.9303.6325.1342.9368.0396.5439.3471.9519.8571.4

609.2650.3715.1799.2875.8931.1

1,037.81,156.91,304.51,459.1

1,110.11,141.51,170.71,205.5

1,244.01,288.21,321.11,364.8

1,411.21,439.71,472.81,512.8

50.5

29.0

46.0

49.962.182.1

105.8116.7117.5112.0123.1135.5134.7

147.0171.3185.3198.5196.8211.7228.3239.3240.5258.9

271.9279.5298.0313.4336.1362.0398.4427.5469.5514.6

546.5580.0633.8701.2764.1805.9890.0984.0

1,103.51,227.3

945.8971.8995.0

1,023.4

1,052.01,090.01,117.41,154.7

1,189.41,211.51,238.01,270.3

0.6

2.1

2.32.73.23.84.55.66.06.15.96.6

7.89.7

10.411.011.613.215.217.217.720.6

23.024.127.129.531.834.540.944.450.356.8

62.770.381.498.0

111.7125.2147.8172.9201.0231.8

164.3169.7175.7182.1

192.0198.3203.7210.1

221.8228.2234.8242.6

14.9

5.8

11.7

12.917.424.029.030.231.736.635.840.736.1

38.442.842.941.340.842.543.645.047.447.2

47.048.349.650.352.256.760.361.063.466.2

65.167.776.192.486.287.089.3

100.2116.8130.0

96.997.698.6

107.6

109.1115.0117.4125.7

129.0129.3130.3131.5

6.2

2.6

4.4

4.56.49.8

11.711.612.214.915.217.512.7

13.515.814.912.912.311.311.211.013.110.7

11.411.811.911.610.312.613.612.112.013.9

13.914.318.032.025.423.518.319.627.732.1

19.217.916.824.7

25.727.726.131.3

34.233.730.929.5

6.3

2.5

4.4

4.56.5

10.312.212.212.615.115.618.113.4

14.116.615.713.712.911.911.811.813.911.6

12.312.712.812.511.213.514.613.213.315.4

15.316.020.034.227.927.122.324.032.637.5

23.122.121.329.4

30.432.531.136.4

39.339.036.235.5

- 0 . 1

- . 0

- . 0- . 0- . 5

-'.S- . 4- . 2- . 4- . 6- . 7

- . 7

- . 7- . 6- . 6- . 6

- . 9_ g-.9

- 1 . 0- . 9

- 1 . 0- . 9

- 1 . 0- 1 . 2- 1 . 3- 1 . 4

- 1 . 4- 1 . 7- 2 . 0- 2 . 2- 2 . 5- 3 . 7- 4 . 0- 4 . 3- 4 . 9- 5 . 4

-4.0-4.2-4.5-4.7

-4 .7-4 .9-5 .0-5 .1

- 5 . 1- 5 . 3- 5 . 3- 6 . 0

3.2

7.3

8.410.914.317.318.619.421.620.623.223.5

24.927.028.028.428.531.232.433.934.336.6

35.636.437.738.742.044.146.748.951.452.3

51.253.458.160.460.963.571.080.589.198.0

77.779.881.782.9

83.487.391.394.4

94.895.599.4

102.0

3.9

7.6

8.611.714.417.118.319.323.321.823.122.2

25.126.426.927.627.630.531.833.133.235.3

34.235.336.437.240.242.745.347.550.451.3

50.752.856.460.362.964.072.281.992.2

103.7

79.381.082.684.5

85.690.194.598.5

99.8100.5106.0108.6

0.1

- . 5

- . 2

- . 0- . 6- . 4- . 2- . 1- . 1

- 1 . 7- 1 . 5

- . 4.5

- 1 . 1- . 3

.2- . 2- . 0- . 2- . 5- . 3- . 1- . 1

.1- . 1- . 0- . 0- . 0- . 2- . 3- . 3- . 4- . 5

- . 5- . 4- . 7

- 1 . 7- 3 . 6- 1 . 2- 1 . 2- 1 . 3- 2 . 1- 3 . 0

- 1 . 7- 1 . 2

- 1 . 3

- 1 . 7- 2 . 0- 2 . 0- 2 . 4

- 3 . 1- 2 . 5- 3 . 1- 3 . 1

- 0 . 2

- . 2

- . 1

- . 1- . 1

.2

.3

.4

.2

.0

.4

.5

.9

.9

.9

.91.01.01.11.21.11.3

1.31.21.41.61.81.61.61.71.51.4

1.01.12.51.81.6

.6- . 0- . 1

- 1 . 0- 2 . 8

.1

.0- . 1- . 3

-.5

-1.1-1.6

-1.9-2 .5-3.4-3 .4


224

TABLE B-19.—National income by type of income, 1929-79—Continued


Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 P

1977:1IIIIIIV

1978:IIIIllIV

1979:1

IllIV P

Rental income of persons

with capital consumption

Total

4.9

2.2

2.6

2.73.14.0444.54.65.55.35.76.17.17.78.8

10.011.011.311.612.212.913.2

13.814.315.015.716.117.118.219.418.618.1

18.620.121.521.621.422.422.124.725.926.9

23.624.625.225.5

25.224.426.827.1

27.326 826.627.0

adjustment

Rentalincome

ofpersons

5.7

2.3

3.1

3.33.95.0565.96.27.37.78.58.9

10.011.012.213.414.414.815.215.916.717.3

17.818.319.019.620.121.022.123.423.824.8

25.827.729.431.333.736.938.344.249.355.0

41.443.545.246.7

46.947.350.952.1

53.054156.056.8

Capitalcon-

sumptionadjust-ment

- 0 . 8

- .1

- .6

- .6- .8

- 1 . 0- 1 2-1 .4- 1 6- 1 . 8- 2 . 5- 2 . 8- 2 . 8

-2 .9- 3 . 3-3 .4-3 .4- 3 . 3- 3 . 5-3 .6- 3 . 6- 3 . 8-4 .0

- 4 . 1- 4 . 0-4 .0- 3 . 9- 4 . 0-3 .9-3 .9-4 .0-5 .2- 6 . 7

- 7 . 1- 7 . 6- 7 . 9- 9 . 8

-12 .3-14.5-16.2-19 .5- 2 3 4-28.1

-17.8-18.9-20.0-21.2

-21.7-22.9-24.1-25.0

-25.7- 2 7 3-29 .5

29.8

Corporate profits with inventory valuation and capital consumption adjustments

Total

9.2

- 1 . 7

5.3

8.714.119.323.523.619.016.622.229.126.9

33.738.135.435.534.644.642.942.137.548.2

46.646.954.959.667,077.182.579.385.881.4

67.977.292.199.183.695.9

126.8150.0167.7178.5

137.1148.9160.8153.0

141.2169.4175.2184.8

178.9176 6180.8

Profits with inventory valuation adjustment and withoutcapital consumption adjustment

Total

10.5

-1 .2

6.3

9.815.220.324.423.819.219.325.633.030.8

37.642.739.839.537.846.745.945.440.851.2

48.948.753.757.664.273.378.675.682.177.9

66.476.989.697.286.5

107.9141.3162.0180.8195.2

149.7160.3172.0166.0

153.6182.0189.0198.6

193.31913198.3

Profits before tax

Total

10.0

1.0

7.0

10.017.721.525.124.119.724.631.535.228.9

42.643.938.940.538.148.448.646.941.151.6

48.548.653.657.764.775.280.777.385.683.4

71.582.096.2

115.8126.9120.4156.0177.1206.0237.0

168.4176.2180.9183.0

177.5207 2212.0227.4

233.3227 9242.3

Profitstax

liability

1.4

.5

1.4

2.87.6

11.414112.910.79.1

11.312.410.2

17.922.619.420.317.622.022.021.419.023.6

22.722.824.026.228.030.933.732.539.439.7

34.537.741.548.752.449.863.872.684.592.7

69.272.573.775.1

70.884 787.595.1

91.388 794.0

Profits after tax

Total

8.6

.4

5.6

7.210.110.111.111.29.0

15.520.222.718.7

24.721.319.520.220.526.426.625.522.128.0

25.825.829.631.536.744.347.144.946.243.8

37.044.354.667.174.570.692.2

104.5121.5144.4

99.2103.7107.2107.9

106.7122 4124.6132.3

142.0139 3148^3

Divi-dends

5.8

2.0

3.8

4.04.44.3444.64.65.66.37.07.28.88.58.58.89.1

10.311.111.511.312.2

12.913.314.415.517.319.119.420.121.922.6

22.923.024.627.831.031.937.542.147.252.7

40.841.542.743.4

45.146 047.849.7

51.552 352.854 4

Undis-tributedprofits

2.8

- 1 . 6

1.8

3.25.75.9666.54.49.9

13.915.711.5

15.912.811.011.511.416.115.514.010.815.8

13.012.515.216.019.425.227.624.724.221.2

14.121.330.039.343.638.754.762.474.391.7

58.362.264.664.5

61.676 476.882.6

90.587 095^5

Inven-tory

valua-tion

adjust-ment

0.5

- 2 . 1

- .7_ 2

-2^5-1 .2

- .8- .3-.6

- 5 . 3-5 .9- 2 . 2

1.9- 5 . 0- 1 . 2

1.0- 1 . 0

- .3- 1 . 7- 2 . 7- 1 . 5

- .3- .5

.3

.1

.1-.2- .5

- 1 . 9- 2 . 1- 1 . 7- 3 . 4- 5 . 5

- 5 . 1-5 .0- 6 . 6

-18.6-40.4-12.4-14.6-15.2-25.2-41.9

-18.7-15.9

-8 .9-17.0

-23.9- 2 5 1-23.0-28.8

-39 .9- 3 6 6-44.0-46.9

Capitalcon-

sumptionadjust-ment

- 1 . 3

- .5

- 1 . 0

- 1 . 1- 1 . 1- 1 . 0

- .8- .2- .1

- 2 . 7-3 .4- 3 . 9- 3 . 8

- 4 . 0- 4 . 6- 4 . 5- 4 . 1-3 .2- 2 . 1- 3 . 0- 3 . 3- 3 . 4- 2 . 9

- 2 . 3- 1 . 8

1.22.12.83.83.93.73.73.51.5

.32.51.9

- 2 . 9-12.0-14 .5-12 .0-13 .1-16.7

-12.6-11.4-11.2-13.0

-12.4-12.6-13.8-13.8

-14 .5- 1 4 7- R 6-20 .1

Netinterest

4.7

4.1

3.6

3.33.33.12.72.42.21.62.12.12.22.32.73.03.44.34.85.26.58.08.89.8

11.212.814.315.918.521.924.326.830.8

37.542.847.052.369.078.683.894.0

109.5129.7

89.392.795.898.2

101.5106 8111.9117.6

122.6125 613L5138.9

1 National income is the total net income earned in production. It differs from gross national product mainly in that it excludesdepreciation charges and other allowances for business and institutional consumption of durable capital goods and indirect businesstaxes. See Table B-17.

2 Employer contributions for social insurance and to private pension, health, and welfare funds; workmen's compensation; directors'fees; and a few other minor items.3 With inventory valuation adjustment and without capital consumption adjustment.

4 Without inventory valuation and capital consumption adjustments.Source: Department of Commerce, Bureau of Economic Analysis.

225

TABLE B-20.—Sources of personal income, 1929-79


Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 "

1977:I||IIIIV

1978:|||IIIIV ...

1979:

II ....IllIV

Personalincome

84.9

46.9

72.4

77.895.3

122.4150.7164.4169.8177.3189.8208.5205.6

226.1253.7270.4286.1288.2308.8330.9349.3359.3382.1

399.7415.0440.7463.1495.7537.0584.9626.6685.2745.8

801.3859.1942.5

1,052.41,154.91,255.51,381.61,531.61 717.41,923.1

1,472.51 5 0 9 01,548.51,596.4

1,634.81689 31,742.51,803.1

1,852.61,892.51946 62,000.5

Wage and salary disbursementsl

Total

50.5

29.0

46.0

49.962.182.1

105.6116.9117.5112.0123.1135.5134.8

147.0171.3185.4198.6196.8211.7228.3239.3240.5258.9

271.9279.5298.0313.4336.1362.0398.4427.5469.5514.6

546.5579.4633.8701.3764.6805.9890.0984.0

1,103 31,227.5

945.89718995 0

1,023.4

1,052 01,090 01,116.81,154.3

1,189.31,212.41238 11,270.1

Commodity-producingindustries

Total

21.5

9.8

17.4

19.727.539.149.050.445.946.054.261.157.8

64.876.382.089.685.793.1

100.6104.2100.0109.6

113.1113.7121.8126.9135.4146.0161.0168.3183.4199.6

202.9208.3227.3254.3274.6275.0307.2343.1387.4435.2

327.9340 5348.1356.1

363.9383 4393.7408.6

423.0431.7438 3447.9

Manufac-turing

16.1

7.8

13.6

15.621.730.940.942.938.236.542.547.144.6

50.359.364.171.267.573.879.482.478.686.8

89.789.896.7

100.6107.1115.5128.0134.1145.8157.5

158.2160.3175.4196.2211.4211.0237.4266.0298 3330.9

254 8263 3269 4276.4

285 62941300.8312.7

324 8328.53319338^6

Distrib-utive

indus-tries

15.6

8.8

13.3

14.216.318.020.122.724.831.035.237.537.7

39.844.346.949.750.153.457.760.560.864.8

68.269.372.876.381.487.294.4

100.9109.9120.7

130.1139.3151.9168.1184.3195.3216.3239.1269.4300.8

230.0236 0241.8248.5

257 6265 9272.5281.6

2911295.8304 0312^2

Serviceindus-tries

8.4

5.2

7.1

7.58.19.09.9

10.911.914.316.117.918.5

19.821.523.124.926.128.631.333.635.638.5

41.444.147.250.254.458.964.771.879.889.4

97.5106.2117.2130.3145.1160.1178.5200.5228.7257.8

192 2196 8202.9210.0

218 2225 4231.9239.4

247 2252.826132693

Govern-mentand

govern-mententer-prises

5.0

5.2

8.2

8.510.216.026.633.034.920.717.519.020.8

22.629.233.334.434.936.638.841.044.146.0

49.252.456.360.064.969.978.386.496.4

104.9

116.0125.6137.3148.6160.5175.4188.0201.3217 8233.7

195.7198 5202 2208.8

212.3215 3218.7224.7

228.0232.1234 5240il

Otherlabor

income1

0.5

.4

.6

.6

.7

.91.11.51.82.02.42.72.9

3.74.65.25.96.17.08.09.09.4

10.6

11.211.813.014.015.717.819.921.725.128.2

32.036.242.048.755.665.177.491.8

106 5122.7

86 289 793 797.4

1011104 7108.2111.9

116.0120.3124 912916

Proprietors'income wnn

inventoryvaluation and

capitalconsumptionadjustments

Farm

6.2

2.6

4.4

4.56.49.8

11.711.612.214.915.217.512.7

13.515.814.912.912.311.311.211.013.110.7

11.411.811.911.610.312.613.612.112.013.9

13.914.318.032.025.423.518.319.611132.1

19 217 916 824.7

25 727 726.131.3

34 233.730 929^5

Nonfarm

8.8

3.2

7.3

8.410.914.317.318.619.421.620.623.223.5

24.927.028.028.428.531.232.433.934.336.6

35.636.437.738.742.044.146.748.951.452.3

51.253.458.160.460.963.571.080.589198.0

11179 881782.9

83 487 391.394.4

94.895.599 4

102^0


226

TABLE B-20.—Sources of personal income, 1929-79—Continued


Year orquarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 "

1977:iIIIllIV

1978:1||IIIIV

1979:1||IIIIV P

Rental

incomeof

personswith

capitalcon-

sumptionadjust-ment

4.9

2.2

2.6

273.14.04.44.54.65.55.35.76.17.17.78.8

10.011.011.311.612.212.913.2

13.814.315.015.716.117.118.219.418.618.1

18.620.121.521.621.422.422.124.725 926.9

23 624.625.225.5

25.224 426.827.1

27.326 826.627.0

Divi-dends

5.8

2.0

3.8

404.44.34.44.64.65.66.37.07.28.88.58.58.89.1

10.311.111.511.312.2

12.913.314.415.517.319.119.420.121.922.6

22.923.024.627.831.031.937.542.147 252.7

40 841.542.743.4

45.146 047.849.7

51.552 352.854.4

Personalinterestincome

6.9

5.5

5.4

535.35.25.15.25.96.47.37.78.28.99.6

10.311.412.713.815.317.418.820.9

23.324.627.130.233.337.241.845.049.655.9

64.369.374.684.1

103.0115.5127.0141.7163 3191.8

135 6140.2143.9147.2

152.2159 4167.2174.3

181.0187 6194.4204.3

Transfer payments

Total

1.5

2.1

3.0

313.13.13.03.66.2

11.311.711.312.5

15.212.613.114.116.217.518.721.625.927.0

28.932.833.835.837.440.444.752.659.966.5

79.994.1

104.1118.9140.8178.2193.8208.4224 1252.1

203 1204.2211.3214.8

217.4218 8228.3231.8

237.3243 6260.8266.7

Old-age,survivors,disability,

andhealthinsur-ance

benefits

0.00

.1

.1

.2

.2

.3

.4

.5

.6

.71.01.92.23.03.64.95.77.38.5

10.2

11.112.614.315.216.018.120.825.530.232.9

38.544.549.660.470.181.492.9

104.9116 3132.4

99 6101.7108.4110.0

111.4112 4119.8121.5

123.8127 1138.7140.2

Govern-mentunem-

ploymentinsur-ance

benefits

0.45

.4

.4

.1

.1

.41.1

.8

.91.91.5

.91.11.02.21.51.51.94.12.83.04.33.13.02.72.31.92.22.12.24.05.85.64.36.6

17.415.512.5

929.3

14 712.611.411.2

10.5929.08.2

8.7889.6

10.0

Veteransbenefits

0.6

.6

.5

.5

.5

.5

.51.03.07.07.05.95.37.74.64.34.14.24.44.44.54.74.64.65.04.74.84.74.94.95.65.96.77.78.89.7

10.411.814.514.413.813 914.3

14 313.913.413.7

14.013 713.714.1

14.514 114.214.5

Govern-ment

employ-ee

retire-ment

benefits

0.1

.2

.33

.3

.3

.4

.4

.5

.7

.7

.7

.91.01.11.21.41.51.71.92.22.52.83.13.43.74.24.75.26.16.97.78.6

10.111.713.515.618.822.725.929.232 937.4

27 628.929.630.8

31.432 533.134.6

35.336 737.939.7

Aid tofamilies

withdepend-

entchildren(AFDC)

0.8

U

1./

1Jl iUU2.(2.C2.]

.3

.4

.5

.6

.6

.5

.5

.6

.6

.6

.7

.8

.91.01.11.31.41.51.71.92.32.83.54.86.26.97.27.99.2

10.110.610 711.0

10 410.610.710.7

10.710 810.710.7

10.710 810.911.5

Other

))

2.52.93.33.53.63.84.14.14.34.54.95.35.86.26.46.77.37.88.39.2

10.211.112.5

14.917.218.921.025.533.035.237.341 147.7

36 436737.838.5

39.540 34Z042.6

44.346 249.650.7

Less:Personalcontribu-tions for

socialinsurance

0.1

.2

.67

.81.21.82.22.32.02.12.22.22.93.43.84.04.65.25.86.76.9 i7.99.39.7

10.311.812.613.317.820.622.826.3

28.030.834.242.247.750.555.661.369 680.7

59 560.861.863.0

67.369 070.271.8

78.779 881.283.0

Nonfarmpersonalincome2

159.6171.5187.7189.9

209.3234.4252.0269.9272.7294.3316.4335.0342.6367.7

384.4399.0424.5447.0480.7519.5566.1609.1667.5725.8

780.7838.0917.3

1,011.91,119.31,220.81,350.61,498.11674 21,873.1

1439 91,477.51,517.6.1,557.3

1,594.51 646 61J00.61,755.3

1,801.31 8410U97.61,952.4

1 The total of wage and salary disbursements and other labor income differs from compensation of employees in Table B-19 in thatit excludes employer contributions for social insurance and the excess of wage accruals over wage disbursements.2 Personal income exclusive of farm proprietors' income, farm wages, farm other labor income, and agricultural net interest.

Note.—The industry classification of wage and salary disbursements and proprietors' income is on an establishment basis and isbased on the 1972 Standard Industrial Classification (SIC) beginning 1948 and on the 1942 SIC prior to 1948.


227

TABLE B-21.—Disposition of personal income, 1929-79


Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 "

19771IIIIIIV

1978-1IIIIIIV

1979:1IIIIIIV

Personal

income

84.9

46.9

72.4

77.895.3

122.4150.7164.4169.8177.3189.8208.5205.6

226.1253.7270.4286.1288.2308.8330.9349.3359.3382.1

399.7415.0440.7463.1495.7537.0584.9626.6685.2745.8

801.3859.1942.5

1,052.41,154.91,255.51,381.61,531.61,717.41,923.1

1,472.51,509.01,548.51,596.4

1,634.81,689.31,742.51,803.1

1,852.61,892.51,946.62,000.5

Less:Personaltax andnontax

payments

2.6

1.4

2.4

2.63.35.9

17.818.920.818.721.421.018.5

20.628.934.035.532.535.439.742.442.146.0

50.452.156.860.358.664.974.582.197.1

115.4

115.3116.3141.2150.8170.3168.8197.1226.4259.0299.9

222.4223.0225.3235.2

239.8252.1266.0278.2

280.4290.7306.6321.7

Equals:Dispos-

ablepersonalincome

82.3

45.5

69.9

75.292.0

116.5132.9145.5149.0158.6168.4187.4187.1

205.5224.8236.4250.7255.7273.4291.3306.9317.1336.1

349.4362.9383.9402.8437.0472.2510.4544.5588.1630.4

685.9742.8801.3901.7984.6

1,086.71,184.51,305.11,458.41,623.2

1,250.11,286.01,323.21,361.2

1,395.01,437.31,476.51,524.8

1,572.21,601.71,640.01,678.8

L

Total

79.1

46.5

67.8

72.081.889.4

100.1109.0120.4145.2163.5176.9180.4

194.7210.0220.4233.7240.1258.5271.6286.4295.4317.3

332.3342.7363.5384.0410.9441.9477.4503.7550.1595.3

635.4685.5751.9831.3913.0

1,003.01,115.91,240.21,386.41,550.4

1,197.61,220.21,251.31,291.7

1,320.41,366.11,405.61,453.4

1,493.01,515.81,569.71,622.9

.ess: Personal outlays

Personalcon-

sumptionexpendi-

tures

77.3

45.8

67.0

71.080.888.699.4

108.2119.5143.8161.7174.7178.1

192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8

324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7

618.8668.2733.0809.9889.6979.1

1,089.91,210.01,350.81,509.8

1,169.11,190.51,220.61,259.7

1,287.21,331.21,369.31,415.4

1,454.21,475.91,528.61,580.4

Interestpaid by

consum-ers tobusi-ness

1.5

.5

.7

.8

.9

.7

.5

.5

.5

.71.01.41.7

2.32.52.93.63.84.45.15.55.66.1

7.07.37.88.89.9

11.112.012.513.314.7

15.516.217.920.222.423.025.129.334.839.6

27.528.729.831.1

32.434.035.637.1

37.739.040.241.6

Parrer-

sonaltransfer

pay-ments

tofor-

eigners(net)

0.3

.2

.2

.2

.2

.2A.5.7.7.7.5

.4

.4

.4

.5

.5

.4

.5

.5

.4

.4

.4

.4

.5

.6

.6

.7

.6

.9

.8

.9

1.11.11.01.31.0

.9

.9

.9

.8

.9

1.01.0

.9

.9

.8

.9

.7

.9

1.1.9.9.9

Equals:Personalsaving

3.1

- 1 . 0

2.1

3.310.227.032.736.528.513.44.9

10.66.7

10.814.816.017.015.614.919.720.621.718.8

17.120.220.418.826.130.333.040.938.135.1

50.657.349.470.371.783.668.665.072.072.8

52.565.971.969.5

74.671.270.971.5

79.285.970.355.9

Percent of disposable

personal income

Personal outlays

Total

96.2

102.2

97.0

95.688.976.875.474.980.891.597.194.396.4

94.793.493.293.293.994.693.293.393.294.4

95.194.494.795.394.093.693.592.593.594.4

92.692.393.892.292.792.394.295.095.195.5

95.894.994.694.9

94.795.095.295.3

95.094.695.796.7

Consump-tion

expend-itures

93.9

100.7

95.8

94.387.776.174.874.480.290.696.193.295.2

93.492.191.891.692.292.891.391.491.392.5

93.092.392.593.091.691.191.190.091.192.0

90.290.091.589.890.390.192.092.792.693.0

93.592.692.292.5

92.392.692.792.8

92.592.193.294.1

Personalsaving

3.8

- 2 . 2

3.0

4.411.123.224.625.119.28.52.95.73.6

5.36.66.86.86.15.46.86.76.85.6

4.95.65.34.76.06.46.57.56.55.6

7.47.76.27.87.37.75.85.04.94.5

4.25.15.45.1

5.35.04.84.7

5.05.44.33.3


228

TABLE B-22.—Total and per capita disposable personal income and personal consumption expenditures in

current and 1972 dollars, 1929-79

[Quarterly data at seasonally adjusted annual rates, except as noted]

Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979"

19771IIIIIIV

19781IIIIIIV

19791IIIIIIV

Disposable personal income

Total (billions ofdollars)

Currentdollars

82.3

45.5

69.9

75.292.0

116.5132.9145.5149.0158.6168.4187.4187.1

205.5224.8236.4250.7255.7273.4291.3306.9317.1336.1

349.4362.9383.9402.8437.0472.2510.4544.5588.1630.4

685.9742.8801.3901.7984.6

1,086.71,184.51,305.11,458.41,623.2

1,250.11,286.01,323.21,361.2

1,395.01,437.31,476.51,524.8

1,572.21,601.71,640.01,678.8

1972dollars

229.8

169.7

230.1

244.3278.1317.3332.2343.9338.6332.4318.8335.5336.1

361.9371.6382.1397.5402.1425.9444.9453.9459.0477.4

487.3500.6521.6539.2577.3612.4643.6669.8695.2712.3

741.6769.0801.3854.7842.0859.7891.8929.5972.5994.1

908.0921.5936.3951.8

956.6966.1976.2991.5

996.6993.0993.4993.4

Per capita(dollars)

Currentdollars

675

362

534

570690863972

1,0511,0651,1221,1681,2781,254

1,3551,4571,5061,5711,5741,6541,7311,7921,8211,898

1,9341,9762,0582,1282,2782,4302,5972,7402,9303,111

3,3483,5883,8374,2854,6465,0885,5046,0176,6727,363

5,7815,9366,0946,256

6,4016,5836,7486,954

7,1577,2757,4307,586

1972dollars

1,886

1,350

1,756

1,8492,0842,3532,4292,4852,4202,3512,2122,2882,253

2,3862,4082,4342,4912,4762,5772,6432,6502,6362,696

2,6972,7252,7962,8493,0093,1523,2743,3713,4643,515

3,6193,7143,8374,0623,9734,0254,1444,2854,4494,509

4,1994,2544,3124,374

4,3894,4254,4614,522

4,5364,5104,5014,489


Total (billions ofdollars)

Currentdollars

77.3

45.8

67.0

71.080.888.699.4

108.2119.5143.8161.7174.7178.1

192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8

324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7

618.8668.2733.0809.9889.6979.1

1,089.91,210.01,350.81,509.8

1,169.11,190.51,220.61,259.7

1,287.21,331.21,369.31,415.4

1,454.21,475.91,528.61,580.4

1972dollars

215.6

170.7

220.3

230.4244.1241.7248.7255.7271.4301.4306.2312.8320.0

338.1342.3350.9364.2370.9395.1406.3414.7419.0441.5

453.0462.2482.9501.4528.7558.1586.1603.2633.4655.4

668.9691.9733.0767.7760.7774.6820.6861.7900.8924.5

849.2853.1863.7880.9

882.7894.8905.3920.3

921.8915.0925.9935.2

Per capita(dollars)

Currentdollars

634

364

511

537605657727781854

1,0171,1221,1921,194

1,2661,3421,3831,4391,4521,5351,5811,6371,6621,755

1,7981,8241,9041,9792,0872,2142,3652,4682,6702,860

3,0203,2273,5103,8494,1974,5845,0645,5796,1796,848

5,4065,4955,6225,789

5,9066,0976,2586,455

6,6196,7046,9267,142

1972dollars

1,769

1,358

1,681

1,7441,8301,7921,8191,8471,9392,1312,1242,1332,145

2,2292,2192,2362,2832,2842,3912,4152,4212,4062,493

2,5072,5162,5892,6492,7552,8722,9823,0353,1563,234

3,2653,3423,5103,6483,5893,6273,8133,9734,1214,193

3,9273,9383,9784,049

4,0504,0984,1374,197

4,1964,1564,1954,226

Popula-tion(thou-

sands) »

121,875

125,690

131,028

132,122133,402134,860136,739138,397139,928141,389144,126146,631149,188

151,684154,287156,954159,565162,391165,275168,221171,274174,141177,073

180,671183,691186,538189,242191,889194,303196,560198,712200,706202,677

204,878207,053208,846210,410211,945213,566215,203216,898218,594220,466

216,244216,643217,119217,586

217,942218,335218,814219,286

219,690220,166220,715221,291

1 Population of the United States including Armed Forces overseas; includes Alaska and Hawaii beginning 1960. Annual data are forJuly 1 through 1973 and are averages of quarterly data beginning 1974. Quarterly data are average for the period.

Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).

229

TABLE B-23.—Gross saving and investment, 1929-79


Year orquarter

Gross saving

Total

Gross private saving

TotalPersonalsaving

Grossbusinesssaving1

Government surplus ordeficit ( - ) , nationalincome and product

accounts

Total FederalStateandlocal

Capitalgrants

receivedby theUnitedStates(net)*

Gross investment

Total

Grossprivate

domesticinvest-ment

Netforeigninvest-ment3

Statis-tical

discrep-ancy

1929

1933

1939

1940

194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 "....

1977:III

IV

1978:III

IV

1 9 7 9 :IIIIllIV P....

15.9

8.7

13.518.510.55.32.35.1

34.641.249.034.8

49.755.549.348.149.465.673.672.660.475.8

78.975.883.689.6

100.1115.4122.9120.3130.8147.5

143.4155.4177.5216.8204.4195.4236.2276.1324.6364.0

253.3276.0291.6283.6

289.7329.2332.7346.9

362.2374.3367.3

14.9

2.2

10.9

14.222.241.949.454.144.629.226.840.638.2

41.649.453.155.056.562.468.471.773.077.3

75.880.087.488.9

102.4114.9124.2134.6136.3136.8

151.9173.0180.4210.5209.5259.8271.9295.6324.9348.9

266.4292.7315.1308.4

308.9324.2330.4336.1

345.2360.5352.1

3.1

- 1 . 0

2.1

3.310.227.032.736.528.513.44.9

10.66.7

10.814.816.017.015.614.919.720.621.718.8

17.120.220.418.826.130.333.040.938.135.1

50.657.349.470.371.783.668.665.072.072.8

52.565.971.969.5

74.671.270.971.5

79.285.970.355.9

11.7

3.2

10.912.014.816.717.716.015.821.830.031.4

30.834.637.138.041.047.548.751.151.358.5

58.759.867.070.176.284.691.293.798.2

101.7

101.4115.7131.0140.2137.9176.2203.3230.7252.9276.0

213.9226.8243.2238.9

234.3253.0259.5264.6

266.0274.6281.9

1.0

- 1 . 4

- 2 . 2

- . 7- 3 . 8

-31.4-44 .1-51.8- 3 9 . 5

5.414.48.4

- 3 . 4

8.06.1

- 3 . 8- 6 . 9- 7 . 1

3.15.2

.9-12.6- 1 . 6

3.1- 4 . 3- 3 . 8

.7- 2 . 3

.5- 1 . 3

-14.2- 5 . 510.7

- 9 . 4-18 .3- 3 . 5

6.3-3 .2

-64.4-35.7-19 .5

- . 314.0

-13.1-16.6-23.5-24.8

-19.25.02.3

10.8

15.812.714.0

1.2

- 1 . 3

-2 .2

- 1 . 3- 5 . 1

-33 .1-46.6-54 .5-42 .1

3.513.48.3

-2 .6

9.26.5

- 3 . 7- 7 . 1- 6 . 0

4.46.12.3

-10 .3- 1 . 1

3.0- 3 . 9-4 .2

- 1 3

- 1 . 8-13.2

- 5 . 88.5

-12 .1-22.0-17 .3- 6 . 7

-10.7-70.6-53.6-46 .3-27.7-10 .5

-37.2-40.9-53.6-53.6

-49.4-24.6-20.4-16.3

-11.7- 7 . 0

-11 .3

-0 .2

- . 1

.61.31.82.52.72.61.91.0.1

- . 7

-1 .2- . 4- . 0

.1- 1 . 1- 1 . 3

- . 9- 1 . 4- 2 . 4

- . 4

.1- . 4

.5

.51.0

- . 0.5

- 1 . 1.3

2.1

2.83.7

13.713.07.66.2

17.926.827.424.4

24.224.230.128.8

30.229.622.727.1

27.619.725.3

0.9.7.7.0

4 - 2 . 0.0.0.0.0

1.1

17.0

1.6

10.1

14.6

19.09.73.55.19.2

35.342.947.835.9

51.759.551.951.452.468.072.872.862.075.5

78.277.387.693.4

102.3116.3126.1122.1130.2144.2

141.4156.8179.2219.4210.1202.8242.3283.6327.9368.0

262.5284.7299.3288.1

292.7331.5336.5351.0

362.8373.1375.6360.4

16.2

1.4

9.3

13.117.99.95.87.2

10.630.734.045.935.3

53.859.252.153.352.768.471.069.261.977.6

76.474.385.290.296.6

112.0124.5120.8131.5146.2

140.8160.0188.3220.0214.6190.9243.0303.3351.5386.2

280.4300.0315.7316.9

327.0352.3356.2370.5

373.8395.4392.3383.3

0.8

1.51.1

- . 2-2 .2- 2 . 1- 1 . 4

4.69.02.0

.6

- 2 . 1.3

- . 2- 1 . 9

- . 3- . 31.83.6

.1- 2 . 0

1.73.02.43.25.74.31.61.2

- 1 . 4- 2 . 0

.5- 3 . 2- 9 . 0

- . 6- 4 . 511.9- . 7

-19.6-23 .5-18.2

-17.9-15 .3-16.4-28 .8

-34.2-20 .8-19.6-19.4

-11.0-22 .3-16.7-22 .8

1.1

1.4

~'.B- 1 . 8

2.74.1

.71.8

- 1 . 21.0

2.04.02.73.33.02.5

- . 8.2

1.7- . 2

_ 7L64.03.72.2

.93.21.7

- 1 . 3- 2 . 1

1.31.72.65.87.46.17.53.34.0

9.18.67.74.6

3.02.33.94.1

.6- 1 . 3

8.3

1 Undistributed corporate profits with inventory valuation and capital consumption adjustments, corporate and noncorporate capitalconsumption allowances with capital consumption adjustment, and private wage accruals less disbursements.

2 Allocations of special drawing rights (SDR), except as noted in footnote 4.3 Net exports of goods and services less net transfers to foreigners and interest paid by government to foreigners plus capital grants

received by the United States, net.4 In February 1974, the U.S. Government paid to India $2,010 million in rupees under provisions of the Agricultural Trade

Development and Assistance Act. This transaction is being treated as capital grants paid to foreigners, i.e., a - $ 2 . 0 billion entry incapital grants received by the United States, net.


230

TABLE B-24.—Saving by individuals, 1946-79x

[Billions of dollars,- quarterly data at seasonally adjusted annual rates]

Year or quarter Total

Increase in financial assets

Total5

Cur-rencyand

demanddepos-

its

Sav-ingsac-

counts

Moneymar-ket

fundshares

Securities

Govern-ment

securi-ties3

Corpo-rateandfor-eign

bonds

Corpo-rateequi-ties4

Insur-anceand

pensionre-

serves 5

Net investment in

Non-farm

homes

Con-sumeidura-bles

Non-cor-

poratebusi-nessas-

sets6

Mort-gagedebton

non-farm

homes

Less: Net increase indebt

Con-sumercredit

Otherdebt 6 7

1946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

24.420.224.521.3

30.934.730.731.627.7

33.436.735.833.435.6

35.634.140.345.255.7

63.872.177.682.273.7

86.198.7

116.9138.4

1975....1976...1977....1978....

1977:

iniv

1978:IIIIll ,IV

1979:III

128.9

150.0164.6172.8198.2

162.4166.5189.7172.7

176.6196.7205.4214.2

170.5201.6194.1

18.813.29.19.9

13.719.123.222.822.2

28.030.228.631.637.4

32.535.940.647.356.1

59.058.470.476.264.5

78.8103.0128.8148.5142.4

167.2208.1241.7275.3

223.7236.8263.8242.6

243.4286.4288.6282.9

248.8300.4281.8

5.6.1

- 2 . 9- 2 . 0

2.64.61.61.02.2

1.21.8

- . 43.8

1.0- . 9

- 1 . 24.25.2

7.52.49.9

11.1- 2 . 5

8.912.213.914.17.1

4.014.922.718.3

23.731.125.510.4

26.717.214.714.7

-24.016.217.7

6.33.42.22.6

2.44.77.88.19.1

8.69.4

11.913.911.1

12.118.326.126.326.1

27.819.035.331.1

9.1

43.667.874.563.855.9

84.0109.3109.2105.2

115.8103.5120.696.9

91.2113.7117.198.8

90.083.2

108.5

— 9

28.831.633.1

- 1 . 51.61.31.8

- . 1- . 62.52.51.0

5.83.92.3

- 2 . 510.1

2.41.81.81.25.1

3.911.7- . 75.7

25.3

- 7 . 3- 1 0 . 1

1.924.127.8

22.912.018.330.2

5.613.17.7

46.9

35.332.526.527.1

52.251.1

-10.5

- 0 . 9

- . 1- . 4

.2- . 0- . 1- . 9

.51.1.9

1.2.4

.7- . 1- . 5

.2— .5

1.33.94.35.4

9.58.85.02.05.1

8.45.8

- 3 . 3- 1 . 4

4.9- 5 . 1- 4 . 7- 8 . 3

-8.91.5

-1.03.0

- 1 . 08.5

- 1 . 4

1.02.01.51.5.6

- . 5.3

- 2 . 0- 2 . 6

- . 1

- 2 . 1- . 6

- 4 . 2- 6 . 4- 3 . 6

- 1 . 5- 5 . 1- 5 . 6- 6 . 7- 2 . 2

- 3 . 6- 3 . 2- 6 . 1- 6 . 2

-11 .0- 3 . 5- 1 . 7- 8 . 3

- 8 . 8

-10 .2

-9.5-13.1-3.6

5.35.45.35.6

6.96.37.77.97.8

8.59.59.5

10.411.9

11.512.112.713.916.1

16.919.218.619.821.5

24.027.529.433.036.3

43.552.665.477.9

56.960.080.663.8

71.073.290.776.4

70.585.190.8

3.66.79.18.4

11.811.711.312.312.7

16.715.613.212.115.9

14.312.012.813.413.9

13.412.610.914.314.2

11.718.826.028.223.1

20.833.148.159.2

39.845.752.054.9

56.658.359.862.0

60.458.556.6

6.18.89.8

10.9

14.911.38.49.46.9

11.98.77.63.46.9

6.74.18.2

11.815.1

20.222.820.926.326.2

20.226.235.141.128.6

26.640.650.957.5

50.849.849.853.1

48.159.558.863.4

61.352.553.6

2.12.07.12.0

7.04.42.0

.81.5

2.4.5

2.12.33.4

3.13.36.38.57.7

11.29.48.59.4

11.4

9.813.517.720.3

2.8

- . 2- 1 . 0

5.96.9

5.35.26.7

10.4

7.06.74.6

3.64.74.64.4

6.76.66.27.68.7

12.211.28.99.5

12.8

11.712.214.116.217.5

17.013.812.517.118.5

14.126.441.547.135.4

38.161.393.2

103.8

77.593.5

101.6100.2

95.3102.8104.1113.2

111.5117.4101.5

3.13.73.23.2

4.81.65.34.21.5

7.23.92.9

.58.0

4.42.56.38.99.8

10.66.55.7

11.510.8

5.414.719.826.0

9.9

9.725.640.650.6

30.742.539.349.7

43.456.948.853.3

50.744.742.4

- 0 . 52.22.82.2

5.03.62.81.95.5

6.43.23.86.07.2

4.86.57.2

10.89.8

12.610.815.015.313.3

14.821.829.526.522.7

16.629.240.046.2

47.037.640.834.7

38.153.055.738.0

44.954.558.6

1 Saving by households, personal trust funds, nonprofit institutions, farms, and other noncorporate business.2 Includes commercial paper and miscellaneous financial assets, not shown separately.3 Consists of U.S. sayings bonds, other U.S. Treasury securities, U.S. Government agency securities and sponsored agency securities,

and State and local obligations.: Includes investment company shares.5 Private life insurance reserves, private insured and noninsured pension reserves, and government insurance and pension reserves.6 Includes data for corporate farms.7 Other debt consists of security credit, policy loans, noncorporate business mortgage debt, and other debt.

Source: Board of Governors of the Federal Reserve System.

231

TABLE B-25.—Money income (in 1978 dollars) and poverty status of families and unrelated individuals byrace of head, 1947-78

Vaar

FAMILIES19471948194919501951195219531954195519561957195819591960196119621963196419651966196719681969197019711972197319741974*1975197619771978

UNRELATEDINDIVIDUALS

19471948194919501951.195219531954195519561957195819591960196119621963196419651966.19671968.1969197019711972197319741974 4

19751976.19771978

Total

Totalnumber

(mil-lions)

37 238.639.339.940.640.841.242.042 943 543 744.245.1

3 45.53 46.43 47.1347.53 48.0348.53 49.23 50.13 50.8351.63 52.2

53.354.455.155.755.756.256.757.257.8

8.2849.09.4919.79.59.7999.8

10.410 910 9

311 13 H 2311.0311 2312.1312.2312 5313.2313 9314.6315.5

16.316.818 318.918 920.221523124.6

Medianincome

$8 8488,6348,5008,9919,3109,557

10,34210,11010 759114681150511,47212,11912,37412,50012,83813,30913,81014,37815,13415,49316,17916,77816,56916,55917,32617,68316,97317,06016,62117,13417,22617,640

$2,8612 6992,8722,8302 9993,4623,4032,9653 2083,4203,4603 3513 4843 7873 8233,7783 8344,1694,4494 6014,6465 2225,2135,2685,3395,4886 0665,8706 0865,91561576 3566,705

Percent withincomes—

Belowpoverty

level

18.518.118.117.215.915.013.911.811.410.09.7

10.110.09.38.89.28.89.79.49.39.1

Belowpoverty

level

46 145 245 945.444 242.739 838 338134 034.032 931.629 025 625.524125.124 922 622.1

$25,000and

over1

40 838.938.142.018.14.04.95.15669637.08.59.4

10.611.112.413.514.816.818.220.422.611.111A25.225.422.625.623.624.926.327.9

$15,000and

over1

7.5597.07.7162.42.624303.141454748597.5788.39291

10112 111.912.512.613.414 913.213 813.413 914 816.6

White

Totalnumber

(mil-lions)

34135.3

38.239 039 539 740.240.941.141.942.442.743.143.544.144.845.446.046.547.648.548.949.549.449.950.150.550.9

7.273

83858.589929396969.597

10.410 510 711312 012.513.414.214 515 816.316 317.518 619 921.3

Medianincome

$9 2178,9658,8399,3319,687

10,10710,72310,5251123312 0011197311,95312,62412,84813,03613,44513,94714,41714,98615,72316,08116,75017,42017,18917,18318,00118,48117,66017,72917,28617,79718,01318,368

$3 0232 8523,1013,01931573,7313,59131913 4103 5123 7013 5903 7224 09441094,0434 0194,3904 6404 8384 8245 5335,4755 5135,5795 7316 26561306 30661786 42165977̂ 030


Belowpoverty

level

15.214.914.813.912.812.211.19.39.08.07.78.07.97.16.67.06.87.77.17.06.9

Belowpoverty

level

44 143 043 242.742 040.738136136 532 232.130 829.627 123 723 221811111120 419.8

$25,000and

over1

43 341.440.444.619.64.35.35.66275697.59.2

10.111.412.013.414.516.018.119.421.624.024.023.826.827.024.227.125.126.527.929.5

$15,000and

over1

82648.184182.73227353447525254688.4879.2

10 210110 913 113.013 613.614 215 614 114 614 314 815 617.3

Black

Totalnumber

(mil-lions)

23123.3

2 3.82392402402 4.02 4.22 4.32 4.52 4.62 4.824.82 4.82 5.0

4.64.64.84.95.25.35.45.55.55.65.85.85.9

21.0210

2142142132152 1 62 1 62152I621.52 1 521.6217216

161 71.8171.9202223242426292.9

Medianincome

2$4 7112 4,7902 4,5142 5,06225,1012 5,74426,0122 5,8622 6 19526 3142 6 40126,12326,52127,1132 6,9552 7,1732 7,3792 8,0682 8,2532 9,425

9,52110,04610,67010,54410,36910,69910,66610,32410,58610,63610,58610,29010,879

2 $2 1782 2 1372 2,2412 2 2122 2 3322 2,5812 2 82422 1192 2 2772 2 6072 2 3522 2 4352 2 4042 2 3512 2 5232 2^7002 2 75823]0082 3 3832 3 042

34373 6813J463 5553,6234 0044 6294 0454 2543 9824 3174 7734,411


Belowpoverty

level

48.12 49.02 49.02 48.02 43.72 40.02 39.7

35.533.929.427.929.528.829.028.127.826.927.127.928.227.5

Belowpoverty

level

57 0259 325272 62!l2 58 32 55.0250 7

54 449 346 346.748 346.042 937 941039 342139 837 038.6

$25,00Cand

over1

214 2213.1211.6212.2

2 3.42.62.72.72 62 92 7

21.421.42 2.52 3.222.72 3.42 4.22 4.52 5.4

6.17.88.89.79.1

11.110.18.5

10.89.9

10.711.113.4

$15,000and

over1

2312 1 7

2 5232

2 62 42 22 52 22 82 52 8

2 1 521421 722.72212 3.2230229

364 13.7485.173937380768295

11.3

^ o r families, restricted to "$10,000 and over" for the years 1947 to 1950 and "$15,000 and over" for the year 1951; for unrelatedindividuals restricted to "$10,000 and over" for the years 1947 to 1950.

2 Data for Black include "other" races.3 Revised using population controls based on the 1970 census. Such controls are not available by race.4 Based on revised methodology procedures.Note.—The poverty level is based on the poverty index adopted by a Federal interagency committee in 1969. That index reflects

different consumption requirements for families based on size and composition, sex and age of family head, and farm—nonfarmresidence. The poverty thresholds are updated every year to reflect changes in the consumer price index. For further details see"Current Population Reports," Series P-60, No. 119, Bureau of the Census.


232

POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY

TABLE B-26.—Population by age groups, 1929-79

[Thousands of persons]

July 1 TotalAge (years)

Under 5 5-15 16-19 20-24 25-44 45-64 65 andover

1929

1933

1939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

1960196119621963196419651966196719681969

19701971197219731974

19751976197719781979

121,767

125,579

130,880

132,122133,402134,860136,739138,397

139,928141,389144,126146,631149,188

152,271154,878157,553160,184163,026

165,931168,903171,984174,882177,830

180,671183,691186,538189,242191,889

194,303196,560198,712200,706202,677

204,878207,053208,846210,410211,901

213,559215,152216,880218,717220 584

11,734

10,612

10,418

10,57910,85011,30112,01612,524

12,97913,24414,40614,91915,607

16,41017,33317,31217,63818,057

18,56619,00319,49419,88720,175

20,34120,52220,46920,34220,165

19,82419,20818,56317,91317,376

17,14817,17716,99016,69416,288

15,87915,34515,24815,37815,649

26,800

26,897

25,179

24,81124,51624,23124,09323,949

23,90724,10324,46825,20925,852

26,72127,27928,89430,22731,480

32,68233,99435,27236,44537,368

38,49439,76541,20541,62642,297

42,93843,70244,24444,62244,840

44,77444,44143,94843,22742,538

41,95641,45940,57539,62338,643

9,127

9,302

9,822

9,8959,8409,7309,6079,561

9,3619,1199,0978,9528,788

8,5428,4468,4148,4608,637

8,7448,9169,1959,54310,215

10,68311,02511,18012,00712,736

13,51614,31114,20014,45214,800

15,27515,63515,94616,31016,590

16,79316,92816,96616,93516,838

10,694

11,152

11,519

11,69011,80711,95512,06412,062

12,03612,00411,81411,79411,700

11,68011,55211,35011,06210,832

10,71410,61610,60310,75610,969

11,13411,48311,95912,71413,269

13,74614,05015,24815,78616,480

17,18418,08918,03218,34518,741

19,22919,63020,07720,46120,726

35,862

37,319

39,354

39,86840,38340,86141,42042,016

42,52143,02743,65744,28844,916

45,67246,10346,49546,78647,001

47,19447,37947,44047,33747,192

47,14047,08447,01346,99446,958

46,91247,00147,19447,72148,064

48,43548,81150,25451,41152,593

53,73555,12956,70658,38060,161

21,076

22,933

25,823

26,24926,71827,19627,67128,138

28,63029,06429,49829,93130,405

30,84931,36231,88432,39432,942

33,50634,05734,59135,10935,663

36,20336,72237,25537,78238,338

38,91639,53440,19340,84641,437

41,97542,41342,78543,07743,319

43,54643,70743,79543,87643,910

6,474

7,363

8,764

9,0319,2889,5849,86710,147

10,49410,82811,18511,53811,921

12,39712,80313,20313,61714,076

14,52514,93815,38815,80616,248

16,67517,08917,45717,77818,127

18,45118,75519,07119,36519,680

20,08720,48820,89221,34621,833

22,42022,95423,51324,06424,658

Note. —Includes Armed Forces overseas beginning 1940. Includes Alaska and Hawaii beginning 1950.


233

TABLE B-27.—Noninstitutional population and the labor force, 1929-79

[Monthly data seasonally adjusted, except as noted]

Year or month

1929

1933

1939

19401941194219431944

194519461947

194719481949

CO

CO

CO

CO

C

O

en en

en en

en

19551956195719581959

I9603

19611962319631964

19651966196719681969

1970197119723

1973 31974

19751976197719783

1979

Noninsti-tutionalpopula-tion1

ArmedForcesx

Civilian labor force

Total

Employment

Total Agri-cultural

Nonagri-cultural

Unem-ployment

Thousands of persons 14 years of age and over

100,380101,520102,610103,660104,630

105,530106,520107,608

260

250

370

5401,6203,9709,020

11,410

11,4403,4501,590

49,180

51,590

55,230

55,64055,91056,41055,54054,630

53,86057,52060,168

47,630

38,760

45,750

47,52050,35053,75054,47053,960

52,82055,25057,812

10,450

10,090

9,610

9,5409,1009,2509,0808,950

8,5808,3208,256

37,180

28,670

36,140

37,98041,25044,50045,39045,010

44,24046,93049,557

1,550

12,830

9,480

8,1205,5602,6601,070

670

1,0402,2702,356


103,418104,527105,611

106,645107,721108,823110,601111,671

112,732113,811115,065116,363117,881

119,759121,343122,981125,154127,224

129,236131,180133,319135,562137,841

140,182142,596145,775148,263150,827

153,449156,048158,559161,058163,620

1,5911,4591,617

1,6503,1003,5923,5453,350

3,0492,8572,8002,6362,552

2,5142,5722,8282,7382,739

2,7233,1233,4463,5353,506

3,1882,8162,4492,3262,229

2,1802,1442,1332,1172,088

59,35060,62161,286

62,20862,01762,13863,01563,643

65,02366,55266,92967,63968,369

69,62870,45970,61471,83373,091

74,45575,77077,34778,73780,734

82,71584,11386,54288,71491,011

92,61394,77397,401

100,420102,908

57,03858,34357,651

58,91859,96160,25061,17960,109

62,17063,79964,07163,03664,630

65,77865,74666,70267,76269,305

71,08872,89574,37275,92077,902

78,62779,12081,70284,40985,935

84,78387,48590,54694,37396,945

7,8907,6297,658

7,1606,7266,5006,2606,205

6,4506,2835,9475,5865,565

5,4585,2004,9444,6874,523

4,3613,9793,8443,8173,606

3,4623,3873,4723,4523,492

3,3803,2973,2443,3423,297

49,14850,71449,993

51,75853,23553,74954,91953,904

55,72257,51458,12357,45059,065

60,31860,54661,75963,07664,782

66,72668,91570,52772,10374,296

75,16575,73278,23080,95782,443

81,40384,18887,30291,03193,648

2,3112,2763,637

3,2882,0551,8831,8343,532

2,8522,7502,8594,6023,740

3,8524,7143,9114,0703,786

3,3662,8752,9752,8172,832

4,0884,9934,8404,3045,076

7,8307,2886,8556,0475,963

Unemploy-ment rate(percent

of civilianlabor

force)

Civilian labor forceparticipation rate2

Total Males Females

Percent

3.2

24.9

17.2

14.69.94.71.91.2

1.93.93.9

3.93.85.9

5.33.33.02.95.5

4.44.14.36.85.5

5.56.75.55.75.2

4.53.83.83.63.5

4.95.95.64.95.6

8.57.77.06.05.8

55.756.057.258.758.6

57.255.856.8

58.358.858.9

59.259.359.058.958.8

59.360.059.659.559.3

59.459.358.858.758.7

58.959.259.659.660.1

60.460.260.460.861.2

61.261.662.363.263.7

83.784.385.686.487.0

84.882.684.0

86.486.686.4

86.486.586.386.085.5

85.385.584.884.283.7

83.382.982.081.481.0

80.780.480.480.179.8

79.779.179.078.878.7

77.977.577.777.977.9

28.228.731.336.036.5

35.931.231.0

31.832.733.1

33.934.634.734.434.6

35.736.936.937.137.1

37.738.137.938.338.7

39.340.341.141.642.7

43.343.343.944.745.6

46.347.348.450.051.0


234

TABLE B-27.—Noninstitutional population and the labor force, 1929-79—Continued

[Monthly data seasonally adjusted, except as noted]

Year or month

1977:JanFebMarAprMayJune

JulyAugSeptOctNovDec

1978:Jan3

FebMarAprMayJune


1979:JanFebMar

MayJune


Noninsti-tutionalpopula-tion1

ArmedForces1

Civilian labor force

Total

Total

Employment

Agri-cultural

Nonagri-cultural

Unem-ployment


157,381157,584157,782157,986158,228158,456

158,68297,759

159,114159,334159,522159,736

159,937160,128160,313160,504160,713160,928

161,148161,348161,570161,829162,033162,250

162,448162,633162,909163,008163,260163,469

163,685163,891164,106164,468164,682164,898

2,1332,1372,1382,1322,1282,129

2,1352,1372,1312,1342,1322,129

2,1212,1242,1222,1182,1132,098

2,1162,1222,1232,1222,1172,108

2,0942,0942,0902,0822,0782,076

2,0822,0902,0922,0932,0922,089

95,68896,22596,54496,77697,15597,475

97,34497,75997,81298,13698,85998,758

99,11899,00999,28199,819

100,242100,458

100,656100,731100,944101,189101,610101,815

102,061102,379102,505102,198102,398102,476

103,093103,128103,494103,595103,652103,999

88,56688,95989,39789,84390,29190,429

90,60390,95891,17791,51492,22192,589

92,81392,92193,12893,76394,11694,556

94,42894,80294,97395,40195,72895,831

96,15796,49696,62396,25496,49596,652

97,18497,00497,50497,47497,60897,912

3,1423,1753,1813,2713,3963,288

3,2013,2133,1713,2363,3403,297

3,3883,2683,3153,2953,2983,415

3,3823,3453,3753,3773,2403,375

3,2603,3073,3203,2153,2463,243

3,2673,3153,3643,2943,3853,359

85,42485,78486,21686,57286,89587,141

87,40287,74588,00688,27888,88189,292

89,42589,65389,81390,46890,81891,141

91,04691,45791,59892,02492,48892,456

92,89793,18993,30393,03993,24993,409

93,91793,68994,14094,18094,22394,553

7,1227,2667,1476,9336,8647,046

6,7416,8016,6356,6226,6386,169

6,3056,0886,1536,0566,1265,902

6,2285,9295,9715,7885,8825,984

5,9045,8835,8825,9445,9035,824

5,9096,1245,9906,1216,0446,087

Unemploy-ment rate(percentof civilian

laborforce)

Civilian labor forceparticipation rate2

Total Males Females

Percent

7.47.67.47.27.17.2

6.97.06.86.76.76.2

6.46.16.26.16.15.9

6.25.95.95.75.85.9

5.85.75.75.85.85.7

5.75.95.85.95.85.9

61.661.962.062.162.262.4

62.262.462.362.462.862.7

62.862.762.863.063.263.2

63.363.363.363.463.563.6

63.663.863.763.563.563.5

63.863.763.963.863.863.9

77.377.677.577.577.677.8

77.677.777.377.878.078.0

77.977.777.877.877.977.9

77.877.877.777.878.078.0

78.278.278.177.977.877.7

77.977.778.077.777.677.6

47.647.948.148.348.448.5

48.448.648.848.649.248.9

49.349.149.349.750.050.1

50.350.250.450.450.550.6

50.650.850.950.650.750.7

51.151.251.251.351.351.5

1 Not seasonally adjusted.2 Civilian labor force as percent of civilian noninstitutional population.3 Not strictly comparable with earlier data due to population adjustments as follows: Beginning 1953, introduction of 1950 census

data added about 600,000 to population and about 350,000 to labor force, total employment, and agricultural employment. Beginning1960, inclusion of Alaska and Hawaii added about 500,000 to population, about 300,000 to labor force, and about 240,000 tononagricultural employment. Beginning 1962, introduction of 1960 census data reduced population by about 50,000 and labor force andemployment by about 200,000. Beginning 1972, introduction of 1970 census data added about 800,000 to civilian noninstitutionalpopulation and about 333,000 to labor force and employment. A subsequent adjustment based on 1970 census in March 1973 added60,000 to labor force and to employment. Beginning 1978, changes in sampling and estimation procedures introduced into thehousehold survey added about 250,000 to labor force and to employment. Unemployment levels and rates were not significantlyaffected.

Note.—Labor force data in Tables B-27 through B-32 are based on household interviews and relate to the calendar week includingthe 12th of the month. For definitions of terms, area samples used, historic comparability of the data, comparability with other series,etc., see "Employment and Earnings."

Source.- Department of Labor, Bureau of Labor Statistics.

235

TABLE B-28.—Civilian employment and unemployment by sex and age, 1947-79

[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]

Year or month

Employment

Total

Males

Total 16-19years

20yearsandover

Females

Total 16-19years

20yearsandover

Unemployment

Total

Males

Total 16-19years

20yearsandover

Females

Total 16-19years

20yearsandover

194719481949

1950195119521953»1954

19551956195719581959

I960119611962l19631964

19651966196719681969

197019711972l1973»1974

1975197619771978»1979

1978:JanFebMar

fez:June

JulyAugSept \OctNovDec

1979:JanFebMar

liajZZZZZZZZJune

i««yAugSeptOctNovDec

57,03858,34357,651

58,91859,96160,25061,17960,109

62,17063,79964,07163,03664,630

65,77865,74666,70267,76269,305

71,08872,89574,37275,92077,902

78,62779,12081,70284,40985,935

84,78387,48590,54694,37396,945

92,81392,92193,12893,76394,11694,556

94,42894,80294,97395,40195,72895,831

96,15796,49696,62396,25496,49596,652

97,18497,00497,50497,47497,60897,912

40,99541,72540,925

41,57841,78041,68242,43041,619

42,62143,37943,35742,42343,466

43,90443,65644,17744,65745,474

46,34046,91947,47948,11448,818

48,96049,24550,63051,96352,518

51,23052,39153,86155,49156,499

54,91054,88454,97355,21155,40355,648

55,52955,66855,61155,82156,12356,087

56,32656,47656,44956,29456,37256,477

56,57056,40856,71456,62956,58056,734

2,2182,3452,124

2,1862,1562,1062,1351,985

2,0952,1642,1172,0122,198

2,3602,3142,3622,4062,587

2,9183,2523,1863,2553,430

3,4073,4703,7504,0174,074

3,8033,9044,1244,2794,326

4,2814,1914,2014,2124,2684,382

4,2934,3734,2954,3164,2794,226

4,3024,2654,2984,2454,2144,276

4,2454,0974,2614,1864,2064,256

38,77639,38238,803

39,39439,62639,57840,29639,634

40,52641,21641,23940,41141,267

41,54341,34241,81542,25142,886

43,42243,66844,29344,85945,388

45,55345,77546,88047,94648,445

47,42748,48649,73751,21252,264

50,62950,69350,77250,99951,13551,266

51,23651,29551,31651,50551,84451,861

52,02452,21152,15152,04952,15852,201

52,32552,31152,45352,44352,37452,478

16,04516,61716,723

17,34018,18118,56818,74918,490

19,55120,41920,71420,61321,164

21,87422,09022,52523,10523,831

24,74825,97626,89327,80729,084

29,66729,87531,07232,44633,417

33,55335,09536,68538,88240,446

37,90338,03738,15538,55238,71338,908

38,89939,13439,36239,58039,60539,744

39,83140,02040,17439,96040,12340,175

40,61440,59640,79040,84541,02841,178

1,6911,6831,588

1,5171,6111,6121,5841,490

1,5481,6541,6631,5701,640

1,7691,7931,8331,8491,929

2,1182,4692,4972,5252,686

2,7342,7252,9723,2193,329

3,2433,3653,4863,7023,748

3,5643,5463,5343,6493,7623,756

3,7433,8173,7503,7723,7693,800

3,8193,8233,8123,7443,7123,718

3,7413,5963,7153,7333,7803,776

14,35414,93715,137

15,82416,57016,95817,16417,000

18,00218,76719,05219,04319,524

20,10520,29620,69321,25721,903

22,63023,51024,39725,28126,397

26,93327,14928,10029,22830,088

30,31031,73033,19935,18036,698

34,33934,49134,62134,90334,95135,152

35,15635,31735,61235,80835,83635,944

36,01236,19736,36236,21636,41136,457

36,87337,00037,07537,11237,24837,402

2,3112,2763,637

3,2882,0551,8831,8343,532

2,8522,7502,8594,6023,740

3,8524,7143,9114,0703,786

3,3662,8752,9752,8172,832

4,0884,9934,8404,3045,076

7,8307,2886,8556,0475,963

6,3056,0886,1536,0566,1265,902

6,2285,9295,9715,7885,8825,984

5,9045,8835,8825,9445,9035,824

5,9096,1245,9906,1216,0446,087

1,6921,5592,572

2,2391,2211,1851,2022,344

1,8541,7111,8413,0982,420

2,4862,9972,4232,4722,205

1,9141,5511,5081,4191,403

2,2352,7762,6352,2402,668

4,3853,9683,5883,0513,018

3,2283,1963,2123,0873,0502,882

2,9942,9442,9672,9692,9173,035

2,9972,9582,9722,9992,9412,893

3,0273,0833,0983,0983,1243,089

270255352

318191205184310

274269299416398

425479407500487

479432448427441

599691707647749

957928861799795

791835833813772711

804767787830807837

830820

811724

773797816781789786

1,4221,3052,219

1,9221,029

9801,0192,035

1,5801,4421,5412,6812,022

2,0602,5182,0161,9711,718

1,4351,1201,060

993963

1,6362,0861,9281,5941,918

3,4283,0412,7272,2522,223

2,4372,3612,3792,2742,2782,171

2,1902,1772,1802,1392,1102,198

2,1672,1382,1642,1902,1302,169

2,2542,2862,2822,3172,3352,303

619717

1,065

1,049834698632

1,188

9981,0391,0181,5041,320

1,3661,7171,4881,5981,581

1,4521,3241,4681,3971,429

1,8532,2172,2052,0642,408

3,4453,3203,2672,9962,945

3,0772,8922,9412,9693,0763,020

3,2342,9853,0042,8192,9652,949

2,9072,9252,9102,9452,9622,931

2,8823,0412,8923,0232,9202,998

144152223

195145140123191

176209197262256

286349313383386

395404391412412

506567595579660

795773781760733

763766770750781745

809766763712750737

712723698746754735

722737728773723741

475564841

854689559510997

823832821

1,2421,063

1,0801,3681,1751,2161,195

1,056921

1,078985

1,016

1,3471,6501,6101,4851,748

2,6492,5462,4862,2362,213

2,3142,1262,1712,2192,2952,275

2,4252,2192,2412,1072,2152,212

2,1952,2022,2122,1992,2082,196

2,1602,3042,1642,2502,1972,257

1 See footnote 3, Table B-27.Note.—See Note, Table B-27.Source: Department of Labor, Bureau of Labor Statistics.

236

TABLE 3-29.—Selected employment and unemployment data, 1948-79

[Percent;1 monthly data seasonally adjusted]

Year ormonth

19481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979

1978JanFebMar

I :June


1979JanFebMar

MayJune


Unemployment rate l

Allworkers

385.9

5.33.33.02.95.54.44.14.36.85.5

5.56.75.55.75.24.53.83.83.63.5

4.95.95.64.95.68.57.77.06.05.8

6.46.16.26.16.15.9

6.25.95.95.75.85.9

5.85.75.75.85.85.7

5.75.95.85.95.85.9

By sex and age

Bothsexes16-19years

9213.4

12.28.28.57.6

12.611.011.111.615.914.6

14.716.814.717.216.214.812.812.812.712.2

15.216.916.214.516.019.919.017.716.316.1

16.517.117.216.616.215.2

16.715.816.216.016.216.4

16.016.015.716.316.515.4

15.816.616.216.415.916.0

Males20 yearsand over

325.4

4.72.52.42.54.93.83.43.66.24.7

4.75.74.64.53.93.22.52.32.22.1

3.54.44.03.23.86.75.95.24.24.1

4.64.54.54.34.34.1

4.14.14.14.03.94.1

4.03.94.04.03.94.0

4.14.24.24.24.34.2

Females20 yearsand over

365.3

5.14.03.22.95.54.44.24.16.15.2

5.16.35.45.45.24.53.84.23.83.7

4.85.75.44.85.58.07.47.06.05.7

6.35.85.96.06.26.1

6.55.95.95.65.85.8

5.75.75.75.75.75.7

5.55.95.55.75.65.7

By selected groups

Experi-enced

wage andsalary

workers

436.8

6.03.73.33.26.24.84.44.67.25.7

5.76.85.65.55.04.33.53.63.43.3

4.85.75.34.55.38.27.36.65.65.4

5.95.75.85.65.75.5

5.75.45.65.45.35.5

5.45.35.45.45.45.3

5.45.75.55.65.55.5

Marriedmen2

35

46151417402826285136

37463634282419181615

2.63.22.82.32.75.14.23.62.82.7

3.02.93.02.82.92.8

2.72.72.72.62.42.6

2.62.62.62.72.52.7

2.82.92.92.92.92.8

Womenwhohead

families

4 9 '4444

5.47.37.27.07.0

10.010.09.38.58.3

8.37.78.7

10.09.18.7

9.88.08.17.57.87.9

8.08.38.28.38.69.0

8.17.97.78.48.48.4

Full-timeworkers3

5.4

5.02.62.5

...........

3.83.74.07.2

""6.7"

5.54.94.23.53.43.13.1

4.55.55.14.35.18.17.36.55.55.3

5.95.75.75.55.65.3

5.75.45.45.25.25.3

5.25.25.25.35.25.2

5.35.45.35.45.45.4

Blue-collar

workers4

428.0

7.23.93.63.47.25.85.16.2

10.27.6

7.89.2747.36.35.34.24.44.13.9

6.27.46.55.36.7

11.79.48.16.96.9

7.47.27.26.76.76.7

6.86.76.96.76.46.7

6.56.56.66.96.86.6

6.87.37.17.27.57.2

Employment as percent ofpopulation5

Total

55 854.6

55.255.755.455.353.855.156.155.754.254.8

54.954.254.254.154.555.055.655.856.056.5

56.155.556.056.957.055.356.157.158.659.3

58.058.058.158.458.658.8

58.658.858.859.059.159.1

59.259.359.359.059.159.1

59.459.259.459.359.359.4

White

54.054.354.855.455.755.956.5

56.255.756.457.357.555.956.857.959.360.0

58.858.858.859.259.359.5

59.359.559.559.759.859.8

60.060.260.159.959.959.9

60.159.960.260.160.160.2

Blackand

other

55.256.156.857.256.956.656.7

55.553.753.053.953.050.050.651.153.353.6

52.452.952.953.053.253.4

53.253.553.853.853.753.6

53.453.453.853.253.353.5

54.153.854.053.953.753.4

1 Unemployment as percent of civilian labor force in group specified.2 Married men living with their wives. Data for 1949 and 1951-54 are for April; 1950, for March.3 Data for 1949-61 are for May.4 Includes craft and kindred workers, operatives, and nonfarm laborers. Data for 1948-57 are based on data for January, April, July,

and October.5 Civilian employment as percent of total noninstitutional population.Note.—See footnote 3 and Note, Table B-27.Source: Department of Labor, Bureau of Labor Statistics.

2372 9 4 - 2 8 9 0 - 8 0 - 1 6

TABLE B-30.—Unemployment rate by demographic characteristic, 1948-79

[Percent; * monthly data seasonally adjusted]

Year or month

19481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979

1978JanFebMar

June


1979JanFebMar

MayJune


White

Total

3.55.6

493.12.82.75.0

3.93.63.86.14.8

4.96.04.95.04.6

4.13.33.43.23.1

4.55.45.04.35.0

7.87.06.25.25.1

5.55.45.35.35.35.0

5.35.15.25.05.05.1

5.04.95.05.05.04.9

5.05.35.15.15.15.1

Males

Total

3.45.6

4.72.6252.54.8

3.73.43.66.14.6

4.85.74.64.74.1

3.62.82.72.62.5

4.04.94.53.74.3

7.26.45.54.54.4

4.74.84.94.54.54.3

4.44.44.44.54.24.5

4.44.34.34.44.34.3

4.54.64.64.54.64.5

16-19years

13.4

11.310.511.515.714.0

14.015.713.715.914.7

12.910.510.710.110.0

13.715.114.212.313.5

18.317.315.013.513.9

13.114.214.013.712.711.8

13.513.113.214.313.314.4

14.013.813.813.914.412.6

13.614.914.413.814.113.7

20yearsandover

4.4

3.33.03.25.54.1

4.25.14.03.93.4

2.92.22.12.01.9

3.24.03.62.93.5

6.25.44.63.73.6

4.03.94.03.73.73.6

3.63.63.63.53.33.5

3.53.43.43.53.43.5

3.63.73.73.73.73.7

Females

Total

3.857

5.34.23.33.15.5

4.34.24.36.25.3

5.36.55.55.85.5

5.04.34.64.34.2

5.46.35.95.36.1

8.67.97.36.25.9

6.66.36.16.36.46.2

6.66.26.25.76.06.1

5.95.95.95.96.05.9

5.86.25.86.05.86.0

16-19years

10.4

9.19.79.5

12.712.0

12.714.812.815.114.9

14.012.111.512.111.5

13.415.114.213.014.5

17.416.415.914.413.9

14.715.015.014.814.813.2

14.514.314.513.314.313.9

13.613.413.413.914.013.8

13.914.714.114.413.814.1

20yearsandover

5.1

3.93.73.85.64.7

4.65.74.74.84.6

4.03.33.83.43.4

4.45.34.94.35.0

7.56.86.25.25.0

5.65.25.05.35.45.3

5.65.25.24.85.05.1

5.05.05.05.05.04.9

4.85.24.85.0495.0

Black and other

Total

5.98.9

9.05.35.44.59.9

8.78.37.9

12.610.7

10.212.410.910.89.6

8.17.37.46.76.4

8.29.9

10.08.99.9

13.913.113.111.911.3

12.911.812.511.812.311.9

12.511.611.511.211.711.4

11.311.811.311.711.511.2

11.011.010.811.510 911.3

Males

Total

5.89.6

9.44.95.24.8

10.3

8.87.98.3

13.711.5

10.712.810.910.58.9

7.46.36.15.65.3

7.39.18.97.69.1

13.712.712.410.910.3

12.211.211.211.111.310.4

10.710.610.510.110.910.5

10.310.910.810.610.310.0

10.19.89.8

10.510 210.5

16-19years

14 4

13.415.018.426.825.2

24.026.822.027.324.3

23.321.323.922.121.4

25.028.929.726.931.6

35.435.437.034.431.5

36.234.736.733.837.532.4

32.631.634.731.936.933.8

33.934.231.532.030.431.4

30.528.429.632.031133.2

20yearsandover

99

8.47.47.6

12.710.5

9.611.710.09.27.7

6.04.94.33.93.7

5.67.26.85.76.8

11.710.610.08.68.4

9.98.88.78.98.88.3

8.48.68.38.08.48.3

8.08.68.78.68.48.1

8.48.18.08.6848.6

Females

Total

6179

8461574192

8.58.97.3

10.89.4

9.411.911.011.210.7

9.28.79.18.37.8

9.310.811.310.510.7

14.013.614.013.112.3

13.612.514.012.513.413.5

14.412.612.512.412.712.4

12.412.711.812.912.812.5

11.912.411.912.511612.2

16-19years

20 6

19.222.820.228.427.7

24.829.230.234.731.6

31.731.329.628.727.6

34.435.438.534.534.6

38.539.039.938.435.7

42.641.241.136.637.940.6

41.036.336.336.535.635.6

31.935.631.636.842.535.9

32.737.535.438.434 635.4

20yearsandover

84

7.77.86.49.58.3

8.310.69.69.49.0

7.56.67.16.35.8

6.98.78.88.28.4

11.511.311.710.610.1

11.09.9

11.510.411.010.8

11.710.310.210.110.510.2

10.510.410.010.510.010.4

10.010.39.8

10.295

10.0

1 Unemployment as percent of civilian labor force in group specified.Note.—See footnote 3 and Note, Table B-27.Source: Department of Labor, Bureau of Labor Statistics.

238

TABLE B-31.—Unemployment by duration, 1947-79

[Monthly data seasonally adjusted1]

Year or month

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979

1978JanFebMarAprMayJune


1979:JanFebMarMayJune

JulyAugsrNovDec

Totalunemploy-

ment Less than5 weeks

Duration of unemployment

5-14weeks

15-26weeks

27 weeksand over


2,3112,2763,637

3,2882,0551,8831,8343,532

2,8522,7502,8594,6023,740

3,8524,7143,9114,0703,786

3,3662,8752,9752,8172,832

4,0884,9934,8404,3045,076

7,8307,2886,8556,0475,963

6,3056,0886,1536,0566,1265,902

6,2285,9295,9715,7885,8825,984

5 9045,8835,8825,9445,9035,824

5,9096,1245,9906,1216,0446,087

1,2101,3001,756

1,4501,1771,1351,1421,605

1,3351,4121,4081,7531,585

1,7191,8061,6631,7511,697

1,6281,5731,6341,5941,629

2,1372,2342,2232,1962,567

2,8942,7902,8562,7932,869

2,7712,6712,8052,6992,9022,736

3,0052,7612,8072,7022,7972,858

2 7512,7792,7692,8762,8232,880

2,8203,1682,7782,9552,9192,916

704669

1,194

1,055574516482

1,116

815805891

1,3961,114

1,1761,3761,1341,2311,117

983779893810827

1,2891,5781,4591,2961,572

2,4522,1592,0891,8751,892

1,9001,8771,9081,8561,8241,933

1,8461,8951,8551,7881,8361,937

18811,8771,8601,8841,9191,808

1,9341,7382,0351,9631,8691,966

234193428

425166148132495

366301321785469

503728534535491

404287271256242

427665597475563

1,2901,003896746684

818882783795717709

684624684711683732

708700729687705656

615658644678660711

164116256

3571378478317

336232239667571

454804585553482

351239177156133

235517562337373

1,1931,3361,015633518

802656686668679619

646605608585518485

521539562536507496

452527508517531519

Average(mean)durationin weeks

8.610.0

12.19.78.48.011.8

13.011.310.513.914.4

12.815.614.714.013.3

11.810.48.88.47.9

8.711.312.010.09.7

14.115.814.311.910.8

13.012.612.412.412.012.1

11.911.511.511.811.110.6

11211.311.811.010.910.5

10.110.710.710.510.610.5

1 Because of independent seasonal adjustment of the various series, detail will not add to totals.Note.—See footnote 3 and Note, Table B-27.Source: Department of Labor, Bureau of Labor Statistics.

239

TABLE B-32.—Unemployment by reason, 1967-79

[Monthly data seasonally adjusted1]

196719681969

19701971197219731974

19751976197719781979


JulyAugSeptOctNovDec.

196719681969

19701971197219731974

19751976197719781979

1979JanFebMar

MayJune


Year or monthTotal

unemploy-ment

2,9752,8172,832

4,0884,9934,8404,3045,076

7,8307,2886,8556,0475,963

5,9045,8835,8825,9445,9035,824

5,9096,1245,9906,1216,0446,087

3.83.63.5

4.95.95.64.95.6

8.57.77.06.05.8

585.75.75.85.85.7

5.75.95.85.95.85.9

Job losers Job leavers

Thousands of persons 16 years o

1,2291,0701,017

1,8092,3132,0891,6662,205

4,3413,6253,1032,5142,555

2,4412,4752,4572,5202,3562,449

2,5262,6802,6322,7312,7292,728

438431436

549587635674756

812886889851854

900828864847940857

846875825835845800

Percent of civilian labor

1.61.31.2

2.22.82.41.92.4

4.73.83.22.52.5

2.42.42.42.52.32.4

2.52.62.52.62.62.6

06.5.5

.7

.7

.7

.8

.8

.9

.9

.9

.8

.8

.9

.8

.8

.8

.9

.8

.8

.8

.8

.8

.8

.8

Reentrants

f age and over

945909965

1,2271,4661,4441,3231,441

1,8651,8951,9261,8141,758

1,7211,7661,7661,7781,7671,753

1,7621,7881,7601,7621,6981,771

force

1.21.21.2

1.51.71.71.51.6

2.02.02.01.81.7

1.71.71.71.71.71.7

1.71.71.71.71.61.7

entrants

396407413

503627672642672

812882938867797

824858808800824781

726745801804736858

05.5.5

.6

.7

.8

.7

.7

.9

.91.0

.9

.8

.8

.8

.8

.8

.7

.7

.8

.8

.7

.8

1 Because of independent seasonal adjustment of the various series, detail will not add to totals.Note.—See footnote 3 and Note, Table B-27.Source: Department of Labor, Bureau of Labor Statistics.

240

TABLE B-33.—Unemployment insurance programs, selected data, 1946-79

Year or month

194619471948194919501951195219531954195519561957195819591960196119621963196419651966196719681969197019711972197319741975197619771978"1979"1978-

JanFebMarAprMayJuneJulyAugSeptOctNovDec

1979JanFebMar

MayJuneJulyAugSeptOct"Nov" ....Dec"

All programs

Coveredemploy-ment1

Insuredunemploy-ment

(weeklyaver-

age)«»

Thousands

31,85633,87634,64633,09834,30836,33437,00638,07236,62240,01842,75143,43644,41145,72846,33446,26647,77648,43449,63751,58054,73956,34257,97759,99959,52659,37566,45869,89772,45171,03773,45976,419

8 88,804

2,8041,7931,4462,4741,6051,0001,0691,0672,0511,3991,3231,5713,2692,0992,0712,9941,946

71,9731,7531,4501,1291,2701,1871,1772,0702,6082,1921,7932,5584,9373,8463,3082,6452,619

3,7813,6383,2122,6592,3692,2972,5812,3942,0641,9992,1482,567

3,1983,2092,9212,6102,2302,1192,4292,3772,1642,2362,5593,034

Totalbenefitspaid

(millionsof

dollars)2 4

2,878.51,785.51,328.72,269.81,467.6

862.91,043.51,050.62,291.61,560.21,540.61,913.04,290.62,854.33,022.84,358.13,145.13,025.92,749.22,360.41,890.92,221.52,191.02,298.64,209.36,154.05,491.14,517.36,933.9

16,802.412,344.810,998.99,006.3

1,091.01,053.61,128.9

805.4753.9706.7663.8771.5595.6589.9605.6700.3

1,036.6972.1

1,043.0844.2793.2662.9715.1820.2656.1741.1

State programs

Insuredunem-

ployment

Initialclaims

Exhaus-tions5

Weekly average; thousands

1,295997980

1,9731,513

9691,044

9901,8701,2651,2151,4462,5261,6841,9082,2901,783

71,8061,6051,3281,0611,2051,1111,1011,8052,1501,8481,6322,2623,9862,9912,6552,3592,460

2,4632,4992,4582,3072,2662,2742,3712,4182,2952,2462,2322,259

2,3452,3292,3362,3812,3072,3202,4092,4922,4882,5402 6432,631

189187200340236208215218304226111270369111331350302

7 298268232203226201200296295261247363478386375346388

348373344336332342356344328327332342

352346359433355380390394394402405416

382420373616181534252023503331463230262115171616253935293781635539

484646484240363433303336

4040444442393836353535

Insuredunemploy-ment as

percentof

coveredemploy-

ment

4.33.13.06.24.62.82.92.85.23.53.23.66.44.44.85.64.44.33.83.02.32.52.22.13.44.13.52.73.56.04.63.93.33.0

3.63.63.63.33.23.23.33.43.23.03.03.1

3.03.03.03.02.92.92.93.03.03.0313.1

Benefits paid

Total(millions

ofdollars)4

1,094.9775.1789.9

1,736.01,373.1

840.4998.2962.2

2,026.91,350.31,380.71,733.93,512.72,279.02,726.73,422.72,675.42,774.72,522.12,166.01,771.32,092.32,031.62,127.93,848.54,957.04,471.04,007.65,974.9

11,754.78,974.58,357.27,716.6

909.4918.8

1,001.5708.0639.8580.0557.0677.8521.0517.8554.1649.0

972.8915.1975.6777.7725.2610.3665.7765.0606.3673.9

Averageweeklycheck

(dollars)6

18.5017.8319.0320.4820.7621.0922.7923.5824.9325.0427.0228.1730.5830.4132.8733.8034.5635.2735.9237.1939.7541.2543.4346.1750.3453.2356.7659.0064.2570.2375.1678.7983.67

84.1085.8085.4884.3382.7081.6980.7781.5381.9083.4283.8986.14

88.2890.3190.2889.2888.3787.2586.4088.5689.1090.59

*Monthly data are seasonally adjusted.1 Includes persons under the State, UCFE (Federal employee, effective January 1955), and RRB (Railroad Retirement Board)

programs. Beginning October 1958, also includes the UCX program (unemployment compensation for ex-servicemen).2 Includes State, UCFE, RR, UCX, UCV (unemployment compensation for veterans, October 1952-January 1960), and SRA

(Servicemen's Readjustment Act, September 1944-September 1951) programs. Also includes Federal and State extended benefitprograms. Does not include FSB (Federal supplemental benefits) and SUA (special unemployment assistance) programs.3 Covered workers who have completed at least 1 week of unemployment.4 Annual data are net amounts and monthly data are gross amounts.5 Individuals receiving final payments in benefit year.6 For total unemployment only.7 Programs include Puerto Rican sugarcane workers for initial claims and insured unemployment beginning July 1963.

8 Latest data available for all programs combined. Workers covered by State programs account for about 94 percent of the total.Source: Department of Labor, Employment and Training Administration.

241

TABLE B-34.— Wage and salary workers in nonagricultural establishments, 1929-79

[Thousands of persons; monthly data seasonally adjusted]

Year or month

Totalwageand

salarywork-

ers

Manufacturing

TotalDurablegoods

Non-durablegoods

Mining Construc-tion

Transpor-tation

andpublic

utilities

Whole-saleand

retailtrade

Finance,insur-ance,andreal

estate

Services

Government

FederalStateandlocal

1929

1933

1939...

1960196119621963.,1964

1965.1966..1967.1968.1969..

19701971197219731974

31,324 10,702

194019411942 „19431944

19451946194719481949

19501951195219531954

19551956195719581959

19751976197719781979 p

23,699

30,603

32,36136,53940,10642,43441,864

40,37441,65243,85744,86643,754

45,19747,81948,79350,20248,990

50,64152,36952,85351,32453,268

54,18953,99955,54956,65358,283

60,76563,90165,80367,89770,384

70,88071,21473,67576,79078,265

76,94579,38282,42386,44689,497

7,397

10,278

10,98513,19215,28017,60217,328

15,52414,70315,54515,58214,441

15,24116,39316,63217,54916,314

16,88217,24317,17415,94516,675

16,79616,32616,85316,99517,274

18,06219,21419,44719,78120,167

19,36718,62319,15120,15420,077

18,32318,99719,68220,47620,979

4,715

5,3636,9688,823

11,08410,856

9,0747,7428,3858,3267,489

8,0949,0899,349

10,1109,129

9,5419,8339,8558,8299,373

9,4599,0709,4809,6169,816

10,40511,28211,43911,62611,895

11,20810,63611,04911,89111,925

10,68811,07711,59712,24612,694

5,564

5,6226,2256,4586,5186,472

6,4506,9627,1597,2566,953

7,1477,3047,2847,4387,185

7,3417,4117,3217,1167,303

7,3377,2567,3737,3807,458

7,6567,9308,0078,1558,272

8,1587,9878,1028,2628,152

7,6357,9208,0868,2308,285

1,087

744

854

925957992925892

836862955994930

901929898866791

792822828751732

712672650635634

632627613606619

623609628642697

752779813851958

1,512

824

1,165

1,3111,8142,1981,5871,108

1,1471,6832,0092,1982,194

2,3642,6372,6682,6592,646

2,8393,0392,9622,8173,004

2,9262,8592,9483,0103,097

3,2323,3173,2483,3503,575

3,5883,7043,8894,0974,020

3,5253,5763,8514,2714,642

3,916

2,672

2,936

3,0383,2743,4603,6473,829

3,9064,0614,1664,1894,001

4,0344,2264,2484,2904,084

4,1414,2444,2413,9764,011

4,0043,9033,9063,9033,951

4,0364,1584,2684,3184,442

4,5154,4764,5414,6564,725

4,5424,5824,7134,9275,154

6,123

4,755

6,426

6,7507,2107,1186,9827,058

7,3148,3768,9559,2729,264

9,3869,742

10,00410,24710,235

10,53510,85810,88610,75011,127

11,39111,33711,56611,77812,160

12,71613,24513,60614,09914,705

15,04015,35215,94916,60716,987

17,06017,75518,51619,49920,140

1,494

1,280

1,447

1,4851,5251,5091,4811,461

1,4811,6751,7281,8001,828

1,8881,9562,0352,1112,200

2,2982,3892,4382,4812,549

2,6292,6882,7542,8302,911

2,9773,0583,1853,3373,512

3,6453,7723,9084,0464,148

4,1654,2714,4674,7274,964

3,425

2,861

3,502

3,6653,9054,0664,1304,145

4,2224,6975,0255,1815,240

5,3575,5475,6995,8355,969

6,2406,4976,7086,7657,087

7,3787,6207,9828,2778,660

9,0369,498

10,04510,56711,169

11,54811,79712,27612,85713,441

13,89214,55115,30316,22017,047

533

565

905

9961,3402,2132,9052,928

2,8082,2541,8921,8631,908

1,9282,3022,4202,3052,188

2,1872,2092,2172,1912,233

2,2702,2792,3402,3582,348

2,3782,5642,7192,7372,758

2,7312,6962,6842,6632,724

2,7482,7332,7272,7532,773

2,532

2,601

3,090

3,2063,3203,2703,1753,116

3,1373,3413,5823,7873,948

4,0984,0874,1884.3404,563

4,7275,0695,3995,6485,850

6,0836,3156,5506,8687,248

7,6968,2208,6729,1029,437

9,82310,18510,64911,06811,446

11,93712,13812,35212,72312,840


242

TABLE B-34.— Wage and salary workers in nonagricultural establishments, 1929-79—Continued

[Thousands of persons; monthly data seasonally adjusted]

Year or month

Totalwageand

salarywork-

ers

Manufacturing

TotalDurablegoods

Non-durablegoods

Mininc Construc-tion

Transpor-tationand

publicutilities

4,6404,6524,6544,6794,7024,712

4,7194,7264,7564,7544,7694,781

4,7974,8294,8574,8954,9104,947

4,8994,9364,9415,0145,0385,054

5,0715,0945,1165,0245,1305,190

5,1695,1945,1805,2185,2275,224

Whole-saleand

retailtrade

18,06518,11718,21318,30918,39318,484

18,55118,63318,71018,78618,90018,981

19,07819,13819,22819,33319,41719,507

19,56219,61219,65319,74419,82919,858

19,96520,01620,05420,08820,12920,116

20,12220,12620,16920,24320,30320,300

Finance,insur-ance,andanorealreal

estate

4,3644,3744,4034,4234,4384,456

4,4674,4884,5114,5354,5614,583

4,6024,6354,6514,6724,6934,723

4,7434,7614,7744,7934,8274,847

4,8684,8844,8994,9154,9364,958

4,9725,0034,9975,0185,0415,070

Services

14,91914,94915,02515,09315,14715,230

15,30115,38615,52615,60615,67515,748

15,77715,86215,96616,06816,12416,196

16,23016,33516,42316,46416,55416,630

16,67016,76316,83316,88016,95417,051

17,09217,14117,19117,25717,31417,385

Government

Federal

2,7242,7242,7302,7242,7252,730

2,7212,7302,7282,7282,7272,725

2,7382,7392,7412,7472,7532,766

2,7632,7632,7552,7602,7572,734

2,7582,7572,7572,7582,7702,788

2,7852,8132,7622,7702,7712,787

Stateandlocal

12,20112,18212,19212,20312,25512,324

12,37712,39612,49112,50512,53612,557

12,59112,63912,69612,75912,79612,799

12,77912,75712,71912,70812,71512,738

12,71912,73812,75312,80612,82812,849

12,85012,88612,91112,90412,91112,948



1978:JanFebMar

May"!!!!!!!!!!!!."!!!June


1979:JanFebMar

May!!!!!!!!!!!!!!!!!!!!!!!June

JulyAugSeptOctNov.Dec".

80,56580,79481,23381,62281,98682,369

82,61682,84983,28783,54983,90884,125

84,42184,73585,24685,96186,22786,590

86,686

87,03287,42487,84088,133

88,43388,70089,03989,03689,39889,626

89,71389,76289,80389,98290,10990,426

19,27219,32419,45619,56819,65519,721

19,76119,78519,80519,85819,92720,055

20,14820,22620,31720,38920,41420,457

20,47420,47620,51120,63320,77220,881

20,95821,02521,07321,06621,05921,063

21,07920,95720,94920,89920,84620,954

11,30111,32011,42311,48511,55411,603

11,64911,68611,69911,74911,79411,896

11,97012,03012,08512,14412,16812,204

12,24712,26312,30812,41912,51012,583

12,64012,71512,75112,75212,73912,760

12,78612,71412,73712,65012,59712,660

7,9718,0048,0338,0838,1018,118

8,1128,0998,1068,1098,1338,159

8,1788,1968,2328,2458,2468,253

8,2278,2138,2038,2148,2628,298

8,3188,3108,3228,3148,3208,303

8,2938,2438,2128,2498,2498,294

801806819825827839

814802837840847696

691696710883882890

895899904910919922

927937940940944949

956968973979984999

3,5793,6663,7413,7983,8443,873

3,9053,9033,9233,9373,9663,999

3,9993,9714,0804,2154,2384,305

4,3414,3414,3524,3984,4294,469

4,4974,4864,6144,5594,6484,662

4,6884,6744,6714,6944,7124,759

Note.—Data in Tables B-34 through B-36 are based on reports from employing establishments and relate to full- and part-time wageand salary workers in nonagricultural establishments who worked during or received pay for any part of the pay period which includesthe 12th of the month.

Not comparable with labor force data (Tables B-27 through B-32), which include proprietors, self-employed persons, domesticservants, and unpaid family workers; which count persons as employed when they are not at work because of industrial disputes, badweather, etc., even if they are not paid for the time off; and which are based on a sample of the working-age population, whereas theestimates in this table are based on reports from employing establishments.

For description and details of the various establishment data, see "Employment and Earnings."


243

TABLE B-35.—Average weekly hours and hourly earnings in selected private nonagricultural industries,

1947-79

[For production or nonsupervisory workers; monthly data seasonally adjusted]

Year or month

Average weekly hours

Totalprivate

non-agricul-turaM

Manufac-turing

Con-struction

Whole-saleand

retailtrade

Average gross hourly earnings,current dollars

Totalprivate

non-agricul-tural >

Manufac-turing

Con-struction

Whole-saleand

retailtrade

Adjusted hourly earnings, totalprivate nonagriculturalz

Index,1967 = 100

Currentdollars dollars3

1967

Percent changefrom a year

earlier4

Currentdollars dollars

1967

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979 "


JulyAug.SeptOctNovDec

1979:JanFebMar

\Hvi~IZZ.June

JulyAugSeptOctNov"Dec"

40.340.039.4

39.839.939.939.639.1

39.639.338.838.539.0

38.638.638.738.838.7

38.838.638.037.837.7

37.136.937.036.936.5

36.136.136.035.835.7

35.535.735.936.035.935.935.935.835.835.835.835.8

35.835.735.935.335.735.6

35.635.635.735.635.735.7

40.440.039.1

40.540.640.740.539.6

40.740.439.839.240.3

39.739.840.440.540.7

41.241.440.640.740.6

39.839.940.540.740.0

39.540.140.340.440.2

39.640.040.540.740.440.540.540.440.540.540.640.6

40.640.640.639.140.240.1

40.240.140.240.240.140.3

38.238.137.7

37.438.138.937.937.2

37.137.537.036.837.0

36.736.937.037.337.2

37.437.637.737.337.9

37.337.236.536.836.6

36.436.836.536.836.9

35.135.836.336.936.637.237.237.037.036.936.837.0

37.136.637.135.537.137.2

36.837.237.536.636.837.1

40.540.440.5

40.540.540.039.539.5

39.439.138.738.638.8

38.638.338.238.137.9

37.737.136.636.135.7

35.335.134.934.634.2

33.933.733.332.932.6

32.832.833.032.932.932.932.932.832.832.932.832.8

32.532.532.732.832.632.6

32.632.532.632.632.732.6

$1,1311.2251.275

1.3351.451.521.611.65

1.711.801.891.952.02

2.092.142.222.282.36

2.462.562.682.853.04

3.233.453.703.944.24

4.534.865.255.696.16

5.475.505.545.615.635.675.725.745.785.845.875.92

5.966.006.046.046.096.13

6.186.226.266.286.336.39

$1,2161.3271.376

1.4391.561.641.741.78

1.851.952.042.102.19

2.262.322.392.452.53

2.612.712.823.013.19

3.353.573.824.094.42

4.835.225.686.176.69

5.945.986.016.066.096.136.196.216.266.336.386.43

6.466.516.566.566.656.68

6.726.746.786.826.876.91

$1,5401.7121.792

1.8632.022.132.282.38

2.452.572.712.822.93

3.073.203.313.413.55

3.703.894.114.414.79

5.245.696.066.416.81

7.317.718.108.659.25

8.328.368.468.488.578.638.668.738.778.788.858.88

8.949.069.039.119.209.19

9.279.329.399.389.459.48

$0,9401.0101.060

1.1001.181.231.301.35

1.401.471.541.601.66

1.711.761.831.891.97

2.042.142.252.412.56

2.722.883.053.233.48

3.733.974.284.675.06

4.524.514.544.604.614.644.684.714.754.794.814.85

4.924.934.964.995.005.03

5.075.105.125.145.195.22

42.646.048.2

50.053.756.459.661.7

63.767.070.373.275.8

78.480.883.585.988.2

91.295.3

100.0106.2113.2

120.7129.2137.5146.0157.5

170.6183.0196.8212.9229.8

205.9206.6208.1210.1211.1212.4214.0214.9216.5218.1219.2220.9

222.6224.0225.2226.8227.5229.0

230.9232.2234.3234.9237.1239.1

63.763.867.5

69.369.070.974.476.6

79.482.383.484.586.8

88.490.292.293.795.0

96.698.0

100.0101.9103.1

103.8106.5109.7109.7106.7

105.9107.3108.4109.0105.6

109.8109.4109.4109.5109.1108.9109.1108.9108.9108.7108.6108.7

108.5107.8107.3106.9106.1105.7

105.6105.1104.9104.2104.1103.8

8.04.8

3.77.45.05.73.5

3.25.24.94.13.6

3.43.13.32.92.7

3.44.54.96.26.6

6.67.06.46.27.9

8.37.37.58.27.9

7.87.77.98.28.08.18.28.38.48.38.38.5

8.18.48.28.07.87.8

7.98.18.27.78.28.2

0.25.8

2.7- . 42.84.93.0

3.73.71.31.32.7

1.82.02.21.61.4

1.71.42.01.91.2

.72.63.0

.0- 2 .7

- . 71.31.0

.6- 3 . 1

1.01.21.21.4.8.7.5.4.1

- . 5- . 5- . 5

- 1 . 2- 1 . 5- 2 . 0- 2 . 4- 2 . 8- 2 . 9

- 3 . 2- 3 . 5- 3 . 6-4 .1- 4 . 1- 5 . 3

1 Also includes other private industry groups shown in Table B-34.2 Adjusted for overtime (in manufacturing only) and for interindustry employment shifts.3 Current dollar earnings index divided by the consumer price index (revised index for urban wage earners and clerical workers used

ieginning 1978).4 Monthly data are computed from indexes to two decimal places.

Note.—See Note, Table B-34.


244

TABLE B-36.—Average weekly earnings in selected private nonagricultural industries, 1947-79

[For production or nonsupervisory workers; monthly data seasonally adjusted]

Year or month

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

197519761977 .19781979'

1978.JanFebMar

tJuneJulyAuga*NovDec


JulyAugSeptoct ::.:::: :.::.:::::::::::::::::::::::::Nov"Dec"

Average gross weekly earnings

Total privatenonagriculturall

Currentdollars

$45.5849.0050.24

53.1357.8660.6563.7664.52

67.7270.7473.3375.0878.78

80.6782.6085.9188.4691.33

95.4598.82

101.84107.73114.61

119.83127.31136.90145.39154.76

163.53175.45189.00203.70219.91

194.19196.35198.89201.96202.12203.55

205.35205.49206.92209.07210.15211.94

213 37214.20216.84213.21217.41218 23

220.01221.43223.48223.57225 98228.12

1967dollars2

$68.1367.9670.36

73.6974.3776.2979.6080.15

84.4486.9086.9986.7090.24

90.9592.1994.8296.4798.31

101.01101.67101.84103.39104.38

103.04104.95109.26109.23104.78

101.45102.90104.13104.30101.02

103.51104.00104.57105.30104.51104.38

104.66104.15104.03104.22104.14104.30

103 98103.13103.31100.48101.40100 75

100.60100.24100.0499.1999 2499.05

Manufac-turing

(currentdollars)

$49.1353.0853.80

58.2863.3466.7570.4770.49

75.3078.7881.1982.3288.26

89.7292.3496.5699.23

102.97

107.53112.19114.49122.51129.51

133.33142.44154.71166.46176.80

190.79209.32228.90249.27268.94

235.22239.20243.41246.64246.04248.27

250.70250.88253.53256.37259.03261.06

262 28264.31266.34256.50267.33267 87

270.14270.27272.56274.16275 49278.47

Construc-tion

(currentdollars)

$58.8365.2367.56

69.6876.9682.8686.4188.54

90.9096.38

100.27103.78108.41

112.67118.08122.47127.19132.06

138.38146.26154.95164.49181.54

195.45211.67221.19235.89249.25

266.08283.73295.65318.32341.33

292.03299.29307.10312.91313.66321.04

322.15323.01324.49323.98325.68328.56

33167331.60335.01323.41341.3234187

341.14346.70352.13343.31347 76351.71

Wholesaleand retail

(currentdollars)

$38.0740.8042.93

44.5547.7949.2051.3553.33

55.1657.4859.6061.7664.41

66.0167.4169.9172.0174.66

76.9179.3982.3587.0091.39

96.02101.09106.45111.76119.02

126.45133.79142.52153.64164.96

148.26147.93149.82151.34151.67152.66

153.97154.49155.80157.59157.77159.08

159 90160.23162.19163.67163.00163 98

165.28165.75166.91167.56169 71170.17

Percent change froma year earlier, total

privatenonagricultural3

Currentdollars

7.52.5

5.88.94.85.11.2

5.04.53.72.44.9

2.42.44.03.03.2

4.53.53.15.86.4

4.66.27.56.26.4

5.77.37.77.88.0

7.56.38.08.57.58.1

8.38.38.28.38.68.9

929.48.65.67.872

7.27.88.17.1727.4

1967dollars

- 0 . 23.5

4.7.9

2.64.3

5.42.9

.1- . 34.1

.81.42.91.71.9

2.7.7.2

1.51.0

- 1 . 31.94.1

- . 0- 4 . 1

- 3 . 21.41.2.2

- 3 . 1

.7- . 01.51.8.4.7

.5

.4- . 0- . 4- . 2

1

.5- 1 . 6- 4 . 6- 2 . 8

34

3.9- 3 . 8

3.8- 4 . 8

49- 5 . 3

1 Also includes other private industry groups shown in Table B-34.2 Earnings in current dollars divided by the consumer price index (revised index for urban wage earners and clerical workers used

beginning 1978).3 Based on unadjusted data.Note.—See Note, Table B-34.Source: Department of Labor, Bureau of Labor Statistics.

245

TABLE B-37.—Productivity and related data, private business sector. 1947-79

[1967 = 100; quarterly data seasonally adjusted]

Year orquarter

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979 "

1977:1IIIllIV

1978:IIIIllIV

1979:1IIIllIV

Output >

Privatebusinesssector

48.750.950.0

54.657.859.562.060.9

65.767.668.567.071.9

73.274.278.882.386.9

92.998.1

100.0105.1108.3

107.3110.3117.5124.4121.4

118.7126.4133.8140.7144.0

131.0132.8135.2136.1

136.9140.3141.8144.0

144.4143.4143.8144.4

Nonfarmbusinesssector

47.549.648.7

53.356.858.560.959.7

64.666.667.665.971.1

72.273.378.181.686.5

92.698.1

100.0105.3108.5

107.4110.2117.8124.9121.8

118.8126.9134.3141.5144.8

131.7133.4135.6136.4

137.3141.1142.7145.0

145.5144.2144.6145.2

Hours of allpersons2


90.991.588.5

89.592.192.293.290.1

93.594.993.589.392.8

92.991.592.993.494.9

97.8100.0100.0101.8104.6

103.0102.4105.5109.6110.3

105.6108.6112.8118.1122.0

110.6112.6113.2114.5

115.6117.9118.4120.2

121.5121.3122.0123.1


79.180.477.3

79.783.484.386.483.5

86.989.188.785.088.7

89.388.390.291.193.2

96.599.8

100.0102.1105.5

104.2103.8107.0111.5112.3

107.4111.0115.6121.1125.4

113.2115.2116.2117.3

118.4121.1121.6123.4

124.8124.9125.7126.4

Output per hour ofall persons


53.655.656.5

61.062.764.566.567.6

70.371.273.275.177.5

78.781.184.888.191.6

95.098.0

100.0103.3103.5

104.2107.7111.4113.6110.1

112.4116.4118.6119.2118.1

118.5117.9119.4118.8

118.4119.0119.7119.8

118.9118.2117.8117.3


60.161.763.0

66.968.169.470.471.5

74.374.776.277.580.1

80.983.086.689.692.8

95.998.4

100.0103.2102.9

103.0106.2110.1112.0108.5

110.5114.4116.2116.8115.5

116.4115.8116.7116.3

116.0116.5117.3117.6

116.6115.4115.0114.9

Compensation perhour3


36.039.039.7

42.446.649.652.854.5

55.859.563.466.269.0

71.974.678.181.085.3

88.794.9

100.0107.6114.9

123.1131.4139.7151.2164.9

181.3197.2213.0231.2252.8

207.7210.8215.3218.5

224.2228.5233.6238.4

244.8250.3255.6260.0


38.441.742.9

45.449.452.155.056.7

58.762.365.968.371.1

74.276.679.782.586.3

89.494.8

100.0107.3114.1

121.7129.9138.4149.2162.8

178.9193.8209.3227.3247.6

204.1207.3211.2214.8

220.6224.6229.4234.3

240.2244.8249.9255.2

Unit labor cost


67.170.170.2

69.674.376.879.380.6

79.483.586.588.189.0

91.392.092.092.093.1

93.396.8

100.0104.1111.0

118.2122.0125.4133.1149.8

161.3169.4179.6194.0214.1

175.2178.8180.2183.8

189.4192.1195.2199.0

205.9211.7217.0221.5


63.967.668.1

67.972.575.178.179.4

79.183.486.488.188.7

91.792.392.092.193.0

93.296.4

100.0104.0110.9

118.1122.3125.7133.2150.0

161.8169.4180.1194.5214.4

175.4179.0180.9184.7

190.2192.7195.6199.3

206.0212.1217.3222.2

Implicit pricedeflator4


65.170.669.8

70.876.077.177.978.6

79.882.284.886.488.1

89.389.890.691.492.7

94.297.2

100.0103.9108.8

113.9118.9123.2130.3143.1

157.5165.5174.8187.2203.8

170.5173.9176.0178.6

180.9185.8188.9192.9

197.2202.0206.1210.0


62.367.568.0

69.173.675.276.877.8

79.481.984.685.988.0

89.289.890.591.592.9

94.196.8

100.0104.0108.7

114.0119.2122.9127.9141.4

156.4164.8174.5186.1202.2

169.8173.6176.2178.3

180.2184.7187.8191.4

195.1200.3204.7208.9

1 Output refers to gross domestic product originating in the sector in 1972 dollars.2 Hours of all persons engaged in the sector, including hours of proprietors and unpaid family workers. Estimates based primarily on

establishment data.3 Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also includes an

estimate of wages, salaries, and supplemental payments for the self-employed.4 Current dollar gross domestic product divided by constant dollar gross domestic product.


246

TABLE B-38.—Changes in productivity and related data, private business sector, 1948-79

[Percent change from preceding period; quarterly data at seasonally adjusted annual rates]

Voor nrTear orquarter

19481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979"

19771IIIIIIV

19781IIIIIIV

19791IIIIIIV "

Outputx


4.5- 1 . 8

9.25.93.04.1

-1 .7

8.02.81.3

-2 .17.3

1.81.46.24.45.6

7.05.52.05.13.0

-.92.86.65.9

- 2 . 4

- 2 . 36.55.85.22.3

10.55.47.62.5

2.410.54.26.4

1.2- 2 . 9

1.11.8


4.4-1 .8

9.46.53.04.1

- 2 . 0

8.23.01.5

- 2 . 57.9

1.61.56.54.55.9

7.16.01.95.33.0

-1 .12.66.96.0

-2 .5

- 2 . 56.95.85.42.3

11.15.36.62.4

2.711.54.56.8

1.2-3 .6

1.21.7

Hours of allpersons2


0.7- 3 . 3

1.12.9

.11.0

- 3 . 3

3.81.5

- 1 . 5- 4 . 5

3.9

.2- 1 . 6

1.6.5

1.5

3.12.3

.01.82.8

- 1 . 6- .63.03.9

.7

- 4 . 32.93.94.73.3

5.77.62.14.6

3.98.41.76.1

4.4- . 72.43.5


1.6- 3 . 8

3.14.61.02.5

- 3 . 4

4.12.5

-.5-4 .1

4.4

.6- 1 . 1

2.11.12.3

3.63.3

.22.13.4

-1 .2_ 4314.2

.7

-4 .33.34.14.83.6

5.87.23.44.0

3.69.41.85.9

4.6.5

2.62.1

Output per hour ofall persons


3.81.6

7.92.82.83.11.6

4.01.32.82.53.2

1.63.14.53.84.0

3.83.22.03.3

.2

.73.33.51.9

- 3 . 0

2.13.51.9

.5-.9

4.6- 2 . 1

5.4- 2 . 0

- 1 . 52.02.4

.3

- 3 . 0- 2 . 2- 1 . 3- 1 . 6


2.72.1

6.11.81.91.51.5

4.0.5

2.01.83.3

1.02.64.33.43.6

3.42.51.63.2

-.3

.13.13.71.7

-3 .1

1.93.51.6

.5- 1 . 2

5.1- 1 . 8

3.1- 1 . 5

- . 91.92.7

.8

-3 .2-4 .1- 1 . 4- . 4

Compensation perhour3


8.51.6

7.09.86.46.53.2

2.56.56.54.44.3

4.23.84.63.85.3

4.07.05.37.66.8

7.16.76.38.29.1

9.98.88.08.59.3

8.26.28.76.1

10.97.99.28.5

11.19.38.86.9


8.63.0

5.88.75.55.63.1

3.66.05.73.84.0

4.43.34.03.54.6

3.56.15.57.36.3

6.76.76.57.89.1

9.98.38.08.68.9

8.76.47.77.0

11.47.58.88.8

10.47.98.58.9

Unit labor cost


4.5.1

- . 96.83.43.31.5

- 1 . 55.23.61.91.0

2.6.7.1

- .11.2

.23.83.34.16.6

6.43.32.86.2

12.5

7.75.06.08.0

10.4

3.48.53.18.3

12.65.86.68.1

14.611.810.38.7


5.7.8

— 36̂ 83.54.01.6

-.45.53.62.0

.7

3.4.6

- .3.1

1.0

.13.53.84.06.7

6.53.52.86.0

12.7

7.94.76.38.0

10.2

3.48.44.58.6

12.45.46.08.0

14.012.510.19.3

Implicit pricedeflator*


8.4-1 .1

1.57.31.5

.1.0.9

1.53.03.21.82.0

1.4.6.9.9

1.4

1.63.22.93.94.7

4.74.43.65.89.8

10.15.05.67.18.9

5.28.44.76.1

5.311.26.98.7

9.310.18.37.8


8.3.8

1.66.52.12.11.3

2.13.23.31.52.4

1.4.6.8

1.01.5

1.32.93.34.04.5

4.94.53.14.1

10.5

10.65.45.96.68.7

4.19.16.24.8

4.410.27.07.8

8.111.09.08.4

1 Output refers to gross domestic product originating in the sector in 1972 dollars.2 Hours of all persons engaged in the sector, including hours of proprietors and unpaid family workers. Estimates based primarily onestablishment data.

3 Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also includes anestimate of wages, salaries, and supplemental payments for the self-employed.4 Current doffar gross domestic product divided by constant dollar gross domestic product.

Note.—Percent changes are based on original data and therefore may differ slightly from percent changes based on indexes in TableB—37.


247

PRODUCTION AND BUSINESS ACTIVITY

TABLE B-39.—Industrial production indexes, major industry divisions, 1929-79

[1967 = 100; monthly data seasonally adjusted]

Year or month

1967 proportion

192919331939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 *



1979JanFebMar

MayJune

JulyAugSeptOctNovDec"

Totalindustrialproduction

100.00

21.613.721.7

25.031.636.344.047.440.735.039.441.138.8

44.948.750.654.851.958.561.161.957.964.8

66.266.772.276.581.789.897.8100.0106.3111.1

107.8109.6119.7129.8129.3117.8130.5138.2146.1152.2

140.0140.3142.1144.4144.8146.1

147.1148.0148.6149.7150.6151.8

151.5152.0153.0150.8152.4152.6

152.8151.6152.4152.2151.8152.2

Total

87.95

22.814.021.5

25.432.437.847.050.942.635.339.440.938.7

45.048.650.655.251.558.260.561.257.064.2

65.465.671.575.881.089.797.9100.0106.4111.0

106.4108.2118.9129.8129.4116.3130.3138.4146.8153.3

140.4140.7142.7144.9145.2146.4

147.7148.6149.6150.7151.6152.9

152.5153.3154.5151.6153.8153.9

154.1152.4153.5153.2152.6153.1

Manufacturing

Durable

51.98

22.59.117.7

23.531.439.954.259.945.231.637.739.335.7

43.548.951.958.751.859.261.161.653.961.9

62.961.868.673.178.389.098.9100.0106.5110.6

102.3102.4113.7127.1125.7109.3122.3130.0139.7146.3

132.1132.3135.0137.6137.9139.0

141.1141.8142.9144.6145.5146.8

146.8147.2148.6144.6147.6147.6

147.2144.2145.9145.8144.7144.8

Nondurable

35.97

23.219.926.1

27.533.334.637.138.638.539.741.342.742.0

46.748.349.251.251.657.260.161.161.667.7

69.371.575.880.085.290.996.7100.0106.2111.5

112.3116.6126.5133.8134.6126.4141.8150.5156.9163.3

152.4152.9153.8155.5155.8157.0

157.2158.4159.3159.5160.4161.7

160.7162.0163.0161.7162.8163.0

164.1164.3164.6163.9164.2165.1

Mining

6.36

43.130.642.1

46.849.751.352.556.255.154.261.364.457.1

63.870.069.471.269.977.982.082.175.378.7

80.380.883.186.489.993.298.2100.0104.2108.3

112.2109.8113.1114.7115.3112.8114.2118.2124.0125.1

114.5114.4119.5125.5126.5127.4

127.1126.2124.4127.9128.0127.4

123.8120.9122.3122.7122.8123.9

124.7126.4125.8127.8129.2130.8

Utilities

5.69

7.46.7

10.7

11.813.314.916.517.517.818.620.122.423.9

27.231.033.736.539.343.948.251.553.959.3

63.467.072.077.083.688.795.5100.0108.4117.3

124.5130.5139.4145.4143.7146.0151.7156.5161.4165.6

160.2159.9158.4158.5159.5160.6

162.0162.2163.0163.2163.7164.7

166.2167.7167.1167.4166.5164.2

164.8165.5165.3164.8164.6164.7

1 Preliminary estimates by Council of Economic Advisers.Source: Board of Governors of the Federal Reserve System, except as noted.

248

TABLE B-40.—Industrial production indexes, market groupings, 1947-79

[1967=100; monthly data seasonally adjusted]

Year or month

1967 proportion

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979 4



1979JanFebMar

tJune


Totalindustrial

production

100.00

39.441.138.8

44.948.750 654.851.9

58.561.161.957.964.8

66.266.711176.581.7

89.897.8

100.0106.3111.1

107.8109.6119.7129.8129.3

117.8130.5138.2146.1152.2

140.0140.3142.1144.4144.8146.1

147.1148.0148.6149.7150.6151.8

151.5152.0153.0150.8152.4152.6

152.8151.6152.4152.2151.8152.2

Final products

Total

47.82

38.640.038.8

43 747.250 754.151.3

55.458.660.357.663.2

65.365.871.475.579.7

87.695.9

100.0106.2109.6

105.3106.3115.7124.4125.1

118.2127.6135.9142.2147.0

136.0137.3139.9141.6141.4142.1

143.2144.2144.5145.1145.3146.1

146.1146.8148.2145.4147.8147.6

147.1145.6147.2146.8146.6147.3

Consumer goods1

Total

27.68

42.443.743.4

49.649.150 253.252.9

59.061.262.662.168.1

70.772.277.181.385.9

92.697.3

100.0105.9109.8

109.0114.7124.4131.5128.9

124.0137.1145.3149.1150.5

143.2145.2147.5149.5149.0149.3

149.8150.6150.8151.2151.3151.5

150.6151.5152.9149.1152.0151.8

150.8148.2149.7149.6148.9149.1

Auto-motive

products

2.83

45.347.447.0

59.152.347.159.555.4

73.660.663.550.563.3

72.566.180.187.791.9

113.3112.8100.0119.4118.1

98.8124.4141.4153.0132.8

125.8155.7175.6179.9168.2

157.6163.9176.4185.9181.2181.6

183.8183.5179.5187.6190.2186.9

181.4179.3186.8163.0182.7175.9

170.3147.3157.6159.5151.6146.0

Homegoods

5.06

37.539.136.2

49.943.043.048.644.9

53.055.754.551.459.0

59.461.366.571.878.4

88.997.9

100.0106.4113.2

110.2115.6129.5142.5136.8

118.8134.1141.9147.7148.6

141.8144.5147.1149.2148.4149.6

150.0149.2149.9148.6147.6147.7

148.6150.9150.6145.2148.1148.8

149.8147.7148.5148.4148.1148.6

Equipment2

Total

20.14

30.632.228.7

31.143.351.956.349.3

50.455.357.551.556.5

58.157.363.767.571.4

80.794.0

100.0106.5109.3

100.194.7

103.8114.5120.0

110.2114.6123.0132.8142.2

126.1126.5129.4130.7131.0132.3

134.0135.3135.9136.6137.1138.6

139.9140.4141.7140.4141.9141.9

142.1141.8143.9143.0143.5144.8

Business

12.63

38.039.534.5

37 045.251253.346.8

50.858.861.151.557.9

59.457.762.765.873.7

84.497.7

100.0105.5112.5

107.0104.1118.0134.2142.4

128.2135.4147.8160.3171.2

152.0153.6156.5158.0158.4160.1

161.7163.4163.8164.8165.0166.8

168.1169.0170.8168.7171.4171.5

171.4171.5173.6171.7172.1173.8

Inter-mediateproducts

12.89

41.944.342.0

48 851.350 954.554.3

61.764.464.463.069.5

70.071.475.779.985.2

90.696.2

100.0106.3112.9

112.9116.7126.5137.2135.3

123.1137.2145.1154.1159.9

150.5150.2150.4152.0152.4154.0

154.7155.6155.6156.4157.8159.9

160.8161.4160.4159.7159.5159.5

159.4160.6159.8159.6159.6159.5

Materials3

Total

39.29

39.541.237.6

45.049.850 556.151.8

61.362.862.856.565.2

66.166.272.176.782.9

92.4100.7100.0106.5112.5

109.2111.3122.3133.9132.4

115.5131.7138.6148.3155.9

141.3140.7142.2145.4146.5148.3

149.3150.2151.2153.2154.5156.2

155.0155.2156.3154.5155.7156.5

157.6156.0156.3156.4155.6155.8

Durablegoods

20.35

38.339.435.3

44.450.551.660.352.0

63.763.963.853.764.0

64.863.370.475.181.9

93.8103.3100.0106.2112.1

103.8104.9117.7134.6132.7

109.1128.0136.1149.0157.7

140.7139.7141.1144.7145.5147.7

150.5151.9153.4155.5157.0159.5

158.1158.0159.2155.7157.9159.5

160.7157.7157.6157.4155.5155.3

Non-durablegoods

10.47

45.9

52.554.954.754.462.1

63.265.871.375.682.2

90.397.5

100.0108.8115.7

115.4120.2132.9142.2142.6

126.6147.8155.6165.6174.8

158.7161.0162.9164.6164.8166.3

164.5165.3167.8168.8170.2171.9

171.0172.4173.1173.0173.8173.4

174.6175.8176.7177.2177.2178.7

1 Also includes clothing and consumer staples, not shown separately.2 Also includes defense and space equipment, not shown separately.3 Also includes energy materials, not shown separately.4 Preliminary estimates by Council of Economic Advisers.Source: Board of Governors of the Federal Reserve System, except as noted.

249

TABLE B-41.—Industrial production indexes, selected manufactures, 1947-79

[1967 = 100; monthly data seasonally adjusted]

Year or month

Durable manufactures

Primarymetals

TotalIronand

steel

Fabri-catedmetalprod-ucts

Non-elec-trical

machin-ery

Electri-cal

machin-ery

Transportationequipment

TotalMotor

vehiclesand

parts

Lumberand

prod-ucts

Nondurable manufactures

Apparelprod-ucts

Printingand

publish-ing

Chem-icalsand

prod-ucts

Foods

1967 proportion..

1947..19481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979»

6.57 4.21 5.93 9.15 8.05 9.27 450 1.64 3.31 4.72 7.74 8.75

1978:JanFeb..Mar.MayJune.

July.AugSeptOctNov.Dec


JulyAugSeptOctNov"Dec"

63.365.855.4

69.775.869.278.563.5

82.582.078.562.372.7

72.471.176.382.392.8

102.1108.4100.0104.3113.8

106.6100.2112.1126.7123.1

96.4109.7111.1119.9121.5

110.4107.7108.0115.5116.0118.3

122.5124.9127.4129.4130.8132.1

123.4120.4123.7121.7121.0124.3

127.1121.0121.7118.7117.6117.5

70.1

93.291.588.266.576.5

77.774.277.384.395.9

105.2108.4100.0103.2112.6

104.796.1

107.1122.3119.8

95.8104.8103.8113.2113.9

102.697.398.4

110.2111.0113.1

116.5118.3121.3123.8124.4125.3

113.3110.8116.2115.8114.3118.1

119.0112.0115.0109.4108.9

49.950.845.8

56.159.958.566.059.4

67.868.870.663.371.0

71.169.475.477.882.6

90.897.2

100.0105.6107.9

102.4103.5112.1124.7124.2

109.9123.9131.0141.6148.6

136.4136.6137.6139.0140.2141.1

142.8143.7144.2144.9145.6147.1

149.1150.8150.2148.8150.3149.3

149.3147.6146.5147.5146.4147.4

39.039.233.4

37.547.751.954.046.1

50.658.057.948.656.7

56.955.462.166.375.6

85.098.8

100.0101.8109.3

104.4100.2116.0133.7140.1

125.1134.5143.6153.6163.7

148.2148.9149.8150.6151.4152.9

154.7155.5156.4157.5157.8158.1

161.2162.9164.0161.8164.3164.5

165.3166.2165.1162.3162.6163.3

22.223.021.6

29.629.834.039.034.7

39.943.142.839.247.6

51.654.862.964.768.4

81.797.9

100.0105.5111.9

108.1107.7122.2143.1143.8

116.5134.8145.4159.4174.6

149.5150.9154.4156.8157.6158.8

162.5161.5163.3164.2165.2167.7

170.9173.2174.2170.6174.7175.1

174.4171.7176.7177.0177.7179.0

31.834.834.9

41.846.654.268.059.2

68.066.070.755.863.2

65.461.571.178.080.0

95.1102.0100.0111.1108.4

89.597.9

108.2118.3108.7

97.4111.1122.2132.5135.3

118.8120.4128.4132.6131.0131.4

133.4134.2134.9139.7142.1142.9

141.2139.9143.7131.6141.9139.4

135.5124.7131.7133.5128.3126.0

60.5

81.265.869.051.066.2

74.765.579.888.390.7

115.9113.9100.0120.3116.5

92.3118.6135.8148.8128.2

111.1142.0161.1169.9159.9

150.4154.6166.2173.2169.1168.9

171.5171.6171.0178.9181.9182.1

177.9173.1179.7156.0176.3169.6

160.2138.5150.6150.6139.7134.8

58.961.354.1

65.765.564.768.468.0

75.975.068.869.979.3

74.778.282.586.392.7

96.3100.0100.0105.5107.9

105.6113.8120.8126.0116.2

107.6123.2131.2136.3137.4

134.0132.5134.0135.1134.4136.3

136.2136.0136.2138.1140.1144.0

137.3137.2137.7137.2136.1136.8

135.2138.0138.6138.7138.4

57.860.359.7

64.363.166.367.266.4

73.375.074.972.880.1

81.782.285.589.192.2

97.499.9

100.0102.9106.7

101.4104.7109.4117.3114.3

107.6125.7134.2134.2131.1

126.5129.8133.3135.3132.7133.7

132.71.37.7139.6136.8135.8136.5

130.3133.5136.5130.8128.2132.0

129.7130.1131.2128.5

43.345.446.6

48.949.749.752.054.1

59.563.265.463.968.2

71.071.373.977.882.6

87.994.6

100.0103.2107.4

107.0107.1112.7118.2118.2

113.3122.5127.6131.5136.9

130.5129.8130.2130.1129.8131.1

131.4131.9132.6132.6133.7134.4

135.6138.2137.3135.7136.8136.9

135.6137.7137.1136.9136.9137.8

19.721.321.0

26.229.731.133.634.1

39.842.745.246.654.3

56.459.265.771.878.8

87.895.7

100.0109.5118.4

120.4125.9143.6154.5159.4

147.2170.9185.7197.4209.8

190.7190.5191.2193.0194.1196.4

198.6199.3201.3202.7204.6207.2

206.5208.6207.4207.7209.7207.8

210.5213.1212.0211.0213.1

55.855.255.9

57.959.060.261.462.7

66.370.171.172.976.5

78.680.983.486.490.4

92.496.0

100.0102.6106.1

108.9112.8116.8120.9124.0

123.4133.0138.8142.7147.8

139.7140.6141.4143.1142.9142.8

143.1143.9143.7143.2143.7144.7

143.9145.5147.6147.0149.2149.5

149.4148.1148.8148.6143.3

1 Preliminary estimates by Council of Economic Advisers. Where unadjusted data are not available for 12 months, data are averages ofseasonally adjusted indexes shown.

Source: Board of Governors of the Federal Reserve System, except as noted.

250

TABLE B-42.—Capacity utilization rate in manufacturing, 1948-79

[Percent; quarterly data seasonally adjusted]

Year or quarter

19481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979"

19741IIIIIIV

19751IIIIIIV

19761IIIIIIV

19771IIIIIIV

19781IIIIIIV

1979|II '.IllIV

FRB series'

Totalmanufac-

turing

82 574.2

82.885.885.489.280.3

87.186.483.775.281.9

80.277.481.683.585.6

89.691.186.987.186.2

79.378.483.587.683.8

72.979.581.984.485.7

85.585.585.179.1

70.370.774.676.1

78.479.580.080.0

80.782.182.482.6

82.083.985.286.4

86.785.985.484.6

Primaryprocess-

ing

87 376.2

88.590.284.989.480.6

92.189.784.775.483.4

79.877.981.683.887.8

91.191.485.787.788.5

82.982.388.292.587.8

73.781.984.086.987.8

90.890.389.480.8

69.970.476.278.4

81.081.982.682.1

82.284.484.584.7

84.086.387.989.5

88.787.988.086.6

Ad-vanced

process-ing

80 073.3

79.883.485.989.380.1

84.384.583.175.181.1

80.477.281.783.484.6

88.991.187.686.885.0

77.476.381.085.081.5

72.578.280.883.084.5

82.682.782.778.2

70.471.073.874.9

77.078.178.578.8

79.880.881.381.3

80.982.783.784.6

85.684.884.083.5

Commerce series2

Totalmanufac-

turing

8686848585

8180838683

77818384

84848478

75757979

82828081

83848282

84848384

848382

Durablegoods

8887838484

7878828582

76818484

83848476

74737877

81837981

84868282

84858385

858482

Non-durablegoods

8586858686

8383858684

79828283

85858480

76788081

82818282

82828282

83828283

838282

Primary-processed

goods

8988878687

8382858985

76828384

87878679

75737878

83838280

83848282

83848485

858483

Advancedproc-essedgoods

8585838484

7980828482

77818384

83838377

75767979

81827982

84848283

84848284

848381

Wharton series3

Totalmanufac-

turing

881

90 587 984 074 278 9

76 973 776 577 779 5

84.288.286.989.290.2

84.182.787.993.290.5

79.886.088.791.7

91.892.092.086.3

77.377.781.482.7

85.286.086.386.5

87.488.989.289.5

89.291.292.494.0

94.493.693.1

Durablegoods

85 3

88 385 381668 073 7

71967 771873 475 5

82.388.086.288.889.6

80.878.384.592.089.2

76.582.685.890.4

90.090.391.085.6

75.474.777.878.2

81.182.783.483.2

83.885.886.487.0

86.989.691.593.7

94.693.592.5

Non-durablegoods

92 0

93 691587 483 086 3

84182 583 383 885 2

86.988.587.989.891.1

88.889.092.994.992.4

84.590.993.093.6

94.594.493.487.4

80.282.086.789.1

91.190.990.691.1

92.693.293.293.0

92.493.693.894.5

94.293.893.9

1 For description of the series, see "Federal Reserve Measures of Capacity and Capacity Utilization," February 1978.2 Quarterly data are for last month in quarter. Annual data are averages of the four indexes, except for 1965 (December index) and

1966-67 (averages of June and December indexes). For description of the series, see "Survey of Current Business," July 1974.3 Annual data are averages of quarterly indexes. For description of the series, see F. Gerard Adams and Robert Summers, "The

Wharton Index of Capacity Utilization: A Ten Year Perspective, 1973 Proceedings of the Business and Economic Statistics Section,American Statistical Association.

Sources: Board of Governors of the Federal Reserve System, Department of Commerce (Bureau of Economic Analysis), and WhartonSchool of Finance.

251

TABLE B-43.—New construction activity, 1929-79

[Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]

Year or month

1929

1933

1939.

19401941194219431944

19451946

New series194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

Totalnew

construc-tion

10.8

2.9

8.2

8.712.014.18.35.3

5.814.3

20.026.126.7

33.635.436.839.141.4

46.547.649.150.055.4

54.756.460.264.867.7

73.776.478.187.193.9

94.9110.0124.1137.9138.5

134.5151.1174.0206.2

Private construction

Total

8.3

1.2

4.4

5.16.23.42.02.2

3.412.1

16.721.420.5

26.726.226.027.929.7

34.834.935.134.639.3

38.939.342.345.547.3

51752.452.559.566.0

66.880.193.9

105.4100.2

93.7111.9135.8160.4

Residentialbuildings'

Total2

3.6

.5

2.7

3.03.51.7

.9

.8

1.36.2

9.913.112.4

18.115.915.816.618.2

21.920.219.019.824.3

23.023.125.227.928.0

27 925.725.630.633.2

31.943.354.359.750.4

46.560.581.093.4

housingunits

3.0

.3

2.3

2.63.01.4

.7

.6

.74.8

7.810.510.0

15.613.212.913.414.9

18.216.114.715.419.2

17.317.119.421.721.8

21719.419.024.025.9

24.335.144.950.140.6

34.447.365.775.8

Presidential buildings and otherconstruction *

Total

4.7

.8

1.7

2.12.71.71.11.4

2.15.8

6.98.28.0

8.610.310.211.311.5

12.914.716.114.815.1

15.916.217.217.619.3

23 826.727.028.932.8

34.936.839.645.749.8

47.251.454.967.0

Commer-cial3

1.1

.1

.3

.3

.4

.2

.0

.1

.21.2

1.01.41.2

1.41.51.11.82.2

3.23.63.63.63.9

4.24.75.15.05.4

7.89.4

9.811.613.515.515.9

12.812.814.818.6

Indus-trial

0.9

.2

.3

.4

.8

.3

.2

.2

.61.7

1.71.41.0

1.12.12.32.22.0

2.43.13.62.42.1

2.92.82.82.93.6

6.06.8

6.55.44.76.27.9

8.07.27.7

11.0

Other4

2.6

.5

1.2

1.31.51.2.9

1.1

1.33.0

4.25.55.9

6.16.76.87.37.2

7.38.09.08.89.0

8.98.79.29.7

10.3

15.116.6

18.619.821.524.025.9

26.431.532.437.4

Public construction

Total

2.5

1.6

3.8

3.65.8

10.76.33.1

2.42.2

3.34.76.3

6.99.3

10.811.211.7

11.712.714.115.516.1

15.917.117.919.420.4

22 124.025 527.628.0

28.129.930.232.538.3

40.939.138.245.8

Federal

0.2

.5

.8

1.23.89.35.62.5

1.7.9

.81.21.5

1.63.04.24.13.4

2.82.73.03.43.7

3.63.93.94.03.9

4040353.43.3

3.34.04.44.95.3

6.37.07.38.3

State andlocal *

2.3

1.1

3.1

2.42.01.3

.7

.6

.71.4

2.53.54.8

5.26.36.67.18.3

8.910.011.112.112.3

12.213.314.015.416.5

18 020 022124.224.7

24.825.925.827.733.0

34.632.130.937.5


252

TABLE B-43.—New construction activity, 1929-79—Continued

[Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]

Year or monthTotalnew

construc-tion

Private construction

Total

Residentialbuildings1

Total2New

housingunits

Nonresidential buildings and otherconstruction'

Total Commer-cial3 Indus-

trial Other4

Public construction

Total Federal State andlocal5

1978:JanFeb.Mar

tJune


1979:JanFebMar

MPay".ZJune

JulyAugSeptOctNov'

174.9181.0188.6198.3204.4206.2

212.8213.7215.3217.8220.0223.2

212.3210.9216.7216.4223.4224.3

231.1230.3232.6238.5235.3

137.3144.4149.4155.0158.6161.5

164.6165.1166.5168.5170.7173.8

165.9169.3172.7171.9175.0178.3

180.1180.6181.6185.6184.1

79.986.488.791.493.794.9

95.695.896.095.997.599.7

93.797.896.595.795.296.9

97.097.599.099.298.3

65.171.673.074.175.376.7

77.677.777.777.678.980.7

73.677.275.976.075.777.7

77.778.379.178.377.0

57.458.060.763.664.966.6

69.069.370.572.673.274.0

72.171.576.276.279.881.4

83.183.182.686.385.7

15.715.416.317.318.819.4

19.219.219.219.920.420.5

19.819.021.021.523.624.8

24.825.825.726.726.6

8.18.39.39.59.2

10.6

11.612.012.513.012.913.5

12.713.415.214.014.514.7

15.513.813.715.014.7

33.634.235.036.836.936.5

38.238.138.739.739.940.1

39.639.240.040.741.741.9

42.743.543.244.644.4

37.636.639.243.445.944.7

48.248.648.849.349.349.4

46.441.644.044.548.446.0

51.049.750.952.951.2

7.67.57.78:48.07.3

9.49.49.28.38.78.5

8.87.89.78.19.38.1

9.69.69.78.28.7

30.029.131.535.037.837.4

38.839.339.541.140.640.9

37.633.834.336.439.137.9

41.340.141.244.742.5

1 Beginning 1960, farm residential buildings included in residential buildings; prior to I960, included in nonresidential buildings andother construction.2 Total includes additions and alterations and nonhousekeeping units, not shown separately.3 Office buildings, warehouses, stores, restaurants, garages, etc.4 Religious, educational, hospital and institutional, miscellaneous nonresidential, farm (see also footnote 1), public utilities, and allother private.

5 Includes Federal grants-in-aid for State and local projects.Source: Department of Commerce (Bureau of the Census).

2 9 4 - 2 8 9 0 - 8 0 - 1 7253

TABLE B-44.—New housing units started and authorized, 1959-79

[Thousands of units]

Year or month

New housing units started

Private and public*

Total(farm andnonfarm)

Nonfarm

Private1

Total (farm and nonfarm)

Total

Type of structure

One unit2 to 4units

5 unitsor more

New private housing unitsauthorized2

Total

Type of structure

One unit2 t o 4units

5 unitsor more

1959

I960..1961196219631964

19651966196719681969

19701971197219731974

19751976197719781979"

1978:JanFeb.,Mar.

June



July...Aug...Sept..Oct....Nov"Dec ".

1,553.7

1,296.11,365.01,492.51,634.91,561.0

1,509.71,195.81,321.91,545.41,499.5

1,469.02,084.52,378.52,057.51,352.5

1,171.41,547.61,989.82,023.31,746.6

88.6101.3172.3197.5211.1216.1

192.3190.9181.1192.1158.6121.4

88.484.7

153.3161.3189.1192.0

165.0171.4163.8169.0119.2

89.2

1,531.3

1,274.01,336.81,468.71,614.81,534.0

1,487.51,172.81,298.81,521.41,482.3

1,517.0

1,252.21,313.01,462.91,603.21,528.8

1,472.81,164.91,291.61,507.61,466.8

1,433.62,052.22,356.62,045.31,337.7

1,160.41,537.51,987.12,020.31,742.5

1,7441,6592,0112,1762,0372,093

2,1042,0042,0242,0542,1072,074

1,6791,3811,7861,7451,8351,923

1,7881,7931,9211,7641,5221,527

1,234.0

994.7974.3991.4

1,012.4970.5

963.7778.6843.9899.4810.6

812.91,151.01,309.21,132.0

888.1

892.21,162.41,450.91,433.31,193.3

283.0

257.4338.7471.5590.8

108.4 450.0

86.661.171.680.985.0

84.8120.3141.3118.3

68.1

64.085.9

121.7125.0122.3

422.5325.1376.1527.3571.2

535.9780.9906.2795.0381.6

204.3289.2414.4462.0426.9

1,208.3

998.01,064.21,186.61,334.71,285.8

1,239.8971.9

1,141.01,353.41,323.7

1,351.51,924.62,218.91,819.51,074.4

939.21,296.21,690.01,800.51,537.3

938.3

746.1722.8716.2750.2720.1

709.9563.2650.6694.7625.9

646.8906.1

1,033.1882.1643.8

675.5893.6

1,126.11,182.6

971.0

77.1

64.667.687.1

118.9100.8

84.861.073.084.385.2

88.1132.9148.6117.0

64.3

63.993.1

121.3130.6124.8

Seasonally adjusted annual rates

192.9

187.4273.8383.3465.6464.9

445.1347.7417.5574.4612.7

616.7885.7

1,037.2820.5366.2

199.8309.5442.7487.3441.5

1,2901,1711,4131,4821,4631,439

1,4551,4311,4321,4361,5021,539

1,139953

1,2661,2781,2261,288

1,2201,2391,2541,159985

1,071

1108812613892143

134137112135150119

12476116115119123

138156122139123106

344400472556482511

515436480483455416

416352404352490512

430398545466414350

1,7231,7051,7421,9141,7561,983

1,7651,7161,8381,8351,7891,827

1,4511,4251,6211,5171,6181,639

1,5281,6541,7751,5421,2631,204

1,1671,0971,1301,2751,1751,245

1,1401,1291,1841,2091,1721,268

929881

1,0561,0361,0471,012

1,0011,0301,015927751768

112119131124122169

116124131135134139

12595126119116132

13515115113799104

444489481515459569

509463523491483420

396449439362455495

392473609478413332

1 Units in structures built by private developers for sale upon completion to local public housing authorities under the Department ofHousing and Urban Development "Turnkey" program are classified as private housing. Military housing starts, including those financedwith mortgages insured by FHA under Section 803 of the National Housing Act, are included in publicly owned starts and excluded fromtotal private starts.

2 Authorized by issuance of local building permit: in 16,000 permit-issuing places beginning 1978; in 14,000 places for 1972-77; in13,000 places for 1967-71; in 12,000 places for 1963-66; and in 10,000 places prior to 1963.

3 Not available separately beginning January 1970.

Note.—Only the series on private and public nonfarm housing units started is available prior to 1959. See 1976 "Economic Report"for this earlier series.


254

TABLE B-45.—Business expenditures for new plant and equipment, 1947-80x


Year or quarter

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

197519761977197819793 .. ..1980 3

1978:1IIIIIIV

1979:1IIIIIIV 3

1980:I3II3

Total

19.3321.3018.98

20.2125.4626.4328.2027.19

29.5335.7337.9431.8933.55

36.7535.9138.3940.7746.97

54.4263.5165.4767.7675.56

79.7181.2188.4499.74112.40

112.78120.49135.80153.82176.37195 67

144.25150.76155.41163.96

165.94173.48179.33184.32

189.32195.76

Manufacturing

Total

8.449.017.12

7.3910.7111.4511.8611.24

11.8915.4016.5112.3812.77

15.0914.3315.0616.2219.34

23.4428.2028.5128.3731.68

31.9529.9931.3538.0146.01

47.9552.4860.1667.6278.3089 51

61.5767.2067.7573.24

71.5676.4280.2283.04

85.0289.11

Durablegoods

3.253.302.45

2.944.825.215.314.91

5.417.457.845.615.81

7.236.316.797.539.28

11.5014.0614.0614.1215.96

15.8014.1515.6419.2522.62

21.8423.6827.7731.6637.8943 76

28.7231.4032.2533.99

34.0036.8639.7240.16

42.3244.44

Non-durablegoods

5.195.714.68

4.455.896.246.566.33

6.487.958.686.776.95

7.858.028.268.70

10.07

11.9414.1414.4514.2515.72

16.1515.8415.7218.7623.39

26.1128.8132.3935.9640.4145 75

32.8635.8035.5039.26

37.5639.5640.5042.88

42.7044.68

Nonmanufacturing

Total

10.8912.2911.86

12.8214.7514.9816.3415.95

17.6420.3421.4319.5120.78

21.6621.5823.3324.5527.62

30.9835.3236.9639.4043.88

47.7651.2257.0961.7366.39

64.8268.0175.6486.1998.07106 16

82.6883.5687.6690.71

94.3897.0699.12101.28

104.29106.65

Mining

0.69.93.88

.841.111.211.251.28

1.311.641.691.431.36

1.301.291.401.271.34

1.461.621.651.631.86

1.892.162.422.743.18

3.794.004.504.785.526 45

4.454.814.994.98

5.465.315.425.91

4.95

Transportation

Rail-road

0.911.371.42

1.181.581.501.42.93

1.021.371.58.86

1.02

1.16.82

1.021.261.66

1.992.371.861.451.86

1.781.671.801.962.54

2.552.522.803.323.884 40

3.353.093.383.49

4.023.664.034.00

3.92

Air

0.17.10.12

.10

.14

.24

.24

.24

.26

.35

.41

.37

.78

.66

.73

.52

.401.02

1.221.742.292.562.51

3.031.882.462.412.00

1.841.301.622.303.343 44

2.672.082.202.39

3.353.263.103.74

5.09

Other

1.131.17.76

1.091.331.231.291.22

1.301.311.301.061.33

1.301.231.651.581.50

1.681.641.481.591.68

1.231.381.461.662.12

3.183.632.512.432.973 41

2.442.232.472.55

2.712.793.163.22

3.75

Publicutilities

1.542.543.10

3.243.563.744.343.99

4.034.525.675.525.14

5.245.004.904.985.49

6.137.438.74

10.2011.61

13.1415.3017.0018.7120.55

20.1422.2825.8029.4833.1834 39

27.9228.4629.6231.73

32.3533.2433.3333.76

33.07

Commu-nication

1.401.741.34

1.141.371.611.781.82

2.112.823.192.792.72

3.243.393.854.064.61

5.306.026.346.838.30

10.1010.7711.8912.8513.96

12.7413.3015.4518.1620.18

Commer-cial andother2

5.054.424.24

5.225.675.456.026.45

7.638.327.607.488.44

8.759.139.9910.9912.02

13.1914.4814.5915.1416.05

16.5918.0520.0721.4022.05

20.6020.9922.9725.7128.98

54 07

17.0718.1818.9018.46

18.7520.2920.41

50

24.7624.7126.0927.12

27.7328.5129.66

65

53 5?

1 Excludes agricultural business; real estate operators-, medical, legal, educational, and cultural services; and nonprofit organizations.These figures do not agree precisely with the nonresidential fixed investment data in the gross national product estimates, mainlybecause those data incTude investment by farmers, professionals, nonprofit institutions, and real estate firms, and certain outlayscharged to current account.

2 Commercial and other includes trade, service, construction, finance, and insurance.3 Planned capital expenditures as reported by business in late October-December 1979. Plans are adjusted when necessary forsystematic bias.


255

TABLE B-46.—Sales and inventories in manufacturing and trade, 1947-79

[Amounts in millions of dollars; monthly data seasonally adjusted]

Year or month

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

1978.JanFebMar

£ :June


1979JanFebMar

MayJune


Total manufacturing andtrade

Salesl

35,26033,788

38,59643,35644,84047,98746,443

51,69454,06355,87954,20159,729

60,82761,15965,66268,99573,682

80,28387,18790,34898,143105,042

107,475116,035130,049151,720175,350

179,982201,814224,686254,125

232,439238,873242,926249,868251,588252,380

252,728259,226260,099266,724269,792272,537

273,304274,579285,372275,936287,139283,388

289,206293,059296,394299,077298,433

Inven-tories2

52,50749,497

59,82270,24272,37776,12273,175

79,51687,30489,05287,09392,129

94,71395,594101,063105,480111,503

120,907136,790145,335156,166169,841

178,337188,563203,161234,163285,519

285,035310,736338,099379,630

341,516344,337349,407353,863357,248360,065

363,048366,574369,227372,404376,812379,630

384,190387,822391,893397,530401,504405,966

413,395416,956417,334421,205424,149

Ratio3

1.421.53

1.361.551.581.581.60

1.471.551.591.601.50

1.561.541.501.491.47

1.451.471.561.541.55

1.621.581.501.441.47

1.581.481.451.41

1.471.441.441.421.421.43

1.441.411.421.401.401.39

1.411.411.371.441.401.43

1.431.421.411.411.42

Manufacturing

Sales1

15,51317,31616,126

18,63421,71422,52924,84323,355

26,48027,74028,73627,24730,286

30,87930,92333,35735,05837,331

40,99544,87046,48750,26853,540

52,83255,92563,04272,95484,821

86,61798,810110,842124,714

114,287118,246120,048123,082122,895123,760

123,079127,029127,483130,415132,082133,796

135,301135,962142,503134,126142,288138,960

141,730142,532143,201145,551144,141

Inven-tories2

25,89728,54326,321

31,07839,30641,13643,94841,612

45,06950,64251,87150,24152,945

53,78054,88558,18660,04663,409

68,18577,95284,65990,61798,210

101,667102,677108,296124,672157,915

158,178170,156179,981198,041

181,322182,798184,066185,826187,536189,267

190,783192,412193,764194,500196,803198,041

200,908203,642205,589209,178211,085214,339

216,560219,137221,417223,450226,159

Ratio3

1.581.571.75

1.481.661.781.761.81

1.621.731.801.841.70

1.751.741.701.691.64

1.601.621.761.741.77

1.901.831.671.581.65

1.831.661.591.52

1.581.541.531.511.521.53

1.551.511.521.491.491.48

1.481.501.441.561.481.54

1.531.541.551.541.57

Merchant wholesalers

Sales1

6,8086,514

7,6958,5978,7829,0528,993

9,89310,51310,47510,25711,491

11,65611,98812,67413,38214,529

15,61116,98719,44820,84622,609

23,94326,25729,58436,82245,836

44,63348,40853,50962,842

56,26057,72958,80361,64063,17162,656

63,42564,89464,53167,33867,55267,823

67,14867,49570,82470,44472,93772,625

75,10675,73376,26477,91578,117

Inven-tories2

7,9577,706

9,2849,88610,21010,68610,637

11,67813,26012,73012,73913,879

14,12014,48814,93616,04817,000

18,31720,76525,37726,60429,114

32,80335,82339,78646,25456,537

55,11361,30767,99880,771

69,19170,32572,62974,32774,77975,191

75,74476,33877,11378,62579,52680,771

81,54383,00584,07884,97385,25785,245

88,14488,72788,39388,78488,648

Ratio3

1.131.19

1.071.161.121.171.18

1.131.191.231.241.15

1.221.201.161.151.14

1.151.151.251.251.23

1.291.301.271.171.12

1.241.211.211.19

1.231.221.241.211.181.20

1.191.181.191.171.181.19

1.211.231.191.211.171.17

1.171.171.161.141.13

Retail trade

Sales1

10,20011,13511,149

12,26813,04613,52914,09114,095

15,32115,81116,66716,69617,951

18,29418,24919,63020,55621,823

23,67725,33024,41327,03028,893

30,70033,85337,42241,94444,692

48,73154,59760,33566,568

61,89262,89864,07565,14665,52265,964

66,22467,30368,08568,97170,15870,918

70,85571,12272,04571,36671,91471,803

72,37074,79476,92975,61176,17577,020

Inven-tories2

14,24116,00715,470

19,46021,05021,03121,48820,926

22,76923,40224,45124,11325,305

26,81326,22127,94129,38631,094

34,40538,07335,29938,94542,517

43,86750,06355,07963,23771,067

71,74479,27390,120100,818

91,00391,21492,71293,71094,93395,607

96,52197,82498,35099,279100,483100,818

101,739101,175102,226103,379105,162106,382

108,691109,092107,524108,971109,342

Ratio3

1.261.391.41

1.381.641.521.531.51

1.431.471.441.431.40

1.451.431.381.391.40

1.391.441.431.381.41

1.411.411.401.411.49

1.451.391.401.44

1.471.451.451.441.451.45

1.461.451.441.441.431.42

1.441.421.421.451.461.48

1.501.461.401.441.44

1 Monthly average for year and total for month.2 Seasonally adjusted, end of period.3 Inventory/sales ratio. For annual periods, ratio of weighted average inventories to average monthly sales; for monthly data, ratio of

inventories at end of month to sales for month.Note.—Earlier data are not strictly comparable with data beginning 1958 for manufacturing and beginning 1967 for wholesale and

retail trade.The inventory figures in this table do not agree with the estimates of change in business inventories included in the gross national

product since these figures cover only manufacturing and trade rather than all business, and show inventories in terms of current bookvalue without adjustment for revaluation.

Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).

256

TABLE B-47.—Manufacturers' shipments and inventories, 1947-79

[Millions of dollars; monthly data seasonally adjusted]

Year or month

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

1978.JanFebMar

£JuneJulyAugSeptOctNovDec

1979-JanFebMar

tJuneJulyAugSeptOctNov

Shipments1

Total

15,51317,31616,126

18,63421,71422,52924,84323,355

26,48027,74028,73627,24730,286

30,87930,92333,35735,05837,331

40,99544,87046,48750,26853,540

52,83255,92563,04272,95484,821

86,61798,810110,842124,714

114,287118,246120,048123,082122,895123,760

123,079127,029127,483130,415132,082133,796

135,301135,962142,503134,126142,288138,960

141,730142,532143,201145,551144,141

Dura-ble

goodsindus-tries

6,6947,5797,191

8,84510,49311,31313,34911,828

14,07114,71515,23713,56315,609

15,88315,61617,26218,28019,637

22,22124,64925,26727,69829,477

28,21529,97334,04339,70344,253

43,67850,69758,01066,505

59,85662,55263,76465,55665,01865,593

65,10667,97268,47670,09671,39272,637

72,89773,64676,85570,99675,69872,629

73,58574,41674,01275,57073,657


8,8199,7388,935

9,78911,22111,21611,49411,527

12,40913,02513,49913,68414,677

14,99615,30716,09516,77817,694

18,77420,22021,22022,57024,064

24,61725,95228,99933,25140,568

42,93948,11352,83258,210

54,43155,69456,28457,52657,87758,167

57,97259,05759,00760,31960,68961,159

62,40462,31665,64863,13066,59066,331

68,14568,11669,18969,98170,484

Total

25,89728,54326,321

31,07839,30641,13643,94841,612

45,06950,64251,87150,24152,945

53,78054,88558,18660,04663,409

68,18577,95284,65990,61798,210

101,667102,677108,296124,672157,915

158,178170,156179,981198,041

181,322182,798184,066185,826187,536189,267

190,783192,412193,764194,500196,803198,041

200,908203,642205,589209,178211,085214,339

216,560219,137221,417223,450226,159

Inventories'

Durable goods industries

Total

13,06114,66213,060

15,53920,99123,73125,87823,710

26,40530,44731,72830,25832,077

32,37132,54434,63235,86638,506

42,25749,92054,99658,87164,739

66,79066,31370,30881,426101,866

101,766109,095115,552129,226

116,467117,728118,731119,901121,426122,529

123,624124,952126,108126,715128,422129,226

131,699133,994135,278137,903139,502141,700

143,369144,966145,927148,042150,332

Mate-rialsand

supplies

8,9667,894

9,19410,41710,60810,03210,776

10,35310,27910,81011,06811,970

13,32515,48916,45417,38918,710

19,19819,77820,89326,06235,228

33,62936,56238,74541,468

38,36138,73338,72338,92339,42539,677

39,75140,20541,09340,86941,27641,468

42,03042,61543,57043,84844,50444,885

45,53846,49246,38247,73448,406

Workin

proc-ess

10,7209,721

10,75612,31712,83712,38713,063

12,77213,20314,15914,87116,191

18,07521,93925,00127,31430,377

29,83628,65430,81935,54642,683

42,92344,84346,99055,449

47,76148,66149,30050,13750,96351,558

52,52553,13753,32454,11454,88955,449

56,27557,26257,65658,99559,97561,461

62,00662,77663,82864,89266,096

Finishedgoods

6,2066,040

6,3487,5658,1257,8398,239

9,2459,0639,6629,92510,344

10,85412,49113,54214,16715,651

17,75617,88218,59719,81823,956

25,21427,69029,81632,309

30,34530,33530,70830,84131,03831,294

31,34731,61131,69131,73232,25632,309

33,39434,11734,05235,06035,02335,354

35,82535,69835,71735,41635,830

Nondurable goods industries

Total

12,83613,88113,261

15,53918,31517,40518,07017,902

18,66420,19520,14319,98320,868

21,40922,34123,55424,18024,903

25,92828,03229,66231,74633,471

34,87736,36437,98743,24556,048

56,41261,06164,43068,816

64,85565,07065,33565,92566,11066,739

67,15867,46067,65767,78568,38168,816

69,20969,64870,31171,27571,58372,639

73,19174,17175,49075,40875,827

Mate-rialsand

supplies

8,3178,167

8,5568,9718,7758,6629,080

9,0829,4939,8139,97810,131

10,44811,15511,71512,28912,726

13,15413,68014,67618,13423,689

23,19925,05625,22726,610

25,31025,38025,75825,72025,76226,184

26,03725,95626,05926,16526,42726,610

27,09827,29227,71228,08928,07928,400

28,51529,26629,36929,57730,044

Workin

proc-ess

2,4722,440

2,5712,7212,8642,8282,944

2,9463,1103,2963,4063,511

3,8064,2044,4234,8495,124

5,2755,6695,9836,7138,179

8,6929,57610,14210,717

10,15210,26810,23910,33410,31510,278

10,36610,37010,46910,66310,69510,717

10,83910,99010,98211,14911,24811,335

11,54811,59811,89011,98111,871

Finishedgoods

7,4097,415

7,6668,6228,6248,4918,845

9,3809,73810,44410,79611,261

11,67412,67313,52414,60815,621

16,44817,01517,32818,39824,180

24,52126,42929,06131,489

29,39329,42229,33829,87130,03330,277

30,75531,13431,12930,95731,25931,489

31,27231,36631,61732,03732,25632,904

33,12833,30734,23133,85033,912

1 Monthly average for year and total for month.2 Book value, seasonally adjusted, end of period, except as noted.Note.—Data beginning 1958 are not strictly comparable with earlier data.Source: Department of Commerce, Bureau of the Census.

257

TABLE B-48.—Manufacturers' new and unfilled orders, 1947-79

[Amounts in millions of dollars; monthly data seasonally adjusted]

Year or month

New orders1

Total

Durable goodsindustries

Total

Capitalgoodsindus-tries,non-

defense

Non-durablegoods

industries

Unfilled orders2

TotalDurablegoods

industries

Non-durablegoods

industries

Unfilled orders—shipmentsratio3

TotalDurablegoods

industries


1947.19481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

1978:Jan..Feb.Mar.

June.

July..Aug.SeptOctNov.Dec...

1979:JanFeb.MarMPayJune.

July..AugSept.OctNov....

15,25617,69315,614

20,11023,90723,20423,58622,335

27,46528,36827,55927,00230,724

30,23531,10433,43635,52438,357

42,10046,40247,06250,68453,967

52,06855,99064,16276,18387,157

85,08299,184112,451128,488

117,197121,220124,585126,896127,022126,651

124,076129,870131,608136,714137,794138,069

141,748144,036148,586139,332143,594142,269

140,508142,664147,154146,640146,569

6,3888,1266,633

10,16512,84112,06112,14710,768

14,99615,36514,11113,29016,003

15,30315,75917,37418,70920,652

23,27826,17725,83128,11329,887

27,41830,00435,05942,85346,740

41,95751,04759,56270,145

62,61165,54168,13869,24968,89568,313

65,93570,59372,39976,46376,91276,831

79,64781,31283,08876,09977,02775,820

72,54574,02977,56076,66375,417

7,0707,746

6,8007,5178,803

11,08912,737

10,77212,50115,08418,308

16,17317,19017,18217,27717,60817,608

17,45018,35819,83521,03220,75419,132

21,41022,86823,97820,76720,96521,753

20,23220,73721,81520,99921,419

9,5668,981

9,94511,06611,14311,43911,566

12,46913,00313,44813,71214,720

14,93215,34516,06116,81517,705

18,82320,22521,23122,57124,079

24,65025,98629,10433,33040,417

43,12548,13752,88958,343

54,58555,67956,44857,64758,12758,338

58,14159,27759,20860,25060,88261,238

62,10162,72465,49863,23366,56766,449

67,96368,63569,59469,97771,152

34,47330,73624,045

41,45667,26675,85761,17848,266

60,00467,37553,18347,37052,732

45,08047,40748,57754,32766,882

80,07198,401105,030109,912115,142

105,916106,772120,395159,468187,574

169,126173,646193,150238,652

196,061199,035203,575207,388211,514214,406

215,403218,244222,368228,667234,381238,652

245,113253,187259,267264,479265,782269,086

267,863267,994271,946273,047275,471

28,57926,61919,622

35,43563,39472,68058,63745,250

56,24163,88050,35244,55949,373

42,51444,37545,96551,27063,691

76,29894,575101,058105,935110,969

101,323101,744114,059152,089182,037

161,286165,509184,319228,181

187,075190,064194,440198,132202,009204,729

205,557208,178212,101218,468223,989228,181

234,943242,608248,839253,948255,273258,457

257,417257,029260,576261,679263,435

5,8944,1174,423

6,0213,8723,1772,5413,016

3,7633,4952,8312,8113,359

2,5663,0322,6123,0573,191

3,7733,8263,9723,9774,173

4,5935,0286,3367,3795,537

7,8408,1378,831

10,471

8,9868,9719,1359,2559,5069,677

9,84510,06610,26710,19910,39210,471

10,17010,57910,42810,53110,50910,629

10,44610,96511,37011,36812,036

3.42

3.633.873.353.093.01

2.782.632.692.803.10

3.333.813.713.843.74

3.643.373.293.874.12

3.693.203.173.35

3.313.223.233.203.293.29

3.323.233.273.313.353.35

3.443.513.413.713.533.65

3.573.563.633.563.66

4.12

4.274.554.003.693.54

3.373.133.243.373.72

3.954.554.424.644.48

4.384.043.894.584.94

4.423.833.773.92

3.953.823.833.803.923.91

3.953.813.843.903.943.92

4.064.134.014.424.194.34

4.274.223.744.224.34

0.96

1.121.04

.85

.86

.94

.72

.79

.68

.73

.72

.76

.73

.69

.69

.77

.77

.88

.93

.64

.83

.74

.73

.81

.76

.74

.74

.73

.75

.76

.76

.78

.81

.78

.79

.81

.76

.79

.75

.76

.73

.75

.71

.76

.79

.77

.82

1 Monthly average for year and total for month.2 Seasonally adjusted, end of period.3 Ratio of unfilled orders at end of period to shipments for period; excludes industries with no unfilled orders. Annual figures relate

to seasonally adjusted data for December.Note.—Data beginning 1958 are not strictly comparable with earlier data.Source: Department of Commerce, Bureau of the Census.

258

PRICESTABLE B-49.—Consumer price indexes, major expenditure classes, 1929-79

[1967 = 100]

Year or month Allitems

Food andbeverages

Total * Food

Housing

Total2Rent,resi-

dential

Homeowner-

ship

Fuel andother

utilities3

Appareland

upkeepTrans-

portationMedical

careEnter-

tainment

Othergoodsand

services

Ener-gy4

192919331939

1940194119421943194419451946194719481949

1979:JanFebMar

51.338.841.6

42.044.148.851.852.753.958.566.972.171.4

1950195119521953195419551956195719581959

72.177.879.580.180.580.281.484.386.687.3

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979

1978:Jan...Feb...Mar..

88.789.690.691.792.994.5

June


May"!MayJuneJulyAugSeptOctNovDec

97.2100.0104.2109.8

116.3121.3125.3133.1147.7161.2170.5181.5195.4217.4

187.2188.4189.8191.5193.3195.3

196.7197.8199.3200.9202.0202.9

204.7207.1209.1211.5214.1216.6

218.9221.1223.4225.4227.5229.9

100.0103.6108.8

114.7118.3123.2139.5158.7172.1177.4188.0206.3228.5

194.6197.3199.5202.6205.2208.5

209.7210.1210.3211.6212.5214.1

218.3222.4224.4226.3228.2229.3

230.7230.2231.0232.1233.1235.5

48.330.634.6

35.238.445.150.349.650.758.170.676.673.5

74.582.884.383.082.881.682.284.988.587.1

88.089.189.991.292.494.499.1

100.0103.6108.9

114.9118.4123.5141.4161.7175.4180.8192.2211.4234.5

199.2202.0204.2207.5210.3213.8

215.0215.4215.6216.8217.8219.4

223.9228.2230.4232.3234.3235.4

236.9236.3237.1238.2239.1241.7

52.252.453.756.256.858.159.160.665.269.870.9

72.877.278.780.881.782.383.686.287.788.6

90.290.991.792.793.894.997.2

100.0104.0110.4

118.2123.4128.1133.7148.8164.5174.6186.5202.8227.6

193.8195.0196.7198.3199.9202.0

203.8205.2207.5209.5210.6211.5

213.1215.6217.6219.8222.4225.5

228.4231.5234.6237.7240.8243.6

76.054.156.0

56.257.258.558.558.658.859.261.165.168.0

70.473.276.280.383.284.385.987.589.190.4

91.792.994.095.095.996.998.2

100.0102.4105.7

110.1115.2119.2124.3130.6137.3144.7153.5164.0176.0

158.8159.7160.5161.5162.7163.6

164.2165.1166.4167.4168.5169.5

170.3171.0171.3172.0173.8174.7

175.9177.5179.0181.4182.1182.9

75.076.377.078.381.783.584.4

86.386.987.989.090.892.796.3

100.0105.7116.0

128.5133.7140.1146.7163.2181.7191.7204.9227.2262.4

215.0216.4218.3220.4222.5225.3

228.3230.6234.2237.0238.8239.5

241.6245.6248.2251.7254.9258.8

263.0267.6271.9276.7282.4286.9

83.083.585.187.389.991.793.8

95.997.197.398.298.498.398.8

100.0101.3103.6

107.6115.0120.1126.9150.2167.8182.7202.2216.0239.3

208.5210.6212.6213.9215.5217.5

218.0218.1218.8220.1218.5219.9

221.5223.3225.9227.5232.2239.0

243.5247.2251.2252.9252.0255.1

48.536.942.4

42.844.852.354.658.561.567.578.283.380.1

79.086.185.384.684.584.185.887.387.588.2

89.690.490.991.992.793.796.1

100.0105.4111.5

116.1119.8122.3126.8136.2142.3147.6154.2159.6166.6

155.7154.5156.5158.4159.8159.9

158.0159.6161.9163.3164.1163.2

160.7161.4164.3165.4166.1165.7

164.3166.3169.8171.0171.7172.2

43.042.744.248.147.947.947.850.355.561.866.4

68.272.577.379.578.377.478.883.386.089.6

89.690.692.593.094.395.997.2

100.0103.2107.2

112.7118.6119.9123.8137.7150.6165.5177.2185.5212.0

179.0179.4179.9181.1183.2185.5

187.2188.1188.7189.7191.4192.6

193.9195.6198.1202.9207.7212.6

216.6219.6221.4222.7224.9227.7

36.736.837.038.039.941.142.144.448.151.152.7

53.756.359 361.463.464.867 269.973.276.4

79.181483.585.687 389593.4

100.0106.1113.4

120.6128.4132.5137.7150.5168.6184.7202.4219.4239.7

211.2213.3214.5215.7216.9217.9

219.4221.4222.6224.7227.0227.8

230.7232.6233.9235.1236.3237.7

239.9241.8243.7245.9248.0250.7

100.0105.7111.0

116.7122.9126.5130.0139.8152.2159.8167.7176.6188.5

171.9172.9174.1175.6176.2176.2

177.0177.4178.3179.3179.5180.9

182.3183.2184.8186.5187.8188.2

189.1190.2191.1192.0192.8193.4

100.0105.2110.4

116.8122.4127.5132.5142.0153.9162.7172.2183.3196.7

178.5179.0179.3179.8180.4181.0

183.1184.0187.8188.3188.8189.1

190.5191.9192.8193.2193.9194.5

195.2197.0201.7202.3202.9204.0

90.190.391.8

94.294.494.795.094.696 397.8

100.0101.5104.2

107.0111.2114.3123.5159.7176.6189.3207.3220.4275.9

211.8213.0214.3215.7217.7

220.7222.4223.7225.1226.5225.9228.3

231.5235.0241.2250.2260.8275.4

287.1296.3304.3307.5307.8313.7

1 Includes alcoholic beverages, not shown separately.2 Includes other items, not shown separately. Series beginning 1967 not comparable with series for earlier years.3 Gas (piped) and electricity; fuel oil, coal, and bottled gas; and other utilities and public services.4 Gas (piped) and electricity; fuel oil, coal, and bottled gas; and gasoline, motor oil, coolant, etc.Note.—Data beginning January 1978 are for all urban consumers; earlier data are for urban wage earners and clerical workers.Source: Department of Labor, Bureau of Labor Statistics.

259

TABLE B-50.—Consumer price indexes, selected expenditure classes, 1939-79

[1967 = 100]

Year ormonth

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

I9601961196219631964196519661967L9681969

1970197119721973197419751976197719781979

1978:JanFebMar

tHayZ'Z.'.June


1979:JanFebMarApr|y|3yJune

JulyAug

OctNovDec

Food and beverages

Total

100.0103.6108.8

114.7118.3123.2139.5158.7172.1177.4188.0206.3228.5

194.6197.3199.5202.6205.2208.5

209.7210.1210.3211.6212.5214.1

218.3222.4224.4226.3228.2229.3

230.7230.2231.0232.1233.1235.5

Food

Total

34 6

35 238 445150.349 650.758170.676 673.5

74.582 884 383.082.881.682 284.988.587.1

88.089189.991292.494.4991

100.0103.6108.9

114.9118.4123.5141.4161.7175.4180.8192.2211.4234.5

199.2202.0204.2207.5210.3213.8

215.0215.4215.6216.8217.8219.4

223.9228.2230.4232.3234.3235.4

236.9236.3237.1238.2239.1241.7

Athome

73.579.876.7

77.686.387 886.285.884.184.487.291.088.8

89.690.491.092.293.295.5

100.3100.0103.2108.2

113.7116.4121.6141.4162.4175.8179.5190.2210.2232.9

197.0200.1202.5206.5209.7213.9

214.7214.5214.1215.4216.1217.9

223.1228.0229.9231.7233.4234.2

235.5233.9234.7235.4236.0238.7

Awayfromhome

68.970.170.872 274.977.279.3

81.483 285.487.388.990.9951

100.0105.2111.6

119.9126.1131.1141.4159.4174.3186.1200.3218.4242.9

208.2210.5212.3214.0215.8217.8

219.9221.7223.2224.6225.9227.4

230.2233.4236.0238.4241.1242.7

244.9246.5247.6249.6251.3253.4

Homeownership

Total

75.076.377.078.381.783.584.4

86.386.987.989.090.892.796.3

100.0105.7116.0

128.5133.7

• 140.1146.7163.2181.7191.7204.9227.2262.4

215.0216.4218.3220.4222.5225.3

228.3230.6234.2237.0238.8239.5

241.6245.6248.2251.7254.9258.8

263.0267.6271.9276.7282.4286.9

Mnmopur-

chase

86.587.187.387 690.091391.3

91.892 393.294 295.797.098 6

100.0102.8109.5

118.3124.8130.0132.7142.7160.3168.4179.5196.7223.1

188.1189.0190.5191.7193.4195.3

197.4197.9201.2203.4204.8207.1

208.1210.9212.7215.4217.6220.9

224.0226.9229.8233.4237.3239.9

ing,"taxes,

andinsur-ance

100.0108.3123.7

142.3143.5150.8160.6181.1201.9212.8227.2257.8308.9

240.5242.4244.8247.7250.8254.7

259.3264.1268.9272.4274.7273.1

276.6283.5287.7292.1297.2302.2

308.6316.4323.0330.5340.1348.3

Mainte-nanceand

repair

71.272.474.177.280.581.883.2

84.685.986.587.789.591.395.2

100.0106.1115.0

124.0133.7140.7151.0171.6187.6199.6214.7233.0256.4

222.4223.5225.5228.4229.6231.9

234.4236.1237.5240.7242.3243.3

245.2245.9247.5250.6252.4255.5

257.9259.7262.5264.7266.4268.3

Total

83.083.585.187 389.991.793.8

95.997197.398 298.498.398 8

100.0101.3103.6

107.6115.0120.1126.9150.2167.8182.7202.2216.0239.3

208.5210.6212.6213.9215.5217.5

218.0218.1218.8220.1218.5219.9

221.5223.3225.9227.5232.2239.0

243.5247.2251.2252.9252.0255.1

Fuel arid other utilities

Household fuels

Total

100.01014103.4

107.9115.3120.1128.4160.7183.8202.3228.6247.4286.4

235.9239.2242.1244.2246.8250.2

250.7250.4251.5254.0250.6252.7

256.3259.3264.0266.8274.6286.2

293.8299.7306.6310.3307.0311.8

Gasand

elec-tricity

82 9

82181.481080.680 379.677 477.179181.0

81.281.582 684.285.387.588 489.392.494.7

98.699 499.499.499.499.499.6

100.0100.9102.8

107.3114.7120.5126.4145.8169.6189.0213.4232.6257.8

219.7223.3226.6229.2232.5236.5

237.2236.9237.9240.0234.9236.2

239.5241.2244.0245.3251.6259.9

264.5266.5270.1272.5267.3270.8

Fueloil,

coal,and

bottledgas

37 1

38 240 543145.247 148.051358.468 670.3

72.776 578 081581.282.385 990.388 789.8

89.291091.593 292.794.697 0

100.0103.1105.6

110.1117.5118.5136.0214.6235.3250.8283.4298.3403.1

295.2296.9297.2296.6295.6295.1

294.5294.2295.7300.1306.1311.8

316.4326.1339.5349.8364.3391.2

412.9438.6461.6470.8477.4488.0

Otherutili-tiesandpublicservices

100.0101.2104.0

107.4114.7120.6124.1130.3137.1145.4152.0158.3159.5

156.3156.8157.3157.7157.7157.9

158.4159.1159.2158.9159.7160.1

159.0159.C158.8158.8159.C159.2

159.4159.S159.8158.fi161.C161.9


260

TABLE B-50.—Consumer price indexes, selected expenditure classes, 1939-79—Continued

[1967 = 100]

Year or month

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979

1978:JanFebMar

MPayJune


1979-JanFebMar

MayJune


Total

43.0

42.744.248.147 947.947.850.355.561.866.4

68.272.577.379 578.377.478.883.386 089.6

89.690.692 593.094 395.997 2

100.0103.2107.2

112.7118.6119.9123.8137.7150.6165.5177.2185 5212.0

179.0179.4179.9181.1183.2185.5

187.2188.1188.7189.7191.4192.6

193.9195.6198.1202.9207.7212.6

216.6219.6221.4222.7224.9227.7

Transportation

Private

Total

44.2

43.645.952.351451.451.354.361.568.272.3

72.575.880.882 480.378.980.184.787 491.1

90.691.393 093.494 796.397 5

100.0103.0106.5

111.1116.6117.5121.5136.6149.8164.6176.6185 0212.3

178.2178.6179.1180.3182.6185.0

186.8187.7188.3189.4191.1192.5

193.8195.5198.1203.2208.1213.3

217.4220.4222.0223.1225.0227.5

cars

43.2

43.346.6

69.275.682.8

83.487.494.995.894.390.993.598.4

1015105.9

104.5104.51041103.5103 2100.9991

100.0102.8104.4

107.6112.0111.0111.1117.5127.6135.7142.9153.8166.0

150.9151.2151.1151.2152.5153.5

153.9153.8153.5155.5158.5159.8

161.2162.3162.7164.3165.8166.3

166.7166.6166.1167.5170.6171.7

Usedcars

89.275.971.869.177.480 289.5

83.686.994 896.0

100199.497 0

100.0

103.1

104.3110.2110.5117.6122.6146.4167.9182.8186.5201.0

169.8170.0172.3177.3184.6191.5

195.9196.7195.9195.4194.7194.0

193.6193.4195.4200.0205.4208.9

209.2207.0202.9199.9198.4198.2

Gaso-line

49.0

48.150.553.454.054.253.854.962.270.472.3

71.873.975.880 382.583.686.590.088 889.9

92.591.491991.891494.997 0

100.0101.4104.7

105.6106.3107.6118.1159.9170.8177.9188.2196.3265.6

190.0189.5189.4190.2191.8194.4

197.2199.8201.5201.9203.5206.2

209.1213.0220.6234.7247.7265.0

280.0292.0301.0303.8306.9313.9

Mainte-nanceand

repair

43.1

43.044.948.849 450.050.452.056 459.661.1

62.367.068.672.374.876.579.582.483 785.5

87.289.390 491.692 894.596 2

100.0105.5112.2

120.6129.2135.1142.2156.8176.6189.7203.7220.6242.6

212.0214.1215.3216.3217.7219.5

220.9222.5224.4226.4228.2229.3

231.3233.9236.3238.2240.1242.0

244.0245.7247.1249.1250.8252.6

Other

100.0103.4109.7

119.2128.4129.1127.8132.4141.2163.1177.3184.6198.6

181.7182.5182.5182.6182.8183.4

183.9184.3185.3186.9189.0190.6

191.4192.5193.4194.8196.4197.3

198.5200.5201.7203.7205.5207.5

Publictranspor-

tation

33.1

33.133.133.333.433.533.534.436.040.745.2

48.954.057.561.365.567.470.072.776178.3

81.084.687 488.590191.995 2

100.0104.6112.7

128.5137.7143.4144.8148.0158.6174.2182.4187.8200.3

186.6186.8187.2187.3187.4187.2

187.7187.6188.2189.3189.7189.1

190.0190.7191.5192.6193.3194.0

197.1200.8205.2209.1216.5223.0

Medical care

Total

36.7

36.837.038.039.941.142.144.448.151.152.7

53.756.359.361.463.464.867.269.973 276.4

79.181.483 585.687 389.593 4

100.0106.1113.4

120.6128.4132.5137.7150.5168.6184.7202.4219.4239.7

211.2213.3214.5215.7216.9217.9

219.4221.4222.6224.7227.0227.8

230.7232.6233.9235.1236.3237.7

239.9241.8243.7245.9248.0250.7

Medi-cal

careserv-ices

32.5

32.532.733.735.436.937.940.143.546.448.1

49.251.755.057.058.760.462.865.568.772.0

74.977.780 282.684.687.392 0

100.0107.3116.0

124.2133.3138.2144.3159.1179.1197.1216.7235.4258.3

226.5228.7229.9231.3232.5233.5

235.4237.7239.1241.5244.1244.8

248.3250.4251.8253.1254.4255.9

258.5260.6262.8265.3267.6270.7

Medicalcarecom-

modities

71.1

70.871.473.073.574.374.876.281.886.187.4

88.591.091.892.693.794.796.799.3

102 8104.4

104.5103.31017100.8100.5100.2100 5100.0100.2101.3

103.6105.4105.6105.9109.6118.8126.0134.1143.5153.8

138.8140.1141.0141.8142.7143.4

144.0144.5145.1145.9147.0148.0

148.8150.1150.7151.6152.4153.3

154.1155.0155.8156.6157.8159.2

1 Not available.Note.—Data beginning January 1978 are for all urban consumers; earlier data are for urban wage earners and clerical workers.Source: Department of Labor, Bureau of Labor Statistics.

261

TABLE B-51.—Consumer price indexes by commodity and service groups, 1939-79

[1967 = 100]

Year or month

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979

1978JanFebMar

May '.June


1979:JanFebMarAprMay::.:.:::::::::::::::::June

July. *AugSept ...OctNov.. ..Dec

Allitems

41.6

42.044.148.851.852.753.958.566.972.171.4

72.177.879.580.180.580.281.484.386.687.3

88.789.690.691.792.994.597.2100.0104.2109.8

116.3121.3125.3133.1147.7161.2170.5181.5195.4217.4

187.2188.4189.8191.5193.3195.3

196.7197.8199.3200.9202.0202.9

204.72071209.12115214.1216.6

218.9221.1223 4225.4227 5229.9

Commodities

Allcom-

modities

40.2

40.643.349.654.054.756.362.475.080.478.3

78.885.987.086.785.985.185.988.690.690.7

91.592.092.893.694.695.798.2100.0103.7108.4

113.5117.4120.9129.9145.5158.4165.2174.7187.1208.4

179.2180.2181.6183.5185.5187.5

188.6189.3190.5191.8192.9194.2

195.8198 3200.5203 3205.8208.4

210 5212.22141215.6217 4219.4

Food

34.6

35.238.445.150.349.650.758.170.676.673.5

74.582.884.383.082.881.682.284.988.587.1

88.089.189.991.292.494.499.1100.0103.6108.9

114.9118.4123.5141.4161.7175.4180.8192.2211.4234.5

199.2202.0204.2207.5210.3213.8

215.0215.4215.6216.8217.8219.4

223.9228 2230.4232 3234.3235.4

236 9236.32371238.22391241.7

Commodities less food

All

47.7

48.050.456.058.461.664.168.176.882.781.5

81.487.588.388.587.586.987.890.591.592.7

93.193.494.194.895.696.297.5100.0103.7108.1

112.5116.8119.4123.5136.6149.1156.6165.1174.7195.1

168.6168.8170.0171.3173.0174.4

175.4176.3177.8179.1180.3181.3

181.9183 7185^188 9191.6194.7

197 0199 52018203 4205 4207.2

Durable

48.5

48.151.458.460.365.970.974.180.386.287.4

88.495.196.495.793.391.591.594.495.997.3

96.796.697.697.998.898.498.5100.0103.1107.0

111.8116.5118.9121.9130.6145.5154.3163.2173.9191.1

166.6167.2168.3169.9172.0173.9

175.3175.9177.2178.8180.0181.2

182.0183 6184^187 2189.2191.1

192 6193 6194 5196 0198 4199.8

Non-durable

44.3

44.746.751.653.856.658.662.972.277.876.3

76.282.082.483.183.583.585.387.688.289.3

90.791.291.892.793.594.897.0100.0104.1108.8

113.1117.0119.8124.8140.9151.7158.3166.5174.3198.7

169.7169.6170.7171.8172.8173.7

174.1175.4177.1178.1179.1180.0

180.3182 2185J189 6193.2197.6

2011205 4209 6211.3212 9215.2

Allservices

43.5

43.644.245.646.447.548.249.151.154.356.9

58.761.864.567.369.570.972.775.678.580.8

83.585.286.888.590.292.295.8100.0105.2112.5

121.6128.4133.3139.1152.1166.6180.4194.3210.9234.2

202.0203.5204.9206.5208.0209.9

211.7213.4215.6217.6218.6219.2

221.1223 3225.1227 0229.5232.1

234 7237 6240 7243 6246 2249.3

Services

Rent

56.0

56.257.258.558.558.658.859.261.165.168.0

70.473.276.280.383.284.385.987.589.190.4

91.792.994.095.095.996.998.2100.0102.4105.7

110.1115.2119.2124.3130.6137.3144.7153.5164.0176.0

158.8159.7160.5161.5162.7163.6

164.2165.1166.4167.4168.5169.5

170.31710171.3172 0173.8174.7

175 9177 5179 0181.4182 1182.9

Serv-iceslessrent

38.1

38.138.640.342.144.245.146.749.051.954.5

56.059.362.264.866.768.270.173.376.479.0

81.983.985.587.389.291.595.3100.0105.7113.8

123.7130.8135.9141.8156.0171.9186.8201.6219.4244.9

209.8211.4213.0214.6216.2218.3

220.4222.2224.6226.7227.8228.2

230.4232 9235.0237 1239^242.6

245 6248 825212551258 2261.6

Special indexes

Allitemslessfood

47.2

47.348.752.153.655.756.959.464.969.670.3

71.175.777.579.079.579.781.183.885.787.3

88.889.790.892.093.294.596.7100.0104.4110.1

116.7122.1125.8130.7143.7157.1167.5178.4191.2213.0

183.8184.7185.9187.4189.0190.6

192.0193.3195.1196.7197.8198.6

199.82018203^206 3208.9211.8

214 2216 9219 6221.82241266.4

Allitemsless

energy

83.986.387.0

88.389.390.491.692.994.397.3100.0104.4110.3

117.0122.0126.1133.8146.9160.2169.2179.8193.8213.1

185.6186.7188.2190.0191.7193.6

195.0196.1197.6199.2200.4201.3

202.9205 2206.9208 8210 7212.2

213 8215.4217 3219.22214223.6

Allitemslessfoodandener-gy

83.385.287.0

88.389.390.591.693.094.396.6100.0104.6110.7

117.6123.1126.9131.3142.2155.3165.5175.8188.7207.0

181.4182.2183.4184.9186.4188.0

189.3190.5192.4194.0195.3196.0

197.0198 8200.4202 3204.1205.8

207 3209 42115213.62161218.1

Note.—Data beginning January 1978 are for all urban consumers; earlier data are for urban wage earners and clerical workers.Source: Department of Labor, Bureau of Labor Statistics.

262

TABLE B-52.—Changes in consumer price indexes, major groups, 1948-79

[Percent change]

Year or month

19481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979

1978:JanFebMartJune




All items

Dec.to

Dec 1

27- 1 . 8

5.85.9.9.6

- .5

.42.93.01.81.5

1.5.7

1.21.61.2

1.93.43.04.76.1

5.53.43.48.8

12.2

7.04.86.89.0

13.3

Yearto

year

78- 1 . 0

1.07.92.2.8.5

- .41.53.62.7.8

1.61.01.11.21.3

1.72.92.94.25.4

5.94.33.36.2

11.0

9.15.86.57.7

11.3

Commodities

Total

Dec.to

Dec.1

17- 4 . 1

7.75.9

-.7- .6

- 1 . 4

- .42.62.61.3.6

1.10

1.01.4.8

1.62.52.53.85.5

4.02.93.4

10.412.7

6.33.36.18.9

13.0

Yearto

year

72- 2 . 6

.69.01.3

- .3- .9

- .9.9

3.12.3.1

.9

.5

.9

.91.1

1.22.61.83.74.5

4.73.43.07.4

12.0

8.94.35.87.1

11.4

Food

Dec.to

Dec.'

08- 3 . 7

9.67.4

- 1 . 1- 1 . 3- 1 . 6

- .93.12.82.2

- .8

3.1- .91.51.91.4

3.43.91.24.37.2

2.24.34.7

20.112.2

6.5.6

8.011.810.2

Yearto

year

85- 4 . 0

1.411.11.8

- 1 . 5- .2

- 1 . 4.7

3.34.2

- 1 . 6

1.01.3.9

1.41.3

2.25.0.9

3.65.1

5.53.04.3

14.514.4

8.53.16.3

10.010.9

Commoditiesless food

Dec.to

Dec.1

53- 4 . 8

5.74.6

_ 5.2

- 1 . 4

02.52.2.8

1.5

- .3.6.7

1.2.4

.71.93.13.74.5

4.82.32.55.0

13.2

6.25.14.97.7

14.3

Yearto

year

77- 1 . 5

_ i

is.9.2

- 1 . 1

- .71.03.11.11.3

.4

.3

.7

.7

.8

.61.42.63.74.2

4.13.82.23.4

10.6

9.25.05.45.8

11.7

Services

Dec.to

Dec.1

613.6

3.65.24.64.21.9

2.33.14.52.73.7

2.71.91.72.31.8

2.64.94.06.17.4

8.24.13.66.2

11.3

8.17.37.99.3

13.7

Yearto

year

634.8

3.25.34.44.33.3

2.02.54.03.82.9

3.32.01.92.01.9

2.23.94.45.26.9

8.15.63.84.49.3

9.58.37.78.5

11.0

All items lessfood

Dec.to

Dec.1

55-.8

4.15.01.71.7

0

.92.63.21.62.3

1.01.11.21.61.0

1.63.33.54.95.7

6.53.13.05.6

12.2

7.16.26.38.5

14.0

Yearto

year

721.0

1.16.52.41.9.6

.31.83.32.31.9

1.71.01.21.31-3,

1.42.33.44.45.5

6.04.63.03.99.9

9.36.66.57.2

11.4

Change from preceding month

Unad-justed

066799

10

768854

.91210111212

111010

99

1.1

Sea-sonally

ad-justed

0768889

.669866

.91.21.01.11.11.0

1.01.11.11.01.01.2

Unad-justed

05.68

101111

646767

.81.31.11.41.21.3

1.0.8.9.7.8.9

Sea-sonally

ad-justed

08.5.8.9.8.9

.4

.5

.8

.8

.78

1.11.21.11.2.9

1.0

.9

.91.1.8.9

1.1

Unad-justed

151.41.11.61.31.7

.6

.2

.1

.6

.57

2.11.91.0.8.9.5

.6- .3

.3

.5

.41.1

Sea-sonally

ad-justed

121.11.21.71.21.4

.1

.4

.7

.9

.610

1.41.61.11.0.7.2

.1

.0

.9

.8

.51.3

Unad-justed

0.1

'.7.8

1.0.8

.6

.5

.9

.7

.76

.31.01.21.61.41.6

1.21.31.2.8

1.0.9

Sea-sonally

ad-justed

07.2.6.5.6.6

.6

.6

.9

.7

.78

.91.01.11.31.11.3

1.21.31.2.8

1.11.1

Unad-justed

07.7.7.8.7.9

.9

.81.0.9.53

.91.0.8.8

1.11.1

1.11.21.31.21.11.3

Sea-sonally

ad-justed

06.8.8.9.9.9

.8

.8

.9

.9

.54

.51.1.9.9

1.31.0

1.11.21.11.21.11.3

Unad-justed

04.5.6.8.9.8

.7

.7

.9

.8

.64

.61.01.01.21.31.4

1.11.31.21.01.01.0

Sea-sonally

ad-justed

07.5.7.7.7.7

.7

.7

.8

.8

.66

.81.01.01.21.21.1

1.21.31.21.01.11.2

1 Changes from December to December are based on unadjusted indexes.Note.—Data beginning January 1978 are for all urban consumers; earlier data are for urban wage earners and clerical workers.Source: Department of Labor, Bureau of Labor Statistics.

263

TABLE B—53.—Changes in special consumer price indexes, 1958-79

[Percent change]

Voor nr mnnthTear or rnonin

19581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979

1978:janFebMar

May '.June


1979JanFebMar

MayJune


All items

Dec.to

Dec.3

181.5

157

121612

1934304761

55343488

12 2

70486890

13.3

Un-adjusted

0.6.6.7

coco

1.0

.7

.6

.8

.8

.5

.4

.91.21.01.11.21.2

1.11.01.0.9.9

1.1

Yearto

Year

2.7.8

1610111213

1729294254

59433362

110

91586577

11.3

Sea-sonally

adjusted

0.7.6.8.8.8.9

.6

.6

.9

.8

.6

.6

.91.21.01.11.11.0

1.01.11.11.01.01.2

All items lessfood

Dec.to

Dec.3

1.62.3

1.01.11.21.61.0

1.63.33.54.95.7

6.53.13.05.6

12.2

7.16.26.38.5

14.0

Un-adjusted

0.4

'.e.8.9.8

.7

.7

.9

.8

.6

.4

.61.01.01.21.31.4

1.11.31.21.01.01.0

Yearto

Year

231.9

1.71.01.21.31.3

1.42.33.44.45.5

6.04.63.03.99.9

9.36.66.57.2

11.4

All items lessenergy1

Dec.to

Dec.3

191*4

1.4.8

1.21.81.3

1.93.53.14.96.4

5.63.33.58.3

11.5

6.74.66.89.2

11.1

Yearto

Year

2.9

1.51.11.21.31.4

1.53.22.84.45.7

6.14.33.46.19.8

9.15.66.37.8

10.0

All items lessfood andenergy1

Dec.to

Dec.3

182.2

.81.51.11.81.2

1.53.33.95.16.1

6.63.13.04.7

11.3

6.76.16.48.5

11.3

Change from preceding month

Sea-sonally

adjusted

0.7

.7

.7

.7

.7

.7

.7

.8

.8

.6

.6

.81.01.01.21.21.1

1.21.31.21.01.11.2

Un-adjusted

0.7.6.8

1.0.9

1.0

.7

.6

.8

.8

.6

.4

.81.1.8.9.9.7

.8

.7

.9

.91.01.0

Sea-sonally

adjusted

0.7.5.9.8.8

1.0

.5

.7

.8

.8

.8

.7

.81.0.8.8.7.7

.6

.81.0.9

1.11.3

Un-adjusted

0.4.4.7

bo b

o

.9

.7

.61.0.8.7.4

.59.8.9.9.8

.71.01.01.01.2.9

Yearto

Year

2.3

1.51.11.31.21.5

1.42.43.54.65.8

6.24.73.13.58.3

9.26.66.27.39.7

Sea-sonally

adjusted

0.8.4.6.7.8.8

.7

.7

.8

.7

.7

.6

.89.7.8.8.8

.71.0.8

1.01.11.2

All items lesshome purchaseand finance2

Dec.to

Dec.3

4.35.5

4.73.73.39.0

12.2

6.75.16.38.1

11.3

Un-adjusted

0.5.6.8.9.9

1.0

.5

.5

.5

.7

.5

.5

.91.0.9

1.11.21.1

.9

.8

.8

.6

.6

.9

Yearto

Year

4.14.7

5.14.53.16.6

11.1

8.85.86.56.9

10.0

Sea-sonally

adjusted

0.6.4.8.7.7.9

.4

.6

.6

.8

.6

.7

1.0.8.9.9

1.11.0

.8

.9

.9

.6

.71.0

1 Seasonally adjusted data are estimates.2 All items less home purchase and financing, taxes, and insurance. All data are estimates.3 Changes from December to December are based on unadjusted indexes.Note.—Data beginning January 1978 are for all urban consumers; earlier data are for urban wage earners and clerical workers.Source: Department of Labor, Bureau of Labor Statistics.

264

TABLE B-54.—Producer price indexes by stage of processing, 1947-79

[1967=100]

Year or month

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

197519761977197819791

1978:Jan ....FebMar

tJuneJulyAugSeptOctNovDec

1979: *JanFebMarMayJuneJulyAugSeptOctNovDec

Finished goods

Totalfinishedgoods

74 079.977.6

79.086.586.085.185.3

85.587.991.193.293.0

93.793.794.093.794.1

95.798.8100.0102.9106.6

110.3113.7117.2127.9147.5

163.4170.3180.6194.6215.9

187 0188.5189.1191.5193.1194.5196.0195.6197.1199.6200.3202.5

205 4207.7209.1211.4212.7213.7

216.2217.3220.4223.7225.9227.8

Consumer foods

Total

82 890.483.1

84.795.294.389.488.7

86.586.389.394.590.1

92.191.792.591.491.9

95.4101.6100.0103.7110.0

113.5115.3121.7146.4166.9

181.0180.2189.1206.7226.3

195.0199.6200.2204.5206.8209.5210.4205.9209.4212.0211.7215.8

220 2225.1226.3227.8226.6223.6

224.9223.5227.8226.7230.5232.0

Crude

99 4107.1101.3

92.2105.9112.8105.294.7

98.898.797.4103.594.3

100.696.197.095.598.2

98.6104.8100.0107.5116.0

116.3115.8121.2160.7180.8

181.2194.8201.8215.5231.3

197.9210.2207.5220.2212.0211.7234.1212.8213.7212.9220.8232.1

236 7257.2244.6241.8226.7227.1

224.9231.7213.9215.4228.0227.8

Proc-essed

80 287.680.1

83.493.291.386.787.6

84.484.387.993.189.5

90.790.991.790.790.8

94.9101.0100.0103.0108.9

113.1115.1121.7143.9164.6

181.3177.4186.4204.1223.7

192.9196.9197.8201.4204.4207.3206.6203.4207.1209.9209.0212.5

216 9220.5222.8224.6224.4221.3

222.8220.7226.8225.4228.6230.1

Finished goods excluding consumer foods

Total

160F102.6105.4

109.1113.1115.4120.1139.3

156.2165.5176.2188.9210.6

182.7183.2183.8185.6186.9188.0189.6190.4191.4193.7194.8196.4

198 8200.2201.7204.2206.3208.5

211.4213.2215.9220.6222.2224.3

Consumer goods

Total

79 084.082.2

83.589.588.389.189.4

90.192.394.694.795.9

96.396.296.096.095.9

96.698.1100.0102.1104.6

107.7111.4113.4118.5138.6

153.1161.8172.1183.7208.1

177.4177.8178.3180.5181.9182.9184.8185.7186.5188.3189.0191.0

193 4194.9196.7199.3202.1205.2

208.9212.3215.9220.6222.4225.0

Durable

74 679.781.8

82.788.288.989.690.3

91.294.397.198.499.6

99.298.898.397.898.2

97.998.5100.0102.2104.0

106.9110.8113.2115.8126.3

138.2144.4152.2165.8181.5

158 5158.3159.0163.2165.0165.3167.7168.4169.1170.9170.7173.0

175 2176.2176.8178.4179.5180.4

181.6181.1182.0187.4188.5191.2

Non-durable

80 785.882.3

83.690.087.888.688.9

89.491.193.292.694.0

94.794.794.895.194.8

95.997.8100.0102.2105.0

108.3111.7113.6120.5146.8

163.0173.3185.4195.4225.8

189 9190.7191.1191.8192.9194.4195.9196.9197.8199.7201.1202.7

205 4207.2209.8213.1217.1221.7

227.1233.4238.9243.0245.2247.8

Capitalequipment

55 460.463.4

64.971.272.473.674.5

76.782.487.589.891.5

91.791.892.292.493.3

94.496.8100.0103.5106.9

112.0116.6119.5123.5141.0

162.5173.2184.5199.1216.6

193 0193.7194.6195.6196.9198.1199.2200.0201.1204.4206.1207.0

209 3210.8211.7214.0215.1215.8

217.2216.5217.7222.5223.8225.1

Totalconsumerfinishedgoods

80 586.582.5

83.991.890.789.289.1

88.589.892.494.493.6

94.594.394.694.194.3

96.199.4100.0102.7106.6

109.9112.9116.6129.2149.3

163.6169.0178.9192.6215.5

184 4186.2186.8189.7191.4193.0194.6193.6195.4197.5197.9200.5

203 7206.3207.9210.2211.6212.7

215.6217.5221.3224.1226.6228.8


265

TABLE B-54.—Producer price indexes by stage of processing, 1947-79—Continued

[1967=100]

Year or month

Intermediate materials, supplies, and components

TotalFoodsand

feeds2Other

Materials andcomponents

Formanufac-

turing

Forcon-

struction

Proc-essedfuelsand

lubri-cants

Con-tainers

Supplies

Crude materials for further processing

Total

Food-stuffsandfeed-stuffs

Other

Total Fuel Other

194719481949

19501951195219531954

19551956195719581959

72.478.375.2

78.688.185.586.086.5

88.192.094.194.395.6

19601961196219631964

19651966196719681969

19701971197219731974

197519761977197819791

1978:JanFebMar

fKyZZZZZZZZJune


1979:1

JanFebMar

fc::::=June


95.695.094.995.295.5

96.899.2100.0102.3105.8

109.9114.1118.7131.6162.9

180.0189.3201.7215.5242.7

207.2208.9210.7212.5213.9215.1

216.0217.3218.7220.8222.0223.0

225.7228.5231.5235.8238.2240.3

244.6247.5250.7254.6256.1258.4

100.099.4

102.7

109.1111.7118.5168.4200.2

195.3186.6191.0201.0223.2

189.6189.9197.9200.6200.8201.9

201.5198.8203.4207.6207.7212.2

214.3218.2218.9220.7219.3223.0

231.0223.1226.6226.0227.0230.0

70.076.174.2

77.787.084.385.385.7

88.392.695.094.896.4

96.895.595.395.095.6

96.998.9

100.0102.6106.1

109.9114.3118.9128.1159.5

178.6189.5202.4216.4243.8

208.2210.1211.5213.3214.7215.9

216.8218.4219.6221.7222.9223.7

226.5229.1232.3236.7239.3241.3

245.4249.0252.1256.4257.8260.1

72.177.874.5

78.188.584.886.286.3

88.492.694.895.296.5

96.595.394.794.995.9

97.499.3

100.0102.2105.8

110.0112.8117.0127.7162.2

178.7185.6195.5208.3234.0

200.0202.2203.5205.5206.5207.4

208.2210.1211.7213.9215.0215.6

218.6221.6224.5229.0230.9232.1

236.0238.0240.5243.9245.2247.5

66.073.173.2

77.084.383.785.185.5

88.993.594.094.096.6

95.994.694.294.595.4

96.298.8

100.0104.9110.8

112.6119.7126.2136.7161.6

176.4188.0202.9224.4246.8

212.7216.3218.3220.8222.5224.3

226.2228.3229.1230.2232.1232.5

236.1239.0241.3244.5245.2245.6

247.4249.2251.6254.4253.8253.6

85.596.988.2

89.993.992.893.493.3

93.396.3

101.996.095.6

98.299.499.098.196.0

97.499.2

100.097.798.7

105.0115.2118.9131.5199.1

233.0250.8283.8296.4360.9

291.2291.7294.3294.8297.3299.9

298.1296.8296.8297.6297.6300.4

302.0304.8312.9323.9336.8349.5

364.8384.6399.4410.5416.5424.6

66.869.870.1

72.084.579.980.081.5

82.688.692.594.794.2

95.594.795.994.794.0

95.898.4

100.0102.4106.3

111.4116.6121.9129.2152.2

171.4181.5193.1212.5234.9

202.2204.3205.7206.6209.3211.7

213.5214.6216.4221.2221.7222.6

223.9224.3229.3231.8234.5234.9

235.4237.6237.1240.8243.5246.1

77.581.076.3

78.988.888.884.386.3

84.887.188.090.091.2

90.791.893.895.294.3

95.299.4

100.0101.2102.8

108.0111.0115.6140.6154.5

168.1179.1188.0196.9217.5

190.5189.8192.7194.0195.1195.8

197.1196.9199.0202.2204.0206.1

207.4209.6211.1212.8213.7216.1

219.6219.6220.8224.4226.0228.4

101.2110.996.0

104.6120.1110.3101.9101.0

97.197.699.8

102.099.4

97.096.597.595.494.5

99.3105.7100.0101.6108.4

112.3115.1127.6174.0196.1

196.9205.1214.3240.1282.2

219.6225.0230.5239.0241.2245.4

245.4240.2244.8249.2248.4252.5

260.2270.4276.6279.9282.3283.0

287.1281.7287.9289.2290.8296.7

111.7120.8100.3

107.6124.5117.2104.9104.9

95.193.197.2

103.096.2

95.193.895.792.990.8

97.1105.9100.0101.3109.3

112.0114.2127.5180.0189.4

191.8190.1190.9215.3247.1

194.0201.3206.3216.3219.1223.7

222.0213.2218.4224.0220.9224.8

233.0243.7247.4251.5251.9248.2

254.1243.7248.7247.1246.4249.7

100.0102.2106.8

112.7117.0128.0162.5208.9

206.9233.6258.4286.7348.3

267.8269.7276.2281.6282.6286.1

289.3291.2294.5296.7300.2304.8

311.5320.7331.6333.3339.6348.7

349.3353.6362.1368.9374.8385.8

66.678.778.3

77.979.479.982.779.0

78.884.489.290.391.9

92.892.692.193.292.8

93.596.3

100.0102.3106.6

122.6139.0148.7164.5219.4

271.5314.7400.4463.7568.2

430.3431.7441.9454.7458.3465.8

471.8470.8478.4480.1485.0495.1

504.3513.9525.2529.2556.8563.1

570.7586.2599.4611.4616.8641.8

90.6100.791.6

104.7120.7104.6100.198.2

103.8107.6106.2102.2105.8

101.4102.5102.0100.7102.4

104.5106.7100.0102.1106.9

109.8110.7121.9161.5205.4

188.3210.2217.3235.4284.6

220.7222.7228.1231.4231.7234.0

236.4239.1241.1243.5246.6249.6

255.6264.7275.5276.5276.6286.6

285.2286.1293.3298.6304.6311.5

1 Data have been revised through August 1979 to reflect the availability of late reports and corrections by respondents. All data aresubject to revision 4 months after original publication.

2 Intermediate materials for food manufacturing and manufactured animal feeds.

Source.- Department of Labor, Bureau of Labor Statistics.

266

TABLE B-55.—Producer price indexes by stage of processing, special groups, 1974-79

[1967=100]

Year or month

1974

197519761977197819792

1978:JanFebMar

June

JulyAug

8fc=NovDec

1979:2

JanFebMar

tJune

JulyAugSept..OctNovDec

Finished goods

Total

147.5

163.4170.3180.6194.6215.9

187.0188.5189.1191.5193.1194.5

196.0195.6197.1199.6200.3202.5

205.4207.7209.1211.4212.7213.7

216.2217.3220.4223.7225.9227.8

Food

166.9

181.0180.2189.2206.7226.3

195.0199.6200.2204.5206.8209.5

210.4205.9209.4212.0211.7215.8

220.2225.1226.3227.8226.6223.6

224.9223.5227.8226.7230.5232.0

Energy

215.2

252.4274.5305.0318.1438.1

311.3309.7308.2308.3310.2313.6

317.7321.4324.0327.6329.3336.0

340.8346.1356.7372.1392.4415.7

445.8474.1505.1525.8535.7546.7

Excluding food andenergy

Total

133.5

148.5156.7166.1178.6194.2

172.5173.1173.9175.7177.0177.9

179.3180.0180.8183.1184.1185.3

187.5188.8189.7191.4192.4193.3

194.5194.8195.8199.5200.6202.1

Capi-tal

equip-ment

141.0

162.5173.2184.5199.1216.6

193.0193.7194.6195.6196.9198.1

199.2200.0201.1204.4206.1207.0

209.3210.8211.7214.0215.1215.8

217.2216.5217.7222.5223.8225.1

Con-sumergoodsexclud-

ingfoodand

energy

129.1

141.0148.0156.1167.4182.1

161.2161.8162.5164.9166.2167.0

168.6169.2169.9171.5172.1173.6

175.8176.9177.8179.1180.2181.2

182.3183.2184.1187.2188.1189.8

Intermediate materials,supplies, and components

Total

162.9

180.0189.3201.7215.5242.7

207.2208.9210.7212.5213.9215.1

216.0217.3218.7220.8222.0223.0

225.7228.5231.5235.8238.2240.3

244.6247.5250.7254.6256.1258.4

Foodsand

feeds1

200.2

195.3186.6191.0201.0223.2

189.6189.9197.9200.6200.8201.9

201.5198.8203.4207.6207.7212.2

214.3218.2218.9220.7219.3223.0

231.0223.1226.6226.0227.0230.0

Energy

188.7

220.8237.3268.3281.2344.6

275.8276.3278.7279.3281.8284.3

283.0281.9282.0282.8282.8285.6

287.6290.2297.7308.3320.7333.7

348.1366.9382.2392.6399.6407.5

Other

156.7

174.7184.9196.0210.1233.9

201.7203.7205.0206.9208.2209.2

210.4212.2213.6215.7217.1217.7

220.5223.2225.9229.7231.4232.3

235.3237.4239.3242.9243.8245.6

Crude materials for furtherprocessing

Total

196.1

196.9205.1214.3240.1282.2

219.6225.0230.5239.0241.2245.4

245.4240.2244.8249.2248.4252.5

260.2270.4276.6279.9282.3283.0

287.1281.7287.9289.2290.8296.7

Food-stuffsand

feed-stuffs

189.4

191.8190.1190.9215.3247.1

194.0201.3206.3216.3219.1223.7

222.0213.2218.4224.0220.9224.8

233.0243.7247.4251.5251.9248.2

254.1243.7248.7247.1246.4249.7

Energy

223.0

266.9291.0344.9390.7479.4

367.4368.6375.6383.3386.0391.4

396.0396.1401.3403.1406.8413.0

419.4427.0433.7436.7455.3467.8

478.1492.9516.0528.8537.7559.8

Crudematerialsexcludingagricul-

turalproducts

andenergy

213.7

167.8192.5193.0216.4270.0

200.3205.1208.6213.8210.9214.4

217.6220.8221.3223.7228.2231.5

241.9259.6282.7282.9275.9282.2

274.1267.4262.4266.2271.4273.3

1 Intermediate materials for food manufacturing and manufactured animal feeds.2 Data have been revised through August 1979 to reflect the availability of late reports and corrections by respondents. All data are

subject to revision 4 months after original publication.


267

TABLE B-56.—Producer price indexes by major commodity groups, 1929-79

[1967=100]

Year or month

1929193319391940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 2

1978JanFebMarNfay '.June


1979 2

JanFebMar

June


Farm products and processedfoods and feeds

Total

94 3101.589 6

93 9106 9102 796 095.791290 693.798193 5

93 793 794 793 893 2971

103 5100 0102 4108 0

1117113 9122 4159.1177 4184 21831188 8206 6229 8

192 2196 8200 0205 5207 6210 4

210 3205 3209 4213 2212.3216 2

2211227 2229 02312230 8229 0

232 2227 52317230 6232 3234.5

Farmproducts

64.131.440.041.450.364.875.075.578.590.9109.4117.5101.6

106.7124.2117.2106.2104.798.296.999.5103.997.5

97.296.398.096.094.698.7105.9100.0102.5109.1

111.0112.9125.0176.3187.7186.7191.0192.5212.5241.4

192.2198.9204.2213.7215.8219.5

219.9210.3215.1219.4218.2222.7

230.4240.9242.8246.0245.4242.8

246.8238.5241.0239.5240.2242.5

Processedfoods andfeeds

82.988.780.6

83.492.791.687.488.985.084.987.491.889.4

89.591.091.992.592.395.5101.2100.0102.2107.3

112.1114.5120.8148.1170.9182.6178.0186.1202.6222.5

191.5194.9196.9200.2202.4204.6

204.2201.8205.5209.0208.2211.8

215.2218.9220.5222.3222.0220.6

223.3220.5225.7224.8227.1229.2

Industrial commodities

Total

48.637.843.344.047.350.751.552.353.058.070.876.975.3

78.086.184.184.885.086.990.893.393.695.3

95.394.894.894.795.296.498.5100.0102.5106.0

110.0114.1117.9125.9153.8171.5182.4195.1209.4236.3

201.6202.9204.1206.1207.4208.7

210.1211.4212.5214.7216.0217.2

220.0222.5225.4229.0231.6234.0

237.5240.6243.8248.5250.2252.8

Textileproducts

andapparel

103.6108.198.9

102.7114.6103.4100.898.698.798.798.897.098.4

99.597.798.698.599.299.8100.1100.0103.7106.0

107.1109.0113.6123.8139.1137.9148.2154.0159.8168.6

156.5157.0157.4157.9158.6159.2

160.0160.5161.3162.3163.2163.6

164.1164.2165.2166.4167.2168.4

169.3170.5171.3171.9172.4172.8

Hides,skins,leather,and

relatedproducts

48.936.342.845.248.452.852.752.252.961.183.384.279.9

86.399.180.181.377.677.381.982.082.994.2

90.891.792.790.090.394.3103.4100.0103.2108.9

110.3114.1131.3143.1145.1148.5167.8179.3200.0252.2

185.8187.2187.9191.9193.6195.3

197.3205.1210.7213.0215.8216.2

223.4232.2253.3258.9269.6268.0

261.9257.9250.7253.6248.5248.9

Fuels andrelated

products,and

powerl

59.447.652.351.454.656.257.859.560.164.476.990.586.2

87.190.390.192.691.391.294.099.195.395.3

96.197.296.796.393.795.597.8100.098.9100.9

106.2115.2118.6134.3208.3245.1265.6302.2322.5408.1

312.8312.9315.3317.3319.7323.2

324.5324.9326.7328.5329.7334.3

338.1342.5350.9361.5377.6393.7

411.8432.8454.4468.3476.7488.7

Chemicalsand alliedproductsl

47.'451.552.457.063.364.164.865.270.593.795.987.6

88.9101.796.597.798.998.599.1101.2102.0101.6

101.8100.799.197.998.399.099.4100.099.899.9

102.2104.1104.2110.0146.8181.3187.2192.8198.8222.1

194.1195.2196.1196.9198.6198.9

199.8199.5200.3201.6202.3202.3

205.0207.3209.9215.1218.0219.2

225.0228.5230.3233.5235.6238.1


268

TABLE B-56. —Producer price indexes by major commodity groups, 1929-79—Continued[1967 = 100]

Year or month

192919331939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 2

1978:JanFebMar

JuneJulyAugSeptOctNovDec.

1979:2

JanFeuMara;JuneJulyAugSeptOctNovDec

Industrial commodities—Continued

Rubberand

plasticproducts

59 440.261.257 161571.673 672.770.570 870.572.870.585.9

105.495.589.190.4

102.4103.8103.4103.3102.9103.199.296.396.895.595.997.8

100.0103.4105.3108.3109.1109.3112.4136.2150.2159.2167.6174 8194.1

170.2170.2171.4172.8173.8174.5174.9175.7176.7178.1179.4179.7

180.8183.2185.9188.8190.8193.1195.5198.8200.3202.4204.3205.7

Lumberand

woodproducts

25 019.024.827.432 735.637 740.641.247 273.484.077.789.397.294.494.392.697.198.593.592.498.895.391.091.693.595.495.9

100.2100.0113.3125.3113.6127.3144.3177.2183.6176.9205.6236.3276.0300.3

256.4263.7266.2269.6273.4278.5277.5281.6282.8284.2290.0288.6

290.2293.9300.5304.9302.8299.8300.1304.7309.7308.8299.0289.8

Pulp,paper,

andallied

products

72.575.772.474.388.085.785.585.587.893.695.496.497.398.195.296.395.695.496.298.8

100.0101.1104.0108.2110.1113.4122.1151.7170.4179.4186.4195.6218.9

188.0188.6189.7191.9193.2193.5195.5195.8199.0202.4203.9205.2

207.0208.8212.3215.0216.2216.6218.3222.2222.8227.2229.3231.0

Metalsand

metalproducts

40 230.737.637.838 539.139 039.039.644 354.962.563.066.373.873.976.376.982.189.291.090.492.392.491.991.291.393.896.498.8

100.0102.6108.5116.6118.7123.5132.8171.9185.6195.9209.0227.1259.3

215.2219.1221.1223.9224.6225.9227.3231.0231.4234.1235.5236.6

241.9247.3251.7256.0256.2258.2260.8261.8263.6269.4270.9273.5

Machineryand

equipment

41.341.442142.842.442.142.246 453.758.261.063.170.570.672.273.475.781.887.689.491.392.091.992.092.292.893.996.8

100.0103.2106.5111.4115.5117.9121.7139.4161.4171.0181.7196.1213.8

189.3190.3191.6192.7193.9195.3196.5197.5198.8200.5202.7203.8

205.1206.5207.9209.8211.4212.4214.8216.0217.6219.6221.0222.9

Furnitureand

householddurables

55.844.652.653.857.261V861.463.163.267177.081.682.984.791.890.191.992.993.395.898.399.199.399.098.497.797.097.496.998.0

100.0102.8104.9107.5110.0111.4115.2127.9139.7145.6151.5160.4171.0

156.5156.7157.7158.4159.2159.5161.4161.8162.0162.9163.5164.6

166.6167.9168.3168.7169.6170.2170.7171.5171.7174.1175.6177.0

Non-metallicmineral

products

51247.249.149.150 252.352.453.555.759 366.371.673.575.480.180.183.385.187.591.394.895.897.097.297.697.697.197.397.598.4

100.0103.7107.7112.9122.4126.1130.2153.2174.0186.3200.5222.8248.3

212.9215.1215.9218.4219.3222.0224.7227.2228.2229.1230.0231.1

238.3240.5240.8243.4245.6246.9249.5249.9252.2255.6257.1259.2

Transpor-tationequip-ment:Motor

vehiclesand

equip-ment3

41.934.839.140.443.247.247.247.548.356 064.170.875.775.379.484.083.683.886.391.295.198.1

100.398.898.698.697.898.398.598.6

100.0102.8104.8108.7114.9118.0119.2129.2144.6153.8163.7176.0190.3

171.3171.8171.9172.9174.6175.0175.5175.8175.9181.8182.5182.8

185.0185.9186.1189.4189.8190.1190.8187.8188.1196.3197.0197.6

Miscella-neous

products

73.576.578.079.283.983.485.686.486.587.690.292.092.293.093.393.794.595.295.997.7

100.0102.2105.2109.9112.9114.6119.7133.1147.7153.7164.3184.3208.3

171.6171.3172.6181.4182.6184.3189.7191.3192.9190.8189.2193.6

197.7199.8200.6201.4203.3205.2207.0208.9212.3216.8219.0227.2

1 Prices for some items in this grouping are lagged and refer to 1 month earlier than the index month.2 Data have been revised through August 1979 to reflect the availability of late reports and corrections by respondents. All data aresubject to revision 4 months after original publication.

3 Index for total transportation equipment is not shown but is available beginning December 1968.Source.- Department of Labor, Bureau of Labor Statistics.

26929U-289 0 - 8 0 - 1 8

TABLE B-57.—Changes in producer price indexes for finished goods, 1948-79

[Percent change]

Year or month

19481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979 2



1979:2

JanFebMarAprMayJune


Total finishedgoods

Dec.to

Dec.1

3.0-4 .6

10.42.9

-2 .2.5

- . 1

1.24.232

.5_ 4

1.8- . 5

.1- . 2

.5

3.32.21.63.14.8

2.23.23.8

11.818.3

6.63.36.69.2

12.5

Yearto

year

8.0- 2 . 9

1.89.5

- . 6- 1 . 0

.2

.22.8362.3

_ 2

.80.3

A

1.73.21.22.93.6

3.53.13.19.1

15.3

10.84.26.07.8

10.9

Consumerfinished foods

Dec.to

Dec.1

- 2 . 4-7 .4

13.35.3

-5 .9-2 .2- 1 . 9

- 2 . 93.653.4

- 3 7

5.2- 1 . 8

.5- 1 . 3

.4

9.11.4

- . 44.88.2

- 2 . 55.98.0

22.513.0

5.5- 2 . 5

6.611.97.5

Yearto

year

9.2- 8 . 1

1.912.4- . 9

-5 .2- . 8

- 2 . 5- . 2355.847

2.2- . 4

.9-1 .2

.5

3.86.5

-1 .63.76.1

3.21.65.6

20.314.0

8.4- . 44.99.39.5

Finished goods excluding consumer foods

Total

Dec.to

Dec.1

2.43.4

4.32.12.06.7

21.2

7.25.56.68.3

14.2

Yearto

year

2.62.7

3.53.72.04.1

16.0

12.16.06.57.2

11.5

Consumergoods

Dec.to

Dec.1

4.0- 4 . 5

8.2.9

- 1 . 11.6.3

1.72.51.7.2.8

.4- . 3- . 1

.1

.1

.91.72.12.02.9

3.92.02.07.4

20.5

6.74.96.18.4

17.8

Yearto

year

6.3- 2 . 1

1.67.2

- 1 . 3.9.3

.82.42.5

.11.3

.4- . 1- . 20

- . 1

.71.61.92.12.4

3.03.41.84.5

17.0

10.55.76.46.7

13.3

Capitalequipment

Dec.to

Dec.1

10.4- . 6

10.33.4

.82.31.1

5.68.34.31.31.0

.1

.2

.3

.9

1.53.93.13.04.6

4.92.42.05.3

22.6

8.26.47.28.08.7

Yearto

year

9.050

2497171712

3074622619

2142

10

1225333533

4841253.3

14.2

15.26.66.57.98.8

Percent change from preceding month

Unad-justed

0.8.8.3

1.3.8.7

.8- . 2

.81.3.4

1.1

1.41.1.7

1.1.6.5

1.2.5

1.41.51.0

.8

Sea-son-

justed

0.7.8.6

1.1.7.7

.7

.3

.8

.8

.71.0

1.31.11.0.9.4.5

1.11.01.41.01.3.8

Unad-justed

1.12.4

.32.11.11.3

.4- 2 . 1

1.71.2

_ j

L9

2.02.2.5.7

- . 5- 1 . 3

.6- . 61.9

- . 51.7.7

Sea-son-allyad-

justed

1.01.91.01.0

31.4

.1- . 4151.6.8

1.2

1.81.81.2

- . 4- 1 . 5-1 .2

.21.21.7

- . 12.6

- . 1

Unad-justed

0.7.3.3

1.07.6

.9

.4

.51.2.6.8

1.2.7.7

1.21.01.1

1.4.9

1.32.2

.7

.9

Sea-son-allyad-

justed

0.6.4.5

1.08.5

.9

.5

.6

.5

.71.0

1.1.9.9

1.31.11.1

1.4.9

1.31.4.8

1.2

Unad-justed

0.7.2.3

1.28.5

1.0.5.4

1.0.4

1.1

1.3.8.9

1.31.41.5

1.81.61.72.2

.81.2

Sea-son-

justed

0.5.3.5

1.38.4

1.0.5.5.4.6

1.2

1.2.9

1.11.31.51.4

1.81.71.81.61.01.3

Unad-justed

0.7.4.5.57.6

.6

.4

.61.6.8.4

1.1.7.4

1.1.5.3

.6- . 3

.62.2

.6

.6

Sea-son-allyad-

justed

0.6.6.5.78.8

.7

.4

.5

.6

.8

.6

1.0.9.6

1.2.6.6

.8- . 3

.61.2.5.9

Finishedenergy goods

Dec.to

Dec1

16.45.49.18.0

62.7

Yearto

year

17.38.8

11.14.3

37.7

Finished goodsexcluding food

and energy

Dec.to

Dec.1

6.15.46.38.29.1

Yearto

year

11.25.56.07.58.7

Unad-justed

0.0- . 5- . 5

.06

1.1

1.31.2.8

1.1.5

2.0

1.41.63.14.35.55.9

7.26.36.54.11.92.1

Sea-son-allyad-

justed

0.6- . 6- . 3

.31

.4

.3

.7

.91.71.12.4

2.11.53.34.54.95.3

6.25.86.74.72.52.4

Unad-justed

0.8.3.5

1.07.5

.8

.4

.41.3

.5

.7

1.2.7.5.9.5.5

.6

.2

.51.9.6.7

Sea-son-allyad-

justed

0.5.6.6

1.19.6

.9

.5

.5

.3

.7

.8

1.0.9.6.9.7.6

.8

.3

.61.0.6

1.0

1 Changes from December to December are based on unadjusted indexes.2 Data have been revised through August 1979 to reflect the availability of late reports and corrections by respondents. All data are

subject to revision 4 months after original publication.Source: Department of Labor, Bureau of Labor Statistics.

270

MONEY STOCK, CREDIT, AND FINANCE

TABLE B-58.—Money stock measures, 1953-79

[Averages of daily figures; billions of dollars, seasonally adjusted, except as noted]

Year and month

Overall measures1

Ml M1 + M2 M3

Components and related items

Cur-rency

Deposits at commercial banks

Demand

Time and savings

Total

Time

LargeCDs2 Other

Savings!

Depos-its atnon-bankthrift

institu-tions4

Check-able

depositsat

nonbankthrift

institu-tions

(unad-justed) 5

U.S.Govern-ment

deposits(unad-

justed) 6

1953: Dec.1954: Dec1955: Dec1956: Dec1957: Dec1958: Dec1959: Dec

I960: Dec1961: Dec1962: Dec1963: Dec1964: Dec1965: Dec1966: Dec1967: Dec1968: Dec1969: Dec

1970: Dec1971: Dec1972: Dec1973: Dec1974: Dec1975: Dec1976: Dec1977: Dec1978: Dec1979: Dec.

1978:Jan...FebMar

tJune.

July

NovDec

1979:JanFebMar

tJuneJulyAugSeptOctNovDec...

128.8132.3135.2136.9135.9141.1143.4

144.2148.7150.9156.5163.7171.4175.8187.4202.5209.0

219.7233.9255.3270.5283.2295.4313.8338.7361.5382.1

341.9342.4343.2347.9350.7352.5

354.4356.7360.7361.2360.7361.5

360.2359.4360.0365.5365.7370.3

373.5375.6379.2380.0380.5382.1

280.7297.7301.8

317.2345.7378.9397.9419.5456.8517.2560.6586.1592.7

564.6565.3566.4572.1576.1578.6

580.0583.4589.2589.4587.0586.1

581.9578.8578.3584.0583.1589.2

594.3597.6601.2598.8592.9592.7

210.9

217.1228.6242.9258.9277.1301.4318.2350.0383.3392.4

423.6471.8525.3571.3612.2664.8740.6809.4879.0952.6

816.0819.4822.6830.3836.7842.6

848.5856.5865.8870.8875.6879.0

879.0880.9883.9894.4898.4909.0

918.7927.1936.6943.3948.3952.6

303.8

319.3342.1369.2400.3434.4471.8495.5544.0589.9607.4

656.3745.1844.5919.0981.0

1,092.41,235.61,374.31,503.31,623.5

1,385.51,392.91,400.31,411.91,422.01,433.1

1,444.41,458.01,474.01,485.41,495.01,503.3

1,507.71,513.91,521.91,535.41,541.61,556.9

1,571.61,584.61,599.01,608.61,616.01,623.5

27.727.427.828.228.328.628.9

29.029.630.632.534.336.338.340.443.446.0

49.052.556.961.667.873.880.888.697.7

106.3

89.490.290.791.392.092.5

93.293.995.295.996.797.7

98.499.099.5

100.2100.7101.5

102.4103.6104.9105.4105.8106.3

101.1104.9107.4108.7107.6112.6114.5

115.2119.1120.3124.1129.5135.1137.5147.0159.0162.9

170.7181.5198.4209.0215.3221.7233.0250.1263.8275.8

252.5252.3252.5256.6258.8260.0

261.2262.8265.5265.3264.0263.8

261.8260.4260.5265.3265.0268.7

271.1272.1274.4274.6274.6275.8

44.548.350.051.957.465.467.4

72.982.797.6

112.0126.2146.4157.9183.3204.3194.4

229.2271.1313.5363.7418.1450.3489.2544.4614.1664.8

550.0555.9560.8565.9572.2576.8

582.1587.4593.5598.2610.2614.1

619.3623.6622.9623.9623.2623.6

629.8637.3645.4654.4662.8664.8

2.85.79.6

12.816.415.520.623.510.9

25.333.343.563.089.081.062.473.796.694.3

75.978.981.583.486.286.7

88.087.688.588.695.496.6

100.5102.199.095.090.684.9

84.785.988.191.195.094.3

67.4

72.979.992.0

102.3113.4130.0142.4

69.485.690.7

106.5126.2146.5173.6193.2208.6224.7251.0295.9363.2

253.7256.4258.5260.8263.2266.6

271.2275.8279.1284.2291.5295.9

300.1305.0308.5313.6318.6323.2

327.8332.9338.8347.9358.8363.2

93.395.292.8

97.4111.6123.5127.1135.9160.7202.1219.7221.6207.3

220.4220.6220.9221.7222.8223.5

222.9224.0225.8225.4223.4221.6

218.8216.5215.3215.3214.1215.6

217.4218.5218.5215.4209.1207.3

92.9

102.3113.4126.4141.4157.3170.4177.3194.0206.7214.9

232.6273.3319.1347.7368.7427.7495.0564.9624.4670.9

569.5573.5577.7581.5585.3590.5

595.9601.5608.5614.6619.5624.4

628.7633.0638.0641.0643.2647.9

652.9657.5662.4665.3667.7670.9

2.22.32.32.52.62.6

2.72.72.82.92.93.0

2.92.93.03.23.33.3

3.43.43.53.43.43.4

3.85.03.43.43.53.94.9

4.74.95.65.15.54.63.45.05.05.6

7.36.97.46.34.94.14.45.1

10.39.5

4.34.34.85.04.06.2

4.43.56.24.38.1

10.3

12.08.46.55.38.4

10.8

13.29.8

12.511.75.59.5

1 M l is currency plus demand deposits; M 1 + is M l plus savings deposits at commercial banks and checkable deposits at nonbankthrift institutions; M2 is Ml plus time and savings deposits at commercial banks other than large certificates of deposit (CDs); and M3is M2 plus deposits at nonbank thrift institutions.

2 Negotiable time certificates of deposit (CDs) issued in denominations of $100,000 or more by large weekly reporting commercialbanks.3 Includes negotiable order of withdrawal (NOW) accounts at commercial banks.

4 Average of the beginning and end-of-month deposits of mutual savings banks, savings capital at savings and loan associations, andcredit union shares.

5 Includes negotiable order of withdrawal (NOW) accounts at thrift institutions, credit union share draft accounts, and demanddeposits at mutual savings banks.

6 Deposits at all commercial banks. Includes Treasury note balances beginning November 1978.Source-. Board of Governors of the Federal Reserve System.

271

TABLE B-59.-—Commercial bank loans and investments, 1939-79


Period

End of month*1939- Dec

1940: Dec1941- Dec1942: Dec1943: Dec1944- Dec1945- Dec1946- Dec1947: Dec1948: Dec

1948- Dec1949: Dec

1950: Dec1951- Dec1952: Dec1953: Dec1954- Dec1955: Dec1956- Dec1957: Dec1958- Dec1959: Dec

I960: Dec1961: Dec1962: Dec1963: Dec1964: Dec1965: Dec1966: Dec1967: Dec1968: Dec1969: Dec1970: Dec1971: Dec1972: DecAverage for month2

1972 Dec1973 Dec1974 Dec1975 Dec1976 Dec1977 Dec1978 Dec1979 Dec"1979

JanFebMar

May '.JuneJulyAugSeptOctNovDec"

Total loansand

investments

40.7

43.950 767.485.1

105.5124.0114 0116.3114.2

Loans

Total

17.2

18.821719.219.121626.131138.142.4

Commer-cial andindus-trial

Investments

U.S.Treasurysecurities

16.3

17.821.841.459.877.690.674.869.262.6

Othersecurities

7.1

7.4726.86.1637.38.19.09.2

Seasonally adjusted

113 0118.7

124.7130.2139.1143.1153.1157.6161.6166.4181.2188.7

197.4212.8231.2250.2272.3300.1316.1352.0390.2401.7435.5485.7558.0

566.1647.8713.6744.6804.3891.1

1,014.31,131.5

1,030.91,042.01,048.91,061.01,068.81,080.01,092.21,102.81,122.81,128.91,128.41,131.5

41542.0

51.156.562.866.269.180.688.191.595.6

110.5

116.7123.6137.3153.7172.9198.2213.9231.3258.2279.4292.0320.9378.9

386.2460.3519.9516.9554.8632.1747.8846.2

759.9770.0775.7786.6793.3803.1813.4823.3840.0844.8843.6846.2

39.4

42.143.947.652.158.469.578.686.295.9

105.7110.0116.2130.4

136.3165.6197.3189.8191.2211.2246.5288.9

252.6256.9259.8263.3266.8270.4275.5279.9285.9288.6288.3288.9

62 366.4

61.160.462.262.267.660.357.256.965.157.7

59.965.364.761.560.757.153.559.460.751.257.860.662.6

64.158.753.782.1

100.699.593.493.7

93.093.293.994.094.194.895.394.195.295.394.393.7

9210.3

12.413.414.214.716.416.816.317.920.520.5

20.823.929.235.038.744.848.761.371.371.185.7

104.2116.5

115.8128.8140.0145.7149.0159.6173.1191.6

178.0178.8179.3180.4181.4182.1183.5185.4187.6188.8190.5191.6

Loans plusloans soldto bankaffiliates

110.5

116.7123.6137.3153.7172.9198.2213.9231.3258.2283.3294.7323.7381.5

388.8464.6524.7521.3558.5636.9751.6

3 849.0

763.5773.5779.2790.3797.0806.9817.2827.0843.7848.4847.2

3 849.0

1 Data are for last Wednesday of month (except June 30 and December 31 call dates).2 Data are averages of Wednesday figures and are for domestically chartered banks and foreign-related institutions. Lease financing

receivables are included in the total loans and investments, total loans, and loans plus loans sold to bank affiliates.3 As of December 1979, loans sold to affiliates were reduced $0.8 billion as a result of data corrections. In addition, comparability of

the data may also be affected by bank mergers, liquidations, loan reclassifications, etc.Note.—Data adjusted to exclude all interbank loans beginning 1948 and domestic interbank loans only beginning January 1959.

Beginning January 1959, loans and investments are reported gross, without valuation reserves deducted, rather than net of valuationreserves, as in earlier periods. Effective June 1966, balances accumulated for payment of personal loans (then about $1.1 billion) areexcluded from loans at all commercial banks, and certain certificates of CCC and Export-Import Bank (then about $1 billion) areincluded in other securities rather than in loans. Beginning June 1969, data include all bank-premises subsidiaries and other significantmajority-owned domestic subsidiaries; earlier data include commercial banks only. Beginning June 1971, Farmers Home Administrationinsured notes (then about $0.7 billion) are classified as other securities rather than as loans.


272

TABLE B-60.—Liquid asset holdings of private domestic nonfinancial investors, 1952-79

[Average outstanding; billions of dollars, seasonally adjusted]

Year and month

1952: Dec1953: Dec .1954: Dec

1955: Dec1956: Dec1957: Dec1958: Dec1959: Dec

I960: Dec1961: Dec1962: Dec1963: Dec1964: Dec



1975: Dec1976: Dec1977: Dec1978: Dec1979: Dec*

1978:Jan.Feb.Mar.Apr.MayJune

July.Aug.SeptOct.Nov.Dec.

1979:Jan.Feb.Mar.Apr.MayJune

July.Aug.SeptOct.Nov.Dec".

Totalliquidassets

269.1284.6295.3

314.8325.4338.0354.4373.3

386.84107442.1479.3515.5

559.6587.3638.3696.8722.7

769.8854.9966.8

1,086.11,174.2

1,295.61,428.41,598.71,775.31,957.7

1,614.81,626.51,636.71,653.61,668,61,681.2

1,694.51,707.21,726.21,737.21,757.11,775.3

1,791.01,804.11,815.91,832.21,845.31,865.9

1,881.91,895.51,915.01,933.11,947.91,957.7

Currency and deposits

Total

200.7210.9223.9

235.4246 2257.2277.5290.7

305.7326.3352.2382.2414.6

451.1474.3521.0565.6582.8

632.4721.1815.9886.5942.4

1,053.21,191.81,327.11,451.41,565.3

1,337.51,344.61,351.81,363.31,373.21,384.3

1,395.11,408.21,423.81,434,21,443.21,451.4

1,455.51,461.41,469.01,481.71,487.71,502.3

1,516.61,529.31,542.61,553.21,559.61,565.3

Currency1

27.327.727.4

27.828 228.328.628.9

29.029.630.632.534.3

36.338.340.443.446.1

49.052.556.961.667.8

73.880.888.697.7

106.3

89.490.290.791.392.092.5

93.293.995.295.996.797.7

98.499.099.5

100.2100.7101.5

102.4103.6104.9105.4105.8106.3

Demanddepositsl

91.592.896.2

98.499 597.9

102.3104.2

104.5106.3106.5109.7114.3

119.4121.9130.5141.2145.2

152.1162.1176.3183.9187.5

193.6201.2214.6224.9229.8

216.2216.0216.1219.9221.9223.1

224.0225.6227.9226.8225.1224.9

222.5221.0221.0225.0224.2227.2

229.2229.9231.3232.1230.6229.8

Time deposits

Com-mercialbanksl

39.141.945.1

46.849 054.661.864.7

69.977.088.898.6

108.8

125.0136.8156.1174.2176.7

198.7233.2263.6293.2318.4

358.2414.8459.0504.4558.3

462.4464.9467.3470.6474.0478.2

482.0487.2492.2496.9501.9504.4

505.8508.4510.5515.5519.5525.7

532.1538.3544.0550.4555.5558.3

Non-bankthrift

institu-tions2

42.848.655.2

62.369 576.484.892.9

102.3113.4126.4141.4157.3

170.4177.3194.0206.7214.9

232.6273.3319.1347.73687

427.7495.0564.9624.4670.9

569.5573.5577.7581.5585.3590.5

595.9601.5608.5614.6619.5624.4

628.7633.0638.0641.0643.2647.9

652.9657.5662.4665.3667.7670.9

U.S. Treasurysecurities

Savingsbonds3

49.249.349.9

50.250148.347.846.1

45746.546.948.149.0

49.650.251.251.851.7

52.054.357.560.463.3

67.271.976.680.679.9

77.077.477.878.278.678.9

79.279.579.880.180.380.6

80.780.680.680.680.680.6

80.680.680.680.580.279.9

Short-term

market-able

securi-ties4

18.423.120.1

27.727 430.627.635.5

32.432.033.435.033.0

35.837.834.840.953.2

41.931.534.343.347.8

67.366778.285.9

112.4

80.180.979.680.180.880.8

81.031.683.882.082.185.9

89.391.595.7

100.3108.4116.2

114.2110.3111.3111.71117112.4

"»?•certifi-cates

ofdepos-

it5

27"5.39.0

11.6

15.114.418721.78.3

21.827.535.953.269.4

57.042.750.762.147.0

51.652.854.456.759.359.1

59.457.557.356.161762.1

65.165.561.456.451745.7

44.343.644.345.948.847.0

Otherprivatemoneymarketinstru-ments 6

0.81.21.3

1.5171.91.61.1

2.93.34.25.17.2

7.810.612716.8267

21.720.623.042.851.3

50.955.366.195.2

153.1

68.470772.974.976.778.4

79.680.381.784.789795.2

100.4105.1109.1113.1117.0121.0

126.2131.7136.4141.8147.6153.1

1 Money stock components (see Table B-58) after deducting foreign holdings and holdings by domestic financial institutions. Thethree columns add to M2 held by domestic nonfinancial sectors.

2 As published in money stock statistics.3 Series E and H savings bonds, other savings bonds, and savings notes held by individuals.4 Short-term marketable U.S. Treasury securities excluding official, foreign, and financial institution holdings.5 Certificates over $100,000 at weekly reporting banks, except foreign holdings.6 Commercial paper, bankers' acceptances, Federal funds, security repurchase agreements, and money market mutual fund shares

held outside banks and other financial institutions.Source-. Board of Governors of the Federal Reserve System.

273

TABLE B-61.—Total funds raised in credit markets by nonfinancial sectors, 1971-79


Item 1971

153.9

24.9

5.1

124.0

11.4112.5

86.7

17.418.850.5

28.09.9

10.22.4

25.8

14.77.1

_ 4AA

124.0

17.744.961.4

4.511.745.2

33.811.4

153.9

88.6

93.7

13.779.1

.8

*

- 5 . 1

22.8

- 4 . 527.3

11.63.1

24.53.3

1972

176.8

15.1

4.0

157.7

10.9146.8

102.1

14.712.275.2

42.512.716.43.6

44.7

19.817.1

.86.9

157.7

14.565.178.1

5.814.158.2

47.210.9

176.8

122.7

106.7

21.583.6

1.6

21.6

- 5 . 6

14.6

3.810.8

2.6- . 426.311.0

1973

203.1

8.3

6.1

188.8

7.9180.9

105.1

14.79.2

81.2

46.410.418.95.5

75.8

26.037.1

2.510.3

188.8

13.280.195.5

9.612.973.0

65.27.9

203.1

140.3

101.2

14.575.7

11.0

45.7

-6 .7

6.4

3.03.4

11.2- 1 . 530.716.1

1974

191.6

11.8

15.4

164.4

4.1160.3

98.0

16.519.761.9

34.86.9

15.15.0

62.3

9.932.06.6

13.7

164.4

15.551.397.6

8.07.4

82.1

78.04.1

191.6

118.9

73.8

8.265.4

.2

47.3

- 2 . 2

22.1

10.311.7

19.5- 4 . 633.4

2.4

1975

210.8

85.4

13.3

112.1

9.9102.1

98.4

16.127.255.0

39.5

11.04.6

3.8

9.7-12.3-2 .6

9.0

112.1

13.749.748.6

8.82.0

37.9

28.09.9

210.8

140.4

98.1

12.684.0

1.6

45.8

- 3 . 5

2.1

-8 .710.8

24.92.8

39.7.9

1976

271.9

69.0

20.8

182.0

10.5171.5

123.5

15.722.885.0

63.71.8

13.46.1

48.0

25.64.04.0

14.4

182.0

15.290.576.3

10.94.7

60.7

50.210.5

271.9

168.5

131.9

16.1113.5

2.3

39.8

- 3 . 2

13.4

- 4 . 617.9

20.53.0

47.918.6

1977

338.5

56.8

13.9

267.9

2.7265.1

175.6

23.721.0

131.0

96.47.4

18.48.8

89.5

40.627.0

2.919.0

267.9

20.4139.9107.6

14.712.979.9

77.22.7

338.5

189.7

149.5

26.1121.0

2.4

46.4

- 6 . 1

43.2

1.242.0

19.5.9

58.726.5

1978

Total funds raised by nonfinancial sectors

U.S. Government

Foreign

Private domestic nonfinancial sectors

Corporate equitiesDebt instruments

Debt capital instruments

State and local government obligations...Corporate bondsMortgages

HomeMulti-family residential..CommercialFarm

Other debt instruments..

Consumer creditBank loans n.e.cOpen-market paperOther

By borrowing sector: Total...

State and local governments....Households....Nonfinancial business

FarmNonfarm noncorporateCorporate

Debt instrumentsEquities

Total funds suppled to nonfinancial sectors

Financed directly or indirectly by.-

Private domestic nonfinancial sectors..

Deposits

Demand deposits and currencyTime and savings depositsMoney market funds and repurchase agree-

ments

Credit market instruments

Corporate equities

Foreign funds

At banksCredit and equity instruments

U.S. Government—related loans, net.U.S. Government cash balancesPrivate insurance and pension reserves.Other sources

400.3

53.7

32.3

314.4

2.6311.8

196.6

28.320.1

148.2

104.510.223.310.2

115.2

50.637.3

5.222.2

314.4

23.6162.6128.2

18.115.494.7

92.22.6

400.3

217.0

151.8

22.2115.2

14.4

71.4

- 6 . 2

46.5

6.340.1

30.53.7

70.632.0


274

TABLE B-61.—Total funds raised in credit markets by nonfinancial sectors, 1971-79—Continued


Item

1979 unadjusted quarterlyflows

I II

1979 seasonally adjustedannual rates

I

Total funds raised by nonfinancial sectors

U.S. Government

Foreign


Corporate equities

Debt instruments

Debt capital instruments

State and local government obligationsCorporate bondsMortgages

Home mortgagesMulti-family residentialCommercialFarm

Other debt instruments

Consumer creditBank loans n.e.cOpen-market paperOther

By borrowing sector: Total

State and local governmentsHouseholdsNonfinancial business

FarmNonfarm noncorporateCorporate

Debt instruments

Equities

Total funds supplied to nonfinancial sectors

Financed directly or indirectly by:


Deposits

Demand deposits and currencyTime and savings deposits

Money market funds and repurchase agreements

Credit market instruments

Corporate equities

Foreign funds

At banksCredit and equity instruments

U.S. Government-related loans, netU.S. Government cash balancesPrivate insurance and pension reservesOther sources


75.3

10.7

-1 .6

66.2

.765.5

40.V

2.35.0

33.4

22.52.04.84.1

24.8

4.59.82.97.5

66.2

1.531.233.5

5.71.5

26.4

25.7.7

75.3

34.2

13.7

-25.228.410.4

21.3

12.7

-17.3- 4 . 6

3.4- 8 . 217.815.5

101.7

- 4 . 6

6.6

99.7

.799.1

57.9

6.46.3

45.2

31.42.07.04.9

41.1

15.014.92.78.5

99.7

5.846.347.7

7.64.6

35.5

34.8.7

101.7

57.0

33.5

12.710.99.9

27.5

- 4 . 0

- 5 . 7

5.7-11.4

11.19.7

19.110.5

112.9

12.4

14.9

85.6

.784.9

54.1

7.73.6

42.8

28.43.27.43.8

30.8

13.114.53.7

85.6

6.942.736.1

4.74.5

26.8

26.1.7

112.9

49.9

39.4

.728.010.8

11.7

- 1 . 3

19.4

10.88.7

12.76.1

18.95.9

371.6

25.2

4.4

342.0

2.9339.1

202.0

22.321.5

158.3

109.79.2

23.216.2

137.1

50.745.812.927.7

342.0

18.9165.3157.8

24.015.2

118.6

115.82.9

371.6

196.0

112.2

-13.984.441.7

93.3

- 9 . 5

49.5

79.9-30.4

31.4-14.1

68.140.8

401.4

29.05

26.3

346.1

2.8343.4

207.6

12.725.8

169.1

115.77.2

28.317.9

135.8

44.751.98.6

30.5

346.1

10.3171.7164.2

22.314.9

126.9

124.12.8

401.4

226.4

131.4

21.670.139.7

108.1

-13.1

.1

24.4- 2 4 . 4

26.18.2

79.361.4

433.9

34.0

60.2

339.7

2.9336.9

194.0

23.512.4

158.1

101.612.528.815.1

142.9

42.467.623.19.8

339.7

20.1159.9159.7

18.418.9

122.4

119.62.9

433.9

226.9

186.2

29.0114.243.0

44.4

- 3 . 7

59.1

20.438.7

43.311.973.819.0

275

TABLE B-62.—Federal Reserve Bank credit and member bank reserves, 1929-79

[Averages of daily figures; millions of dollars]

Year and month

1929- Dec1933: Dec1939: Dec

1940: Dec1941: Dec1942: Dec1943: Dec1944: Dec1945: Dec1946: Dec1947: Dec1948: Dec1949: Dec



1970: Dec1971: Dec1972: Dec1973: Dec1974: Dec1975: Dec1976: Dec1977: Dec1978: Dec1979: Dec"


JulyAugsept"::":: ..:::.::: :OctNovDecp

Reserve Bank credit outstanding

Total

16432,6692,612

2,3052,4046,03511,91419,61224,74424,74622,85823,97819,012

21,60625,44627,29927,10726,31726,85327,15626,18628,41229,435

29,06031,21733,21836,61039,87343,85346,86451,26856,61064,100

66,70874,25576 85185,64293,96799,651107,632116,382129,330140,008

128,749125 953126 356127,462128 597129,035

131,585131 441133,505134 049136'696140,008

U.S.Governmentand Federalagencysecurities

4462,4322,510

2,1882,2195,54911,16618,69323,70823,76721,90523,00218,287

20,34523,40924,40025,63924,91724,60224,76523,98226,31227,036

27,24829,09830,54633,72937,12640,88543,76048,89152,52957,500

61,68869,15871,09479,70186,67992,108100,328107,948117,344126,276

113,192110 863112 992113,133113 575114,653

118,298120 158121J491122 189123'603126,276

Member bankborrowings

Total

801953

35490265334157224134118

142657

1,593441246839688710557906

87149304327243454557238765

1,086

321107

1,0491,29870312762558874

1,454

994973999897

1 7771,396

1,1791097l'3442 0221*9081,454

Seasonal

413213125413481

112114121134173188

16817716916114181

Othar1umer *

39614299

114180482658654702822729842607

1,1191,3801,3061,0271,1541,4121,7031,4941,5431,493

1,7251,9702,3682,5542,5042,5142,5472,1393,3165,514

4,6994,9904 7084,6436,5857,4167,2427,87611,11212,278

14,56314,11712 36513,43213 24512',986

12,10810,18610,6709,8381118512,278

Member bank reserves2

Tntal10131

2 3952,58811,473

14,04912,81213,15212,74914,16816,02716,51717,26119,99016,291

17,39120,31021,18019,92019,27919,24019,53519,42018,89918,932

19,28320,11820,04020,74621,60922,71923,83025,26027,22128,031

29,26531,3293135335,06836,94134,98935,13636,47141,57244,063

43,16740,70340 31640,54640,3824O'lO5

40,90040,68740,86842,4234297944,063

PomiiroHRequired

2,34731,8226,462

7,4039,42210,77611,70112,88414,53615,61716,27519,19315,488

16,36419,48420,45719,22718,57618,64618,88318,84318,38318,450

18,51419,55019,46820,21021,19822,26723,43824,91526,76627,774

28,99331,1643113434,80636,60234,72734,96436,29741,44743,560

42,86540,49440 05940'54840 09539^884

40,71040,49440,86342,0024277043,560

Cvroccexcess

483 7665,011

6,6463,3902,3761,0481,2841,491900986797803

1,027826723693703594652577516482

769568572536411452392345455257

272165219262339262172174125503

302209257_2287221

19019395421209503

1 Mainly float.2 Beginning December 1959, part of currency and cash held by member banks allowed as reserves; beginning November 1960 all

such currency and cash allowed.Beginning November 1972, includes reserve deficiencies on which Federal Reserve Banks were allowed to waive penalties for a

transition period in connection with bank adaptation to Regulation J as amended effective November 9, 1972. Transition period endedafter second quarter 1974.

Effective November 1975, includes reserve deficiencies on which penalties are waived over a 24-month period when a nonmemberbank merges into an existing member bank, or when a nonmember bank joins the Federal Reserve System.3 Data are for licensed banks only.


276

TABLE B-63.—Aggregate reserves and deposits of member banks, 1959-79

[Averages of daily figures; billions of dollars, seasonally adjusted]

Year and month

1959: Dec

I960: Dec1961: Dec1962: Dec1963: Dec1964: Dec



1975: Dec1976: Dec1977: Dec1978: Dec1979: Dec"

1978:Jan....FebMar...

t: .June..

July...Aug...Sept..Oct....Nov...Dec...

1979:Jan....Feb....Mar...Apr....May...June..

July...Aug...Sept..Oct....NovDec"

Member bank reserves *

Total

18.63

18.9219.7519.6620.3121.19

22.1823.2824.7627.0627.99

29.1131.1631.3434.9036.55

34.6734.8936.1041.2743.

36.6736.8836.6736.9337.2737.63

38.1137.9338.2138.3839.7541.27

41.4840.7540.8140.6540.4840.42

40.8241.0741.4642.3043.1343.53

Non-borrowed

17.68

18.8419.6119.4019.9820.92

21.7422.7524.5426.3126.87

28.7831.0330.2933.6035.83

34.5434.8335.5340.4042.06

36.1836.4836.3436.3836.0636.53

36.8036.7937.1537.1039.0540.40

40.4839.7839.8239.7338.7239.00

39.6539.9840.1240.2841.2242.06

Re-quired

18.12

18.1719.1619.0819.8220.78

21.7622.9424.3926.6327.70

28.8630.9831.0534.6036.30

34.4034.6135.9141.0443.13

36.4036.6436.4736.7937.0537.45

37.9237.7738.0238.2239.5341.04

41.2640.5440.6640.4740.3440.20

40.6140.8541.2742.0442.8843.13

Mone-tary

base2

48.3

48.750.251.153.756.5

59.662.866.471.875.4

79.685.390.198.6

106.7

111.0118.4127.8142.4153.8

129.3130.3130.6131.4132.6133.5

134.7135.3136.8137.8139.9142.4

143.4143.3143.9144.5144.9145.6

146.9148.4150.1151.6152 8153.8

Member bank deposits subject toreserve requirements3

Total

158.2

162.5175.5189.0203.2218.7

238.3246.3275.7299.8287.8

321.1360.2402.0442.2486.0

504.2528.6568.6616.7645.7

575.4577.3581.3585.8591.5595.8

600.5602.7607.0608.9616.9616.7

621.1619.7616.4618.6613.9613.1

618.7623.7630.5638.2644 2645.7

Timeand

savings

54.3

58.867.779.992.1

103.7

120.7128.7148.9164.5150.5

178.8210.5241.6279.2322.1

336.8354.1386.7429.4452.0

390.1394.6398.3400.7405.1407.4

410.8413.0416.8418.3427.5429.4

433.5436.1434.1432.0428.7425.9

429.4434.4439.8445.64518452.0

Demand

Private

99.0

99.1102.9103.3105.9109.1

112.8113.9121.3130.5132.1

136.1144.0154.4158.1160.6

164.5171.5178.5185.1192.0

182.1179.7179.7181.8183.6184.6

186.1186.5186.2187.2187.0185.1

185.6181.9180.5184.7183.5184.8

187.5187.1189.0190.8190 4192.0

U.S.Govern-

ment

4.8

4.64.95.75.25.9

4.93.75.54.95.2

6.25.86.14.83.3

2.93.03.52.31.8

3.23.03.43.32.73.8

3.63.34.03.52.32.3

1.91.81.81.81.72.4

1.82.21.81.8201.8

Adjusted for changes in reserverequirements4

Member bank reserves

Total

16.30

16.5617.2517.8418.4819.34

20.3220.6422.7924.5224.46

26.1728.3531.8634.3737.10

36.8337.2439.1841.5743.20

39.7740.0039.8340.1140.4740.87

41.3741.2041.5041.6741.5741.57

41.7741.0341.1040.9140.7540.70

41.1341.3841.7742.4842 6643.20

Non-borrowed

15.35

16.4917.1217.5818.1519.08

19.8820.1122.5723.7823.35

25.8328.2230.8133.0736.38

36.7037.1938.6140.7041.73

39.2839.6039.5039.5539.2639.77

40.0540.0640.4440.4040.8740.70

40.7640.0640.1139.9938.9839.28

39.9640.2940.4340.4640 7541.73

Re-quired

15.79

15.8216.6617.2717.9918.94

19.9020.3022.4224.1024.18

25.9228.1731.5834.0736.85

36.5736.9738.9941.3442.81

39.5039.7639.6339.9640.2640.69

41.1741.0341.3141.5141.3541.34

41.5540.8240.9440.7340.6140.48

40.9241.1541.5842.2242.4242.81

Mone-tarybase

46.01

46.3447.6549.3151.9054.62

57.7560.1164.4069.2971.92

76.6982.5290.6698.02

107.25

113.16120.80130.90142.69153.48

132.40133.40133.74134.61135.79136.76

137.97138.56140.12141.05141.75142.69

143.70143.62144.18144.75145.13145.88

147.24148.73150.45151.77152 38153.48

1 Series reflects actual reserve requirement percentages with no adjustment to eliminate the effect of changes in Regulations D andM. In addition to earlier breaks in the series effective November 2, 1978, a supplementary reserve requirement of 2 percentage pointswas imposed on time deposits of $100,000, or more. This action increased required reserves approximately $3.0 billion in the weekbeginning November 16, 1978. Effective October 11, 1979, an 8 percentage point marginal reserve requirement was imposed on"managed liabilities." On October 25. 1979. reserves of Edge Act Corporations were included in member bank reserves. In the weekbeginning October 25,1979, these last two actions raised required reserves $320 million and $318 million, respectively.

2 {ncludes total reserves (member bank reserve balances in the current week DIUS vault cash held two weeks earlier); currencyoutside the U.S. Treasury, Federal Reserve Banks, and the vaults of commercial banks; and vault cash of nonmember banks.

3 Includes total time and savings deposits and net demand deposits as defined by Regulation D. Private demand deposits include alldemand deposits except those due to the U.S. Government, less cash items in process of collection and demand balances due fromdomestic commercial banks.

4 Reserve aggregates series have been adjusted to remove discontinuities associated with marginal reserve requirements, theinclusions of Edge Act Corporation Reserves, and other changes in Regulations D, K and M.


277

TABLE B-64.—Bond yields and interest rates, 1929-79

[Percent per annum]

Year or month

U.S. Treasury securities

Bills(new

issues)x

3-month month

Constantmaturities2

years years

Corporatebonds

(Moody's)

Aaa Baa

High-grade

munici-pal

bonds(Stand-ard &

Poor's)

New-home

mortgageyields

(FHLBBP

Primecom-

mercialpaper,

months

Prime ratecharged by

banks4

Discountrate,

FederalReserveBank of

NewYork4

Federalfundsrate5

1929.

1933

1939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979

0.515

023

014103326373375

375375594

10401.102

1.2181.55217661.931953

1.7532 6583.2671.8393.405

2 9282.3782 77831573 549

3.9544.8814.3215.3396.677

6.4584 3484.0717.0417.886

5.8384.9895.2657.221

10.041

3.832

3.2472.6052.9083.2533.686

4.0555.0824.6305.4706.853

6.5624.5114.4667.1787.926

6.1225.2665.5107.572

10.017

2.47163

2.473.193.982.844.46

3.983.543.473.674.03

4.225.235.035.687.02

7.295.655.726.957.82

7.496.776.698.299.71

2.852.40

2.823.183.653.324.33

4.123.883.954.004.19

4.284.925.075.656.67

7.356.166.216.847.56

7.997.617.428.419.44

4.73

4.49

3.01

2.842.772.832.732.72

2.622.532.612.822.66

2.622.862.963.202.90

3.063.363.893.794.38

4.414.354.334.264.40

4.495.135.516.187.03

8.047.397.217.448.57

8.838.438.028.739.63

5.90

7.76

4.96

4.754.334.283.913.61

3.293.053.243.473.42

3.243.413.523.743.51

3.533.884.714.735.05

5.195.085.024.864.83

4.875.676.236.947.81

9.118.568.168.249.50

10.619.758.979.49

10.69

4.27

4.71

2.76

2.502.102.362 061.86

1.671.642.012.402.21

1.982.002.192.722.37

2.532.933.603.563.95

3.733.463.183.233.22

3.273.823.984.515.81

6.515.705.275.186.09

6.896.495.565.906.39

5.895.82

5.816.256.466.977.80

8.457.747.607.958.92

9.018.999.019.54

10.77

5.85

1.73

.59

.56

.5366.69.73

.75

.811.031.441.49

1.452.162.332.521.58

2.183.313.812.463.97

3.852.973.263.553.97

4.385.555.105.907.83

7.725.114.698.159.87

6.335.355.607.99

710.91

2.00

2.072.563.003.173.05

3.163.774.203.834.48

4.824.504.504.504.50

4.545.635.616.307.96

7.915.725.258.03

10.81

7.866.846.839.06

12.67

5.16

2.56

1.00

1.001.00

61.0061.0061.00

61.0061.00

1.001.341.50

1.591.751.751.991.60

1.892.773.122.153.36

3.533.003.003.233.55

4.044.504.195.175.87

5.954.884.506.457.83

6.255.505.467.46

10.28

1.782.733.111.573.30

3221.962.683.183.50

4.075.114.225.668.22

7.174.674.448.74

10.51

5.825.055.547.94

11.20


278

TABLE B-64.—Bond yields and interest rates, 1929-79—Continued

[Percent per annum]

Year or month

U.S. Treasury securities

Bills(new

issues)1

3- 6-month month

Constantmaturities2

3 10years years

Corporatebonds

(Moody's)

Aaa

High-grade

munici-pal

bonds(Stand-ard &

Poor's)

New-home

mortgageyields

(FHLBB)3

Primecom-

mercialpaper,

months

Prime ratecharged by

banks4

Discountrate,

FederalReserveBank of

New York4

Federalfundsrate5

1977:JanFebMarAprfayJune






4.5974.6624.6134.5404.9425.004

5.1465.5005.7706.1886.1606.063

6.4486.4576.3196.3066.4306.707

7.0747.0367.8368.1328.7879.122

9.3519.2659.4579.4939.5799.045

9.2629.450

10.18211.47211.86812.071

4.7834.8964.8834.7905.1935.198

5.3515.8105.9916.4106.4336.377

6.6856.7406.6446.7007.0197.200

7.4717.3637.9488.4939.2049.397

9.5019.3499.4589.4989.5319.062

9.1909.450

10.12511.33911.85611.847

6.226.446.476.316.556.39

6.516.796.847.197.227.30

7.617.677.707.858.078.30

8.548.338.418.629.049.33

9.509.299.389.439.428.95

8.949.149.69

10.9511.1810.71

7.217.397.467.377.467.28

7.337.407.347.527.587.69

7.968.038.048.158.358.46

8.648.418.428.648.819.01

9.109.109.129.189.258.91

8.959.039.33

10.3010.6510.39

7.968.048.108.048.057.95

7.947.987.928.048.088.19

8.418.478.478.568.698.76

8.608.698.899.039.16

9.259.269.379.389.509.29

9.209.239.44

10.1310.7610.74

9.089.129.129.079.018.91

8.878.828.808.898.958.99

9.179.209.229.329.499.60

9.609.489.429.599.839.94

10.1310.0810.2610.3310.4710.38

10.2910.3510.5411.4011.9912.06

5.705.755.765.615.645.53

5.505.465.375.535.385.48

5.605.515.495.715.976.13

6.185.985.935.956.036.33

6.256.196.166.146.105.99

6.056.106.406.987.197.09

9.058.998.958.948.968.98

9.009.029.049.079.079.09

9.159.189.269.309.379.46

9.579.709.739.839.87

10.02

10.1810.2010.3010.3610.4710.66

10.7811.0111.0211.2111.3711.65

4.744.824.874.875.355.49

5.415.846.176.556.596.64

6.796.806.806.867.117.63

7.917.908.449.03

10.2310.43

10.3210.019.969.879.989.71

9.8210.3911.6013.23

713.2612.80

6V4-6V46V4-6V4

66 y 4 6 %6%-6%

63/4-6%6%-77 - 7y 4

7

73/4-73/4

73/4-8

8 -8y8y2-9

9 -99 -9y

9%ioy4ioy2-iiy2

llV2-ll3/4

^ l P AH3/4-ll3/4H3/4-ll3/4ll%-H3/4

n%i2y4

I2y4-i3y2

I3y2-i5I 5 i 55y45y2I5y2-i5y4

5%5%-5%5%-66 -66 -6

6 -6y2

6y2-6y2

6y2-6y2

6y2-6y2

6y2-77 -7

7 -7y4

7y4-7%7%-88 -8y2

9y2-9y2

99

9y2-9y2

9y2-9y2

9y2-9y2

9y2-9y2

9y2-9y2

9y2-9y2

9y2-io10 - ioy 2

10V2-ll11 -1212 -1212 -12

4.614.684.694.735.355.39

5.425.906.146.476.516.56

6.706.786.796.897.367.60

7.818.048.458.969.76

10.03

10.0710.0610.0910.0110.2410.29

10.4710.9411.4313.7713.1813.78

1 Rate on new issues within period.2 Yields on the more actively traded issues adjusted to constant maturities by the Treasury Department.3 Effective rate (in the primary market) on conventional mortgages, reflecting fees and charges as well as contract rate and

assumed, on the average, repayment at end of 10 years. Rates beginning January 1973 not strictly comparable with prior rates.4 Average effective rate for the year; opening and closing rate for the month.5 Since July 19, 1975, the daily effective rate is an average of the rates on a given day weighted by the volume of transactions at

these rates. Prior to that date, the daily effective rate was the rate considered most representative of the day's transactions, usuallythe one at which most transactions occurred.

6 From October 30, 1942, to April 24, 1946, a preferential rate of 0.50 percent was in effect for advances secured by Governmentsecurities maturing in 1 year or less.

7 Beginning November 1979, data are for 6-months paper.

Sources: Department of the Treasury, Board of Governors of the Federal Reserve System, Federal Home Loan Bank Board (FHLBB),Moody's Investors Service, and Standard & Poor's Corporation.

279

TABLE B-65—Consumer credit outstanding and net change, 1950-79

[Millions of dollars]

Year and month

Amount outstanding (end of month)

Total

Installment credit1

TotalAuto-

mobileRevolv-ing 2

Mobilehome3 Other

Nonin-stallmentcredit4

Net change from preceding period

Total

Installmentcredit1

TotalAuto-mobile

Nonin-stallmentcredit4



1970: Dec1971: Dec1972: Dec1973: Dec1974: Dec1975: Dec1976: Dec1977: Dec1978: Dec



1979:JanFeb....Mar...

June-

July....Aug....Sept...OctNov....

25,64127,26832,55136,73638,19245,34849,26852,19152,70260,741

65,10467,63573,91782,80592,591103,207109,749115,430126,949137,742

143,113157,795177,639203,077213,427223,497249,383289,398340,317

288,194289,170292,691297,708303,527310,589

314,400320,978325,209328,895333,151340,317

340,432341,579344,523349,779354,807359,515

362,801368,088372,641375,178

15,50316,22020,47024,25424,89130,26933,17135,44335,33941,123

45,05146,02750,99457,82965,57273,88179,33983,14891,681

101,161

105,528118,255133,173155,108164,594172,353193,992230,829275,629

230,126230,547233,842237,855243,371249,865

253,897259,614263,387265,814269,436275,629

275,337276,019278,453282,575287,315291,856

295,052299,813303,902305,217307,641

6,0155,9587,6359,6859,747

13,47114,48415,47214,25816,632

18,08317,59919,92422,84225,81729,35530,99231,13134,34836,946

36,32540,51947,86253,77254,26657,24267,70782,911

102,468

83,07583,82685,75787,74790,35993,261

95,28997,68799,062

100,159101,565102,468

102,890103,780105,426107,186109,211110,930

111,952113,351114,765114,876115,121

2,1053,720

5,1288,5289,70011,70913,68115,01917,18939,27447,051

38,79538,14338,03438,42638,96740,001

40,55341,62942,42042,57943,52347,051

46,51645,58645,24045,78146,48947,458

47,89449,27050,42250,88352,060

2,4617,2269,52613,58014,64214,43414,57315,14116,042

15,09215,07015,14915,28715,39615,532

15,66315,79915,91015,92516,01716,042

16,00416,00816,09216,19816,45316,607

16,71916,97217,10517,24417,349

9,48810,26212,83514,56915,14416,79818,68719,97121,08124,491

26,96828,42831,07034,98739,75544,52648,34752,01755,22860,495

61,61461,98266,08576,04782,00585,65894,52393,503110,068

93,16493,50894,90296,39598,649101,071

102,392104,499105,995107,151108,331110,068

109,927110,645111,695113,410115,162116,861

118,487120,220121,610122,214123,111

10,13811,04812,08112,48213,30115,07916,09716,74817,36319,618

20,05321,60822,92324,97627,01929,32630,41032,28235,26836,581

37,58539,54044,46647,96948,83351,14455,39158,56964,688

58,06858,62358,84959,85360,15660,724

60,50361,36461,82263,08163,71564,688

65,09565,56066,07067,20467,49267,659

67,74968,27568,73969,961

4,7891,6275,2834,1851,4567,1563,9202,923511

8,039

4,3632,5316,2828,8889,78610,6166,5425,68111,51910,793

5,37114,68219,84425,43810,35010,07025,88640,01550,919

3,271717

4,2503,784637

5,3782,9022,272-1045,784

3,928976

4,9676,8357,7438,3095,4583,8098,5339,480

4,36712,72714,91821,93549,4867,759

21,63936,83744,800

1,537- 5 71,6772,050

623,7241,013988

-1,2142,374

1,451-48 42,3252,9182,9753,5381,637139

3,2172,598

-6214,1947,3435,910494

2,97610,46515,20419,557

Seasonally adjusteds

2,7553,6204,2314,9224,7454,430

3,5764,3974,1274,7144,4074,499

4,3943,8634,4234,9973,7612,421

2,8872,7924,9223,586

2,4372,8634,0764,1064,2804,207

3,4663,6323,6803,3763,8324,399

3,0673,5633,6254,1053,3062,558

2,4432,4464,4462,1862,407

1,3261,3331,6341,8121,8771,642

1,7111,6041,5321,3751,7551,780

1,6811,5651,4861,3871,225

690616594

1,823487533

1,518910

1,033401819

1,7781,018

651615

2,255

4351,5551,3152,0532,0432,3071,0841,8722,9861,313

1,0041,9554,9263,503

8642,3114,2473,1786,119

318757155816465223

110765447

1,338575100

1,327300798892455

- 1 3 7

444346476

1,400

1 Installment credit covers most short- and intermediate-term credit extended to individuals through regular business channels,usually to finance the purchase of consumer goods and services or to refinance debts incurred for such purposes, and scheduled to berepaid (or with the option of repayment) in two or more installments.

2 Consists of credit cards at retailers, gasoline companies, and commercial banks, and check credit at commercial banks. Prior to1968, included in "other," except gasoline companies, included in noninstallment credit prior to 1971. Beginning 1977, includes open-end credit at retailers, previously included in "other." Also beginning 1977, some retail credit was reclassified from commercial intoconsumer credit. Credit secured by real estate is generally excluded.

3 Not reported separately prior to July 1970.4 Noninstallment credit is credit scheduled to be repaid in a lump sum, including single-payment loans, charge accounts, and service

credit. Because of inconsistencies in the data and infrequent benchmarking, series is no longer published by the Federal Reserve Board on aregular basis. Data are shown here as a general indication of trends.

5 For installment credit, computed as the difference between extensions and liquidations (both seasonally adjusted); see also TableB-66. For noninstallment credit, computed as the change from one month to another in the seasonally adjusted amount outstanding.


280

TABLE B-66—Consumer installment credit extended and liquidated, 1950-79


Year or month

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973 , .19741975197619771978

1978:JanFebMarX :June



JulyAugSeptOctNov

Total

Ex-tended

22,13024 58330,61632,57932,26540,26340,88643,10141,13849,134

50,82750,59857,56264,66072,44579,91883,82189,058101,426109,422

115,132138,046151,749173,035172,765180,441211.028254 071298,351

21,98322,75823,92524,68225,10425,565

25,02225,66925,53725,76625,95626,516

25,54826,45226,53327,00927,90126,139

26,84827,58328,63427,69526,464

Liqui-dated

18,86123,86726,35528,79431,62534,88237,89940,75941,29043,395

47,02249,73552,60157,82264,61671,61678,36585,19492,07599,945

110,352127,789136,787152,817163,276172,676189,381218 793253,541

19,54619,89519,84920,57620,82421,358

21,55622,03721,85722,39022,12422,117

22,48122,88922,90822,90424,59523,581

24,40525,13724,18825,50924,057

Automobile

Ex-tended

8,4458,95111,61012,74011,74116,73215,57216,55414,28718,008

18,11216,47720,16422,61724,79227,91327,84427,62332,22833,686

30,85736,70643,70249,60646,51452,42063,74375 64188,987

6,5416,7307,0437,4347,5927,595

7,6527,7447,5427,5017,7887,833

7,5497,7567,7947,9998,2607,178

7,4477,6678,4307,6767,066

Liqui-dated

6,9069,0089,93210,68911,67913,00814,55915,56715,50115,638

16,66116,96017,84019,69921,81524,38626,20627,48229,01331.090

31,41432,51238,08143,69646,01949,44453,27860,43769,430

5,2155,3975,4095,6225,7155,953

5,9416,1406,0106,1266,0336,053

5,8686,1916,3086,6127,0356,488

6,8317,0736,6077,1896,533

Revolving1

Ex-tended

3,4816,182

8,68921,86224,65928,70233,21336,95643,93486,756104,587

7,9608,1478,3988,5238,5639,062

8,7009,0289,0068,8469,1769,424

9,4179,3579,7149,72210,03910,136

9,85610,37110,69910,42410,613

Liqui-dated

2,7264,567

7,27820,81823,48526,69931,24335,61641,76480,50896,811

7,5457,6987,5667,8407,9198,107

8,1008,2918,3848,5008,5118,555

8,9849,0408,9728,8049,2909,340

9,4279,5849,6429,7609,814

Mobile home 2

Ex-tended

6122,5215,1217,0615,7884,3284,85954256,067

447405493529527510

509531494604486502

369454518510668547

519655531582515

Liqui-dated

4781,7542,9754,1844,7204,5364,7194 8605,170

398389398417426440

426452422579411431

329398410428434445

447473442432412

Other

Ex-tended

13,68515,63219,00619,83920,52423,53125,31426,54726,02631,126

32,71534,12137,39842,04347,65352,00555,97761,43565,71769,554

74,98076,95778,26787,66687,25086,73798,49286 24998,710

7,0357,4767,9918,1968,4228,398

8,1618,3668,4958,8158,5068,757

8,2138,8858,5078,7788,9348,278

9,0268,8908,9749,0138,270

Liqui-dated

11,95514,85916,42318,10519,94621,87423,34025,19225,78927,757

30,36132,77534,76138,12342,80147,23052,15957,71260,33664,288

71,18872,70572,24678,23881,29483,08089,62072 98882,130

6,3886,4116,4766,6976,7646,858

7,0897,1547,0417,1857,1697,078

7,3007,2607,2187,0607,8367,308

7,7008,0077,4978,1287,298

1 Consists of credit cards at retailers, gasoline companies, and commercial banks, and check credit at commercial banks. Prior to1968, included in "other," except gasoline companies, included in noninstallment credit prior to 1971. Beginning 1977, includes open-end credit at retailers, previously included in other." Also beginning 1977, some retail credit was reclassified from commercial intoconsumer credit. Credit secured by real estate is generally excluded.

2 Not reported separately prior to July 1970.Note.—Installment credit covers most short- and intermediate-term credit extended to individuals through regular business channels,

usually to finance the purchase of consumer goods and services or to refinance debts incurred for such purposes, and scheduled to berepaid (or with the option of repayment) in two or more installments.

Liquidated credit includes repayments, chargeoffs, and other credit.See also Table B-65.Source: Board of Governors of the Federal Reserve System.

281

TABLE B-67.— Morti outstanding by type of property and of financing, 1939-79


End of yearor quarter

1939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

19771IIIIIIV

1978.1IIIIIIV

1979

IIIII

Allproper-

ties

35.5

36 537.636 735.334.7

35.541.848.956.262.7

72.882.391.4

101.3113.7

129.9144.5156.5171.8190.8

207.5228.0251.4278.5305.9

333.3356.5381.2410.9441.4

474.2526.5603.4682.3742.5

801.5889.2

1,023.51,172.7

911.7949.0986.5

1,023.5

1,051.71,092.31,133.51,172.7

1,206.31,252.51,295.4

Farmproper-

ties

6.6

656.4605.44.9

4.84.95.15.35.6

6.16.77.27.78.2

9.09.8

10.411.112.1

12.813.915.216.818.9

21.223.125.127.429.2

30.332.235.841.346.3

50.957.065.876.1

59.261.964.065.8

68.170.973.876.1

80.285.189.0

Nonfarm properties

Total

28.9

30 031.230.829.929.7

30.836.943.950.957.1

66.775.684.293.6

105.4

120.9134.6146.1160.7178.7

194.7214.1236.2261.7287.0

312.1333.4356.1383.5412.2

443.8494.3567.7641.1696.2

750.7832.2957.7

1,096.6

852.5887.1922.5957.7

983.71,021.41,059.71,096.6

1,126.11,167.41,206.4

1- to 4-familyhouses

16.3

17 418.418 217.817.9

18.623.028.233.337.6

45.251.758.566.175.7

88.299.0

107.6117.7130.9

141.9154.7169.3186.4203.4

220.5232.9247.3264.8282.8

298.1328.3372.2416.2449.4

490.8556.5656.6761.9

573.2601.7630.5656.6

676.4706.3734.7761.9

784.6817.0845.3

Multi-familyprop-erties

5.6

575.9585.85.6

5.76.16.67.58.6

10.111.512.312.913.5

14.314.915.316.818.7

20.323.025.829.033.6

37.240.343.947.352.3

60.170.182.893.1

100.0

100.6104.5111.8122.0

105.3107.6109.7111.8

113.7116.4119.4122.0

124.0125.9129.1

Com-mercialproper-ties1

7.0

697.0676.36.2

6.47.79.1

10.210.8

11.512.513.414.516.3

18.320.723.226.129.2

32.436.441.146.250.0

54.560.164.871.477.1

85.695.9

112.7131.7146.9

159.3171.2189.3212.7

174.0177.8182.3189.3

193.6198.7205.6212.7

217.5224.5232.1

Nonfarm properties by type of mortgage

Government underwritten

Total2

1.8

233.0374.14.2

4.36.39.8

13.617.1

22.126.629.332.136.2

42.947.851.655.159.3

62.365.669.473.477.2

81.284.188.293.4

100.2

109.2120.7131.1135.0140.2

147.0154.1161.7176.4

155.7158.7161.6161.7

165.3167.4174.7176.4

183.0187.1194.4

1- to 4-family houses

Total

1.8

233.0374.14.2

4.36.19.3

12.515.0

18.922.925.428.132.1

38.943.947.250.153.8

56.459.162.265.969.2

73.176.179.984.490.2

97.3105.2113.0116.2121.3

127.7133.5141.6153.4

134.9137.4139.9141.6

144.7146.7150.7153.4

158.4162.2168.3

FHAinsured

1.8

233.0374.14.2

4.13.73.85.36.9

8.69.7

10.812.012.8

14.315.516.519.723.8

26.729.532.335.038.3

42.044.847.450.654.5

59.965.768.266.265.1

66.166.568.071.4

66.967.867.968.0

68.669.269.971.4

73.976.479.1

VAguar-

anteed

0.22.45.57.28.1

10.313.214.616.119.3

24.628.430.730.430.0

29.729.629.930.930.9

31.131.332.533.835.7

37.339.544.750.056.2

61.667.073.682.0

68.069.671.973.6

76.177.680.882.0

84.585.889.2

Conventional3

Total

27.1

27 728.227125.825.5

26.530.634.137.340.0

44.649.054.961.569.2

78.086.894.6

105.5119.4

132.3148.5166.9188.2209.8

231.0249.3267.9290.1312.0

334.6373.5436.5506.0556.0

603.7678.0795.9920.2

696.8728.5761.0795.9

818.4853.9885.1920.2

943.1980.4

1,012.0

1- to 4-familyhouses

14.5

15115.414 513.713.7

14.316.918.920.822.6

26.328.833.138.043.6

49.355.160.467.677.0

85.595.6

107.1120.5134.1

147.4156.9167.4180.4192.7

200.8223.1259.2300.0328.1

363.0422.9515.0608.5

438.2464.4490.6515.0

531.7559.6584.0608.5

626.2654.8677.0

1 Includes negligible amount of farm loans held by savings and loan associations.2 Includes FHA insured multifamily properties, not shown separately.3 Derived figures. Total includes multifamily and commercial properties, not shown separately.Source: Board of Governors of the Federal Reserve System, based on data from various Government and private organizations.

282

TABLE B-68.—Mortgage debt outstanding by holder, 1939-79


End of year or quarter

1939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

19771IIIIIIV

1978-1IIIIIIV

1979:IIIIll

Total

35.5

36.537.636.735.334.7

35.541.848.956.262.7

72.882.391.4

101.3113.7

129.9144.5156.5171.8190.8

207.5228.0251.4278.5305.9

333.3356.5381.2410.9441.4

474.2526.5603.4682.3742.5

801.5889.2

1,023.51,172.7

911.7949.0986.5

1,023.5

1,051.71.092.31,133.51,172.7

1206 31252 51,295.4

Major financial institutions

Total

18.6

19.520.720.720.220.2

21.026.031.837.842.9

51.759.566.975.185.7

99.3111.2119.7131.5145.5

157.6172.6192.5217.1241.0

264.6280.8298.8319.9339.1

355.9394.2450.0505.4542.6

581.2647.5745.0848.1

662.8690.5718.1745.0

764.6793.8822.0848.1

866 0894 5920.0

Savingsandloan

associa-tions

3.8

4.14.64.64.64.8

5.47.18.9

10.311.6

13.715.618.422.026.1

31.435.740.045.653.1

60.168.878.890.9

101.3

110.3114.4121.8130.8140.2

150.3174.3206.2231.7249.3

278.6323.0381.2432.9

333.6350.6366.8381.2

392.4408.0421.0432.9

44144566468.3

Mutualsavingsbanks

4.8

4.94.84.64.44.3

4.24.44.95.86.7

8.39.9

11.412.915.0

17.519.721.223.325.0

26.929.132.336.240.6

44.647.350.553.556.1

57.962.067.673.274.9

77.281.688.195.2

82.384.186.188.1

89.891.593.495.2

96197297.9

Commer-cial

banks*

4.3

4.64.94.74.54.4

4.87.29.4

10.911.6

13.714.715.916.918.6

21.022.723.325.528.1

28.830.434.539.444.0

49.754.459.065.770.7

73.382.599.3

119.1132.1

136.2151.3179.0214.0

155.2163.0171.2179.0

184.4194.5205.4214.0

22012296239.4

Lifeinsur-ancecom-

panies

5.7

6.06.46.76.76.7

6.67.28.7

10.812.9

16.119.321.323.326.0

29.433.035.237.139.2

41.844.246.950.555.2

60.064.667.570.072.0

74.475.576.981.486.2

89.291.696.8

106.2

91.892.994.196.8

97.999.9

102.2106.2

108 41111114.4

Other holders

Federaland

relatedagen-cies2

5.0

4.94.74.33.63.0

2.42.01.81.82.3

2.83.54.14.64.8

5.36.27.78.0

10.2

11.512.212.611.812.2

13.517.520.925.131.1

38.346.454.664.882.1

101.0116.6140.3170.5

121.5127.1133.7140.3

146.0152.6161.4170.5

18121924203.7

Individ-uals

others

11.9

12.012.211.711.511.5

12.113.815.316.617.5

18.419.320.421.723.2

25.327.129.132.335.1

38.443.146.349.552.7

55.258.261.465.971.2

79.985.998.9

112.2117.8

119.3125.1138.2154.1

127.4131.4134.7138.2

141.2145.8150.1154.1

159 0165 7171.7

1 Includes loans held by nondeposit trust companies, but not by bank trust departments.2 Includes former Federal National Mortgage Association (FNMA) and new Government National Mortgage Association (GNMA), as

well as Federal Housing Administration, Veterans Administration, Public Housing Administration, Farmers Home Administration, and inearlier years Reconstruction Finance Corporation, Homeowners Loan Corporation, and Federal Farm Mortgage Corporation. Also includesGNMA Pools and U.S.-sponsored agencies such as new FNMA, Federal Land Banks, and Federal Home Loan Mortgage Corporation. OtherU.S. agencies (amounts small or current separate data not readily available) included with "individuals and others.

Source-. Board of Governors of the Federal Reserve System, based on data from various Government and private organizations.

283

GOVERNMENT FINANCE

TABLE B-69.—Federal budget receipts, outlays, and debt, fiscal years 1970-81

[Millions of dollars; fiscal years]

DescriptionActual

1970 1971 1972 1973 1974 1975

BUDGET RECEIPTS AND OUTLAYS:

Total receipts

Federal fundsTrust funds

Interfund transactions

Total outlays


Interfund transactions

Total surplus or deficit ( - )

Federal funds

Trust funds

OUTSTANDING DEBT, END OF PERIOD:

Gross Federal debtHeld by Government agenciesHeld by the public

Federal Reserve System..Other

193,743

143,15859,362-8,778

196,588

156,30049,066-8,778

-2,845

-13,14210,296

382,603

97,723284,880

57,714227,166

188,392

133,78566,193

-11,586

211,425

163,65159,360

-11,586

-23,033

-29,8666,833

409,467

105,140304,328

65,518238,810

208,649

148,84672,959

-13,156

232,021

178,11067,067

-13,156

-23,373

-29,2645,892

437,329

113,559323,770

71,426252,344

232,225

161,35792,193

-21,325

247,074

186,95181,448

-21,325

-14,849

-25,59410,745

468,426

125,381343,045

75,182267,863

264,932

181,219104,846-21,133

269,620

199,91890,835

-21,133

-4,688

-18,69914,011

486,247

140,194346,053

80,648265,405

280,997

187,505118,590-25,098

326,185

240,115111,168-25,098

-45,188

-52,6097,422

544,131

147,225396,906

84,993311,913

BUDGET RECEIPTS

Individual income taxes.Corporation income taxes.Social insurance taxes and contributions.Excise taxesEstate and gift taxes.Customs dutiesMiscellaneous receipts-

Deposits of earnings by Federal Reserve System..All other

BUDGET OUTLAYS

National defense..International affairs.General science, space, and technology.EnergyNatural resources and environment.AgricultureCommerce and housing credit.TransportationCommunity and regional development.Education, training, employment, and social services.HealthIncome securityVeterans benefits and services.Administration of justice.General governmentGeneral purpose fiscal assistance.InterestAllowancesUndistributed offsetting receipts.

Composition of undistributed offsetting receipts:Employer share, employee retirement.Interest received by trust funds.Rents and royalties on the Outer Continental

Shelf

193,743

90,41232,82945,29815,7053,6442,430

3,266158

196,588

78,5534,2974,507

9903,0615,1612,1087,0062,3918,625

13,05143,073

8,677952

1,857536

18,309

188,392

86,23026,78548,57816,6143,7352,591

3,533325

211,425

75,8084,0974,1801,0313,9094,2882,3588,0502,9169,839

14,71655,4269,7761,2992,020

53519,602

208,649

94,73732,16653,91415,4775,4363,287

3,252381

232,021

76,5504,6934,1731,2704,2355,2802,2168,3883,422

12,51917,46763,91310,730

1,6502,415

67320,563

232,225

103,24636,15364,54216,2604,9173,188

3,495426

247,074

74,5414,0664,0301,1794,7634,852924

9,0654,59512,73518,83272,96512,0132,1312,5687,351

22,782

264,932

118,95238,62076,78016,8445,0353,334

4,845524

269,620

77,7815,6813,977837

5,6702,2273,9259,1724,13412,34422,07384,43713,3862,4623,2436,890

28,032

-6,567

-2,444-3,936

-187

-8,427

-2,611-4,765

-1,051

-8,137

-2,768-5,089

-279

-12,318

-2,927-5,436

-3,956

-16,651

-3,319-6,583

-6,748

280,997

122,38640,62186,44116,5514,6113,676

5,777934

326,185

85,5526,9223,9892,1697,3361,6595,60710,3883,73715,87027,648108,61016,5972,9423,1357,187

30,911

-14,075

-3,980-7,667

-2,428


284

TABLE B-69.—Federal budget receipts, outlays, and debt, fiscal years 1970-81—Continued

[Millions of dollars; fiscal years]

Description

Actual

1976Transi-

tionquarter

1977 1978 1979

Estimate

1980 1981

BUDGET RECEIPTS AND OUTLAYS:

Total receipts


Interfund transactions-

Total outlaysFederal fundsTrust fundsInterfund transactions.

Total surplus or deficit ( - ) . . . .

Federal funds...Trust funds

OUTSTANDING DEBT, END OF PERIOD:

Gross Federal debt

Held by Government agenciesHeld by the public

Federal Reserve SystemOther

300,005

201,099133,695

-34,789

366,439

269,943131,286-34,789

-66,434

-68,8432,410

631,866

151,566480,300

94,714385,586

81,773

54,08532,071-4,383

94,729

65,08934,023-4,383

-12,956

-11,004-1,952

646,379

148,052498,327

96,702401,625

357,762

241,312152,763-36,313

402,725

295,772143,267-36,313

-44,963

-54,4599,496

709,138

157,295551,843

105,004446,839

401,997

270,484168,012-36,498

450,836

332,016155,318-36,498

-48,839

-61,53312,694

780,425

169,477610,948

115,480495,468

465,940

316,351189,641-40,052

493,673

362,420171,305-40,052

-27,733

-46,06918,335

833,751

189,162644,589

115,594528,996

523,829

347,813222,196-46,179

563,583

405,653204,110-46,179

-39,754

-57,84018,086

892,812

203,923688,889

599,988

383,151265,107-48,270

615,761

429,700234,331-48,270

-15,773

-46,54930,776

939,357

217,368721,989

BUDGET RECEIPTS....

Individual income taxesCorporation income taxesSocial insurance taxes and contributions....Excise taxesEstate and gift taxesCustoms dutiesMiscellaneous receipts:

Deposits of earnings by Federal Re-serve System

All other

BUDGET OUTLAYS...

National defenseInternational affairsGeneral science, space, and technologyEnergyNatural resources and environmentAgricultureCommerce and housing creditTransportationCommunity and regional developmentEducation, training, employment, and so-

cial servicesHealthIncome securityVeterans benefits and services....,Administration of justiceGeneral governmentGeneral purpose fiscal assistanceInterestAllowancesUndistributed offsetting receipts

Composition of undistributed offsettingreceipts:

Employer share, employee retirement.Interest received by trust fundsRents and royalties on the Outer

Continental Shelf

300,005

131,60341,40992,71416,9635,2164,074

5,4512,575

366,439

89,4305,5524,3703,1278,1242,5043,79213,4354,767

18,73733,448127,41218,4323,3202,9487,235

34,511

81,773

38,8018,460

25,7604,4731,4551,212

1,500112

94,729

22,3072,1931,161794

2,532581

1,3923,3041,340

5,1628,721

32,7973,962859883

2,0927,216

357,762

157,62654,892108,68817,5487,3275,150

5,908622

402,725

97,5014,8134,6774,17210,0005,532- 4 4

14,6366,348

20,98538,785137,91518,0383,6003,3129,499

38,009

401,997

180,98859,952123,41018,3765,2856,573

6,641772

450,836

105,1865,9224,7425,86110,9257,7313,32415,44511,039

26,46343,676146,21218,9743,8023,7379,601

43,966

-14,704

-4,242-7,800

-2,662

-2,567

-985-270

-1,311

-15,053

-4,548-8,131

-2,374

-15,772

-4,983-8,530

-2,259

465,940

217,84165,677141,59118,7455,4117,439

8,327910

493,673

117,6816,0915,0416,85612,0916,2382,56517,4599,482

29,68549,614160,19819,9284,1534,1538,372

52,556

-18,488

-5,271-9,950

-3,267

523,829

238,71772,303162,18126,3335,7777,600

10,058861

563,583

130,36810,4015,8897,75112,7764,6365,47619,6318,467

30,65456,563190,94820,7664,5304,8858,670

63,330100

-22,258

-5,919-11,539

-4,800

599,988

274,36771,574187,39740,2095,9388,403

10,8761,224

615,761

146,2419,6126,4428,10712,8192,802712

20,1598,820

31,98962,449

219,98221,7314,6994,9319,617

67,1972,570

-25,119

-6,161-12,958

- 6 , 0 0 0

Note.—Through fiscal year 1976, the fiscal year was on a July 1—June 30 basis. Beginning October 1976 (fiscal year 1977), thefiscal year is on an October 1—September 30 basis. The period July 1, 1976 through September 30, 1976 is a separate fiscal periodknown as the transition quarter.

See "Budget of the United States Government, Fiscal Year 1981" for additional information.

Sources: Department of the Treasury and Office of Management and Budget.

285

2 9 4 - 2 8 9 0 - 8 0 - 1 9

TABLE B-70.—Federal budget receipts and outlays, fiscal years 1929-81


1929 ..

1933

1939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

196519661967 .19681969

19701971197219731974

19751976Transition quarter197719781979

19801

1981 *

Fiscal year Receipts

3,862

1,997

4,979

6,3618,62114,35023,64944,276

45,21639,32738,39441,77439,437

39,48551,64666,20469,57469,719

65,46974,54779,99079,63679,249

92,49294,38999,676106,560112,662

116,833130,856149,552153,671187,784

193,743188,392208,649232,225264,932

280,997300,00581,773

357,762401,997465,940

523,829599,988

Outlays

3,127

4,598

8,841

9,45613,63435,11478,53391,280

92,69055,18334,53229,77338,834

42,59745,54667,72176,10770,890

68,50970,46076,74182,57592,104

92,22397,795106,813111,311118,584

118,430134,652158,254178,833184,548

196,588211,425232,021247,074269,620

326,185366,43994,729402,725450,836493,673

563,583615,761

Surplus ordeficit (-)

734

-2,602

-3,862

-3,095-5,013

-20,764-54,884-47,004

-47,474-15,856

3,86212,001

603

-3,1126,100

-1,517-6,533-1,170

-3,0414,0873,249

-2,939-12,855

269-3,406-7,137-4,751-5,922

-1,596-3,796-8,702

-25,1613,236

-2,845-23,033-23,373-14,849-4,688

-45,188-66,434-12,956-44,963-48,839-27,733

-39,754-15,773

1 Estimates.Note.—Under provisions of the Congressional Budget Act of 1974, the fiscal year for the Federal Government shifted beginning with

fiscal year 1977. Through fiscal year 1976, the fiscal year was on a July 1-June 30 basis; beginning October 1976 (fiscal year 1977),the fiscal year is on an October 1-September 30 basis. The 3-month period from July 1, 1976 through September 30, 1976 is aseparate fiscal period Known as the transition quarter.

Data for 1929-39 are according to the administrative budget and those beginning 1940 according to the unified budget.Refunds of receipts are excluded from receipts and outlays.See "Budget of the United States Government, Fiscal Year 1981" for additional information.Sources: Department of the Treasury and Office of Management and Budget.

286

TABLE B-71.—Relation of Federal Government receipts and expenditures in the national income and

product accounts to the unified budget, 1979-81

[Billions of dollars; fiscal years]

Receipts and expenditures

RECEIPTS

Total budget receipts

Government contribution for employee retirement (grossing)Other netting and grossingAdjustment to accrualsOther

Federal sector, national income and product accounts, receipts

EXPENDITURES

Total budget outlays

Lending and financial transactionsGovernment contribution for employee retirement (grossing)Other netting and grossingDefense timing adjustmentBonuses on Outer Continental Shelf land leasesOther

Federal sector, national income and product accounts, expenditures ,

1979

465.9

7.93.67.3

_ 9

483.7

493.7

- 7 . 27.93.6

- 1 . 31.94.9

493.6

Estimate

1980

523.8

8.83.8

- 4 . 8- 1 0

530.6

563.6

- 7 . 38.83.8

- 2 . 73.0

- 4 . 9

564.2

1981

600.0

9.44.3

- 4 . 9- 1 2

607.7

615.8

- . 49.44.3

- 2 . 23.9

- 4 . 4

626.3

Note.—See Note, Table B-70.See Special Analysis B, "Special Analyses, Budget of the United States Government, Fiscal Year 1981" for description of these

categories.

Sources: Department of Commerce (Bureau of Economic Analysis), Department of the Treasury, and Office of Management andBudget.

287

TABLE B-72.—Government receipts and expenditures, national income and product accounts, 1929-79


Calendar year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979"

19771IIIIIIV

19781IIIIIIV

1979:1IIIIIIV

Total government

Receipts

11.3

9.3

15.4

17.725.032.649.251.253.251.056.958.955.9

69.085.290.194.689.9

101.1109.7116.2115.0129.4

139.5144.8156.7168.5174.0188.3212.3228.2263.4296.3

302.6322.2367.4411.2455.1468.5538.3606.6685.7771.9

589.5599.0609.6628.5

642.4678.6696.3725.4

741.1754.0782.9

Expendi-tures

10.3

10.7

17.6

18.428.864.093.3

103.092.745.642.550.559.3

61.079.293.9

101.697.098.0

104.5115.3127.6131.0

136.4149.1160.5167.8176.3187.8213.6242.4268.9285.6

311.9340.5370.9404.9458.2532.8574.0626.1686.0757.9

602.6615.6633.1653.3

661.7673.7694.1714.5

725.3741.3768.8796.2

Surplus ordeficit(-),

nationalincome

andproduct

accounts

1.0

- 1 . 4

- 2 . 2

-.7-3 .8

-31.4-44.1-51.8-39.5

5.414.48.4

- 3 . 4

8.06.1

- 3 . 8- 6 . 9- 7 . 1

3.15.2.9

-12.6- 1 . 6

3.1- 4 . 3- 3 . 8

.7- 2 . 3

.5- 1 . 3

-14.2- 5 . 510.7

- 9 . 4-18.3

- 3 . 56.3

- 3 . 2-64.4-35.7-19.5

- .314.0

-13.1-16.6-23.5-24.8

-19.25.02.3

10.8

15.812.714.0

Federal Government

Receipts

3.8

2.7

6.7

8.615.422.939.341.042.539.143.243.238.7

50.064.367.370.063.772.678.081.978.789.8

96.198.1

106.2114.4114.9124.3141.8150.5174.7197.0

192.1198.6227.5258.3288.6286.2331.4375.4432.1497.6

366.8370.8375.8388.2

397.8424.8442.1463.5

475.0485.8504.8

Expendi-tures

2.6

4.0

8.9

10.020.556.185.895.584.635.629.834.941.3

40.857.871.177.169.868.171.979.688.991.0

93.1101.9110.4114.2118.2123.8143.6163.7180.6188.4

204.2220.6244.7265.0299.3356.8385.0421.7459.8508.0

404.0411.6429.4441.8

447.3449.4462.6479.7

486.8492.9516.1536.4


nationalincome

andproduct

accounts

1.2

- 1 . 3

- 2 . 2

- 1 . 3- 5 . 1

-33.1-46.6-54.5-42.1

3.513.48.3

- 2 . 6

9.26.5

-3 .7- 7 . 1- 6 . 0

4.46.12.3

-10.3-1 .1

3.0- 3 . 9- 4 . 2

.3- 3 . 3

.5- 1 . 8

-13.2- 5 . 8

8.5

-12.1-22.0-17.3

-6 .7-10.7-70.6-53.6-46.3-111-10.5

-37.2-40.9-53.6-53.6

-49.4-24.6-20.4-16.3

-11.7- 7 . 0

-11.3

Receipts

7.6

7.2

9.6

10.010.410.610.911.111.613.015.417.719.5

21.323.425.427.429.031.735.038.542.046.4

49.954.058.563.269.575.184.893.6

107.2119.7

134.9152.6177.4193.5210.4236.9268.0298.8331.0354.4

285.4293.7305.2310.7

319.0330.5331.8342.6

343.9345.9359.8

State and localgovernment

Expendi-tures

7.8

7.2

9.6

9.39.18.88.48.59.0

11.114.417.620.2

22.523.925.527.330.232.935.939.844.346.9

49.854.458.062.868.575.184.394.7

106.9117.6

132.2148.9163.7180.5202.8230.6250.1271.9303.6329.9

261.3269.5275.1281.9

288.8301.0309.1315.5

316.3326.1334.5342.8


nationalincome

andproduct

accounts

- 0 . 2

1

.0

.61.31.82.52.72.61.91.0.1

-.7

- 1 . 2- .4- .0

.1- 1 . 1- 1 . 3- .9

- 1 . 4- 2 . 4- .4

.1- .4

.5

.51.0

- .0.5

-1 .1.3

2.1

2.83.7

13.713.07.66.2

17.926.827.424.4

24.224.230.128.8

30.229.611127.1

27.619.725.3

Note.—Federal grants-in-aid to State and local governments are reflected in Federal expenditures and State and local receipts. Totalgovernment receipts and expenditures have been adjusted to eliminate this duplication.


288

TABLE B-73.—Federal Government receipts and expenditures, national income and product accounts,

1953-81


Year or quarter

Receipts

Total

Personaltax andnontax

receipts

Corpo-rate

profitstax

accruals

Indirectbusinesstax andnontax

accruals

Contri-butions

forsocialinsur-ance

Expenditures

Total1

Pur-chases

ofgoods

andserv-ices

Transferpayments

Topersons

Toforeign-

ers

Grants-in-aid

toStateandlocal

govern-ments

Netinter-estpaid

Subsi-diesless

currentsurplus

ofgovern-

mententer-prises

Surplusor

deficit

nationalincome

andproductaccounts

Fiscal year:1953195419551956195719581959196019611962196319641965196619671968196919701971197219731974197519761977197819791980 2

1981 2

Calendar year:195319541955195619571958195919601961196219631964196519661967196819691970197119721973197419751976197719781979 ".

1978:IIIIllIV

1979:|||

III

IV P

69.465.867.476.381.078.185.494.895.0104.0110.0115.6120.0132.7146.0160.0190.1194.9192.5213.5240.5271.8283.5313.9366.0414.7483.7530.6607.7

70.063.772.678.081.978.789.896.198.1106.2114.4114.9124.3141.8150.5174.7197.0192.1198.6227.5258.3288.6286.2331.4375.4432.1497.6

397.8424.8442.1463.5

475.0485.8504.8

31.430.329.733.636.736.338.242.543.647.349.650.751.457.564.471.490.093.687.5100.3107.3122.6127.1137.0166.0186.3223.5245.1279.7

32.229.031.435.237.436.839.943.644.748.651.548.653.961.767.579.694.892.289.9108.2114.6131.1125.4147.2169.6194.9229.9

178.9188.8200.9211.0

213.0223.4235.2248.1

19.717.318.921.520.817.921.422.320.022.723.325.727.130.830.333.237.033.032.034.241.043.742.151.759.167.778.476.577.1

19.516.921.120.920.418.022.521.421.522.524.626.128.931.430.036.336.230.833.536.643.045.942.854.661.872.078.3

60.272.274.681.2

77.274.979.4

10.710.410.010.811.711.612.013.213.314.215.015.616.915.515.817.118.619.220.019.920.721.422.224.324.527.229.438.553.0

10.99.7

10.711.211.811.512.513.413.614.615.316.216.515.616.318.019.019.320.420.021.221.723.923.425.128.130.0

26.628.028.429.3

29.429.930.030.7

7.67.88.7

10.311.712.313.916.718.119.922.123.624.528.935.538.444.549.252.959.171.584.292.1

100.9116.4133.5152.4170.5197.9

7.48.29.4

10.612.312.414.917.618.320.523.124.025.033.136.740.847.049.754.962.879.489.994.2

106.3118.9137.0159.3

132.2135.8138.2142.0

155.5157.5160.2164.2

75.974.367.270.076.082.891.291.398.1

106.2111.7117.2118.5132.7154.9172.2184.7195.6212.7232.9256.2278.8328.7371.1411.4450.1493.6564.2626.3

77169.868.171.979.688.991.093.1

101.9110.4114.2118.2123.8143.6163.7180.6188.4204.2220.6244.7265.0299.3356.8385.0421.7459.8508.0

447.3449.4462.6479.7

486.8492.9516.1536.4

56.453.944.345.548.151.154.852.955.861.063.765.964.672.486.095.098.097.094.8

100.9101.7104.6118.0125.7140.3150.7162.4185.6202.9

57.547.944.545.950.053.953.953.757.463.764.665.267.378.890.998.097.595.696.2

102.1102.2111.1123.1129.7144.4152.6166.3

150.9148.2152.3159.0

163.6161.7162.9177.0

9.210.512.112.814.417.819.920.623.625.126.527.428.431.837.242.748.755.067.776.187.1

101.7131.2153.5166.4178.5197.7230.9263.2

9.411.512.413.415.719.620.121.625.025.627.027.930.333.540.146.050.661.372.780.593.2

114.4146.0158.4169.5181.6205.7

176.4176.8185.3187.9

192.7198.0213.9217.9

2.11.72.11.81.91.71.81.82.12.12.12.22.22.32.22.12.22.02.32.82.73.03.13.03.23.54.04.24.4

2.01.82.01.91.81.81.81.92.12.22.22.22.22.32.22.12.12.22.62.72.63.23.13.23.23.73.9

3.43.93.54.2

4.03.93.74.0

2.82.93.03.23.74.76.26.96.97.68.39.8

10.912.714.817.819.222.626.832.640.441.648.457.666.374.779.384.390.7

2.82.93.13.34.25.66.86.57.28.09.1

10.411.114.415.918.620.324.429.037.540.643.954.661.167.577.380.1

74.476.777.680.7

77.877.781.883.0

4.54.64.64.85.35.45.66.86.46.47.17.78.28.79.6

10.512.113.614.214.115.919.821.925.228.433.140.449.252.2

4.64.64.65.15.55.26.26.86.26.87.38.08.49.29.8

11.412.914.314.014.618.220.923.226.829.034.843.0

32.534.035.637.1

40.042.643.546.0

.9

.81.21.72.62.42.52.43.34.14.04.14.34.85.24.14.65.46.86.49.18.05.76.26.99.69.8

10.012.9

.71.01.52.42.42.82.12.64.04.23.94.54.65.54.74.55.26.36.27.88.25.36.85.88.19.79.0

9.79.88.4

10.9

8.39.0

10.28.4

- 6 . 5- 8 . 5

.26.35.0

- 4 . 7- 5 . 8

3.4- 3 . 1- 2 . 2- 1 . 7- 1 . 5

1.4.0

- 8 . 9-12.2

5.4- . 6

-20.2-19 .5-15.7- 7 . 0

-45 .3-57.3-45.5-35.4

- 9 . 9-33.6-18.6

- 7 . 1-6 .0

4.46.12.3

-10.3- 1 . 1

3.0- 3 . 9-4 .2

.3- 3 . 3

.5- 1 . 8

-13.2- 5 . 8

8.5-12.1-22.0-17.3- 6 . 7

-10.7-70.6-53.6-46.3-27.7-10.5

-49.4-24.6-20.4-16.3

-11.7- 7 . 0

-11 .3

1 Includes an item for the difference between wage accruals and disbursements, not shown separately.2 Estimates.

Sources: Department of Commerce (Bureau of Economic Analysis) and Office of Management and Budget.

289

TABLE B-74.—State and local government receipts and expenditures, national income and product accounts,

1946-79


Calendar yearor quarter

Receipts

Total

Personaltax andnontax

receipts

Corpo-rate

profitstax

accruals

Indirectbusinesstax andnontax

accruals

Contribu-tions for

socialinsurance

Federalgrants-in-aid

Expenditures

Total1

Pur-chases

ofgoods

andservices

Trans-fer

pay-ments

toper-sons

Netinterest

paid

Subsi-diesless

currentsurplus

ofgovern-

mententer-prises

Surplusor

deficit( —)

nationalincome

andproduct

accounts

1946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979 ".

1977:|IIIllIV

1978:1IIIll .IV

1979:|IIIllIV

13.015.417.719.5

21323.425.427.429.0

31.735 038.542.046.4

49.954.058.563.269.5

75.184.893.6107.2119.7

134.9152.6177.4193.5210.4

236.9268.0298 8331.0354.4

285.4293.7305.2310.7

319.0330.5331.8342.6

343.9345.9359.8

1.51.72.12.4

2.52.83.03.23.5

3.94.55.05.46.1

6.77.48.28.8

10.0

10.912.814.617.420.6

23.126.433.036.139.2

43.449.956.864.169.9

54.656.357.458.9

60.963.365.067.2

67.367.371.473.7

0.5.6.7.6

1.01.01.01.01.2

1.21.31.51.71.8

2.02.22.53.13.4

3.74.25.05.76.5

7.19.3

10.912.514.3

10.310.811.111.3

10.612.512.913.9

14.113.714.7

9.310.712.213.3

14.615.917.418.819.9

21.623.825.727.229.3

32.034.437.039.442.6

46.149.754.060.867.4

74.783.191.099.0

106.9

115.4128.0140.0150.0159.5

135.8137.9141.3144.9

147.0151.3148.8152.8

155.5157.0161.1164.5

0.6.7

1.11.41.61.72.0

2.12.32.62.83.1

3.43.73.94.24.7

5.05.76.77.27.9

9.09.9

10.812.113.9

16.419.723.627.130.5

22.123.124.025.1

26.026.827.528.0

29.130.230.931.8

1.11.72.02.2

2.32.52.62.82.9

3.13.34.25.66.8

6.57.28.09.1

10.4

11.114.415.918.620.3

24.429.037.540.643.9

54.661.167.577.380.1

62.765.571.470.4

74.476.777.680.7

77.877.781.883.0

11.114.417.620.2

22.523.925.527.330.2

32.935.939.844.346.9

49.854.458.062.868.5

75.184.394.7

106.9117.6

132.2148.9163.7180.5202.8

230.6250.1271.9303.6329.9

261.3269.5275.1281.9

288.8301.0309.1315.5

316.3326.1334.5342.8

9.912.815.318.0

19.821.823.225.027.8

30.633.537.141.143.7

46.550.854.359.064.6

71.179.889.3

100.7110.4

123.2137.5151.0167.3191.5

215.4231.6251.8283.0309.8

241.8249.0254.9261.6

268.5280.1288.6294.8

296.5304.9314.9322.8

1.72.33.03.0

3.63.13.33.53.6

3.83.94.34.85.1

5.45.86.06.46.9

7.38.19.4

10.612.1

14.617.218.920.320.5

24.527.430.233.336.3

29.129.830.531.3

32.133.033.834.4

35.035.736.537.9

0.2.1.1.1

.1

.0

.0

.0

.1

.1

.1

.1

.1

.1

.1

.1

.1

.1- . 1

- . 3

- ! 9-1 .2- 1 . 6

- 2 . 0- 1 . 8- 2 . 1- 2 . 9- 4 .9

- 4 . 8- 4 . 1- 5 . 0- 7 . 1- 9 . 5

-4.3-4.6-5.2-5.9

- 6 . 4- 7 . 0- 7 . 3- 7 . 6

- 8 . 3- 9 . 0

-10.0-10.8

- 0 . 7- . 8- . 8- . 9

- . 9- 1 . 0- 1 . 1- 1 . 2- 1 . 3

- 1 . 5- 1 . 6- 1 . 7- 1 . 7- 2 . 0

- 2 . 2- 2 . 3- 2 . 5- 2 . 8- 2 . 8

- 3 . 0- 3 . 0- 3 . 1-3 .2- 3 . 3

- 3 . 6- 3 . 8- 4 . 2- 4 . 4- 4 . 3

- 4 . 5- 4 . 8- 5 . 0- 5 . 5- 6 . 7

-6.5-6.4-7.0-6.9

1.91.0.1

- . 7

-1 .2- . 4- . 0

.1- 1 . 1

- 1 . 3- . 9

- 1 . 4-2 .4

- . 4

.1- . 4

.5

.51.0

- . 0.5

- 1 . 1.3

2.1

2.83.7

13.713.07.6

6.217.926.827.424.4

24.224.230.128.8

30.229.622.727.1

27.619.725.3

1 Includes an item for the difference between wage accruals and disbursements, not shown separately.


290

TABLE B-75.—State and local government revenues and expenditures, selected fiscal years, 1927-77


Fiscal yearl

General revenues by source2

Total Propertytaxes

Salesand

grossre-

ceiptstaxes

Individ-ual

i.icometaxes

Corpo-ration

netincometaxes

Revenuefrom

FederalGovern-

ment

Allother3

General expenditures by function2

Total Educa-tion

High-ways

Publicwelfare

Allother4

1927

1932193419361938

19401942194419461948

1950195219531954

19551956195719581959

1960196119621963

1962-635

1963-6451964-655

1965-665

1966-675

1967-685

1968-695

1969-705

1970-715

1971-725

1972-735

1973-745

1974-755

1975-765

1976-775

7,271

7,2677,6788,3959,228

9,60910,41810,90812,35617,250

20,91125,18127,30729,012

31,07334,66738,16441,21945,306

50,50554,03758,25262,890

62,26968,44374,000

83,03691,197

101,264114,550130,756

144,927166,352190,214207,670228,171

256,176285,796

4,730

4,4874,0764,0934,440

4,4304,5374,6044,9866,126

7,3498,6529,3759,967

10,73511,74912,86414,04714,983

16,40518,00219,05420,089

19,83321,24122,583

24,67026,04727,74730,67334,054

37,85242,13345,28347,70551,491

57,00162,535

470

7521,0081,4841,794

1,9822,3512,2892,9864,442

5,1546,3576,9277,276

7,6438,6919,4679,82910,437

11,84912,46313,49414,456

14,44615,76217,118

19,08520,53022,91126,51930,322

33,23337,48842,04746,09849,815

54,54760,595

70

7480153218

224276342422543

788998

1,0651,127

1,2371,5381,7541,7591,994

2,4632,6133,0373,269

3,2673,7914,090

4,7605,8267,3088,90810,812

11,90015,23717,99419,49121,454

24,57529,245

92

7949113165

156272451447592

593846817778

744890984

1,0181,001

1,1801,2661,3081,505

1,5051,6951,929

2,0382,2272,5183,1803,738

3,4244,4165,4256,0156,642

7,2739,174

116

2321,016948800

945858954855

1,861

2,4862,5662,8702,966

3,1313,3353,8434,8656,377

6,9747,1317,8718,722

8,66310,00211,029

13,21415,37017,18119,15321,857

26,14631,25339,25641,82047,034

55,58962,575

1,793

1,6431,4491,6041,811

1,8722,1232,2692,6613,685

4,5415,7636,2526,897

7,5848,4659,2509,69910,516

11,63412,56313,48914,850

14,55615,95117,250

19,26921,19723,59826,11829,971

32,37435,82640,21046,54151,735

57,19161,673

7,210

7,7657,1817,6448,757

9,2299,1908,86311,02817,684

22,78726,09827,91030,701

33,72436,71140,37544,85148,887

51,87656,20160,20664,816

63,97769,30274,546

82,84393,350102,411116,728131,332

150,674166,873181,227198,959230,721

256,731274,388

2,235

2,3111,8312,1772,491

2,6382,5862,7933,3565,379

7,1778,3189,39010,557

11,90713,22014,13415,91917,283

18,71920,57422,21623,776

23,72926,28628,563

33,28737,91941,15847,23852,718

59,41364,88669,71475,83387,858

97,216102,805

1,809

1,7411,5091,4251,650

1,5731,4901,2001,6723,036

3,8034,6504,9875,527

6,4526,9537,8168,5679,592

9,4289,844

10,35711,136

11,15011,66412,221

12,77013,93214,48115,41716,427

18,09519,01018,61519,94622,528

23,90723,105

151

444889827

1,069

1,1561,2251,1331,4092,099

2,9402,7882,9143,060

3,1683,1393,4853,8184,136

4,4044,7205,0845,481

5,4205,7666,315

6,7578,2189,857

12,11014,679

18,22621,07023,58225,08528,155

32,60435,941

3,015

3,2692,9523,2153,547

3,8623,8893,7374,5917,170

8,86710,34210,61911,557

12,19713,39914,94016,54717,876

19,32521;06322,54924,423

23,67825,58627,447

30,02933,28136,91541,96347,508

54,94061,90769,31678,09692,180

103,004112,537

1 Fiscal years not the same for all governments. See footnote 5.2 Excludes revenues or expenditures of publicly owned utilities and liquor stores, and of insurance-trust activities. Intergovernmental

receipts and payments between State and local governments are also excluded.3 Includes licenses and other taxes and charges and miscellaneous revenues.4 Includes expenditures for health, hospitals, police, local fire protection, natural resources, sanitation, housing and urban renewal,

local parks and recreation, general control, financial administration, interest on general debt, and unallocable expenditures.5 Data for fiscal year ending in the 12-month period through June 30. Data for 1963 and earlier years include local government

amounts grouped in terms of fiscal years ended during the particular calendar year.

Note.—Data are not available for intervening years.


291

TABLE B-76.—Interest-bearing public debt securities by kind of obligation, 1967-79


End of year or month

Totalinterest-bearingpublicdebt

securities

Marketable

Total BillsTreasury

notesTreasurybonds»

Nonmarketable

TotalU.S.

savingsbonds

Foreigngovern-

mentand

publicseries2

Govern-ment

accountseries3

Other4

Fiscal year:196719681969

19701971197219731974

19751976197719781979



1979:JanFeb.MarApr.MayJune.


322,286344,401351,729

369,026396,289425,360456,353473,238

532,122619,254697,629766,971819,007

720,563728,474736,929733,074740,579748,002

749,462763,404766,971775,452782,048782,371

789,502791,249792,344795,434803,816799,863

806,508812,095819,007825,736832,730843,960

5 210,672226,592226,107

232,599245,473257,202262,971266,575

315,606392,581443,508485,155506,693

466,780470,766478,252472,193473,684477,699

481,041485,557485,155491,651493,337487,546

496,529497,976500,400504,585506,867499,343

506,994509,187506,693515,033519,573530,731

58,53564,44068,356

76,15486,67794,648

100,061105,019

128,569161,198156,091160,936161,378

161,221161,817165,652159,640159,391159,757

160,092160,615160,936161,227161,548161,747

162,286162,416165,459163,730163,076159,890

159,938160,489161,378161,692165,100172,644

49,10871,07378,946

93,489104,807113,419117,840128,419

150,257191,758241,692267,865274,242

257,077258,472262,179262,180261,612265,310

266,586268,531267,865272,610271,663265,791

272,807271,372270,803275,311276,123272,066

278,257277,582274,242280,832279,723283,379

97,41891,07978,805

62,95653,98949,13545,07133,137

36,77939,62645,72456,35571,073

48,48350,47750,42050,37352,68152,632

54,36356,41056,35557,81460,12560,007

61,43664,18964,13965,54467,66867,387

68,79971,11671,07372,51074,75174,708

111,614117,808125,623

136,426150,816168,158193,382206,663

216,516226,673254,121281,816312,314

253,783257,707258,677260,881266,895270,303

268,420277,847281,816283,801288,711294,825

292,973293,273291,944290,849296,949300,520

299,514302,909312,314310,703313,157313,229

51,21351,71251,711

51,28153,00355,92159,41861,921

65,48269,73375,41179,79880,440

76,98777,41577,80478,22078,64578,965

79,28179,54379,79880,09180,33180,546

80,41480,45980,41780,42680,43080,460

80,52480,50380,44080,17879,66979,517

1,5143,7414,070

4,7559,270

18,98528,52425,011

23,21621,50021,79921,68028,115

22,78722,59723,64923,43322,41921,460

20,81322,22421,68024,04226,62429,593

30,25728,15028,16125,41625,15826,807

28,01527,68828,11523,86023,89523,551

56,15559,52666,790

76,32382,78489,598

101,738115,442

124,173130,557140,113153,271176,360

136,364139,422137,956138,833144,394146,448

144,665149,047153,271152,685154,812157,522

155,237157,637153,765158,178164,552166,274

163,882167,301176,360175,267176,992177,460

2,7312,8283,051

4,0685,7593,6543,7014,289

3,6444,883

16,79727,06727,400

17,64418,27319,26720,39521,43623,430

23,66027,03227,06726,98326,94427,164

27,06527,02729,60126,82926,80926,981

27,09427,41827,40031,39832,60132,701

1 Includes Treasury bonds and minor amounts of Panama Canal and postal savings bonds.2 Nonmarketable certificates of indebtedness, notes, bonds, and bills in the Treasury foreign series of dollar-denominated and foreign-

currency denominated issues.3 Includes Treasury deposit funds and some special issues formerly included in "Other."4 Includes depository bonds, retirement plan bonds, Rural Electrification Administration bonds, State and local bonds, and special

issues held only by U.S. Government agencies and trust funds and the Federal home loan banks.5 Includes $5,610 million in certificates not shown separately.

Note.—Through fiscal year 1976, the fiscal year was on a July 1—June 30 basis; beginning October 1976 (fiscal year 1977) thefiscal year is on an October 1—September 30 basis.

Source: Department of the Treasury.

292

TABLE B-77.—Estimated ownership of public debt securities, 1967-79

[Par values;1 billions of dollars]


Fiscal year:196719681969

1970 '1971197219731974

19751976197719781979

1978:JanFebMar

MayJune


1979JanFebMar

MayJune


Total public debt securities

Total2

322.9345.4352.9

370.1397.3426.4457.3474.2

533.2620.4698.8771.5826.5

721.6729.8738.0736.6741.6749.0

750.5764.4771.5776.4783.0789.2

790.5792.2796.8796.4804.8804.9

807.5813.1826.5826.8833.8845.1

Held byGovern-

mentaccounts

71.876.184.8

95.2102.9111.5123.4138.2

145.3149.6155.5168.0187.7

1515154.2152.7153.6159.1161.1

159.3163.7168.0166.3167.4170.0

167.7170.1166.3170.7177.1178.6

176.3178.6187.7185.7187.1187.1

Held byFederalReserveBanks

46.752.254.1

57.765.571.475.080.5

84.794.4

104.7115.3115.5

97.098.5

101.6103.5102.8110.1

108.9111.7115.3115.3113.3110.6

101.3103.5110.9108.6106.2109.7

111.4113.0115.5114.6118.1117.5

Held by private investors

Total3

204.4217.0214.0

217.2228.9243.6258.9255.6

303.2376.4438.6488.3523.4

473.1477.1483.7479.5479.7477.8

482.3489.0488.3494.7502.3508.6

521.4518.6519.6517.1521.5516.6

519.8521.5523.4526.5528.6540.5

Corn-banks4

55.559.755.3

52.661.060.958.853.2

69.092.599.896.392.3

1001101.7100.7100.398.499.1

97.996.896.395.394.594.7

93.394.495.696.297.694.0

93.492.792.393.595.0

Mutualsavingsbanksand

insur-ancecom-

panies

13.212.511.6

10.410.310.29.68.5

10.616.020.520.319.3

21321.821.120.420.619.9

20.320.320.320.520.219.9

20.120.220.119.719.819.1

19.219.219.319.318.8

Corpora-tions5

11.012.011.1

8.57.49.39.8

10.8

13.224.323.321.323.7

23.422.320.819.518.918.2

19.122.421.320.420.820.5

21.222.511122.624.922.8

21.220.723.724.124.0

State andlocal

govern-ments 6

23.625.126.4

29.025.926.928.828.3

31.739.353.069.068.9

55.357.760.660.159.763.7

62.970.769.068.370.470.1

69.269.871.471.771.770.5

69.970.168.969.768.2

Indi-viduals7

70.474.277.3

81.875.473.275.980.7

87.196.4

103.9109.4113.2

106 3107.0107.1107.3108.1108.2

108.6109.2109.4110.0110.3110.8

111.2111.6111.9112.3112.6112.5

112.7112.9113.2113.4113.7

Miscel-laneousinves-

tors3-8

30.733.432.3

35.049.163.276.074.2

91.5107.9138.1172.1205.9

166.6166.6173.5171.9173.9168.6

173.6169.7172.1180.2186.1192.7

206.2200.1197.9194.7195.0197.6

203.4205.9205.9206.4208.9

1 U.S savings bonds, series A-F and J, and U.S. savings notes are included at current redemption value.2 As of July 31, 1974, public debt outstanding has been adjusted to exclude the notes of the International Monetary Fund to conformwith the Budget presentation. This adjustment applies to the 1967-79 data in this table.3 For comparability with 1975-79 published data, published data for 1967-74 have been adjusted to exclude notes of theInternational Monetary Fund. These adjustments amounted to $3.3 billion in 1967, $2.2 billion in 1968, and $0.8 billion in each year1969 through 1974. These adjustments were necessary in order to add to the total public debt figures as published by the Departmentof the Treasury.

4 Includes commercial banks, trust companies, and stock savings banks in the United States and Territories and island possessions;figures exclude securities held in trust departments. Since the estimates in this table are on the basis of par values and includeholdings of banks in United States Territories and possessions, they do not agree with the estimates in Table B-59, which are based onbook values and relate only to banks within the United States.

5 Exclusive of banks and insurance companies.6 Includes trust, sinking, and investment funds of State and local governments and their agencies, and of Territories and

possessions.7 Includes partnerships and personal trust accounts.8 Includes savings and loan associations, nonprofit institutions, corporate pension trust funds, dealers and brokers, certain

government deposit accounts and government-sponsored agencies, and investments of foreign balances and international accounts inthe United States.

Note.—Through fiscal year 1976, the fiscal year was on a July 1—June 30 basis; beginning October 1976 (fiscal year 1977), thefiscal year is on an October 1—September 30 basis.


293

TABLE B-78.—Average length and maturity distribution of marketable interest-bearing public debt securities

held by private investors, 1967-79


Amountout-

standing,privately

held

Maturity class

Withinlyear

I t o 5years

5 to 10years

10 to 20years

20 yearsand over

Average length

Fiscal year:19671968..1969

19701971197219731974

19751976197719781979

1978:JanFeb.MarAprMayJune-

JulyAugSeptOctNovDec...

1979:JanFeb.Mar

MPayJune.

JulyAugSeptOctNovDec...

Millions of dollars

150,321159,671156,008

157,910161,863165,978167,869164,862

210,382279,782326,674356,501380,530

355,374358,320362,693355,144356,892353,660

358,255359,919356,501362,443367,256365,239

382,556381,797380,060383,315388,001377,649

383,102384,771380,530389,074390,439402,226

56,56166,74669,311

76,44374,80379,50984,04187,150

115,677151,723161,329163,819181,883

177,642175,195178,474170,272166,094162,533

163,619163,512163,819165,337170,492174,231

184,277185,602186,967185,725188,018184,113

183,277182,891181,883182,297180,671190,408

53,58452,29550,182

57,03558,55757,15754,13950,103

65,85289,151113,319132,993127,574

123,692130,715132,501130,884135,524137,543

139,017136,462132,993136,064133,876128,293

133,992132,434129,454132,538130,576124,443

129,462130,607127,574134,205133,281133,168

21,05721,85018,078

8,28614,50316,03316,38514,197

15,38524,16933,06733,50032,279

32,71229,85329,41431,81631,75830,458

30,57333,60333,50033,47633,69533,604

33,69031,29931,24531,23533,57233,359

33,55532,39232,27932,32534,31936,592

6,1536,1106,097

7,8766,3576,3588,7419,930

8,8578,0878,42811,38318,489

9,7339,7199,6359,5719,8479,766

11,51211,40711,38312,74613,87913,833

15,28215,19515,14116,57817,32617,271

18,61718,54818,48919,93819,86619,796

12,96812,67012,337

8,2727,6456,9224,5643,481

4,6116,65210,53114,80520,304

11,59512,83812,66912,60113,66813,360

13,53314,93614,80514,82015,31415,278

15,31517,26717,25417,23918,50818,462

18,39020,33420,30420,30922,30222,262

Years Months

631

11

71137

11011011

13

244

109

Note.—All issues classified to final maturity.Through fiscal year 1976, the fiscal year was on a July 1—June 30 basis; beginning October 1976 (fiscal year 1977), the fiscal year

is on an October 1—September 30 basis.


294

CORPORATE PROFITS AND FINANCE

TABLE B-79.—Corporate profits with inventory valuation and capital consumption adjustments, 1946-79


Year or quarter

1946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979".

1977:III .IllIV

1978:1IIIIIIV

1979:I||III

Corporateprofits with

inventoryvaluation

and capitalconsumptionadjustments

16.622.229.126.9

33.738.135.435.534.6

44.642.942.137.548.2

46.646.954.959.667.0

77.182.579.385.881.4

67.977.292.199.183.6

95.9126.8150.0167.7178.5

137.1148.9160 8153.0

141.2169.4175.2184.8

178.9176 6180.8

Corporateprofits tax

liability

9.111.312.410.2

17.922.619.420.317.6

22.022.021.419.023.6

22.722.824.026.228.0

30.933.732.539.439.7

34.537.741.548.752.4

49.863.872.684.592.7

69.272 573 775.1

70.884.787.595.1

91388 794.0

Profits after tax with inventory valuation andcapital consumption adjustments

Total

7.510.916.716.7

15.715.516.015.217.0

22.620.920.618.524.6

23.924.130.933.439.0

46.248.946.846.441.8

33.439.550.550.431.2

46.163.077.383.285.8

67 876 487 277.9

70.484.787.889.8

87.688 0867

Dividends

5.66.37.07.2

8.88.58.58.89.1

10.311.111.511.312.2

12.913.314.415.517.3

19.119.420.121.922.6

22.923.024.627.831.0

31.937.542.147.252.7

40.841.542 743.4

45.146.047.849.7

51.552 35Z8

Undistributedprofits with

inventoryvaluation

and capitalconsumptionadjustments,

2.04.69.79.5

6.97.07.56.47.9

12.29.89.17.2

12.4

11.010.816.517.921.7

27.129.426.724.419.2

10.516.525.922.6

.2

14.225.535.236.033.1

27.034.944 534.5

25.338.740.040.1

36.135 634.0

Source-. Department of Commerce, Bureau of Economic Analysis.

295

TABLE B-80.—Corporate profits by industry, 1929-79


Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979"

19771IIIIIIV

19781IIIIIIV

1979:1IIIII

Corporate profits with inventory valuation adjustment and without capital consumption adjustment

Total

10.5

- 1 . 2

6.3

9.815.220.324.423.819.219.325.633.030.8

37.642.739.839.537.846.745.945.440.851.2

48.948.753.757.664.273.378.675.682.177.9

66.476.989.697.286.5

107.9141.3162.0180.8195.2

149.7160.3172.0166.0

153.6182.0189.0198.6

193.3191.3198.3

Domestic industries

Total

10.2

- 1 . 2

6.1

9.615.020.124.123.518.918.924.932.229.9

36.741.538.738.436.445.144.143.539.149.4

47.046.351.154.961.070.175.972.678.974.2

62.672.484.790.476.9

101.8133.1152.1170.6181.9

139.9150.5161.2156.9

143.5171.0178.8189.0

181.4179.6182.5

Total

1.3

.3

.8

1.01.11.21.31.61.72.11.72.63.1

3.13.64.04.54.64.85.05.25.76.8

7.27.07.36.86.97.58.59.0

10.411.3

12.614.115.416.214.413.017.823.829.733.0

21.322.924.826.4

27.228.930.632.1

31.932.033.8

Financial'

CpHpralrcQcldl

Re-servebanks

0.0

.0

.0

.0

.0

.0

.01

.1

.11

.2

.2

.2

.3

.4

.4

.3

.3

.5

.6

.6

.7

1.0.8.9

1.01.11.41.72.02.53.1

3.63.33.44.55.75.76.06.27.79.6

6.06.26.26.4

6.97.48.08.6

8.89.29.7

Other

1.3

.3

.8

.91.01.21.31.61.62.01.62.32.9

3.03.33.74.14.34.54.54.65.16.0

6.26.36.45.85.86.26.87.07.98.2

9.010.812.111.78.77.3

11.817.621.923.4

15.216.718.620.0

20.321.522.623.5

23.122.824.1

Total

8.9

- 1 . 5

5.3

8.614.018.922.821.917.316.823.229.626.8

33.537.934.733.931.840.339.138.333.542.6

39.839.343.848.154.162.567.463.668.562.9

50.158.269.374.162.588.9

115.3128.3140.9149.0

118.7127.6136.4130.5

116.3142.1148.3156.9

149.6147.7148.7

Nonfinancial

Manufac-turing2

5.2

- .4

3.3

5.59.5

11.813.813.29.79.0

13.617.616.2

20.924.621.722.019.926.024.724.019.426.2

23.923.026.028.731.938.341.637.941.236.8

27.132.440.644.136.648.365.773.581.789.3

68.375.172.578.1

67.683.485.190.6

94.190.686.4

Whole-saleand

retailtrade

1.0

- .5

.7

1.21.42.23.03.23.33.84.65.54.5

5.05.04.83.83.85.04.54.44.65.9

4.94.95.75.97.47.98.08.9

10.110.1

9.411.713.314.712.920.723.324.123.0

21.523.431.020.5

17.911125.525.8

18.622.426.5

Utili-ties3

1.8

.0

1.0

1.32.03.44.43.92.71.82.23.03.0

4.04.64.95.04.75.65.95.85.97.0

7.47.88.49.39.9

11,011.810.710.710.2

8.28.39.08.35.69.2

13.816.820.3

16.315.318.117.5

17.120.121.222.7

21.718.518.0

Other

0.9

-.7

.3

.61.11.51.61.61.52.12.93.63.1

3.63.73.33.13.43.64.14.03.63.5

3.53.63.84.24.95.36.06.16.55.8

5.35.86.47.07.4

10.712.413.916.0

12.613.814.814.4

13.716.016.517.9

15.116.117.8

Restof theworld

0.2

.0

.2

.2

.2

.2

.2

.3

.2

.4

.7

.8

.8

1.01.21.11.11.41.61.81.91.71.8

1.92.32.62.63.13.32.83.03.23.7

3.84.64.86.89.66.18.29.8

10.213.3

9.89.8

10.79.1

10.111.010.29.6

11.911.715.8


296

TABLE B-80.—Corporate profits by industry, 1929-79—Continued


year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979 p

1977.1IIIIIIV

19781IIIIIIV

19791IIIll

Corporate profits before deduction of capital consumption allowances, with inventory valuation adjustment

Total

14.7

2.6

10.1

13.619.525.429.729.925.524.031.440.038.7

46.553.051.352.752.864.164.966.362.974.8

74.175.384.290.098.7

110.8119.3119.7130.2130.9

123.0137.8157.4170.9168.1197.2238.5271.3300.6326.1

253.8268.6283.7279.0

270.1301.1309.6321.7

318.8321.7331.1

Domestic industries

Total

14.4

2.6

9.9

13.419.325.229.529.625.323.630.739.237.9

45.551.850.251.651.462.663.164.461.273.0

72.272.981.587.495.6

107.5116.5116.7127.0127.2

119.2133.3152.6164.1158.5191.1230.2261.4290.4312.9

244.0258.8272.9269.9

260.0290.1299.4312.1

306.9310 0315.3

Financial1

Total

1.4

.4

.9

1.11.21.31.41.71.72.21.82.73.3

3.33.84.24.84.95.25.45.76.17.3

7.87.78.07.67.98.59.6

10.211.813.0

14.516.318.019.518.317.322.528.935.238.7

26.228.029.931.6

32.534.336.137.8

37.537 739.6

PoHoralreoerai

Re-servebanks

0.0

.0

.0

.0

.0

.0

.0

.1

.1

.1

.1

.2

.2

.2

.3

.4

.4

.3

.3

.5

.6

.6

.7

1.0.8.9

1.01.21.41.72.02.53.1

3.63.43.44.55.75.76.06.27.89.6

6.06.26.26.4

7.07.48.08.6

8.8929.7

Other

1.4

.4

.9

1.11.21.31.41.61.62.11.72.53.0

3.13.53.94.44.64.84.95.05.56.5

6.86.97.16.66.77.27.98.29.39.9

11.013.014.714.912.611.616.522.727.429.2

20.221.823.725.2

25.626.928.129.1

28.828 529.9

Nonfinancial

Total

13.0

2.2

9.0

12.318.123.928.127.923.621.428.936.534.6

42.248.046.046.846.557.457.758.755.065.7

64.465.373.679.887.799.0

106.9106.5115.1114.2

104.7116.9134.6144.6140.2173.8207.7232.5255.2274.1

217.8230.9243.0238.3

227.5255.8263.3274.4

269.4272 3275.7

Manufac-turing2

7.1

1.3

4.9

7.211.414.216.616.513.011.216.320.819.8

24.929.126.928.327.134.333.633.929.837.1

35.535.240.243.948.055.960.558.763.961.5

53.159.869.975.070.585.2

105.7119.9132.1145.1

112.2121.0120.3126.2

117.0133.7135.5142.2

147.2145 9143.0

Whole-saleand

retailtrade

1.3

-.2

1.0

1.51.72.63.33.53.64.25.26.25.4

6.06.26.15.15.26.76.36.56.68.0

7.37.48.48.7

10.411.111.512.714.314.9

14.717.520.222.121.329.934.336.036.2

33.135.243.032.8

30.635.738.939.5

32.536 741.1

Utili-ties3

2.9

1.1

2.0

2.33.14.85.85.54.63.03.64.74.8

6.17.17.68.18.29.8

10.310.510.912.5

13.314.015.416.817.919.621.321.021.922.4

21.423.226.327.426.732.338.543.349.7

41.741.745.244.8

45.749.451.052.7

52.250 450.0

Other

1.7

.0

1.1

1.41.92.22.42.42.32.93.84.84.6

5.25.65.45.35.96.67.47.87.68.0

8.48.89.6

10.411.412.313.614.115.015.4

15.516.418.320.221.726.429.233.237.3

30.933.034.534.6

34.337.037.939.9

37.539 441.5

PoetKesi

of theworld

0.2

.0

.2

.2

.2

.2

.2

.3

.2

.4

.7

.8

.8

1.01.21.11.11.41.61.81.91.71.8

1.92.32.62.63.13.32.83.03.23.7

3.84.64.86.89.66.18.29.8

10.213.3

9.89.8

10.79.1

10.111.010.29.6

11.911715.8

1 Consists of the following industries: Banking; credit agencies other than banks; security and commodity brokers, dealers, andservices; insurance carriers; regulated investment companies; small business investment companies; and real estate investment trusts.2 See Table B-81 for industry detail.3 Consists of transportation, communication, and electric, gas, and sanitary services.

Note.—The industry classification is on a company basis and is based on the 1972 Standard Industrial Classification (SIC) beginning1948, and on the 1942 SIC prior to 1948.


297

TABLE B-81.—Corporate profits of manufacturing industries, 1929-79


Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979"

1977-1IIIIIIV

19781IIIIIIV

19791IIIII

Corporate profits with inventory valuation adjustment

, Totalmanufac-

turing

5.2

- . 4

3.3

5.59.5

11.813.813.29.79.0

13.617.616.2

20.924.621.722.019.926.024.724.019.426.2

23.923.026.028.731.938.341.637.941.236.8

27.132.440.644.136.648.365.773.581.789.3

68.375.172.578.1

67.683.485.190.6

94.190.686.4

Nondurable goods

Total

26

0

17

24314.657595.26678

10 08.1

8.911.49.9

10.19.4

11.811.910.710.012.7

11.911.711.912.814.415.818.017.318.817.7

16.817.318.120.125.130.137.539.341.451.3

37.339.539.440.9

36.741.042.745.1

48.249.453.8

Foodandkin-dredprod-ucts

191.6

1.61.41.71.81.62.21.81.82.12.6

2.12.32.32.72.82.63.33.13.22.9

3.53.32.82.23.07.97.36.25.7

5.46.27.25.9

4.65.56.56.4

5.77.67.8

Chemi-calsand

alliedprod-ucts

171.8

2.32.82.32.22.23.02.82.82.53.4

3.13.13.23.63.94.54.84.25.04.6

3.94.25.05.85.15.88.07.67.9

7.87.87.37.4

7.47.67.88.9

9.08.07.1

Petro-leumandcoalprod-ucts

281.9

2.32.72.32.82.73.03.32.62.12.5

2.52.22.12.12.42.83.23.83.63.3

3.63.63.54.9

10.28.1

11.712.213.0

11.812.611.413.0

10.013.314.114.8

16.419.521.8

Other

372.8

2.74.43.63.32.93.64.13.63.34.2

4.24.04.34.55.35.86.76.27.06.9

5.86.26.87.26.88.2

10.613.414.7

12.312.913.514.7

14.814.714.415.1

17.114.217.1

and without capital consumption adjustment

Durable goods

Total

26

- 4

17

3164728 174452458758.1

12.013.211.711.910.514.312.813.39.3

13.5

12.011.314.115.917.522.623.520.622.419.2

10.315.122.524.011.518.328.234.240.338 0

31.035.533.137.2

30.942.342.445.5

46.041.232.6

Pri-marymetalindus-tries

161.5

2.33.11.92.51.72.93.03.01.92.3

2.11.51.61.92.43.13.62.72.01.4

.9

.51.62.04.92.92.01.32.5

1.31.8.6

1.6

.73.23.12.9

3.84.24.0


08.7

1.11.31.01.0.9

1.01.11.1

.91.1

.91.01.21.21.42.02.42.42.42.0

1.21.32.12.61.22.93.94.34.6

4.04.44.24.6

3.84.84.95.1

5.05.44.8

Machin-ery,

exceptelectri-

cal

121.3

1.62.32.31.91.71.72.12.01.42.1

1.81.82.32.43.13.84.44.04.13.6

2.72.73.94.51.54.35.67.18.3

6.16.87.48.1

6.19.47.89.8

8.27.67.9

Electricandelec-

tronicequip-ment

07.8

1.21.31.51.41.21.11.21.51.31.7

.1.31.31.51.51.62.53.02.92.82.2

1.11.82.92.6

.32.12.74.25.2

3.54.14.34.8

4.74.96.15.1

5.55.25.1

Motorvehicles

andequip-ment

142.1

3.12.42.42.62.14.12.22.6

.92.9

3.02.54.04.94.76.15.13.95.54.8

1.44.95.95.8

.21.77.49.18.9

8.910.48.58.7

7.09.69.59.3

11.47.4

- .5

Other

181.7

2.62.82.62.62.93.53.23.12.93.4

2.93.13.53.94.25.05.14.75.75.2

3.03.86.06.63.44.36.78.2

10.8

7.28.08.29.4

8.610.511.013.3

12.011.311.2


298

TABLE B-81.—Corporate profits of manufacturing industries, 1929-79—Continued


Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979"

19771IIIIIIV

19781IIIIIIV

19791IIIII

Corporate profits before deduction of capital consumption

Totalmanufac-

turing

7.1

1.3

4.9

7.211.414.216.616.513.011.216.320.819.8

24.929.126.928.327.134.333.633.929.837.1

35.535.240.243.948.055.960.558.763.961.5

53.159.869.975.070.585.2

105.7119.9132.1145.1

112.2121.0120.3126.2

117.0133.7135.5142.2

147.2145.9143.0

Nondurable goods

Total

36

11

26

3441597175707993

118101

11.113.912.713.213.116.016.515.715.418.4

17.818.019.120.522.624.427.227.129.329.2

29.030.432.235.140.847.256.662.166.378.8

58.562.262.964.7

61.065.967.670.7

74.476.981.6

Foodandkin-dredprod-ucts

2220

2.12.02.32.32.32.92.52.63.03.6

3.23.43.64.04.24.04.94.74.94.8

5.65.55.14.85.7

10.910.610.09.9

9.09.9

11.19.8

8.69.5

10.610.7

10.112.212.5

Chemi-calsand

alliedprod-ucts

2021

2.73.22.82.83.03.93.83.83.64.6

4.44.54.85.35.76.56.86.37.37.1

6.67.18.29.08.69.7

12.512.813.6

12.813.012.512.8

12.813.213.514.9

15.214.513.5

Petro-leumandcoal

prod-ucts

3426

3.13.63.23.94.14.64.94.44.04.5

4.54.34.44.75.15.86.37.27.37.1

7.67.98.09.7

15.113.317.519.921.7

18.620.019.721.2

18.422.022.723.5

25.429.031.4

Other

4234

3.35.14.44.13.84.65.24.94.75.7

5.85.76.26.57.58.19.28.99.9

10.2

9.29.9

10.811.611.513.316.019.521.2

18.119.319.621.0

21.121.120.921.5

23.821.124.2

allowances, with inventory valuation adjustment

Durable goods

Total

34

2

23

3872849.5906033699097

13.715.314.215.014.118.317.218.214.418.7

17.717.221.123.325.531.433.331.634.632.3

24.129.437.639.929.738.049.157.965.866 3

53.758.857.461.4

56.067.967.971.6

72.769.161.4

Pri-marymetalindus-tries

1919

2.83.62.63.52.94.24.34.53.23.6

3.42.93.33.74.35.15.75.04.54.0

3.53.14.14.78.16.35.45.26.7

4.95.74.55.6

4.97.37.37.2

8.18.68.8


109

1.31.51.31.21.21.41.41.51.31.5

1.41.51.81.92.12.73.13.33.430

2.32.43.33.82.64.55.66.46.9

5.96.46.46.8

6.07.07.27.4

7.58.17.5

Machin-ery,

exceptelectri-

cal

15'16

1.92.62.72.32.22.32.82.72.22.9

2.72.83.43.54.35.25.85.76.057

5.25.46.87.64.97.99.7

11.613.2

10.411.412.112.6

10.814.212.814.9

13.313.013.4

Electricandelec-tronicequip-ment

089

1.41.51.71.61.51.51.62.01.82.2

1.81.92.12.22.33.33.93.94.137

2.83.75.14.93.05.05.87.89.0

6.97.67.98.6

8.48.99.98.9

9.59.49.4

Motorvehicles

andequip-ment

1623

3.32.72.73.02.54.62.93.31.63.7

4.03.55.26.36.38.07.56.48.175

3.87.38.48.33.14.8

10.713.213.3

12.814.112.813.0

11.614.313.813.5

16.012.04.6

Other

2221

3.03.33.33.33.74.44.24.24.24.8

4.44.65.35.76.27.17.37.38.68.4

6.57.59.9

10.68.19.5

12.013.716.8

12.713.613.714.9

14.316.216.919.8

18.417.917.7

Note.—The industry classification is on a company basis and is based on the 1972 Standard Industrial Classification (SIC) beginning1948, and on the 1942 SIC prior to 1948.


299

TABLE B-82.—Sales, profits, and stockholders' equity, all manufacturing corporations, 1950-79


Year or quarter

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

1970197119721973

1973 IV

New series19741975197619771978

1973 IV

19741IIIIIIV

19751IIIIIIV

1976

II '.IllIV

1977

IIIIIIV

19781IIIIIIV

19791IIIII

All manufacturing corporations

Sales/n_x\(net;

181.9245.0250.2265.9248.5

278.4307.3320.0305.3338.0

345.7356.4389.9412.7443.1

492.2554.2575.4631.9694.6

708.8751.4849.5

1,017.2

275.1

1,060.61,065.21,203.21,328.11,496.4

236.6

242.0269.4272.1277.0

247.1265.8271.0281.3

284.2307.6301.6309.8

311.5338.6331.7346.2

340.3377.5376.9401.8

406.2436.4437.5

Profits

Beforeincometaxes'

23.227.422.924.420.9

28.629.828.212.129.7

27.527.531.934.939.6

46.551.847.855.458.1

48.153.263.281.4

21.4

92.179.9

104.9115.1132.5

20.6

21.225.925.020.1

15.420.221.722.6

24.529.326.224.9

25.632.427.329.9

26.936.033.436.3

36.542.638.3

Afterincometaxes

12.911.910.711.311.2

15.116.215.412.716.3

15.215.317.719.523.2

27.530.929.032.133.2

28.631.336.548.1

13.0

58.749.164.570.481.1

13.2

13.516.315.513.4

9.312.413.214.2

14.818.116.015.6

15.619.716.718.4

16.022.120.422.6

22.626.824.8

Stock-holders'equity2

83.398.3

103.7108.2113.1

120.1131.6141.1147.4157.1

165.4172.6181.4189.7199.8

211.7230.3247.6265.9289.9

306.8320.9343.4374.1

386.4

395.0423.4462.7496.7539.4

368.0

379.0389.9402.7408.4

410.7420.2427.4435.5

446.5460.1468.9475.3

479.8492.9502.4511.7

518.7531.8546.3560.8

574.2592.0609.2


Sales

(net)

86.8116.8122.0137.9122.8

142.1159.5166.0148.6169.4

173.9175.2195.5209.0226.3

257.0291.7300.6335.5366.5

363.1382.5435.8527.3

140.1

529.0521.1589.6657.3760.7

122.7

120.3136.8134.8137.1

121.3132.4131.0136.3

137.8153.7146.2151.8

151.2169.5163.8172.7

170.1195.0189.7205.9

208.1223.3214.6

Profits

Beforeincometaxes*

12.915.412.914.011.4

16.516.515.811.415.8

14.013.616.718.521.2

26.229.225.730.631.5

23.026.533.643.6

10.8

41.135.350.757.969.6

10.1

9.512.610.58.6

7.09.39.1

10.0

11.314.812.212.4

12.516.913.015.5

13.619.817.019.1

18.821.716.4

Afterincometaxes

6.76.15.55.85.6

8.18.37.95.88.1

7.06.98.69.5

11.6

14.516.414.616.516.9

12.914.518.424.8

6.3

24.721.430.834.841.8

6.2

5.77.66.25.2

4.15.75.56.2

6.79.07.47.7

7.510.27.89.4

7.912.010.311.6

11.513.310.4


39.947.249.852.454.9

58.865.270.572.877.9

82.384.989.193.398.5

105.4115.2125.0135.6147.6

155.1160.6171.4188.7

194.7

196.0208.1224.3239.9261.5

185.8

189.4194.1199.9200.8

201.7207.3209.7213.7

216.7223.4227.1229.9

230.8238.4243.1247.5

250.3257.6265.2272.9

281.1290.1297.8


Sales(not\(net;

95.1128.1128.0128.0125.7

136.3147.8154.1156.7168.5

171.8181.2194.4203.6216.8

235.2262.4274.8296.4328.1

345.7368.9413.7489.9

135.0

531.6544.1613.7670.8735.7

113.9

121.7132.6137.3140.0

125.8133.314C.0145.0

146.3153.9155.4158.1

160.3169.1167.9173.5

170.3182.4187.2195.9

198.1213.0223.0

Profits

Beforeincometaxesl

10.312.110.010.49.6

12.113.212.411.313.9

13.513.915.116.418.3

20.322.622.024.826.6

25.226.729.637.8

10.6

51.044.654.357.262.9

10.5

11.713.314.511.5

8.410.912.712.6

13.214.514.012.6

13.015.514.314.3

13.316.216.417.1

17.721.021.8

Afterincometaxes

6.15.75.25.55.6

7.07.87.56.98.3

8.28.59.2

10.011.6

13.014.614.415.516.4

15.716.718.023.3

6.7

34.127.733.735.539.3

7.0

7.88.79.48.2

5.26.87.78.1

8.19.18.67.9

8.19.58.99.0

8.110.110.111.0

11.213.414.4


43.551.153.955.758.2

61.366.470.674.679.2

83.187.792.396.3

101.3

106.3115.1122.6130.3142.3

151.7160.3172.0185.4

191.7

199.0215.3238.4256.8277.9

182.1

189.6195.8202.8207.6

209.0212.9217.6221.8

229.8236.7241.7245.5

249.1254.5259.3264.2

268.4274.2281.1287.8

293.1301.9311.4

1 In the old series, "income taxes" refers to Federal income taxes only, as State and local income taxes had already been deducted.In the new series, no income taxes have been deducted.

2 Annual data are average equity for the year (using four end-of-quarter figures).Note.—Data are not necessarily comparable from one period to another due to changes in accounting procedures, industry

classifications, sampling procedures, etc. For explanatory notes concerning compilation of the series, see "Quarterly Financial Report forManufacturing, Mining, and Trade Corporations, Federal Trade Commission.

Source: Federal Trade Commission.

300

TABLE B-83.—Relation of profits after taxes to stockholders' equity and to sales, all manufacturing

corporations, 1947-79

Year or quarter

Ratio of profits after income taxes (annualrate) to stockholders' equity—percent1

Allmanufacturingcorporations

Durablegoods

industries

NondurableRoods

industries

Profits after income taxes per dollar ofsales—cents

Allmanufacturingcorporations

Durablegoods

industries

Nondurablegoods

industries

1947.1948.1949.

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

1970197119721973

1973: IV

New series:

19741975197619771978

1973:IV

1974:IIIIllIV

1975:IIIIllIV

1976:|||IIIIV

1977:|II...IllIV

1978:|IIIllIV

1979:III

15.616.011.6

15.412.110.310.59.9

12.612.310.98.6

10.4

9.28.99.8

10.311.6

13.013.411.712.111.5

9.39.7

10.612.8

13.4

14.911.613.914.215.0

14.3

14.316.715.413.2

9.011.812.413.1

13.315.713.713.1

13.016.013.314.4

12.416.714.916.1

15.818.116.3

14.415.712.1

16.913.011.111.110.3

13.812.811.38.0

10.4

8.58.19.6

10.111.7

13.814.211.712.211.4

8.39.0

10.813.1

12.9

12.610.313.714.516.0

13.3

12.115.612.310.4

8.110.910.511.6

12.416.113.013.4

13.017.112.915.1

12.718.715.517.0

16.318.413.9

16.616.211.2

14.1U.29.79.99.6

11.411.810.69.2

10.4

9.89.69.9

10.411.5

12.212.711.811.911.5

10.310.310.512.6

14.0

17.112.914.213.814.2

15.3

16.417.818.515.8

10.012.814.114.5

14.215.414.312.9

13.015.013.713.7

12.114.814.415.3

15.317.818.5

6.77.05.8

7.14.84.34.34.5

5.45.34.84.24.8

4.44.34.54.75.2

5.65.65.05.14.8

4.04.14.34.7

4.7

5.54.65.45.35.4

5.6

5.66.05.74.8

3.74.74.95.1

5.25.95.35.0

5.05.85.05.3

4.75.95.45.6

5.66.15.7

6.77.16.4

7.75.34.54.24.6

5.75.24.83.94.8

4.03.94.44.55.1

5.75.64.84.94.6

3.53.84.24.7

4.5

4.74.15.25.35.5

5.0

4.85.54.63.8

3.44.34.24.5

4.95.85.15.1

5.06.04.85.4

4.76.25.45.6

5.56.04.8

6.76.85.4

6.54.54.14.34.4

5.15.34.94.44.9

4.84.74.74.95.4

5.55.65.35.25.0

4.54.54.44.8

5.0

6.45.15.55.35.3

6.1

6.46.66.85.9

4.15.15.55.6

5.65.95.65.0

5.05.65.35.2

4.85.65.45.6

5.66.36.5

1 Annual ratios based on average equity for the year (using four end-of-quarter figures). Quarterly ratios based on equity at end ofquarter only.

Note.—Based on data in millions of dollars.See Note, Table B-82.Source: Federal Trade Commission.

301

2 9 4 - 2 8 9 0 - 8 0 - 2 0

TABLE B-84.—Relation of profits after taxes to stockholders' equity and to sales, all manufacturing

corporations, by industry group, 1978-79

Industry

All manufacturing corporations....


Stone, clay, and glass productsPrimary metal industries

Iron and steelNonferrous metals

Fabricated metal productsMachinery, except electricalElectrical and electronic equipmentTransportation equipment2

Motor vehicles and equipmentAircraft, guided missiles, and parts

Instruments and related productsOther durable manufacturing products


Food and kindred productsTobacco manufactures-Textile mill productsPaper and allied productsPrinting and publishingChemicals and allied products2

Industrial chemicals and syntheticsDrugs

Petroleum and coal productsRubber and miscellaneous plastics productsOther nondurable manufacturing products

Ratio of profits after income taxes (annualrate) to stockholders' equity—percent*

1978

ill

14.9

15.5

21.39.9

10.39.0

16.416.118.312.8

10.917.9

18.418.4

14.3

13.518.712.012.218.315.2

13.218.9

14.010.716.9

IV

16.1

17.0

17.811.1

9.813.4

15.419.117.917.8

17.819.0

18.318.2

15.3

15.318.311.714.121.116.3

17.217.0

14.88.3

14.3

1979

1

15.8

16.3

7.712.7

10.216.9

15.816.317.820.1

21.817.6

16.716.4

15.3

12.218.59.0

16.316.017.6

16.920.7

15.714.112.6

II

18.1

18.4

19.417.2

15.619.9

18.917.818.719.1

18.720.6

17.419.6

17.8

15.618.412.816.819.018.3

17.120.5

20.113.412.7

III

16.3

13.9

19.313.2

11.715.7

15.815.916.3

5.1

18.1

16.219.7

18.5

17.321.613.420.520.116.1

13.518.6

21.28.8

19.1

Profits after income taxes perdollar of sales—cents

1978

III

5.4

5.4

7.53.6

3.53.8

4.77.16.14.0

3.65.1

9.44.8

5.4

3.110.53.25.06.27.2

6.312.7

7.43.43.5

IV

5.6

5.6

6.63.9

3.25.5

4.48.05.84.8

4.95.1

9.44.7

5.6

3.59.63.15.77.07.7

8.111.3

7.62.53.0

1979

1

5.6

5.5

3.34.2

3.26.2

4.57.05.85.5

6.14.7

8.84.6

5.6

2.811.0

2.66.75.67.9

7.413.9

7.84.12.9

II

6.1

6.0

6.95.4

4.67.2

5.27.25.85.3

5.55.5

9.05.0

6.3

3.510.9

3.36.66.48.1

7.314.2

9.53.82.7

III

5.7

4.8

6.74.4

3.76.0

4.56.75.31.7

- . 25.2

8.45.2

6.5

3.913.13.78.26.87.3

6.012.7

9.02.73.7

1 Ratios based on equity at end of quarter.2 Includes other industries not shown separately.

Source: Federal Trade Commission.

302

TABLE B-85.—Determinants of business fixed investment, 1955-79

[Percent, except as noted]

Year

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979: First 3 quarters6

Ratio ofreal

invest-ment toreal GNP

9.39.79.78.78.7

9.08.78.98.89.3

10 310.810.310.310.6

10.29.8

10.010.610.7

9.49.39.6

10.010.4

Capacityutilization

rate inmanufac-turing1

87.186.483.775.281.9

80.277.481.683.585.6

89 691.186.987.186.2

79.378.483.587.683.8

72.979.581.984.486.0

Nonfinancial corporations

Cashflowas

per-cent

nfOI

GNP2

9.38.98.98.69.2

9.08.89.49.6

10.0

10.410.39.99.48.6

7.98.28.68.06.9

8.79.19.18.88.5

Rateof

returnon

depre-ciable

as-sets3

14.412.411.29.5

12.1

11.211.012.713.614.6

15 815.713.813.611.9

9.49.7

10.710.37.8

8.39.39.79.7

- 9 . 2

Rate ofreturn

onstock-

holders'equity4

6.25.55.03.94.9

5.04.55.96.47.6

939.18.07.87.1

4.65.46.69.28.8

5.44.86.37.17.7

Ratio ofmarket

value toreplace-

mentcost of

netassets5

0.922.918.849.869

1.041

1.0171.1411.0881.1971.287

13521.1981.2121.2521.116

.906

.9961.0681.008

.750

.712

.801

.729

.678

.654

1 Federal Reserve Board index.2 Cash flow calculated as after-tax profits plus capital consumption allowance plus inventory valuation adjustment.3 Profits before taxes plus capital consumption adjustment and inventory valuation adjustment plus net interest paid divided by the

stock of depreciable assets valued at current replacement cost.4After-tax profits corrected for inflation effects divided by net worth (physical capital component valued at current replacement

cost).5 Equity plus interest-bearing debt divided by current replacement cost of net assets.6 Seasonally adjusted.Sources: Department of Commerce (Bureau of Economic Analysis), Board of Governors of the Federal Reserve System, and Council of

Economic Advisers.

303

TABLE B-86.—Sources and uses of funds, nonfarm nonfinanciaI corporate business, 1946-79


Year or quarter

1946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

1977:

IIIII.IV

19781IIIIIIV

1979:I||III

Sources

Total

18.426.728.519.7

41.835.929.227.329.1

52.044.042.241.355.2

47.654.558.866.072.6

91.196.893.9

114.6118.6

104.4127.8161.6200.0191.3

150.0209.7242.3295.7

223.4221.3268.0256 4

259.6297.7303.5322.1

345.5324.1335.3

Internal'

7.812.618.819.3

17.819.721.221.123.5

28.828.730.429.635.0

34.735.341.644.550.1

56.160.561.362.361.7

58.968.680.883.875.7

106.8125.3139.9148.8

129.1138.5150.01421

135.0150.5153.8155.9

154.4159.0167.8

External

Total

10.614.19.8

.4

24.016.28.06.15.6

23.215.311.811.720.1

12.919.217.221.522.5

35.136.332.752.257.0

45.559.380.8

116.2115.6

43.284.4

102.3146.9

94.382.7

118.0114 3

124.5147.2149.7166.2

191.1165.1167.5

Credit market funds2

Total

6.98.36.53.1

8.110.59.55.66.5

10.212.812.210.512.2

11.912.512.812.214.8

20.625.429.831.838.6

40.745.258.273.082.1

37.960.779.994.7

63.271.583.8

101 1

94.792.790.4

101.1

118.6126.9122.4

Long-term

4.66.46.44.2

5.38.08.25.86.1

7.89.8

11.010.29.4

8.611.010.79.7

10.9

13.519.623.822.625.7

34.241.945.349.251.6

44.149.153.061.5

41.042.056.572 5

51.265.263.166.5

69.376.968.9

Short-term

2.32.0

.1- 1 . 1

2.82.51.3

- . 2.3

2.43.11.3

2̂ 8

3.31.52.12.63.9

7.25.85.99.2

12.9

6.53.3

12.923.830.6

- 6 . 311.626.933.2

22.229.527.328 6

43.527.527.334.6

49.350.053.6

Other

3.75.83.3

- 2 . 7

15.95.7

- 1 . 5.5

- . 8

13.12.5

- . 41.27.9

1.06.74.39.37.7

14.410.92.9

20.418.4

4.914.122.643.133.4

5.323.822.452.2

31.111.334.313 2

29.854.559.365.1

72.538.245.1

Uses

Total

17.125.324.917.9

39.937.229.127.727.7

49.241.139.438.751.7

40.650.454.959.164.1

82.290.587.5

105.3113.1

95.9119.6145.8185.6179.0

133.0183.3216.8274.3

205.5191.7237.0233 1

232.5281.3284.4298.9

321.4296.5310.2

Purchaseof

physicalassets 3

18.517.019.914.4

23.629.824.525.422.8

32.737.135.227.937.5

38.037.243.844.950.7

62.075.773.077.284.3

80.386.0

100.3123.3134.7

99.9139.0169.9195.9

158.8168.5180.2172 0

177.0203.2199.9203.6

213.0229.1228.6

Increasein

financialassets

- 1 . 48.45.03.5

16.47.44.62.34.9

16.54.04.2

10.814.2

2.713.211.114.213.4

20.214.814.528.228.8

15.633.545.662.344.4

33.244.346.978.3

46.723.156.8611

55.578.184.495.2

108.467.481.6

Discrep-ancy

(sourcesless uses)

1.31.43.61.9

1.9- 1 . 3

.1- . 51.4

2.82.92.92.53.5

7.04.13.96.98.5

9.06.36.49.25.6

8.58.2

15.814.412.2

16.926.425.5214

17.929.631.023 3

27.016.419.123.2

24.227.625.1

1 Undistributed profits (after inventory valuation and capital consumption adjustments), capital consumption allowances, and foreignbranch profits.

2 Maturity split is aproximate: Long-term consists of stocks, bonds, multi-family and commercial mortgages, and 40 percent of bankloans. Short-term consists of home mortgages, 60 percent of bank loans, commercial paper, finance company loans, bankers'acceptances, and U.S. Government loans.

3 Plant and equipment, residential structures, inventory investment, and mineral rights from U.S. Government.Source: Board of Governors of the Federal Reserve System.

304

TABLE B-87.—Current assets and liabilities of U.S. corporations, 1939-79


End of yearor quarter

SEC series:5

1939 . . .

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

19601961

SEC series:5

196119621963196419651966196719681969

19701971197219731974

FTC-FRB series:7

19741975197619771978

19781IIIIIIV

1979:III

Total

54.5

60.372.983.693.897.297.4

108.1123.6133.0133.1

161.5179.1186.2190.6194.6224.0237.9244.7255.3277.3

289 0306.8

Cash1

10.8

13.113.917.621.621.621.722.825.025.326.5

28.130.030.831.133.434.634.834.937.436.3

37 241.1

Current

U.S.Govern-ment

securities2

2.2

2.04.0

10.116.420.921.115.314.114.816.8

19.720.719.921.519.223.519.118.618.822.8

20120.0

assets

Notesand

accountsreceiv-able

22.1

24.028.027.326.926.525.930.738.342.443.0

56.861.567.468.573.688.997.7

102.2109.7120.6

129 2139.2

Inven-tories

Othercurrentassets

All corporations

18.0

19.825.627.327.626.826.337.644.648.945.3

55.164.965.867.265.372.880.482.281.988.4

91895.2

1.4

1.51.41.31.31.42.41.71.61.61.4

1.72.12.42.43.14.25.96.77.59.1

10 611.4

Current liabilities

Total

i

30.0

32.840.747.351.651.745.851.961.564.460.7

79.892.696.198.999.7

121.0130.5133.1136.6153.1

160 4171.2

Notesand

accountspayable

21.9

23.226.426.026.326.825.731.637.639.337.5

48.354.959.359.561.776.183.986.690.4

101.0

106 8114.6

Othercurrentliabil-ities

8.1

9.614.321.325.324.920.120.323.925.023.3

31.637.836.839.438.045.046.646.546.252.0

53 656.6

Networkingcapital

24.5

27.532.336.342.145.651.656.262.168.672.4

81.686.590.191.894.9

103.0107.4111.6118.7124.2

128 6135.6

Currentratio3

1.817

1.8381.7911.7671.8181.8802.1272.0832.0102.0652.193

2.0241.9341.9381.9271.9521.8511.8231.8381.8691.811

18021.792

Nonfinancial corporations6

254.7269.7288.2305.6336.0364.0386.2426.5473.6

492.3529.6599.3697.8790.7

735.4759.0826.3900.9

1,028.1

925.0954.2992.6

1,028.1

1,078.61,110.2

34.837.139.840.542.841.945.548.247.9

50.253.359.066.371.1

73.282.187.394.3

103.5

88.891.391.6

103.5

102 4100.1

16.516.816.715.814.413.010.311.510.6

7.711.010.612.812.3

11.119.023.618.717.8

18.617.316.117.8

19.220.8

97.9103.2110.5119.9134.1146.6155.3173.9197.0

206.1221.1248.2288.5322.1

265.8272.1293.3325.0381.9

337.4356.0376.4381.9

405 3418.8

95.0100.5106.8113.1126.6142.8153.1166.0186.4

193.3200.4225.7263.9313.6

319.5315.9342.9375.6428.3

390.5399.3415.5428.3

452 6468.9

10.512.114.416.318.119.722.026.931.6

35.043.855.866.471.7

65.969.979.287.396.5

89.690.392.996.5

991101.4

123.7132.4145.5156.6178.8199.4211.3244.1287.8

304.9326.0375.6450.9530.4

453.4451.6492.7546.8662.2

574.2593.5626.3662.2

7019723.7

84.488.797.0

104.9121.5137.5147.1168.8199.2

211.3220.5282.9340.3402.3

269.8264.2282.0313.7375.1

325.2337.9356.2375.1

392 6410.5

39.343.748.551.757.361.964.275.388.6

93.6105.592.7

110.7128.1

183.6187.4210.6233.1287.1

249.0255.6270.0287.1

309 2313.1

131.0137.3142.7149.0157.2164.6174.9182.4185.7

187.4203.6223.7246.9260.3

282.0307.4333.6354.1365.9

350.7360.7366.3365.9

376.7386.5

2.0592.0371.9811.9511.8791.8251.8281.7471.646

1.6151.6251.5951.5481.491

1.6221.6811.6771.6481.552

1.6111.6081.5851.552

15371.534

1 Includes time certificates of deposit.2 Includes Federal agency issues.3 Total current assets divided by total current liabilities.4 Excludes banks, savings and loan associations, and insurance companies.5 Based on data from "Statistics of Income," Department of the Treasury.6 Excludes banks, savings and loan associations, insurance companies, investment companies, finance companies (personal and

commercial), real estate companies, and security and commodity brokers, dealers, and exchanges.7 Based on data from "Quarterly Financial Report for Manufacturing, Mining, and Trade Corporations," Federal Trade Commission. See

"Federal Reserve Bulletin," July 1978, for details regarding the series.Note.—SEC series not available after 1974.Sources: Board of Governors of the Federal Reserve System, Federal Trade Commission, and Securities and Exchange Commission.

305

TABLE B-88.—State and municipal and corporate securities offered, 1934-79


Year or quarter

Stateand

municipalsecurities

offeredfor cash(princi-

palamounts)

Corporate securities offered for cash

Totalcorporateofferings

Type of corporate security

Commonstock

Preferredstock

Bondsand

notes

Industry of corporate issuer

Manufac-turing *

Electric,gas, andwater2

Transpor-tation3 Communi-

cation Other

1934...

1939...

1940.1941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

197519761977...1978...

1978:

II.IllI V

1979:III...

939

1,128

1,238956524435661

7951,1572,3242,6902,907

3,5323,1894,4015,5586,969

5,9775,4466,9587,4497,681

7,2308,3608,55810,10710,544

11,14811,08914,28816,37411,460

17,76224,37022,94122,95322,824

29,32633,84545,06046,215

10,31612,75711,99211,152

9,72210,54610,097

397

2,164

2,6772,6671,0621,1703,202

6,0116,9006,5777,0786,052

6,3627,7419,5348,8989,516

10,24010,93912,88411,5589,748

10,15413,16510,70512,21113,957

14,78217,38524,01421,26125,997

37,45143,22939,70531,68037,729

52,53952,29051,83646,749

10,54412,71711,55011,938

11,94914,60412,459

87

1081103456163

397891779614736

8111,2121,3691,3261,213

2,1852,3012,5161,3342,027

1,6643,2941,3141,0112,679

1,4731,9011,9273,8857,640

7,0379,485

10,7077,6423,979

7,4148,3048,0477,941

1,5211,7071,8882,825

1,9161,4552,250

98

183167112124369

7581,127762492425

631838564489816

635636411571531

409450422343412

724580881636691

1,3903,6833,3713,3412,253

3,4592,8033,9162,832

5071,234456635

603607

1,491

372

1,979

2,3862,389917990

2,670

4,8554,8825,0365,9734,890

4,9205,6917,6017,0837,488

7,4208,0029,9579,6537,190

8,0819,4208,96910,85610,865

12,58514,90421,20616,74017,666

29,02330,06125,62820,70031,494

41,66641,18239,87935,976

8,5169,7769,2068,478

9,43012,5428,718

604

992848539510

1,061

2,0263,7012,7422,2261,414

1,2003,1224,0392,2542,268

2,9943,6474,2343,5152,073

2,1524,0773,2493,5143,046

5,4147,056

11,0696,9586,346

10,64711,6516,3984,832

10,408

18,65115,49613,75411,070

2,5623,1482,6992,661

2,0963,3083,668

133

1,271

1,2031,357

472477

1,422

2,3192,1583,2572,1872,320

2,6492,4552,6753,0293,713

2,4642,5293,9383,8043,258

2,8513,0322,8252,6772,760

2,9343,6664,9355,2936,715

11,00911,72111,31410,26912,837

15,89414,41413,70412,336

2,4333,8033,0493,051

3,3343,3733,007

176

186

32436648161609

1,454711286755800

813494992595778

893724824824967

718694567957982

7021,4941,6391,5641,779

1,2531,148860811

1,005

2,6353,6261,8011,763

230689489354

577803717

902571

399612760882720

1,1321,4191,4621,424717

1,0501,8341,3031,1052,189

9452,0031,9751,7752,172

5,2915,8404,8364,8723,930

4,4643,5624,4423,640

854424

1,1431,219

1,569779

1,103

103

15996

21109

211329293

1,008946

1,3001,0581,0682,1382,037

2,7572,6192,4261,9912,733

3,3833,5272,7613,9574,980

4,7873,1674,3965,6718,985

9,25212,86716,29810,8979,551

10,89515,19018,13917,944

4,4674,6514,1734,652

4,3716,3423,966

1 Prior to 1948, also includes extractive, radio broadcasting, airline companies, commercial, and miscellaneous company issues.2 Prior to 1948, also includes telephone, street railway, and bus company issues.3 Prior to 1948, includes railroad issues only.Note.—Covers substantially all new issues of State, municipal, and corporate securities offered for cash sale in the United States in

amounts over $100,000 and with terms to maturity of more than 1 year; excludes notes issued exclusively to commercial banks,intercorporate transactions, and issues to be sold over an extended period, such as employee-purchase plans. Closed-end investmentcompany issues are included beginning 1973.

Sources: Securities and Exchange Commission, "The Commercial and Financial Chronicle" and "The Bond Buyer."

306

TABLE B-89.—Common stock prices and yields, 1949-79

Year or quarter

1949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979

1978:JanFebMar

MayJune

JulyJUIJ

AugSeptOctNovDec

1979JanFebMar

MayJune

JulyJUIJ

AugSeptOctNovDec

Common stock prices1

New York Stock Exchange indexes (Dec. 31,

Composite

9.02

10.8713.0813.8113.6716.1921.5424.4023.6724.5630.73

30.0135.3733.4937.5143.7647 3946.1550.7755.3754.67

45.7254.2260.2957.4243.8445.7354.4653.6953.7058.32

49.8949 4149.50517554 4954.83

54.6158 5358.5856.4052.7453.69

55 7755 0856.1957.5056 2157.61

58 3861.1961.8959 2759.0261.75

1965=50) 2

Industrial

46.1851.9758.0057.44

48.0357.9265.7363.0848.0850.5260.4457.8658.2364.76

53 4552 8052.7755 4859.1459.63

59.3564 0764.2361.6057.5058.72

61.3160 3761.8963.6362 2163.57

64 2467.7169.1766.6866.4569.83

Transpor-tation

50.2653.5150.5846.96

32.1444.3550.1737.7431.8931.1039.5741.0943.5047.34

391538 9038.95411944.2144.19

44.7449 4550.1946.7041.8042.49

43 6942 2743.2245.9245 6047.54

48 8552.4852.2148 0947.6150.59

Utility

45.4145.4344.1942.80

37.2439.5338.4837.6929.7931.5036.9740.9239.2238.21

39 0939 0239.2639 6939.4739.41

39.2840 2039.8239.4437.8838.09

38.8339 2138.9438.6337 4838.44

38 8839.2638.3936 5836.5537.29

Finance

44.4549.8265.8570.49

60.0070.3878.3570.1249.6747.1452.9455.2556.6561.42

50.9150 6051.4455 0457.9658.31

57.9763 2863.2260.4254.9555.68

57.5956 0957.6559.5058 8061.87

64 4368.4067.21616460.6463.21

Dow-Jones

industrialaverage3

179.48

216.31257.64270.76275.97333.94442.72493.01475.71491.66632.12

618.04691.55639.76714.81834.05910.88873.60879.12906.00876.72

753.19884.76950.71923.88759.37802.49974.92894.63820.23844.40

781.09763 57756.37794 66838.56840.26

831.71887 93878.64857.69804.29807.94

837.39825 18847.84864.96837 41838.65

836 95873.55878.50840 39815.78836.14

Standard& Poor'scomposiieindex(1941-

43 = 10) 4

15.23

18.4022.3424.5024.7329.6940.4946.6244.3846.2457.38

55.8566.2762.3869.8781.37881785.2691.9398.7097.84

83.2298.29109.20107.4382.8586.16102.0198.2096.02103.01

90.2588 9888.8292 7197 4197.66

97.19103 92103.86100.5894.7196.11

99 7198 23100.11102.0799 73101.73

102 71107.36108.60104 47103 66107.78

Common stock yields(percent)5

Dividend-priceratio6

6.59

6.576.135.805.804.954.084.094.353.973.23

3.472.983.373.173.013.003.403.203.073.24

3.833.142.843.064.474.313.774.625.285.45

5.325 495.625 425.205.19

5 254 934.975.115.455.39

5 285 435.365.355 585.53

5 505.305.315.565.715.53

Earnings-priceratio7

15.48

13.9911.829.4710.268.577.957.557.896.235.78

5.904.625.825.505.325.596.635.735.676.08

6.455.415.507.1211.599.158.9010.7912.03

12.24

11.76

11.28

12.83

13.09

13.58

13.27

1 Averages of daily closing prices, except New York Stock Exchange data through May 1964 are averages of weekly closing prices.2 Includes all the stocks (more than 1,500) listed on the New York Stock Exchange.3 Includes 30 stocks.4 Includes 500 stocks.5 Standard & Poor's series, based on 500 stocks in the composite index.6 Aggregate cash dividends (based on latest known annual rate) divided by aggregate market value based on Wednesday closing

prices. Monthly data are averages of weekly figures; annual data are averages of monthly figures.7 Ratio of quarterly earnings after taxes (seasonally adjusted annual rate) to price index for last day of quarter. Annual ratios are

averages of quarterly ratios.Note.—All data relate to stocks listed on the New York Stock Exchange.Sources: New York Stock Exchange, Dow-Jones & Co., Inc., and Standard & Poor's Corporation.

307

TABLE B-90.—Business formation and business failures, 1929-79

Year or montn

192919333

19393

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

197019711972197319741975197619771978

1978:JanFebMar

May '.June


1979:JanFebMar

JuneJulyAugSeptOct

Indexof net

businessformation(1967 —100)

104 886.4

90 890.194 592 490 898.295.491.491.198.1

94.591.192.894.798.099.598.9100.0107.6113.5

107.1109.5115.5115.5111.2108.9117.2126.5132.9

Newbusinessincorpor-ations

(number)

132,916112,89796,34685,640

93,09283,77892,946102,706117 411139,915141,163137,112150,781193,067

182,713181,535182,057186,404197,724203,897200,010206,569233,635274,267

264,209287,577316,601329,358319,149326,345375,766432,172477,827

Seasonally adjusted

133.6133.7130.5130.7131.0132.9

133.4133.0133.0135.5133.6133.5

131.4132.4132.2130.4130.1131.0132.3131.3133.1134.0

36,54739,25337,60238,49838,32039,796

39,40342,60541,82741,94541,56842,461

42,84742,06142,20642,76343,74142,63445,04943,21344,96146,346

Business failures1

Businessfailurerate2

103 9100.369.663.054.444.616.46.54.25.2

14.320.434.4

34.330.728.733.242 041.648.051.755.951.8

57.064.460.856.353.253.351.649.038.637.3

43.841.738.336.438.442.634.828.423.9

21.624.024.624.123.421.9

22.029.822.622.525.226.4

27.424.427.930.829.126.227.5

Number of failures

Total

22,90919,85914,76813,61911,8489,4053,2211,222809

1,1293,4745,2509,246

9,1628,0587,6118,86211,08610,96912,68613,73914,96414,053

15,44517,07515,78214,37413,50113,51413,06112,3649,6369,154

10,74810,3269,5669,3459,91511,4329,6287,9196,619

504559666594583519

459675458511556535

642545732734708602565

Liability size class

Under$100,000

2216518,88014,54113,40011,6859,2823,1551,176759

1,0033,1034,8538,708

8,7467,6267,0818,07510 22610,11311,61512,54713,49912,707

13,65015,00613,77212,19211,34611,34010,83310,1447,8297,192

8,0197,6117,0406,6276,7337,5046,1764,8613,712

316319388335337301

244347266283296280

355291379397380307285

$100,000and over

744979111219163123664650126371397538

416432530787860856

1,0711,1921,4651,346

1,7952,0692,0102,1822,1552,1742,2282,2201,8071,962

2,7292,7152,5262,7183,1823,9283,4523,0582,907

188240278259246218

215328192228260255

287254353337328295280

Amount of current liabilities(millions of dollars)

Total

483 3457.5182.5166.7136.1100.845.331.730.267.3

204.6234.6308.1

248.3259.5283.3394.2462 6449.4562.7615.3728.3692.8

938.61,090.11,213.61,352.61,329.21,321.71,385.71,265.2941.0

1,142.1

1,887.81,916.92,000.22,298.63,053.14,380.23,011.33,095.32,656.0

168.3205.0324.4203.0160.4178.8

231.8206.4127.0475.3178.9196.5

182.2177.1187.8242.8200.4273.2212.2

Liability size class

Under$100,000

2615215.5132.9119.9100.780.330.214.511.415.763.793.9161.4

151.2131.6131.9167.52114206.4239.8267.1297.6278.9

327.2370.1346.5321.0313.6321.7321.5297.9241.1231.3

269.3271.3258.8235.6256.9298.6257.8208.3164.7

14.314.118.215.514.712.3

10.715.911.412.412.812.6

15.112.818.016,816.813.813.9

$100,000and over

2218242.049.746.835.420.515.117.118.851.6140.9140.7146.7

97.1128.0151.4226.62512243.0322.9348.2430.7413.9

611.4720.0867.1

1,031.61,015.61,000.01,064.1967.3699.9910.8

1,618.41,645.61,741.52,063.02,796.34,081.62,753.42,887.02,491.3

154.0190.9306.2187.5145.7166.5

221.2190.5115.6463.0166.1183.9

167.1164.3169.8226.0183.7259.4198.3

1 Commercial and industrial failures only. Excludes failures of banks and railroads and, beginning 1933, of real estate, insurance,holding, and financial companies, steamship lines, travel agencies, etc.

2 Failure rate per 10,000 listed enterprises.3 Series revised; not strictly comparable with earlier data.Sources: Department of Commerce (Bureau of Economic Analysis) and Dun & Bradstreet, Inc.

308

AGRICULTURE

TABLE B-91.—Income of farm people and farmers, 1929-79


Year or QUdrier

192919331939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

197019711972197319741975197619771978

19771IIIIIIV

19781IIIIIIV

19791IIIll

Personal income received by

total farm population

Fromall

sources

7476

10114.116.516.617.220.021.123.819.5

20.322.722.019.718.317.517.617.519.217.5

18.419.019.720.019.822.623.822.924.126.9

27.528.834.648.945.244.540.342.954.0

Fromfarm

sources *

484868

10.112.112.212.815.515.818.013.3

14.116.115.313.312.411.311.110.812.510.4

11.111.411.411.010.012.012.611.111.312.9

13.013.516.929.223.421.916.818.025.2

Fromnonfarmsources2

2628333.94.44.44.44.65.35.86.26.36.56.76.45.96.26.66.66.77.17.27.68.39.09.7

10.611.211.712.813.9

14.515.317.819.721.811123.524.928.8

Income received from farming3

GrOSS inhume UCIUIC iiiveuiuiy

Total4

13.97.1

10.6

11.113.918.823.424.425.829.534.134.731.6

32.337.136.835.133.733.334.434.238.137.9

38.540.241.742.743.145.550.649.951.756.3

58.660.670.195.5

100.096.9

104.2107.5124.9

107.0104.5103.4115.0

119.8124.3122.2133.4

141.9144 3143.2

adjustment

Cash receipts from1

Total

11.35.37.98.4

11.115.619.620.521.724.829.630.227.8

28.532.932.531.029.829.530.429.733.533.6

34.235.236.537.537.339.443.442.844.248.2

50.552.961.287.192.488.294.895.7

111.0

96.893.892.199.9

106.2111.0109.0118.0

128.9130 7129.9

idincuug:.

stockand

prod-ucts

6.22.84.54.96.59.0

11.511.412.013.816.517.115.4

16.119.618.216.916.316.016.417.419.218.9

19.019.520.220.019.921.925.024.425.528.6

29.630.635.745.941.443.046.147.459.0

46.445.747.150.6

53.958.360.463.4

70.068 265.0

>

Crops

5.12.53.33.54.66.58.19.29.7

11.013.113.112.4

12.413.214.314.113.613.514.012.314.214.7

15.315.716.317.417.217.518.418.418.719.6

21.022.325.541.151.145.148.748.252.1

50.448.144.949.4

52.452.748.654.6

58.962 564.9

Produc-tionex-

penses

7.74.46.36.97.8

10.011.612.313.114.517.018.818.0

19.522.322.821.521.822.222.723.725.827.2

27.428.630.331.631.833.736.538.239.542.1

44.447.452.365.672.275.983.188.898.1

86.787.588.592.4

95.097.097.4

103.0

109.0112 0116.0

Not trnei TO i at in

operators afterinventory

adjustment5

Currentdollars

6.22.64.44.56.59.9

11.711.712.315.115.417.712.8

13.615.915.013.012.411.311.311.113.210.7

11.512.012.111.810.512.914.012.312.314.3

14.214.618.733.326.124.518.719.827.9

19.318.016.924.8

25.827.826.331.6

34.934 830.7

1967dollars6

12.06.6

10.6

10.714.720.222.722.222.825.823.024.517.9

18.920.518.816.215.414.113.813.115.212.3

13.012.313.312.811.313.714.412.311.813.4

12.212.114.925.117.715.211.010.914.3

10.910.09.2

13.4

13.714.413.315.6

16.816 313.9

1 Net income to farm operators after inventory adjustment, less net income of nonresident operators, plus wages and salaries andother labor income of farm resident workers, less contributions of farm resident operators and workers to social insurance.2 Estimated income of farm residents from nonfarm sources; based on survey benchmarks with extrapolations to current year.3 Includes government payments.4 Also includes government payments and nonmoney income and other farm income furnished by farms, not shown separately.5 Includes net value of physical change in inventory of crops and livestock valued at average prices for the year.

6 Income in current dollars divided by the consumer price index (Department of Labor).Sources: Department of Agriculture and Department of Labor.

309

TABLE B-92.— Farm output and productivity indexes, 1929-79

[1967=100]

Year

1929

1933

1939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979 P

Farm output

Total1

53

51

58

6062706971

7071697674

7476797980

8282818788

9191929695

9895100102102

101110110112106

114117121121129

Crops2

Total3

62

55

64

6768767175

7377738379

7678818179

8282808989

9391929693

9995100103104

100112113119110

121121130131144

Feedgrains

48

44

51

5256645962

6065507263

6459636164

6868748084

8778798675

88891009599

8911611211593

114120126135145

Foodgrains

52

36

48

5260635467

7072858170

6564837667

6366629173

8780747786

888810010698

91107102114120

142141132123143

Oilcrops

11

8

25

2929404136

3634394745

4647464749

5360586964

6877788181

9597100114116

117121131155127

153132175183219

Live-stockandprod-ucts2

53

57

59

6064717773

7371706872

7578787982

8484838488

8791929597

9597100100101

105106107105106

101105106106107

Productivity indicators

Farmoutputperunitof

totalinput

52

53

59

6062686667

6871687471

7171747576

7880808787

9091929695

10097100102103

102110110111106

115115117117124

Croppro-

ductionper

acre4

56

50

60

6263706468

6771677570

6970737271

7476778685

8992959795

10097100105106

104112115116104

112111117121130

Farm output per hour

Total

16

16

19

2021242424

2627283132

3435383942

4447515759

6567717781

8992100106110

115128136130136

152162173183184

Crops

16

15

20

2123252425

2729293333

3635394042

4548536161

6668727779

9094100106108

111126135138128

142146158166171

1 iwoLive-stockandprod-ucts

26

25

27

2728303130

3132333435

3739404143

4648505458

6266717782

8693100105112

121128137144156

160178189204195

1 Farm output measures the annual volume of net farm production available for eventual human use through sales from farms orconsumption in farm households.

2 Gross production.3 Includes items not included in groups shown.4 Computed from variable weights for individual crops produced each year.Source: Department of Agriculture.

310

TABLE B-93.—Farm input use, selected inputs, 1929-79

Year

1929

1933

1939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979"

Farm population/ Anr;i I \ i(April l ) 1

Num-horDel

(thou-sands)

30,580

32,393

30,840

30,54730,11828,91426,18624,815

24,42025,40325,82924,38324,194

23,04821,89021,74819,87419,019

19,07818,71217,65617,12816,592

15,63514,80314,31313,36712,954

12,36311,59510,87510,45410,307

9,7129,4259,6109,4729,264

8,8648,2537,806

78,005

Aspercentof totalpopula-tion2

25.1

25.8

23.5

23.122.621.419.217.9

17.518.017.916.616.2

15.214.213.912.511.7

11.511.110.39.89.4

8.78.17.77.16.8

6.45.95.55.25.1

4.74.64.64.54.4

4.23.83.63.7

Farm employment

(tnousanas

Total

12,763

12,739

11,338

10,97910,66910,50410,44610,219

10,00010,29510,38210,3639,964

9,9269,5469,1498,8648,651

8,3817,8527,6007,5037,342

7,0576,9196,7006,5186,110

5,6105,2144,9034,7494,596

4,5234,4364,3734,3374,389

4,3424,3744,1553,9373,944

Fam-

work-ers

9,360

9,874

8,611

8,3008.0177,9498,0107,988

7,8818,1068,1158,0267,712

7,5977,3107,0056,7756,570

6,3455,9005,6605,5215,390

5,1725,0294,8734,7384,506

4,1283,8543,6503,5353,419

3,3483,2753,2283,1693,075

3,0262,9972,8592,6812,525

Hiredwork-ers

3,403

2,865

2,727

2,6792,6522,5552,4362,231

2,1192,1892,2672,3372,252

2,3292,2362,1442,0892,081

2,0361,9521,9401,9821,952

1,8851,8901,8271,7801,604

1,4821,3601,2531,2131,176

1,1751,1611,1461,1681,314

1,3171,3771,2961,2561,418

Cropshar-

vested(mil-

lions ofacres)4

365

340

331

341344348357362

354352355356360

345344349348346

340324324324324

324302295298298

298294306300290

293305294321328

336337344336348

Selected indexes o

Tntal10131

102

96

98

100100103104105

103101101103105

104107107106105

105103101100102

101100100100100

989810010099

100100100101100

100103104103103

Farmlabor

329

321

294

293288296292289

271260246240231

217218208200192

185174162156151

145139133129122

1101031009793

8986828078

7673716766

Farmreales-tate

103

97

102

1031021009898

98102103103104

105105105105105

105102102100101

100100100100100

99991009998

10199989795

9697999898

input use

Me-chanicalpowerand

machin-ery

38

32

40

4244515557

5857647280

8490949696

9798979798

9794949393

9496100101101

100102101105109

113117118120121

(1967 =

Agri-culturalchemi-cals5

10

6

11

1314151720

2021232527

2932353637

3941414349

4953586571

7585100105111

115124131136140

127145151145151

LOO)

Feed,cooHSeed,

andliwolive-

stockpur-

chases 6

31

28

41

4245485252

5453555661

6367696971

7275747984

8488909092

939710097101

104111113116107

101110111116116

xFarm population as defined by Department of Agriculture and Department of Commerce, i.e., civilian population living on farms,regardless of occupation. See also footnote 7.

2 Total population of United States as of July 1, including Armed Forces overseas.3 Includes persons doing farmwork on all farms. These data, published by the Department of Agriculture, differ from those on

agricultural employment by the Department of Labor (see Table B-29) because of differences in the method of approach in concepts ofemployment, and in time of month for which the data are collected. See monthly report on "Farm Labor."

4 Acreage harvested plus acreages in fruits, tree nuts, and farm gardens.5 Fertilizer, lime, and pesticides.6 Nonfarm constant dollar value of feed, seed, and livestock purchases.7 Based on new definition of a farm, farm population is 6,501,000 in 1978 and 6,200,000 (preliminary) in 1979.Sources: Department of Agriculture and Department of Commerce (Bureau of the Census).

311

TABLE B-94.—Indexes of prices received and prices paid by farmers, 1940-79

[1967 = 100]

Year or month

1940 ....194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976197719781979

1978:JanFebMarMay '.June

JulyAugSeptOctNovDec . ...

1979:JanFebMar

MayJune


Prices received by

Allfarmprod-ucts

40496477798394110115100

1031211151029893929410096

959698979598106100102107

110113125179192185186183210241

187193200208215217

216211217218216222

232241246244246244

244237241236238239

farmers

Crops

404864838890102117113100

1031181191071081031041009998

9910110310710610310610010097

100108114175224201197192204223

188190197208212216

213204205202202205

209216214212220233

240235225224223220

.Live-ctnrbSTOCK

andprod-ucts

4050627271778810511599

10212211197908582899993

929193898694106100104117

118118136183165172111175217257

186197204209219219

218218111232230239

252264274111269255

250239255248251256

Prices paid by farmers

Allcommod-

ities,services,interest,taxes,andwageratesl

36394450535661707673

75828481818181848687

88889091929499100103108

112118125144164180192202219249

209211214216219220

220221223224225226

234238243246248249

251251254256256259

Production items

Total2

43455257606167788783

86959589898787909293

929394959496100100100104

108113121146166182193200216247

203206211214217218

218217220222222225

230235243246247248

250249253255255258

Tractorsandself-pro-pelledmachin-ery

9296100104111

116122128137161195217238259289

245245251251251260

260260111111111111

111111280280280293

293293302302302302

Fertil-izer

1031021009487

889194102167217185181180196

179179181181181181

181181181179179179

179179187187194194

194194194211211111

CiialcrucIS

andener-gy

9898100101102

104107108116159111187202212276

209209209209209211

213214215215217220

227231237248258271

287298308314318324

Wagerates3

15182331384246495251

5055596160616366687274767880828693100108119

128134142155178192210226242265

244244244246246246

243243243237237237

257257257269269269

266266266268268268

Adden-dum:

Averagefarmreal

estatevalueper

acre4

19192123262932363941

40465152515355586166

68697377828693100107113

117122132150187213242283308351

308

332

351

384

1 Includes items used for family living, not shown separately.2 Includes other items not shown separately.3 Seasonally adjusted; annual data are averages of seasonally adjusted data.4 Average for 48 States. Annual data are for March 1 of each year through 1975 and for February 1 beginning 1976. Monthly data

are for first of month.Source: Department of Agriculture.

312

TABLE B-95.—U.S. exports and imports of agricultural commodities, 1940-79


Year

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

Jan-Sept:19781979

Exports

Total1

0.5.7

1.22.12.1

2.33.14.03.53.6

2.94.03.42.83.1

3.24.24.53.94.0

4.85.05.05.66.3

6.26.96.46.36.0

7.37.79.4

17.722.0

21.923.023.629.4

21.223.8

Feedgrains

(

4

444

4

3../1I3

.2

.3

.3

.3

.2

.3

.4

.3

.5

.6

.5

.5

.8

.8

.9

1.11.31.1.9.9

1.11.01.53.54.6

5.26.04.95.9

4.55.4

Foodgrains2

(4)0.1(4)

.1

A.1

141.51.1

.61.11.1.7.5

.61.01.0.8.9

1.21.41.31.51.7

1.41.81.51.41.2

1.41.31.84.75.4

6.24.73.65.5

4.14.3

Oil-seedsand

prod-ucts

PI£j

PI.2

.2

.3

.2

.2

.3

.4

.5

.5

.4

.6

.6

.6

.7

.81.0

1.21.21.31.31.3

1.92.22.44.35.7

4.55.16.68.2

5.56.0

Cot-ton

0.2.1.1.2.1

.3

.54.5.9

1.01.1.9.5.8

.5

.71.0.7.4

1.0.9.5.6.7

.5

.4

.5

.5

.3

.4

.6

.5

.91.3

1.01.01.51.7

1.41.6

To-bacco

(4)0.1

.1

.2

.1

.2

.43.2

.3

.3

.2

.3

.4

.3

.4

.4

.3

.4

.4

.4

.4

.4

.4

.5

.5

.5

.6

.5

.5

.7

.7

.9

.9

.91.11.4

.8

.7

Ani-malsand

prod-ucts

0.1.3.8

1.21.3

.9

.97.5.4

.3

.5

.3

.4

.5

.6

.7

.7

.5

.6

.6

.6

.6

.7

.8

.8

.7

.7

.7

.8

.91.01.11.61.8

1.72.42.73.0

1.82.4

Imports

Total*

1.31.71.31.51.8

1.72.3283.12.9

4.05.24.54.24.0

4.04.04.03.94.1

3.83.73.94.04.1

4.14.54.55.05.0

5.85.86.58.41.2

9.311.013.414.8

1.912.3

Crops,fruits,

andvege-

tables3

ft( 1.1.21

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.3

.3

.3

.4

.4

.5

.5

.5

.6

.7

.8

.8

.8

.91.21.5

1.51.6

Ani-malsand

prod-ucts

0.2.3.5.4.3

.4

.44.6.4

.71.1.7.6.5

.5

.4

.5

.7

.8

.6

.7

.9

.9

.8

.91.21.11.31.4

1.61.51.82.62.2

1.82.32.33.1

2.22.8

Cof-fee

0.1.2.2.3.3

.3

.56.7.8

1.11.41.41.51.5

1.41.41.41.21.1

1.01.01.01.01.2

1.11.11.01.2.9

1.21.21.31.71.6

1.72.94.24.0

3.02.9

Cocoabeansand

prod-ucts

(4)(4)(4)(4)(4)

(4)0.1

.2

.1

.2

.2

.2

.2

.3

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.1

.2

.2

.2

.3

.2

.2

.3

.5

.5

.61.01.4

1.0.9

Agri-culturaltrade

balance

- 0 . 8- 1 . 0- . 1

.6

.6

.81.2.4.7

-1 .1- 1 . 2-1 .1- 1 . 4- . 9

- . 8.2.5

-"i1.01.31.11.62.2

2.12.41.91.2.9

1.51.92.99.3

11.8

12.612.01.2

14.8

1.311.5

1 Total includes items not shown separately.2 Rice, wheat, and wheat flour.3 Includes nuts, fruits, and vegetable preparations.4 Less than $50 million.Note.—Data derived from official estimates released by the Bureau of the Census, Department of Commerce. Agricultural

duties, ocean freight, and marine insurance.Source: Department of Agriculture.

313

TABLE B-96.—Balance sheet of the farming sector, 1929-80


Beginning ofyear

Assets

Total Realestate

Live-stock »

Other physical assets

Machin-ery andmotor

vehicles

Crops2

House-hold

equip-mentand

furnish-ings

Financial assets

Depos-its

andcur-

rency

U.S.savingsbonds

Invest-ments incooper-atives

Claims

Total estatedebt

Otherdebt

Propri-etors'

equities

1929

1933

1939...

1940...1941..1942...1943...1944...

1945...1946...1947...1948...1949...

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979

53.054.862.973.684.0

93.8102.9115.9127.4134.6

134.5154.3170.1167.6164.6

168.8173.6182.8191.3208.4

210.2210.8219.3227.7235.8

243.8260.8274.2288.0302.8

314.9326.0351.8394.8478.5

517.6580.2655.8713.0820.2

1980 950.0

48.0

30.8

• 34.1

33.634.437.541.648.2

53.961.068.573.776.6

77.689.598.4100.198.7

102.2107.5115.7121.8131.1

137.2138.5144.5150.2158.6

167.5179.2189.1199.7209.2

215.8223.2239.6267.3327.7

368.5416.9483.8525.8599.5

696.0

6.6

3.0

5.1

5.15.37.19.69.7

9.09.7

11.913.214.4

12.917.119.514.811.8

11.210.611.013.917.7

15.315.616.417.315.9

14.517.619.018.920.2

23.523.727.334.142.4

24.629.529.132.051.3

64.0

3.2

2.5

3.2

3.13.34.04.95.4

6.55.45.37.4

10.1

12.214.116.717.418.4

18.619.320.220.121.8

22.722.222.523.523.9

24.826.027.429.831.3

32.334.436.639.344.2

55.765.071.977.784.3

97.0

9.8

2.73.03.95.16.1

6.76.37.19.08.5

7.67.98.89.09.2

9.68.38.37.69.3

7.78.08.89.39.8

9.29.7

10.09.6

10.6

10.910.711.814.522.1

23.321.322.024.927.4

30.5

8.5

6.8

4.24.14.84.84.7

5.25.57.28.18.9

8.49.6

10.19.69.5

9.710.09.69.69.4

9.28.78.9

8.48.48.38.89.4

9.610.010.811.912.3

14.014.214.416.419.2

22.0

3.23.54.25.56.6

7.99.4

10.29.99.6

9.19.19.49.49.4

9.49.59.49.5

10.0

9.28.78.89.29.2

9.610.010.310.911.5

11.912.413.214.014.9

15.115.616.016.316.8

17.2

0.3.3.5

1.12.2

3.44.24.24.44.6

4.74.74.74.64.7

5.05.25.15.15.2

4.74.64.54.44.2

4.24.03.93.83.8

3.73.63.74.04.1

4.34.44.44.44.8

5.0

0.8.9.9

1.01.1

1.21.41.51.71.9

2.02.32.52.72.9

3.13.23.53.73.9

4.24.54.95.05.4

5.65.96.26.56.8

7.28.08.89.7

10.8

12.113.314.215.516.9

18.3

53.054.862.973.684.0

93.8102.9115.9127.4134.6

134.5154.3170.1167.6164.6

168.8173.6182.8191.3208.4

210.2210.8219.3227.7235.8

243.8260.8274.2288.0302.8

314.9326.0351.8394.8478.5

517.6580.2655.8713.0820.2

950.0

6.66.56.45.95.4

4.94.74.95.15.3

5.66.16.77.27.7

8.29.09.8

10.411.1

12.012.813.815.116.8

18.921.223.125.127.4

29.230.332.235.741.3

46.351.156.663.772.3

83.1

3.43.94.14.03.5

3.43.23.64.26.1

6.86.98.08.99.2

9.49.89.5

10.012.5

12.813.414.716.317.6

17.919.521.022.323.1

23.824.226.929.632.8

35.539.746.155.665.2

74.7

43.044.452.463.775.1

85.595.0

107.4118.1123.2

122.1141.3155.4151.5147.7

151.2154.8163.5170.9184.8

185.4184.6190.8196.3201.4

207.0220.1230.1240.6252.3

261.9271.5292.7329.5404.4

435.8489.4553.1593.7682.7

792.2

1 Beginning with 1961, horses and mules are excluded.2 Includes all crops held on farms and crops held off farms by farmers as security for Commodity Credit Corporation loans. The latter

on January 1, 1980 totaled approximately $1.0 billion.

Note.—Beginning 1960, data include Alaska and Hawaii.

Source: Department of Agriculture.

314

INTERNATIONAL STATISTICS

TABLE B-97.— Exchange rates, 1973-79

[Cents per unit of foreign currency, except as noted]

Year and month

1973:MarJuneSeptDec

1Q74ly/'j

MarJuneSeptDec

1975:MarJuneSeptDec

1Q7Ciy/oMarJuneSeptDec

1977MarJuneSeptDec

1978:MarJuneSeptDec

1979MarJuneSeptDec

1973:MarJuneSeptDec

MarJuneSeptDec

1975MarJuneSeptDec

1976MarJuneSeptDec

1977:MarJuneSeptDec

MarJuneSeptDec

1979:MarJuneSeptDec

Belgian franc

2.53772.66432.70892.4726

2.50402.63662.53642.7158

2.90832.86032.54852.5311

2.54802.52202.60462.7483

2.72582.77132.79102.9608

3.15893.05903.22073.3637

3.39713.30483.46843.5423

Netherlandsguilder

34.83436.58238.54235.615

36.35437.75736.87039.331

42.12441.50237.22937.234

37.14936.52438.39040.240

40 07940.32640.60442.955

45.99444.71646.73349.120

49.80148.37450.63552.092

Canadiandollar

100.333100.16099.181

100.058

102.877103.481101.384101.192

99.95497.42697.43798.627

101.431102,712102.55798.204

95.12594.54993.16891.132

88.82389.14385.73984.763

85.18785.29685.81485.471

Swedish krona

22.58223.74623.76922.026

21.91522.88522.33323.897

25.48125.53222.50122.685

22.70222.47522.99824.051

23 72622.62520.60221.044

21.69321.69022.59222.808

22.90123.02823.86023.935

French franc

22.19123.47223.46621.757

20.74220.40820.83122.109

23.80424.97122.36722.428

21.65721.10920.33420.055

20.07520.24020.31420.844

21.25621.84122.90923.178

23.32822.91423.82624.614

Swiss franc

31.08432.75733.14631.252

32.49033.44933.37138.442

40.27340.08636.90537.970

38.98040.48440.43140.823

39 20940.17042.11548.168

52.69353.04663.76559.703

59.47358.88462.08762.542

German mark

35.54838.78641.24637.629

38.21139.60337.58040.816

43.12042.72638.19138.144

39.06438.79740.16941.965

41.81242.45343.03446.499

49.18147.98450.77853.217

53.75453.08455.75857.671

UnitedKingdom

pound

247.24257.62241.83231.74

234.06239.02231.65232.94

241.80228.03208.35202.21

194.28176.40172.72167.84

17174171.91174.31185.46

190.55183.72195.95198.61

203.78211.19219.66220.07

Italian lira

0.17600.16792.17691.15458

.15687

.15379

.15103

.15179

.15842

.15982

.14740

.14645

.12113

.11780

.11837

.11521

.11276

.11295

.11318

.11416

.11692

.11634

.12050

.11863

.11888

.11828

.12326

.12329

Japanese yen

0.38190.37808.37668.35692

.35454

.35340

.33439

.33288

.34731

.34077

.33345

.32715

.33276

.33424

.34800

.33933

.35687

.36652

.37486

.41491

.43148

.46744

.52656

.51038

.48470

.45750

.44963

.41613

United States dollar(March 1973 = 100)

Multilateraltrade-weighted

average

100.096.595.1

101.5

101.6100.0102.998.6

93.994.8

103.0103.5

105.1107.1105.7105.3

105 2104.4103.898.4

94.894.789.588.5

88.489.686.786.3

Bilateral trade-weightedaverage

100.098.598.3

102.2

100.999.9

103.0101.0

98.5100.0104.9105.0

104.6105.2104.0105.8

106.2105.6105.4101.9

100.399.296.096.3

96.798.096.597.5


315

TABLE B-98.— U.S. international transactions, 1946-79

[Millions of dollars; quarterly data seasonally adjusted]

Year orquarter

Merchandise12

Exports ImportsNet

balance

Investment income3

ceiptsPayments Net

Netmilitarytransac-

tions

Nettraveland

transpor-tation

receipts

Otherserv-ices,net3

Balanceon goods

andserv-

ices1 4

Remit-tances,

pensions,and otherunilateral

trans-fers1

Balanceon

currentaccount

1946194719481949

1950....1951....1952...1953...1954....

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

1977:IIIIllI V

1978:III

IV

1979:I

Ill"

11,76416,09713,26512,213

10,20314,24313,44912,41212,929

14,42417,55619,56216,41416,458

19,65020,10820,78122,27225,501

26,46129,31030,66633,62636,414

42,46943,31949,38171,41098,306

107,088114,745120,816142,052

29,51831,07530,55829,665

30,71235,39636,53239,412

41,34842,79247,337

-5,067-5,973-7,557-6,874

-9,081-11,176-10,838-10,975-10,353

-11,527-12,803-13,291-12,952-15,310

-14,758-14,537-16,260-17,048-18,700

-21,510-25,493-26,866-32,991-35,807

-39,866-45,579-55,797-70,499

-103,649

-98,041-124,051-151,689-175,822

-37,185-37,639-37,996-38,869

-42,629-43,329-44,481-45,383

-47,463-50,508-54,619

6,69710,1245,7085,339

1,1223,0672,6111,4372,576

2,8974,7536,2713,4621,148

4,8925,5714,5215,2246,801

4,9513,8173,800

635607

2,603-2,260-6,416

911-5,343

9,047-9,306

-30,873-33,770

-7,667-6,564-7,438-9,204

-11,917-7,933-7,949-5,971

-6,115-7,716-7,282

7721,1021,9211,831

2,0682,6332,7512,7362,929

3,4063,8374,1803,7904,132

4,6164,9985,6196,1576,823

7,4367,5268,0219,368

10,912

11,74612,70614,76421,80827,587

25,35129,28632,58743,465

7,7758,0808,4208,312

9,77610,25610,52612,907

14,11515,40417,506

- 2 1 2- 2 4 5-437- 4 7 6

- 5 5 9- 5 8 3- 5 5 5- 6 2 4- 5 8 2

-676- 7 3 5- 7 9 6- 8 2 5

-1,061

-1,237-1,245-1,324-1,561-1,784

-2,088-2,481-2,747-3,378-4,869

-5,516-5,436-6,544-9,655

-12,084

-12,564-13,311-14,598-21,820

-3,192-3,519-3,686-4,201

- 4 , 5 3 7- 5 , 4 0 2- 5 , 5 7 4- 6 , 3 0 8

-7,251-7,939-8,712

560857

1,4841,355

1,5092,0502,1962,1122,347

2,7303,1023,3842,9653,071

3,3793,7534,2954,5965,039

5,3485,0455,2745,9906,043

6,2307,2708,220

12,15315,503

12,78715,97517,98921,645

4,5834,5614,7344,111

5,2394,8544,9526,599

6,8647,4658,794

- 4 9 3- 4 5 5- 7 9 9- 6 2 1

- 5 7 6-1,270-2,054-2,423-2,460

-2,701-2,788-2,841-3,135-2,805

-2,752-2,596-2,449-2,304-2,133

-2,122-2,935-3,226-3,143-3,328

-3,354-2,893-3,420-2,070-1,653

- 7 4 6674

1,679492

509407407357

244237247

- 2 3 9

34-217- 3 8 4

733946374230

- 1 2 0298

83- 2 3 8- 2 6 9

-297- 3 6 1- 1 8 9- 6 3 3- 8 2 1

- 9 6 4- 9 7 8

-1,152-1,309-1,146

-1,280-1,331-1,750-1,548-1,763

-2,038-2,345-3,063-3,158-3,184

-2,725-2,465-3,200-2,985

- 9 1 2- 8 0 8- 6 9 3- 7 8 7

- 7 3 1- 7 9 8- 7 8 4- 6 7 2

- 5 6 6- 8 4 0- 6 1 5

310145175208

242254309307305

299447482486573

579594809960

1,041

1,3871,3651,6121,6301,833

2,1902,5092,7893,1853,975

4,5904,7254,9836,226

1,1671,2311,3311,251

1,4391,5011,6031,682

1,5201,6151,623

7,80711,6176,9426,511

2,1774,3993,1451,1952,499

2,9285,1537,1073,1451,166

5,1326,3456,0267,1679,603

8,2845,9615,7093,5633,393

5,6342,282

-1,88911,0229,298

22,9529,603

-9,423- 8 , 3 9 2

-2,320-1,173-1,659-4,272

-5,725-2,139-1,931

1,399

1,737307

2,136

-2,922-2,625-4,525-5,638

-4,017-3,515-2,531-2,481-2,280

-2,498-2,423-2,345-2,361-2,448

-2,308-2,524-2,638-2,754-2,781

-2,854-2,932-3,125-2,952-2,994

-3,294-3,701-3,854-3,881

5—7,186

-4,613-4,998-4,670-5,086

-1,116-1,283-1,249-1,023

-1,228-1,313-1,233-1,314

-1,322-1,363-1,374

4,8858,9922,417

873

-1,840884614

-1,286219

4302,7304,762

784-1,282

2,8243,8213,3884,4146,822

5,4313,0292,584

611399

2,340-1,419-5,744

7,1412,113

18,3394,605

-14,092-13,478

-3,436-2,456-2,908-5,295

-6,953-3,452-3,164

85

415-1,056

762

1 Excludes military grants.2 Adjusted from Census data for differences in valuation, coverage, and timing.3 Fees and royalties from U.S. direct investments abroad or from foreign direct investments in the United States are excluded from

investment income and included in other services, net.4 In concept, the sum of balance on current account and allocations of special drawing rights is equal to net foreign investment in

the national income and product accounts, although the two may differ because of revisions, special handling of certain items, etc.

(See next page for continuation of table.)

316

TABLE B-98.—U.S. international transactions, 1946-79—Continued

[Millions of dollars; quarterly data seasonally adjusted, except as noted]

Year or quarter

U.S. assets abroad, net[increase/capital outflow ( - ) ]

Total

U.S.officialreserveassets6

OtherU.S.

Govern-ment

assets

U.S.privateassets

Foreign assets in the U.S., net[increase/capital inflow ( + )]

Total

Foreign officialassets

Total

Assetsof

foreignofficialreserve

agencies

Otherforeignassets

Alloca-tions ofspecialdrawingrights(SDRs)

Statisticaldiscrepancy

Total(sum of

theitems

with signreversed)

Ofwhich:

Seasonaladjust-ment

discrep-ancy

19461947.19481949

19501951195219531954

19551956195719581959

19601961.196219631964

19651966196719681969

19701971197219731974.

197519761977.1978

1977:III.IllI V

1978IIIIII.IV.

1979-III.Ill "..

-623-3,315-1,736-266

1,758-33

-4151,256480

182-869

-1,1652,2921,035

2,145607

1,535378171

1,22557053

-870-1,179

2,4812,349- 4158

-1,467

-849-2,558-375732

-420-24112-43

187248115182

-3,585343

2,779

-4,099-5,537-4,175-7,270-9,559

-5,715-7,319-9,758-10,977-11,585

-9,336-12,474-14,497-22,874-34,745

-39,703-51,269-35,793-60,957

-1,683-12,272-6,625-15,213

-15,188-5,466-10,049-30,254

-7,637-16,165-23,325

-1,100-910

-1,085-1,662-1,680

-1,605-1,543-2,423-2,274-2,200

-1,589-1,884-1,568-2,6445 366

-3,474-4,214-3,693-4,656

-1,062-885

-1,001-746

-1,009-1,263-1,390-994

-1,094-1,001-756

-5,144-5,234-4,624-5,986-8,049

-5,335-6,345-7,387-7,833-8,206

-10,228-12,939-12,925-20,388-33,643

-35,380-44,498-31,725-57,033

-201-11,363-5,736

-14,424

-14,366-4,451-8,774

-29,442

-2,958-15,507-25,348

2,2942,7051,9113,2173,643

7423,6617,3799,92812,702

6,35922,97021,46118,38834,241

15,42036,39950,82363,713

2,59614,00214,23619,991

18,175941

15,35829,239

1,4766,057

23,059

1,473765

1,2701,9861,660

134-6723,451-774

-1,301

6,90826,87910,4756,02610,546

6,77717,57336,65633,758

5,4917,7208,266

15,179

15,618-5,265

4,64118,764

-9,391-10,043

5,562

1,258741

1,1181,5581,362

69- 7 8 53,368- 7 5 9

-1,552

7,36427,38910,2935,09010,244

5,25913,06635,41631,004

4,9287,4977,890

15,101

14,895-5,129

4,51916,719

- 9 , 2 2 7-10,299

5,371

8211,939

6411,2311,983

6074,3333,928

10,70314,002

- 5 5 0-3,90910,98612,36223,696

8,64318,82614,16729,956

-2,8956,2825,9704,812

2,5576,206

10,71710,475

10,86816,10017,497

867717710

1,139

-1,019- 9 8 9

-1,124- 3 6 0-907

- 4 5 8629

- 2 0 5438

-1,516

- 2 3 0-9,794-1,930-2,655-1,609

5,94410,265- 9 3 7

10,722

2,523726

-4,703517

3,9657,976

-2,145930

4,60611,163- 4 9 5

714240

-2,2751,321

901517

-2,7161,301

985737

-3,756

5 Includes extraordinary U.S. Government transactions with India.6 Consists of gold, special drawing rights, convertible currencies, and the U.S. reserve position in the International Monetary Fund

(IMF).

Note.—Quarterly data for changes in U.S. official reserve assets, U.S. private assets abroad, and foreign assets in the United Statesare not seasonally adjusted.


3172 9 4 - 2 8 9 0 - 8 0 - 2 1

TABLE B-99.—U.S. merchandise exports and imports by principal end-use category, 1965-79

[Millions of dollars; quarterly data seasonally adjusted]

Year or quarter

19651966196719681969

19701971197219731974

1975197619771978

1977:1IIIIIIV

1978:1IIIIIIV

1979:IIIIll"

Exports

Total

26,46129,31030,66633,62636,414

42,46943,31949,38171,41098,306

107,088114,745120,816142,052

29,51831,07530,55829,665

30,71235,39636,53239,412

41,34842,79247,337

Agricul-tural

6,3056,9496,4536,2976,096

7,3747,8319,51317,97822,412

22,24223,38124,33129,904

6,2456,2546,0235,809

6,4967,6807,9307,798

7,6407,7339,609

Nonagricultural

Total

20,15622,36124,21327,32930,318

35,09535,48839,86853,43275,894

84,84691,36496,485112,148

23,27324,82124,53523,856

24,21627,71628,60231,614

33,70835,05937,728

Capitalgoods

8,0528,9079,93411,11112,369

14,65915,37216,91421,99930,878

36,63939,11239,76746,474

9,7739,85410,2649,876

10,15311,08012,42512,816

13,81113,69515,557

Othergoods

12,10413,45414,27916,21817,949

20,43620,11622,95431,43345,016

48,20752,25256,71865,674

13,50014,96714,27113,980

14,06316,63616,17718,798

19,89721,36422,171

Imports

Total

21,51025,49326,86632,99135,807

39,86645,57955,79770,499103,649

98,041124,051151,689175,822

37,18537,63937,99638,869

42,62943,32944,48145,383

47,46350,50854,619

Petrol-eumand

products

2,0342,0782,0912,3842,649

2,9273,6504,6508,415

26,609

27,01734,57344,98342,317

12,39610,69911,34210,546

10,6359,97210,87110,839

11,63812,90516,619

Nonpetroleum

Total

19,47623,41524,77530,60733,158

36,93941,92951,14762,08477,040

71,02489,478106,706133,505

24,78926,94026,65428,323

31,99433,35733,61034,544

35,82537,60338,000

Indus-trialsup-plies

9,12310,2359,95612,02711,798

12,39013,76216,26319,58827,766

23,96629,70035,67042,547

7,9498,9469,2209,555

10,24810,99610,68010,623

11,05712,28412,726

Othergoods

10,35313,18014,81918,58021,360

24,54928,16734,88442,49649,274

47,05859,77871,03690,958

16,84017,99417,43418,768

21,74622,36122,93023,921

24,76825,31925,274

Note.—Data are on an international transactions basis and exclude military shipments.


318

TABLE B-100.—U.S. merchandise exports and imports by area, 1973-79


Item 1973 1974 1975 1976 1977 1978 1979»

Exports

Developed countries

CanadaJapanWestern EuropeAustralia, New Zealand, and South

Africa

Developing countries...

OPEC2

Other3....

Eastern Europe

Imports

Developed countries.

Canada.JapanWestern Europe.Australia, New Zealand, and South

Africa

Developing countries...

OPEC^Other3

Eastern Europe

71,410

48,529

16,7108,356

21,216

2,247

20,834

3,41417,420

2,047

70,499

48,985

17,6949,665

19,774

1,852

20,913

5,09715,816

601

98,306

64,487

21,84210,72428,164

3,757

32,082

6,21925,863

1,737

103,649

61,092

22,39212,41424,267

2,019

41,580

17,23424,346

977

107,088

66,496

23,5379,567

29,884

3,508

37,343

9,95627,387

3,249

98,041

55,973

21,71011,25720,764

2,242

41,334

18,89722,437

734

114,745

72,335

26,33610,19631,883

3,920

38,287

11,56126,726

4,123

4124,051

67,488

26,47515,53123,003

2,479

55,379

27,40927,970

875

120,816

76,970

28,53310,56634,094

3,777

40,951

12,87728,074

2,895

4151,689

79,227

29,64418,56528,226

2,792

70,681

35,77834,903

1,127

142,052

87,762

31,22812,96039,364

4,210

50,208

14,84635,362

4,082

4175,822

99,154

33,55224,54236,620

4,440

74,407

33,28941,118

1,509

175,303

110,463

36,00817,36552,052

5,037

60,133

14,26445,869

5,347

4 203,453

109,527

37,86925,85140,260

5,547

90,570

41,48349,087

1,687

1 First 3 quarters at seasonally adjusted annual rate; preliminary. Detail will not add to totals because of seasonal adjustmentdiscrepancy and rounding.

2 Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.3 Latin American Republics, other Western Hemisphere, and other countries in Asia and Africa, less petroleum exporting countries and

the International Monetary Fund.4 Includes imports of nonmonetary gold from International Monetary Fund, not in area detail.

Note.—Data are on an international transactions basis and exclude military shipments.


319

TABLE B-101.—U.S. merchandise exports and imports by commodity groups, 1958-79


Year ofmonth

Merchandise exports1

Totaldomes-tic andforeign

exports2

Domestic exports

Total2

Foodbever-ages,and

tobac-co

Crudemateri-als andfuels4

Manu-facturedgoods5

Merchandise imports

General imports6

Total3

Foodbever-ages,and

tobac-co

Crudemateri-als andfuels4

Manu-facturedgoods5

Total,c.i.f.

value7

Merchandise trade balance

Exportsless

imports,customs

value

Exportsless

imports,f.a.s.

Exportsless

imports,c.i.f.

1958...1959...

1960...1961...1962...1963...1964...

1965...1966...1967...1968...1969...

1970...1971...1972...1973...1974...

19741975197619771978

1978:Jan....Feb....Mar...Apr....May...June..

July...Aug...Sept..Oct....Nov....Dec...

1979:Jan....FebMar...Apr....May...June..

July...Aug...

§5!:Nov

F.a.s. value8 Customs value

16,37516,426

19,65920,22620,98622,46725,832

26,74229,49031,03034,06337,332

42,65943,54949,19970,82397,998

97,998107,589115,150121,150143,575

9,8649,94511,14711,63011,78612,268

11,66212,29413,27412,90113,45113,283

13,13213,50714,45213,88313,86215,038

15,66915,82115,83216,83817,004

16,21116,243

19,45919,98220,71722,18225,479

26,39929,05430,64633,62636,788

42,02542,91148,39969,73096,634

96,634106,100113,476118,944141,069

9,7139,768

10,90311,42011,54112,05311,49712,10113,06612,67013,21213,054

12,92313,28314,16513,63613,57814,774

15,43315,56015,57916,55416,650

2,6882,8523,1673,4663,7434,1884,637

4,5195,1864,7104,5924,4465,0585,0766,569

12,93815,233

15,23316,79317,23415,96320,626

1,2621,5101,6431,6411,8641,964

1,7991,9601,8771,7861,6341,692

1,4371,5571,7651,7581,8072,1822,3522,2622,2662,4972,278

3,0522,9963,9423,8643,3563,7754,337

4,2734,4044,7264,8655,0066,6926,4417,091

10,73515,802

15,80215,19716,09518,57920,952

1,4141,3021,5311,6771,7541,905

1,6201,7181,9011,9342,0402,047

2,1432,0092,3132,1341,9392,2862,4412,4502,5862,5062,759

11,54711,179

12,58312,78413,66814.29716,529

17,43319,21820,84423,81826,785

29,34430,44333,74044,73163,523

63,52370,95177,24180,15194,484

6,6066,7217,3397,5947,6147,791

7,7288,0948,5868,6268,9138,907

8,7599,0789,4039,0569,0689,639

9,81910,07110,09210,50710,441

13,39215,690

15.07314,76116,46417,20718,749

21,42725,61826,88933,22636,043

39,95145,56355,58369,476101,394

3,5503,580

3.3923,4553,6743,8634,022

4,0134,5904,7015,3655,3086,2306,4047,3799,235

10,701

4,1644,615

4,4184,3344,6914,7555,029

5,4405,7185,3676,0316,3916,5427,2688,838

13,44631,842

5,3117,117

6,8636,5377,6498,0709,106

11,24414,44615,75620,62423,011

25,90730,41437,76745,00156,202

F.a.s. value8

100,64896,570

121,009147,685172,026

13,10314,26014,00414,49214,00913,970

14,54514,13314,82014,85214,82515,032

16,23114,80615,27316,03616,34216,937

16,77718,17718,66618,85618,422

10,7099,923

11,89114,22715,742

1,2701,2761,4081,3741,3261,240

1,3131,1231,2351,3581,3691,452

1,4861,2611,4371,5401,4561,552

1,3861,4111,4151,3931,689

32,06432,59641,47453,55451,913

4,1204,3334,2514,3084,1054,234

4,1734,5154,5114,3514,4364,577

5,1454,4384,8905,1865,2065,504

5,9666,4607,0467,4676,364

55,22351,08064,77576,554100,352

7,3848,3947,9728,4718,2578,158

8,7298,1678,7678,7558,6918,617

9,2918,8248,5969,0239,2329,475

9,0659,8739,7499,5049,839

28,74535,32038,241

42,42948,34258,86273,573108,392

108,392103,843129,896157,560183,137

13,92715,19314,89315,43414,91314,869

15,49515,07415,82115,76415,77016,006

17,28215,72016,22817,05317,35017,977

17,82319,27519,77719,95719,524

2,983736

4,5865,4654,5225,2607,083

5,3153,8724,141

8371,289

2,708-2,014-6,384

1,348-3,396

-3,396 -2,65011,020

-5,859-26,535-28,451

-3,239-4,315-2,858-2,861-2,223-1,702

-2,883-1,839-1,546-1,951-1,374-1,749

-3,099-1,300

- 8 2 1-2,153-2,480-1,900

-1,108-2,357-2,833-2,018-1,418

2,283-1,257

- 9 0 9

230-4,793-9,663

2,752-10,395

-10,3953,747

-14,746-36,410-39,563

-4,063-5,248-3,747-3,804-3,127-2,601

-3,834-2,780-2,547-2,863-2,319-2,724

-4,150-2,213-1,776-3,171-3,488-2,940

-2,154-3,455-3,945-3,119-2,521

1 Beginning 1960, data have been adjusted for comparability with the revised commodity classifications effective in 1965.2 Total excludes Department of Defense shipments of grant-aid military supplies and equipment under the Military Assistance

Program.3 Total includes commodities and transactions not classified according to kind.4 Includes fats and oils.5 Includes machinery, transportation equipment, chemicals, metals, and other manufactures. Export data for these items include

military grant-aid shipments through 1975. They are excluded in 1978-79.6 Total arrivals of imported goods other than intransit shipments.7 C.i.f. (costs, insurance, and freight) import value at first port of entry into United States. Data for 1967-73 are estimates.8 F.a.s. (free alongside ship) value basis at U.S. port of exportation for exports and at foreign port of exportation for imports.

Note.—Data are as reported by the Bureau of the Census adjusted to include silver ore and and bullion reported separately prior to1969. Trade in gold is included beginning 1974. Export statistics cover all merchandise shipped from the U.S. customs area, exceptsupplies for the U.S. Armed Forces. Exports include shipments under Agency for International Development and Food for Peace programsas well as other private relief shipments.

Source: Department of Commerce (Bureau of the Census and International Trade Administration).

320

TABLE B-102.—International investment position of the United States at year-end, selected years, 1970-78


Type of investment 1970 1972 1974 1976 1977 1978

Net international investment position of the United States..

U.S. assets abroad

U.S. official reserve assets

GoldSpecial drawing rights (SDRs)Reserve position in the International Monetary Fund (IMF)Foreign currency reserves

Other U.S. Government assets

U.S. loans and other long-term assetsU.S. short-term assets other than reserves

U.S. private assets

Direct investments abroad (book value)Foreign securitiesClaims on foreigners reported by U.S. banks, not included

elsewhereClaims on unaffiliated foreigners reported by U.S. nonbanks

Foreign assets in the United States..

Foreign official assets

U.S. Government securities*Other U.S. Government liabilitiesLiabilities reported by U.S. banks, not included elsewhereOther official assets

Other foreign assets..

Direct investments in the United States (book value)Liabilities reported by U.S. banks, not included elsewhereU.S. Treasury securitiesOther U.S. securities2

Liabilities to unaffiliated foreigners reported by U.S. nonbanks.,

58.6

165.5

14.5

11.1.9

1.9.6

32.1

29.72.5

118.8

75.521.0

13.88.5

106.8

26.1

17.71.76.7

.0

80.7

13.322.7

1.234.7

8.8

37.1

199.0

13.2

10.52.0

.5

.2

36.1

34.12.0

149.7

89.927.6

20.711.4

161.8

63.2

52.91.68.5

.2

98.7

14.921.2

1.250.710.7

58.8

255.7

15.9

11.72.41.9.0

38.4

36.32.1

201.5

110.128.2

46.217.0

196.9

79.8

58.12.6

18.4.6

117.1

25.141.8

1.734.913.6

82.6

347.2

18.7

11.62.44.4

.3

46.0

44.11.9

282.4

136.844.2

81.120.3

264.6

105.5

74.08.7

17.25.6

159.1

30.853.57.0

54.813.0

72.4

383.0

19.3

11.72.64.9

.0

49.6

47.81.8

314.1

149.849.4

92.622.3

310.6

141.9

106.89.9

18.07.2

168.7

34.660.2

7.652.913.4

76.7

450.1

18.7

11.71.61.04.4

54.2

52.31.9

377.2

168.153.4

129.626.1

373.3

175.1

130.812.723.18.5

198.2

40.877.09.9

55.415.1

1 Includes Treasury and agency issues of securities.2 Corporate and other bonds and corporate stocks.

Note.—Gold is valued at SDR35 per ounce, throughout. The SDR value is converted to dollars at $1/SDR before December 1971, at$1.08571/SDR from December 1971 through January 1973, at $1.20635/SDR from February 1973 through June 1974, and as measuredby the basket valuation of the SDR beginning July 1974.


321

TABLE B-103.— World trade: Exports and imports, 1965, 1970, and 1975-79

[Billions of U.S. dollars]

Area and country 1965 1970 1975 1976 1977 1978 19791

Developed countries3..

United StatesCanadaJapan

European Community4

FranceWest GermanyItalyUnited Kingdom

Other developed countries

Developing countries

OPEC 5...Other

Communist countries6

U.S.S.REastern Europe..China

TOTAL..

Developed countries3

United States.CanadaJapan

European Community4

FranceWest GermanyItaly

United Kingdom

Other developed countries..

Developing countriesOPEC5

Other

Communist countries6..

U.S.S.REastern EuropeChina

TOTAL....

129.7

27.58.58.5

64.8

10.217.97.2

13.8

20.4

35.2

10.724.5

23.2

8.211.82.0

188.1

136.7

23.28.78.2

69.3

10.417.67.4

16.1

27.3

37.0

6.530.5

22.6

8.111.61.8

196.3

Exports, f.a.s.2

225.9

43.216.719.3

113.0

18.134.213.219.6

33.6

54.3

17.636.7

34.7

12.818.22.1

314.9

583.3

107.634.155.8

298.4

53.190.234.844.5

87.4

203.5

111.592.0

90.4

33.445.3

7.2

877.2

647.3

115.040.567.3

328.8

57.2102.2

37.346.7

95.7

248.3

135.2113.1

99.1

37.349.5

7.3

994.7

735.3

121.243.481.1

382.3

65.0118.1

45.358.2

107.1

282.5

148.0134.5

115.4

45.256.48.0

1,133.2

Imports, c.i.f.7

881.0

143.747.998.4

462.2

79.4142.5

56.171.7

128.8

294.8

142.8152.0

133.2

52.464.29.9

1,309.0

235.3

42.414.318.9

116.9

19.129.915.022.0

43.0

56.6

10.046.6

34.2

11.718.52.2

326.1

611.0

103.436.357.9

301.9

54.074.938.454.2

111.5

189.8

52.7137.1

100.8

37.151.37.4

901.6

701.5

129.640.364.9

345.6

64.488.443.456.6

121.2

208.0

64.6143.4

105.1

38.255.66.0

1,014.6

793.8

157.642.171.3

390.2

70.5101.5

48.164.6

132.7

248.0

84.8163.2

115.3

40.962.3

7.1

1,157.1

915.4

183.146.279.9

462.8

81.8121.8

56.578.6

143.4

296.4

104.0192.4

139.7

50.871.710.9

1,351.5

1,032.2

183.155.5

102.5

555.8

98.8173.2

72.090.7

135.3

383.9

201.9182.0

145.6

64.073.1

1.2

1,561.7

1,080.0

219.555.1

108.9

577.2

105.7161.2

75.4103.1

119.3

339.2

106.1233.1

161.4

60.078.914.4

1,580.6

1 Preliminary estimates.2 Free-alongside-ship value.3 Includes the OECD countries, South Africa, and non-OECD Europe.4 Includes Belgium-Luxembourg, Denmark, Ireland, and the Netherlands, not shown separately.5 Includes Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Oman, Qatar, Saudi Arabia, United Arab Emirates, and

Venezuela.6 Includes North Korea, Vietnam, Albania, Cuba, Mongolia, and Yugoslavia, not shown separately.7 Cost, insurance, and freight value, except Eastern Europe (except Albania) and U.S.S.R., which are f.o.b (free on board).

Sources: International Monetary Fund, Organization for Economic Cooperation and Development, and Council of Economic Advisers.

322

TABLE B-104.— World trade balance and current account balances, 1965, 1970, and 1975-79

[Billions of U.S. dollars]

Area and country 1965 1970 1975 1976 1977 1978 1979l

Developed countries3

United States..CanadaJapan

European Community4

FranceWest GermanyItalyUnited Kingdom-

Other developed countries-

Developing countries

OPEC5...Other

Communist countries6...

U.S.S.REastern EuropeChina

TOTAL7

OECD...

United States....CanadaJapan

European Community4

FranceWest Germany.ItalyUnited Kingdom.

Developing countries.

OPEC9.Other

Other10..

TOTAL

-6 .9

4.3- . 2

.3

- 4 . 5

- . 2.3

- . 2- 2 . 3

- 6 . 8

- 1 . 8

4.2- 6 . 0

.1

.2

.2

- 8 . 2

3.8

5.4-1 .1

.9

.9

.4- 1 . 6

2.2- . 1

World trade balance2

- 9 . 6

.82.5.4

- 3 . 9

- 1 . 04.3

- 1 . 8- 2 . 4

- 9 . 4

- 2 . 3

7.6- 9 . 9

.5

1.1- . 4- . 2

-11.4

-27.7

4.2- 2 . 1- 2 . 1

- 3 . 5

- . 815.2

- 3 . 6- 9 . 6

-24.1

13.7

58.8-45.1

-10.4

-3 .7- 6 . 0- . 2

-24.4

-54.2

-14.6.2

2.4

-16.8

- 7 . 213.7

- 6 . 2- 9 . 9

-25.5

40.3

70.6-30.3

- 6 . 0

- . 9- 6 . 1

1.3

-19.9

-58.5

-36.31.39.8

- 7 . 9

- 5 . 516.6

- 2 . 8- 6 . 4

-25.7

34.5

63.2-28.7

.1

4.3-5 .9

.9

-23.9

-34.4

-39.41.7

18.5

- .6

-2 .420.7- . 4

-6 .9

-14.6

- 1 . 6

38.8-40.4

- 6 . 5

1.6- 7 . 5- 1 . 0

-42.5

Current account balances8

6.7

2.31.12.0

3.2

.1

.91.11.8

- 8 . 5

- . 5- 8 . 0

- 2 . 9

- 4 . 7

- 0 . 4

18.3-4 .7- . 7

- . 13.5

- 4 . 1

-10.2

27.3-37.5

-18.5

-29.1

-18.2

4.6- 3 . 9

3.7

- 6 . 2

- 6 . 13.4

- 2 . 8- 1 . 5

11.0

36.5- 2 5 . 5

-13 .0

-20.2

- 2 4 . 8

-14.1- 4 . 010.9

1.5

- 3 . 34.22.5

.5

5.0

29.0-24.0

- 8 . 7

- 2 8 . 5

9.1

-13.9- 4 . 616.5

17.2

3.98.86.42.0

-29.0

7.0-36.0

- 9 . 5

-29.4

- 4 7 . 8

-36.4.4

- 6 . 4

-21.4

-6 .912.1

-3 .4

-12.4

16.0

44.795.8

-51.1

-15.8

4.0- 5 . 8

-13.2

-18.9

- 3 0 . 0

.0- 6 . 0- 7 . 5

- 5 . 9

1.5- 3 . 5

6.3- 5 . 5

18.0

65.0- 4 7 . 0

- 8 . 2

- 2 0 . 2

1 Preliminary estimates.2 Exports f.a.s. (free alongside ship) less imports c.i.f. (cost, insurance, and freight).3 Includes the OECD countries, South Africa, and non-OECD Europe.4 Includes Belgium-Luxembourg, Denmark, Ireland, and the Netherlands, not shown separately.5 Includes Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, N i i O S d i

lVenezuela.

shown separately.Nigeria, Oman, Saudi Arabia, United Arab Emirates, and

6 Includes North Korea, Vietnam, Albania, Cuba, Mongolia, and Yugoslavia, not shown separately.7 Asymmetries arise in global payments aggregations because of discrepancies in coverage, classification, timing, and valuation in the

recording of transactions by the countries involved.• OECD basis.9 Consists of countries in footnote 4 plus Bahrain and Qatar.

1 0 Includes Communist countries and non-OECD developed countries.

Sources: International Monetary Fund, Organization for Economic Cooperation and Development, and Council of Economic Advisers.

323

TABLE B-105.—International reserves, selected years, 1952-79

[Millions of dollars; end of period]

Area and country 1952 1962 1972 1976 1977 1978

1979

November

All countries

Industrialized countries2....

United StatesCanada.Japan

AustriaBelgium.France.Germany.ItalyNetherlands..Scandinavian countries (Denmark, Norway, and Swe-

den).Switzerland.United Kingdom.

Other Europe.

Australia, New Zealand, and South Africa

Oil exporting countries

Iran.NigeriaSaudi Arabia3.Venezuela.Other4

Other less developed areas

Other Western Hemisphere....

Other Middle East

Other Asia

Other Africa

149,187

36,773

24,7141,9441,101

1161,133686960722950

8171,6671,956

1,559

1,509

1,699

177500

443'579

7,187

2,086

826

3,479

796

62,660

49,254

17,2202,5612,021

1,0811,7534,0496,9574,0681,944

1,3622,9193,308

2,966

2,066

2,030

211289268583680

6,343

1,700

992

2,663

989

159,118

105,814

13,1506,05018,366

2,7203,86910,01523,7856,0854,785

3,7577,5575,647

12,749

8,264

10,901

960376

2,5001,732

5,330

21,388

8,145

2,927

8,248

2,067

257,415

131,848

18,3195,84316,605

4,4105,2069,728

34,8016,6547,387

5,63512,9934,230

13,734

4,602

65,233

8,8335,203

27,0258,57815,597

41,997

15,222

5,778

17,912

3,085

317,886

169,397

19,3924,608

23,261

4,2445,761

10,19439,73711,6298,065

7,58013,83021,057

15,668

3,657

75,499

12,2664,259

30,0348,214

20,727

53,664

20,280

7,472

22,138

3,776

364,035

209,062

19,5824,569

33,500

6,0075,90813,92953,88314,8997,585

10,53021,56117,067

22,324

3,742

60,214

12,1521,916

19,4076,555

20,184

68,692

28,938

9,391

26,323

4,039

383,966

211,353

20,1963,971

20,475

4,5987,818

20,39553,62121,3539,512

11,38117,77520,208

24,327

3,445

67,869

4,98118,7106,243

76,971

33,584

9,642

29,383

4,362

1 Includes Cuba.2 Includes Luxembourg.3 Data beginning April 1978, exclude the foreign exchange coyer against the note issue.4 Algeria, Indonesia, Iraq, Kuwait, Libya, Oman, Qatar, and United Arab Emirates.

Note.—International reserves is comprised of monetary authorities' holdings of gold, special drawing rights (SDRs), reserve positionsin the International Monetary Fund, and foreign exchange. Data exclude U.S.S.R., other Eastern European countries, Mainland China, andCuba (after 1960).

Source.- International Monetary Fund, "International Financial Statistics."

324

TABLE B-106.—Growth rates in real gross national product, 1960-79

[Percent change]

Area and country

OECD countries

United StatesCanadaJapan

European Community3

FranceWest GermanyItalyUnited Kingdom

Other OECD4

Communist countries5

U.SSREastern EuropeChina

Less developed countries

OPECOther

TOTAL

1960-73annual

average

4.8

3954

10 5

47

57485232

54

«53

«50M l6 6 2

7 9 076.1

1974

0.5

-1 .33.5

-1 .0

1.7

3.2.5

4.2-1 .5

3.5

4.3

4.14.73.7

8.05.3

1975

0.4

-1 .01.12.4

-1 .4

- 2 i l- 3 . 5- 1 . 0

.2

3.6

2.54.27.0

- . 34.1

1976

5.2

5.55.76.0

5.1

4.95.65.73.7

3 8

3.0

3.74.3

.1

12.85.0

1977

3.7

4.82.75.4

2.3

2.82.81.71.3

1.9

4.4

3.13.38.1

6.25.1

1978

3.9

4.43.45.6

3.1

3.33.52.63.3

2.3

4.7

4.02.9

117

2 65 2

1979 *

3.3

2.02.86.0

3.0

3.04.34.0

.5

3.0

.8

6 5 "

U.S. dollarvalue in

1978(billions)2

5,960.0

2,107.6203.5968.8

1,950.0

470.2640.2235.2309.6

730.1

2,240.0

1,253.6384.0444 2

1,460 0

9,660 0

1 Preliminary estimates.2 Estimates based on conversion at average rates of exchange for 1977, except for those of the Communist countries, which were

converted at U.S. purchasing power equivalents.3 Includes Belgium-Luxembourg, Denmark, Ireland, and the Netherlands, not shown separately.4Growth rates are for OECD countries other than the Big Seven (United States, Canada, Japan, France, West Germany, Italy, and the

United Kingdom).5 Includes North Korea, Vietnam, Albania, Cuba, Mongolia, and Yugoslavia, not shown separately.61961-73 annual average.71967-73 annual average.

Note.—For Italy and United Kingdom, data relate to real gross domestic product. For France, data relate to real gross domesticproduct excluding nommarket activity such as compensation of employees in the government sector.

Sources: Department of Commerce, International Monetary Fund, Organization for Economic Cooperation and Development (OECD),and Council of Economic Advisers.

325

TABLE B-107.—Industrial production and unemployment rate, major industrial countries, 1960-79

[Quarterly data seasonally adjusted]

Year or quarter

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979

1978:1II(IIIV

1979:1IIIIIIV

19601961196219631964

19651966196719681969

19701971197219731974

19751976197719781979 4

1978.1IIIIIIV

1979.1IIIIIIV

UnitedStates Canada Japan

EuropeanCommun-

ity1France West

Germany Italy UnitedKingdom

Industrial production (1967=100)2

66.266.772.276.581.7

89.897.8

100.0106.3111.1

107.8109.6119.7129.8129.3

117.8130.5138.2146.1152 2

140.8145.1147.9150.7

152.2151.9152.3152.1

63.165.671.275.782.6

89.796.2

100.0106.4113.7

115.3121.5130.7143.0147.5

139.6147.4152.1160.9

156.3158.8162.0166.2

167.8165.8169.9

43.051.255.461.771.4

74.283.8

100.0115.2133.4

151.8155.7167.0190.5183.1

163.9182.0189.7201.1

196.0199.6202.4206.5

210.2215.4219.4

74.778.181.384.891.0

94.798.4

100.0107.4117.6

123.3126.1131.7141.4142.3

132.8142.5145.7149.1

146.6147.7148.6152.2

152.3155.2155.6

7073788690

9398

100104114

120128135145148

139148152156

154157156159

159160165

78.482.886.188.996.6

102.1103.0100.0109.2123.2

131.1133.6138.7147.7145.1

137.1149.1152.5155.8

153153157159

159163165

59.265.571.978.479.2

82.893.3

100.0106.4110.5

117.6117.5122.7134.6140.6

127.6143.7145.1148.4

146.1147.8145.6153.9

157.0151.9153.6

84.484.385.188.495.0

97.799.2

100.0106.7110.3

110.9110.6113.2123.0120.0

114.3117.4122.8126.5

123.7127.4128.2127.3

128.5135.3130.6

Unemployment rate (percent)3

5.56.75.55.75.2

4.53.83.83.63.5

4.95.95.64.95.6

8.57.77.06.05.8

6.26.06.05.8

5.85.85.85.9

7.07.15.95.54.7

3.93.43.84.54.4

5.76.26.25.55.3

6.97.18.18.47.5

8.48.58.48.2

7.97.67.17.3

1.71.51.31.31.2

1.21.41.31.21.1

1.21.31.41.31.4

1.92.02.02.3

52.2

2.22.32.32.3

2.02.12.2

1.81.61.51.31.5

1.61.92.02.62.4

2.62.82.92.83.0

4.34.75.05.56.1

4.95.45.85.8

5.96.26.36.1

1.1.6.6.5.4

.3

.31.31.4.9

.8

.8

.8

.81.7

3.63.63.63.43.0

3.53.53.43.3

3.23.02.92.8

3.83.22.82.42.6

3.53.83.43.43.3

3.13.13.63.42.8

3.23.63.43.73.9

3.73.63.63.7

3.93.83.93.9

2.22.02.83.42.5

2.22.33.43.33.0

3.13.74.12.92.9

4.15.56.26.15.8

6.36.26.15.8

6.05.75.65.9

1 Consists of Belgium-Luxembourg, Denmark, France, Ireland, Italy, Netherlands, United Kingdom, and West Germany.2 All data exclude construction.3 Unemployment rates adjusted to U.S. concepts. Data for United Kingdom exclude Northern Ireland.4 Data are preliminary except for United States and Canada.5 Ten-month average, seasonally adjusted.Sources: Department of Commerce (International Trade Administration) and Department of Labor (Bureau of Labor Statistics).

326

TABLE B-108.—Consumer prices and hourly compensation, major industrial countries, 1960-79

[1967 = 100]

Year or quarter

19601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

19781IIIIIIV

19791IIIll

I9601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

UnitedStates Canada Japan France West

Germany Italy UnitedKingdom

Consumer prices

88.789.690.691.792.9

94.597.2100.0104.2109.8

116.3121.3125.3133.1147.7

161.2170.5181.5195.4

188.5193.4197.9201.9

207.0214.1221.1

77179.482.685.288.9

91.095.2100.0107.0113.9

121.8129.5136.6146.4161.1

180.2195.1212.0229.5

85.986.787.789.290.9

93.196.5100.0104.0108.8

112.4115.6121.2130.3144.5

160.1172.1185.9202.5

195.6200.3205.4208.6

213.4218.9223.3

80 378.977.079.082.0

86.293.0100.0107.4115.5

128.2142.6156.6170.5200.6

222.4260.8270.3270.1

68.371.876.782.585.8

91.696.3100.0105.3110.9

119.3126.5132.3147.9184.0

205.8224.9243.0252.3

247.5252.6254.3254.9

254.0260.5263.1

^ s . o^ o . e85.489.592.5

94.897.4100.0104.5111.3

117.1123.5131.1140.7160.0

178.9196.1214.5233.9

224.5230.9237.1242.0

247.3254.3262.5

Hourly compensation

43.450.357.564.172.0

81.189.2100.0116.9139.3

165.9197.3259.2353.7431.2

497.2538.3644.5870.2

56.061.767.975.080.7

86.992.5100.0112.6111.6

117.2131.3159.9208.5231.3

310.7319.1355.5437.1

82.984.887.489.992.0

95.098.4100.0101.6103.5

107.1112.7119.0127.2136.1

144.2150.7156.6160.7

159.6161.1161.0161.2

164.5167.1169.0

2

51.860.568.873.679.5

85.794.3100.0105.9117.3

145.9173.4211.4289.3342.4

406.3425.4506.1628.5

74.175.779.285.190.1

94.296.4100.0101.4104.1

109.2114.4121.0134.0159.7

186.8218.1255.2286.2

274.1282.6289.3298.1

309.5321.0331.8

46 851.861.172.380.4

86.089.8100.0106.8121.1

145.0169.7206.0261.7291.6

374.7352.7394.2466.9

79.081.685.186.889.6

93.997.6100.0104.8110.3

117.4128.5137.7150.2174.3

216.5252.4292.4316.6

306.2314.6320.0325.5

335.6347.9371.2

65 970.874.677.983.2

91.298.7100.093.3101.7

115.3134.3154.4167.8197.8

247.3235.6250.4316.1

1 Data for 1960 and 1961 are for Paris only.2 Hourly compensation in manufacturing, U.S. dollar basis. Data relate to all employed persons (wage and salary earners and the self-

employed) in the United States and Canada and to all employees (wage and salary earners) in the other countries. For France andUnited Kingdom compensation adjusted to include changes in employment taxes that are not compensation to employees, but are laborcosts to employers.

Sources: Department of Commerce (International Trade Administration) and Department of Labor (Bureau of Labor Statistics).

327

TABLE B-109.—Summary of major U.S. Government net foreign assistance, July 1, 1945 to December 31,

1978

[Millions of dollars]1

Type and geographic distribution

Total net

Investment in 6 international financial institutions3

Under assistance programs, net

Net new military grantsGross new grantsLess: Reverse grants and returns

Other grants, credits, and other assistance (through net accumulationof foreign currency claims), net

Net new economic and technical aid grants4

Gross new grantsLess* Reverse grants and returns

Net new cred i ts 4 5

New creditsLess* Principal collections

Other assistance (through net accumulation of foreign currencyclaims)6

Currency claims acquiredSales of farm productsSecond-stage operations7

Less: Currencies disbursedEconomic grants and credits to purchasing countryOther uses

Geographic distribution of net nonmilitary assistance

Developing countries,8 net total

Net new economic and technical aid grantsNet new creditsOther assistance (through net accumulation of foreign currency

claims)

Developed countr ies8 net total


claims)

1945-492

5,540

141

5,399

325340

15

5,074

3,3123,486

174

1,7621,986

224

904

752152

4170

2,5601610

Yearly average or calendar year

1950-54

5,059

5,059

2,4622,494

32

2,597

2,4062,512

106

148544396

42

5151

972

1,032

772240

20

1564

1,63492

22

1955-59

4,772

7

4,764

2,4382,451

14

2,327

1,7101,759

48

210827617

407

965963

2

558413145

2,211

1,470386

355

116

240176

52

1960-64

4,664

124

4,540

1,5941,629

35

2,946

1,8501,872

22

8711,843

972

225

1,2301,186

44

1,005807198

3,316

1,8171,310

189

371

32439

36

1965-69

5,899

81

5,818

2,1902,196

5

3,628

1,7761,780

4

1,9503,0821132

- 9 8

814691122

912716196

3,611

1,7651,926

- 8 0

17

1124

- 1 8

1 Negative figures ( - ) occur when the total of grant returns, principal repayments, and/or foreign currencies disbursed by theGovernment exceeds new grants and new credits utilized and/or acquisitions of foreign currencies through new sales of farm products.

2 July 1, 1945, through December 31, 1949. Yearly average is for 4V2 years.3 Includes paid-in capital subscriptions and contributions to the special funds of the African Development Fund, Asian Development

Bank, Inter-American Development Bank, International Bank for Reconstruction and Development, International Development Association,and Internationa! Finance Corporation.

4Net new grants are not adjusted for settlements of postwar relief and other grants under agreements, and net new credits excludeprior grants converted into credits. Repayments on these settlements are included in net new credits.

5 Outstanding credits on December 31 , 1978, totaled $45,287 million, representing net credits extended since organization of Export-Import Bank, February 12, 1934, less chargeoffs and net adjustments due to exchange rates ($1,560 million), and excluding World WarI debts. The amount repayable in dollars at U.S. Government option was $42,849 million; the remainder was repayable in foreigncurrencies, commodities, or services, at the option of the borrowers.

(See next page for continuation of table.)

328

TABLE B-109.—Summary of major U.S. Government net foreign assistance, July 1, 1945 to December 31,

1978—Continued

[Millions of dollars]1

Type and geographic distribution

Yearly average or calendar year

1970-74 1975 1976 1977 1978"

Total.net

Investment in 6 international financial institutions3

Under assistance programs, net

Net new military grantsGross new grantsLess: Reverse grants and returns

Other grants, credits, and other assistance (through net accumulationof foreign currency claims), net

Net new economic and technical aid grants4

Gross new grantsLess: Reverse grants and returns

Net new credits4 5

New creditsLess: Principal collections

Other assistance (through net accumulation of foreign currencyclaims)6

Currency claims acquiredSales of farm productsSecond-stage operations7

Less: Currencies disbursedEconomic grants and credits to purchasing country....Other uses

7,146

332

6,814

3,3103,314

5

3,504

2,4862,534

48

1,1903,8362,646

- 1 7 1

742106635

913709204

8,676

654

8,022

2,8912,895

5,130

2,2472,250

2

2,8535,2972,444

30

189

184

15921138

7,931

1,102

6,829

1,3391,342

3

5,490

2,2682,274

6

3,2755,8372,562

-53

129

a18242140

6,732

870

5,862

767770

3

5,096

2,2742,274

8,000

867

7,134

84085313

6,294

2,6522,652

2,8615,5462,685

-39

175

21416

198

3,6956,5992,904

-53

124

17717

160

Geographic distribution of net nonmilitary assistance

Developing countries,8 net total


claims)

Developed countries,8 net total


claims)

3,614

2,5291,234

- 1 4 9

- 1 1 0

- 4 4- 4 4

- 2 2

5,021

2,2482,715

58

109

- 1138

- 2 8

5,330

2,2683,094

- 3 0

158

(*)181

- 2 3

5,283

2,2713,018

- 6

- 1 8 8

2-157

- 3 3

6,215

2,6393,606

- 3 0

78

1289

- 2 3

6 Equivalent value of currencies still available to be used, including some funds advanced from foreign governments and after loss byexchange rate fluctuations ($1,404 million), was $504 million on December 31 , 1978.7 Includes foreign currencies acquired from triangular trade operations and principal and interest collections on credits, originallyextended under Public Law 83-480, which—since enactment of Public Law 87-128—are available for the same purposes as Public Law83-480 currencies.8 Developed countries include Australia, Canada, Japan, New Zealand, Republic of South Africa, and all countries in Europe exceptCyprus, Gibraltar, Greece, Malta, Portugal, Spain, Turkey, and Yugoslavia. Developing countries include all other countries. Thisclassification is on the basis of the standard list of less developed countries used by the Development Assistance Committee of theOrganization for Economic Cooperation and Development.

Hess than plus or minus $500,000.Source: Department of Commerce, Bureau of Economic Analysis, based on information made available by operating agencies.

329

U. S. GOVERNMENT PRINTING OFFICE : 1980 0 - 29H-289